Client is a registered investment advisory firm that focuses on providing credit analysis to fixed income investors and lenders. They have provided municipal credit research for over 200 banks and other institutional clients. The firm specializes in Municipal Credit Surveillance, Reporting and Research. They provide its proprietary services and technology on a fee basis to clients across USA.
Scope of Work
One of the major activities involved in the project was to analyze different municipal securities
prevailing in securities market. The objective was to:
- Help investors looking for fixed income and secured investment in government or semi government bodies
- Help investor in assessing the value of their investments
- Providing useful and compressed information for investors
The analysis was based on the financial disclosures available for public access on EMMA website (operated by Municipal Securities and Remarketing Board MSRB) and Michigan Government websites.
- The information needed to compete the reports was to be accessed from over 40,000 municipalities in more than 3000 counties in USA
- The assignment involved a great deal of accuracy in computing over 30+ parameters as the reports would be used by investors for taking critical decisions
- Understanding the CAFRs (Comprehensive Annual Financials reports) and other disclosures was a challenger due to technical terminologies and multiple atypical asset/liability types
Existing Set-up and OHIs Role
The client had a ready excel template and procedures set in place to abstract useful financial data and prepare a report to evaluate financial worthiness of the municipalities. OHI’s role was to abstract financial information related to Assets, Liabilities, Net Position, Total Funds, General Revenue, Expenses, Pension Assets and Liabilities etc from CAFRs (Comprehensive Annual Financials reports) and other public available records.
The first step in the entire process was to understand and document the existing process. Detailed interviews were done with client personnel, at the start of the engagement based on which the entire process was documented. Gaps and Strengths in existing procedures were identified. A team of two Senior Accountants was allotted to this process.
The following measures were taken by OHI to standardize the process:
- Extensive Process Documentation – The base template to capture the information from these financial statements was provided by the client. OHI developed an exhaustive checklist for each information to be captured as many municipalities used different terms in their financial statements. The checklist is updated on a regular basis to ensure maximum terms are covered
- Substantial training and knowledge sharing were undertaken between US and Indian teams including periodic calls and screen sharing sessions
- Turnaround time and Targets – To meet clients targets and timelines an internal system was set in place. The completion of activities was tracked on a weekly and monthly basis, based on which monthly targets were determined and executed
- Information Accuracy was an important parameter as these reports were used by investors for taking important financial decisions. The client has an internal review team to monitor the process and the feedback was shared with OHI. OHI worked closely with the client’s review team and set up its own internal review and training process to minimize the gaps
- Accuracy percentage of above 92% in first week and 97% by the end of first month was noted. By end of second month, OHI’s team was producing the reports with 100% accuracy
- We have also met the deadlines and output targets set for the process
- Client achieved cost savings of 35% on their base cost structure. Annualized savings of about $35000 per full-time employee allocated in the process was achieved
- Post six months, the process was scaled-up to cover a third staff member
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