Internal Management Audit

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Internal Management Audit

• Tom Kern, CFEE
• Lawrence Chamber of Commerce

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Purpose

• The internal management audit is a tool to
  critically evaluate the various income and
  expense streams of an organization. The audit
  examines both revenue and expenses but more
  importantly it examines how and why those
  revenues and expenses occur as they do.

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Event Budgeting

• Explain format
• How well do you budget
• Look at variances

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Budget Review
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• Large variances show you where opportunities
  might exist.

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Expenditure Analysis
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• Every dollar you save in expenses is a dollar
  you dont have to raise in revenue

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• Areas of greatest possible savings
• Administrative expenses
• Contractual services
• Operational expenses
• Media/PR expenses

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• Analysis of accounts payable list

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• Examine who you spend your money withis there a
  way to do the same for less?

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Salary/Benefit Expenses

• Payroll
• Health
• Dental
• 401K

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• Look at flexible employee benefit plan versus
  same benefits for everyone
• Look at HRA/HSAS
• Look at non-traditional job structures
• Flex-time positions
• Job sharing
• Contracting out staff services

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Example

• Year 2000
• 6 full-time and 2 part-time 425,000
• Year 2005
• 3 full-time, 2 part-time, and 2 flex time
  345,000
• Savings of 80,000 annually

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Office Expenses

• Supplies
• Paper
• Stationary
• Envelopes
• Business Cards

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• Shopping around can save you at least ten percent
  (10)
• Look at internet pricing for paper, toner, and
  ink cartridges

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Computer/Telephone Service

• Local phone service
• Number of lines / local rates
• Long distance
• 3.5 max
• Cable TV/Internet
• Wireless Internet
• Computer Maintenance Contract

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Office Equipment

• Copy machine
• Fax machine
• Visa/MasterCard machine
• Maintenance Contract

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Examples

• Long distance
• Sprint 5.2
• SBC 3.7
• Annual savings 630

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• Copy machine maintenance
• 1.75 a copy
• .5 a copy
• Savings at 200,000 copies 2,500

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• Credit Card service fee
• 3.2 versus 1.5
• Savings on 500,000 in sales 8,500

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• Cell Phone Service
• Revise minute plan
• Savings 3,600

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Contractual Services

• Legal
• Bookkeeping
• Public Relations

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Employee Travel

• Is it necessary?
• Can it occur over a weekend?

• Rental cars
• Per diem

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Event Expense

• Tables
• Chairs
• Porta Jons
• Tents
• Insurance
• Security

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Rental Equipment

• Trailers
• Signs
• Generators

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Example

• Tent/Table/Chair
• Bid 10 off bill if we prepaid fifty percent
  (50) of the bill before event
• Savings 2,900

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Revenue Analysis
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• Are you changing the appropriate prices and fees?

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Food Beverage Pricing

• Typical Large Special Event Pricing
• 16 oz Beer 5.00
• 16 oz Pepsi 3.00
• Brat/Hot Dog 4.00
• Ice Cream 2.50
• Hamburger 6.50
• Popcorn 3.00

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• How does your event pricing look compared to the
  special event industry?

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Example

• Beer at 3.50 versus 3.75
• 35,000 units 8,750
• Pepsi at 2.25 versus 2.50
• 60,000 units 15,000

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• Are your prices reflective of the value received?
• Ticket prices
• Membership fees
• Advertising rates
• Concession pricing

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Third Party Contractual Fees

• Concession Vendors
• Twenty Percent (20) gross versus twenty-five
  percent (25) gross
• 250,000 gross 12,500

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Carnival Vendors

• Thirty five percent (35) versus thirty- percent
  (30)
• Additional revenue 12,500

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Participation Fees

• Bike Tour
• Hole-In-One
• 15K Race

• Change 15K Race fee 1.50 per runner and add an
  additional revenue of 2,400

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Licensing Fee

• Should be seven percent (7) of sales

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Souvenir Pricing

• Mark up 1.00 over what is normal and add
  additional revenue of 7,500

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Summary of Savings and Revenue Enhancements at
the National Cherry Festival
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Expenditure Savings

• Salary Benefit 80,000
• Office Supplies 3,700
• Computer/Tel. Services 12,000
• Contractual Services 6,000
• Employee Travel 1,500
• Event Expenses 52,000
• Total Savings 155,200

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Revenue Enhancements

• Food and Beverage 26,000
• Ticket Prices 5,100
• Membership Fee 7,000
• Concession Pricing 7,000
• Third Party Contract 25,000
• Participation Fee 8,000
• Souvenir Pricing 7,500
• Total Savings 86,600

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• Expense Reduction 155,200
• Revenue Enhancements 85,600
• Total 240,800

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Internal Audit Results from a Music/Food Festival

• Summary of Revenue Recommendations
• Price increases for admissions 159,150
• Price increases for concessions 141,962
• Price increase for fine art print 10,050
• New volunteer wear program 7,000
• Increases in sponsorships 50,000
• Increases in educational contributions
  25,000
• Increase in Diplomat program 47,745
• TOTAL 440,907
• Summary of Expenditure Reductions
• Administrative 32,250
• Marketing services 23,975
• Park Operations 46,500
• Sunset Symphony 2,100
• International 15,000
• Merchandise 10,700
• TOTAL 130,525

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Internal Audit Results from a Major
Music Festival
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Summary

• You can create savings by examining how you spend
  money
• You can create more revenue by making small
  incremental changes in your revenue sources
• Remember a lot of small changes can end up making
  a huge financial impact

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