Reviewing key performance indicators (KPI) is another management tool that can be used to monitor the fiscal performance of the system. Things that can be monitored and compared by month and year include: inventory turns, cost recovery ratios and days cash on hand.
Grants management provides a tool to managers to gauge the effectiveness of the federal and state funding sources. Managers can monitor the percentage of expenses funded by grants, the frequency of funds requests and the milestones required for federal grants.
Operational audits can be used to supplement the financial audits in ensuring an efficient operation. These audits include cash handling reviews, cash counting reviews and operator audits that review fare collection processes.
The procurements that a transit system issues, account for much of the annual expenses. Managers need to monitor the procurement process and ensure that procurement policies are in place and followed. Procurement audits should be done periodically and all large procurements should be internally audited prior to award.
Managers should periodically review the insurance coverage in place. This includes liability insurance, physical damage insurance and employee benefit insurances. The policies should be reviewed to guarantee that the desired protections are in place and the coverage limits are acceptable. Through bidding or price quoting, managers can ensure that the price the system receives is fair.
The list of key financial management items listed above will provide the transit manager with a good set of tools to oversee the financial process. Managers need to use all of the tools available to them to protect the assets of the transit systems. Some of the pitfalls that transit systems have experienced due to poor fiscal management include:
- *Theft by an employee because management oversight and separation of duties were not in place.
- *The transit system operating in crisis when a key employee leaves because procedure manuals don't exist or are outdated. This can also be affected if employee cross-training has not been done.
- *The system not having suffi cient cash to pay bills or meet payroll needs. The lack of management attention to monthly and sometimes weekly financial reporting is often the culprit.
- *Operating outside of the annual budget parameters due to poor budget development and lack of "ownership" by those that developed the budget.
- *Overpaying for items or not having the required documentation to "backup" a federally funded procurement.
- *Finding out that the system does not have the insurance coverage the manager thought was in place once an accident or incident has occurred.
The transit manager must stay involved in the financial management of the transit system. Time must be spent with the staff going over the financial reports to determine where problems exist and strategies must be developed to address the problems. The manager must also periodically review the policies to ensure that they remain current and continue to meet the system's needs.
The annual reviews and audits that are performed present an excellent opportunity for the manager to ask questions about the financial condition of the system.
Auditing firms have become more responsive to managers' questions and have increased the amount of information reviewed. Managers must actively participate in these audits.
Managers can also turn to transit consultants to provide an added level of financial review. This type of service could include policy development, financial organization structure reviews and reviews that tie into the financial system such as procurement reviews, fleet management reviews and payroll reviews. There are many companies that are available to provide these services.