State of Alabama Changes in State Government How an Enterprise Resource Planning Project became a Segmented Approach Presented by Thomas L. White, Jr. State Comptroller April 12, 2012

State Financial Condition Changes Challenging Times Post FY08 economic downturn Significant revenue reductions from historic highs –General Fund (GF) $1.8B –Education Trust Fund (ETF) $6.4B FY10 GF revenue declined to FY05 level (-21%+) FY10 ETF declined to less than FY06 (-18%+) Full impact of reductions offset by federal stimulus (ARRA) and other one time funds Lower than anticipated revenues triggered proration in multiple FY’s

Proration General Fund Education Trust Fund FY FY % FY % FY % All Rainy Day Accounts exhausted FY11 Revenues $1.5B -$300M from FY08 FY % FY10 9.5% FY11 3.0% FY All Proration Prevention Accounts exhausted FY11 Revenues $5.3B -$1.1B from FY08

State Financial Condition Changes Continued Annual merit step raises frozen calendar Employee layoffs and attrition reductions Agencies reduced or eliminated –Equipment purchases –Contracts –Operating expenses Revenues –Incremental recovery after low point in FY10 Low single digits Revenue growth of 1-2% per year will take 5+ years to recover to FY08 level

Recent State Employee Changes Deferred Retirement Option Program (DROP) abolished State retirement contributions increased State employee insurance changes increased cost for many employees retiring after January 1, 2012 State employee overtime not eligible for retirement contributions (AG opinion ) Internal Revenue Service (IRS) non overnight per diem FICA/Medicare tax In-state employee travel paid on payroll

Financial Management System History State of Alabama’s business processes are collectively referred to as the Financial Resource Management System (FRMS) Combination of on-line and batch computer programs and data processes –Accounting –Financial Reporting –Payroll –Procurement –Personnel Functionality Implemented –Extensive upgrade in 1999 to be year 2000 (Y2K) compliant –Y2K upgrade to meet minimum operating requirements, no improved functionality All FRMS systems are highly customized

Current FRMS Majority AMS now CGI Central Accounting System –American Management System (AMS) Advantage Financial 2.0 State-wide payroll and personnel system –AMS Advantage HR 2.0 Agency Accounting –Modified version of AMS Advantage Financial 2.0 Advantage Financial System (AFNS) implemented as an agency accounting system A significant number of state agencies have their own accounting systems and do not use AMS Advantage Financial 2.0 AFNS –Transportation is the largest Procurement –Informs, Inc. (local vendor)

The Plan Original Plan –Implement a Commercial Off-the-Shelf (COTS) Enterprise Resource Planning (ERP) software package and supporting technologies Interim Steps –Discovery Project Auburn University Montgomery Center for Government and Public Affairs –explored possibilities, ramifications, cost, risks, and environment of a business transformation effort –Benchmarking Project Hackett Group –efficiency and effectiveness, –benchmark other states, financial, procurement, personnel, and payroll management, and identify areas with most benefit from business transformation –Business Process Reengineering for ERP planning business processes were evaluated – ~150 identified based on efficiencies gained in a ERP project and detailed in “as- is” and “to-be” format

First ERP Step Procurement Systems Improvement RFP issued December 2009 Planned award date March 2010 State decided not to make an award –Funding issues –Manpower requirements –Primary election/general election year politics –New incoming Governor would replace 2 term limited Governor Outcome –New Republican Governor –Democratic House and Senate became Republican super majority in both houses –Most radical change at state level in over 130 years

What can we do? In 2011 –identified segmented concept focused on greatest need and opportunity for improvement Follow the money –Personnel Cost $2.4B –40,000+ employees Use a best of breed/best of fit approach Time & Attendance opportunity –Front end interfaced with current payroll system –Standardization

Time & Attendance Situational Summary Considerable amount of effort, time and money required to maintain the state's current Time and Attendance processes –Existing payroll processes are labor intensive –Numerous timekeeping practices that differ widely –High costs associated with existing processes –Time and leave reporting errors more likely Labor Law Compliance Risks Extensive use of paper and distribution labor –Costly payroll production and distribution –Hard copy timesheets and leave requests Lack of labor analysis and scheduling tools

Business Needs Control and reduce overtime More accurate leave reporting, scheduling and processing Ensure Labor Law Compliance –Fair Labor Standards Act (FLSA) –Family and Medical Leave Act (FMLA) Provide employee self service facility (Portal) Support automated workflow and online approvals Better secure employee information –Personally Identifying Information (PII) –Convert to an employee number system Provide ability to support future requirements –Labor and pay changes –Conversion to different pay cycles

Project Description Procure software, hardware and implementation services –Use RFP and ITB process –Anticipate five year contract managed by Finance State Information Systems Division –Contract will consist of professional services, software, technical support, training and software maintenance Project will consist of –Implementation of a new statewide T&A System –Team comprising state employees and T&A implementation experts –Phased implementation approach –Duration estimated at 24 Months Permanent Support Team –Sustain system, training and upgrades

Benefits Efficiency gains and cost reductions –Automated workflow replaces the current paper-based review and approval –Greater Accuracy Human error reduction More accurate reporting –Reduction of labor wages –Increased control over employee overtime –Elimination or reduction of paper documents Creation of an Employee Portal where employees –Electronically record time –Request leave –Review pay and leave-related documents –Eventually perform many other tasks

Benefits, continued. And where managers –Approve employee time and leave requests –Create and modify work schedules –Better manage workforce Data Availability provides support for –Labor cost studies –Workforce analysis –Productivity analysis –Audits –Dispute resolution Improved compliance with state and federal laws