Financial Operations Centralization

Background: A midsized City had decentralized financial operations, with individual departments and their staff managing most accounts receivable (AR) and accounts payable (AP) functions. There was also no clear policy, procedures, or guidance for how staff within the departments should be performing the AR or AP functions. This led to a lack of financial controls, inconsistency in financial management and reporting, and duplication of work without providing additional controls. The decentralization was also a consistent audit finding over several years. 

Process: The team reviewed the current process through interviews and process mapping. When compared it to industry best practices it found significant deviations and a need for changes. The team presented a new centralized financial operations model to City leadership, which approved a pilot program. 

The pilot program centralized staff and AP/AR functions from several small departments as well as a few midsized departments. The pilot program compared AP processing times and accuracy to the remaining decentralized departments. The pilot centralization improved process times and accuracy through standardization and conforming to industry best practices, including GAAP. 

Solution(s): Following the pilot period of four months, the data showed significant improvements over decentralization and the pilot was converted into a permanent centralization project. The project was scaled to gradually integrate the remaining departments and relevant staff into the central Finance Department. 

Results: The new centralized AP/AR model improved processing times and accuracy for transactions. The new centralized team developed standard operating procedures (SOPs) and a procurement manual, which was presented to the City’s leadership and formally adopted citywide. Ultimately the changes resolved the longstanding audit finding.