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General Government 

### Executive Summary

#### Key Statistics
- Implementation of APAC recommendations generated $16.9M ROI to-date
- 59% of recommendations were initiated overall
- $60M potential additional ROI remains

The Agency Performance and Accountability Commission (APAC) was created in 2017 to oversee independent, comprehensive performance audits of state agencies. The Commission, primarily composed of business leaders skilled in management, fiscal operations and efficiency, also captured observations from the work and presented their suggestions for incorporating business best practices across state government.

APAC was statutorily charged with reviewing the 20 highest- appropriated state agencies on a four-year schedule. In 2018, the Commission awarded $1.2 million in contracts to four auditing firms for the review of six state agencies:

#### Finding 1: APAC Has Yielded a 14 to 1 Return on Fiscal Investment and Achieved Other Operational Efficiencies

The six audit reports contracted through APAC cost a combined $1.2 million and has yielded a minimum $16.9 million positive fiscal impact to date.

![apac-efficiencies.png](https://dy8iim215g2zo.cloudfront.net/apac_efficiencies_857a0623d3.png)

LOFT examined the collective recommendations in the audit reports and worked directly with agencies to determine any resulting financial benefits, increased efficiencies, or enhanced quality of services.

Identified benefits are from recommendations that have been implemented and include direct cost savings and revenue enhancements.

Additionally, LOFT identified recommendations currently in the process of being implemented that are likely to result in more savings or revenue, efficiency gains or improved service quality. Last, LOFT captured actions taken by agencies as a result of the APAC audits but not in direct response to recommendations within the reports.

LOFT was able to quantify the status of actions detailed within this report due to agencies’ collection of pre- and post- conditions. This information was not captured by all agencies audited and limited LOFT’s ability to measure outcomes. Other savings and improvements likely exist but are more difficult to quantify.

![apac-implementation-status.png](https://dy8iim215g2zo.cloudfront.net/apac_implementation_status_8879822ee9.png)

The chart demonstrates the timeline for when agencies acted on recommendations. Recommendations described as “initiated” include those fully and partially implemented, and those in-progress.

#### Finding 2: Unimplemented Recommendations Have the Potential for an Additional $60 Million in Savings

Of the remaining recommendations that have not been fully implemented, LOFT identified five that would have a material fiscal impact. LOFT estimates the potential annual positive fiscal impact of these recommendations is between $51.9 and $60 million.

In addition to financially quantifiable examples, LOFT identified among the unimplemented recommendations other valuable opportunities to improve state processes or service delivery.

LOFT found the work undertaken by APAC has demonstrated financial benefits as well as increased efficiency and improved quality of service. However, agencies and auditors often did not record metrics to capture the pre- recommendation state for comparison with the post-recommendation improvements.

Results of some implementations have not materialized or delivered comparable data to conduct a meaningful analysis. There are also challenges with determining the savings due to discrepancies in analytical approaches and data used.

#### Finding 3: Limited Knowledge of State Government, Technical Deficiencies, and a Lack of Actionable Strategies Contributed to Unimplemented Recommendations

LOFT found deficiencies in APAC’s processes, including limited understanding regarding statutory compliance and government processes, ambiguous recommendation language and a lack of coordination and communication between agencies.

LOFT also found technical deficiencies, including the absence of business objectives related to enacting recommendations, likely reducing agency implementation of recommendations.

Missing from APAC’s processes were coordination by auditors and inter-agency communication. Agencies that were not directly audited, but were mentioned as part of a recommendation, were not aware they were impacted by a recommendation until LOFT contacted them.

LOFT also found that agencies’ prioritization of APAC recommendations differed from those prioritized by auditors. Auditors emphasized changes with long-term impact like establishing new policies, using strategic management, creating data and records management, adding analysis staff positions, and enhancing revenue collection practices. Agencies focused on improving immediate operational needs and workforce management.

#### Finding 4: APAC’s Enterprise-Wide Recommendations Have Value but Require a Comprehensive Approach for Success

_Auditors emphasized changes with long-term impact like establishing new policies, using strategic management, creating data and records management, adding analysis staff positions, and enhancing revenue collection practices. Agencies focused on improving immediate operational needs and workforce management._

Upon completion of the auditors’ reports, the members of the Commission submitted a list of recommendations that, based on their collective business experience and observation of themes that emerged across the various reports, were best practices applicable across State government.

The five “Macro,” or enterprise-wide, recommendations reflected the Commissioners’ broad observations that agencies lacked alignment with Executive Branch strategic initiatives, underutilized performance measures related to well-defined goals, and lacked the technology to make data-driven decisions.

Better statewide coordination and strategy was a theme of the Macro Recommendations presented by the Commissioners. LOFT examined recommendations related to strategic management of agency budgets due to the prevalence of these type of recommendations in both independent agency audits and the Macro Recommendations. From this review, LOFT identified gaps in the State’s current practices for both developing budgets and strategic planning.

Executive Summary

APAC Report

Report

Resources

Report & Resources

###  Summary of Policy Considerations and Agency Recommendations

#### Policy Considerations

The Oklahoma State Legislature may consider the following:

- Amending the provisions of 62 O.S. § 45.3 that currently require five-year strategic plans to be resubmitted every two years to instead require a five-year strategic plan that is followed with an annual update regarding outcomes. The Legislature may additionally consider requiring agencies’ strategic plans to be made publicly available. 
- Requiring agencies to enact a phased implementation of outcome-based budgeting practices that align with an agency’s strategic plan.
- Creating an Innovations Fund for the purpose of providing loans for qualified State agency projects that demonstrate an ability to repay the loan with State savings generated from the project.
- Amending 62 O.S. § 35.9 to replace the current requirement for agencies to submit quarterly progress reports on the State’s IT consolidation efforts with a report detailing the expected return on investment for any Information Systems acquisitions and expenditures.
- Amend contracting standards to enable the State to have a vendor correct discovered defects after the payment for product or services has been rendered.

#### Agency Considerations

Agencies across State government should adopt the following business practices:

- Prior to developing a strategic plan, agencies should first evaluate the legislative intent of a program and then align the program’s strategic plan to deliver customer-oriented outcomes.
- The Executive’s Cabinet should regularly coordinate with agencies in developing strategic goals and outcomes for the State.
- Agencies’ requests for new programs or funding should be accompanied by a projection of qualitative or quantitative returns on the State’s investment or a description of the long- term impact of the investment.
- Agencies should gather metrics before and after implementation of a recommendation to demonstrate any change.
- Any agency estimating costs or developing a fee or use structure for stakeholder services should include all operational expenses, including stepwise, variable, and fixed costs.
- Agencies should conduct an agency stakeholder assessment as part of any independent audit or review and communicate with any agency about recommendations that may impact that agency.
- Agencies should outline in contracts with third-party independent auditors any expected deliverables, including a summary of all recommendations, an implementation strategy and schedule, and explanation of methodologies and calculations.

Recommendations

August 2021

Agency Performance and Accountability Commission (APAC)

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