Maximizing the benefits from your ERP – before and after implementation NASACT August, 2009

Finance Transformation is a Long Journey State governments cumulatively spend hundreds of millions of dollars annually on ERP planning, acquisition, implementation, and maintenance Maximizing the benefits of your ERP requires: Inter- and intra- agency collaboration Strong executive sponsorship and participation Recognition that all benefits cannot be realized on Day 1 Each state has its own nuances, but there are enough similarities that we can learn from each other. Two states are currently pursuing a path to maximize benefits from their ERP: State of New York – pursuing a first in the nation approach to coupling financial systems through a Service Oriented Architecture (SOA) Commonwealth of Pennsylvania – demonstrating that “after implementation” business process analysis further increases benefits

State of New York Approach to Integrated Financial Management between Separate Constitutional Entities NASACT August, 2009

Decision Process Towards Integration Discussion Points How to best streamline interdependent business processes between separate constitutional entities? The Case for Financial Systems Integration Decision Process Towards Integration Solution Overview and Related Challenges

The Case For System Integration Joan Sullivan Executive Deputy Comptroller for Operations New York State Office of the State Comptroller

State of New York Organizational Context State of New York is implementing two instances of PeopleSoft “loosely coupled” via SOA “middleware” Elected State Comptroller Responsible for audit of payments and contracts, statewide accounting and financial reporting Elected Governor Responsible for business operations within executive agencies Joint Governance established to coordinate new financial systems Several states have separately elected officials with check and balance responsibilities that make a single ERP very challenging.

State of New York Government Organization New York State Government Executive Branch Judicial Branch Legislative Branch Governor State Attorney General State Comptroller All four officials are separately elected on a statewide ballot LT. Governor Department of Law Department of Audit and Control State Agencies (in the following functional areas): Economic Development Education Parks/Environment Health and Social Welfare General Government Transportation Mental Health Public Protection

Statewide Financial Systems Governance Joint Governance Board (JGB) Legislature Quality Assurance (QA) Joint Coordinating Committee (JCC) Domain Owners Budget/Finance Procurement Human Resources Accounting Domain Owners IT Domain Operating Decisions NYFMS Steering Committee Business/Design Decisions IT Architecture/ Design Decisions FOCAS Steering Committee NYFMS Project Director PMO Joint Project Team Lead(s) FOCAS Project Director PMO Operating Decisions Operating Decisions NYFMS Project Team Joint Project Team(s) FOCAS Project Team Executives from the State Comptroller, Division of the Budget, and Office for Technology comprise the Joint Governance Board (JGB)

History of the New York State Financial Systems Program Statewide Financial Systems Program Evolution Pre-2007 2007 2008 2009 1999-2005 Initial efforts/ assessments/ planning (business case, stakeholder assessment, strategy discussions) toward replacement of OSC’s Central Accounting System (CAS) 2005-2006 Quality Assurance Consultant (KPMG) selected for OSC Project Oracle’s PeopleSoft Financials software chosen for OSC project Deloitte assists with Executive Agencies’ system requirements definition for NYFMS OSC and DOB announce intention to create a strategic partnership to coordinate implementation of statewide financial system Deloitte joins FOCAS Project Team as Integrator/Developer OSC implementation project begins December 2007 NYFMS selects PeopleSoft Financials software Joint Governance Board requests integration analysis from Deloitte Consulting and KPMG and selects option that best balances risks and rewards Integration approach and 4/1/2011 go-live date announced MOU governing statewide financial systems program approved Teams begin joint work on COA and SOA designs NYFMS Project awards System Integrator contract to IBM Joint efforts toward integrated statewide financial system continue…

Decision Process Towards Near Real-time Integration Terry Blake Principal Deloitte Consulting

Considered 5 Options for Integration (from 2008) Option 1: Batch file transfer Two Systems, Minimally Integrated Approach Separate transaction and master data Batch file transaction transmission between OSC and Executive Agencies Option 2: Two Systems, One Maintains Master Separate systems; separate transaction data; some common master data Option 3 – Two Systems, Common Master, Near Real-Time Transaction Synchronization Near-real-time transaction transmission between OSC and Executive Agencies Option 4 – Single System Logically Separated as Two Single systems logically partitioned; separate transaction data; some common master data Option 5: Single System Application Single systems; common transaction data; common master data Common real-time transactions between OSC and Executive Agencies Integration Continuum Integration Options Low Integration --- High Integration 1 2 3 4 5 Business Process Integration Data Integration Core Data Master Data Transaction Data Low Medium High

Assessment of Integration Options (from 2008) Integration Assessment Categories Integration Options 1 2 3 4 5 Benefits – Business and IT Degree of Difficulty – Technology difficulty, organization change requirements, funding and governance requirements Cost – Design and Build Cost – Operate and Support Risks – Related to governance, reputational damage, delays, conflicting needs and priorities, and security Today - This was probably underestimated – should have been at least a half ball: Cross OSC and Executive Agencies workflow transformation

Summary of Integration Options (from 2008) Pros No interference with OSC development and timetable Maximum physical separation of application and data with simple security Key common master data across systems Separation of application and most data requires simple security setup Minimal interference with OSC schedule development and timetable Near real-time transaction workflow substantially improves end user experience Addresses needs during transition as well as the long-term Integration platform easily leveraged for future needs Key common master data across systems Still simple security setup Near real-time transaction workflow Most flexibility to gradually increase transaction integration Real-time transaction workflow All common data across systems Cons No business process integration across agencies – batch transaction data exchange Duplication of data on both systems hinders integrity and may require significant reconciliation No transaction integration across agencies – batch transaction data exchange Additional risk of frontloading OSC with Executive Agencies system implementation work Integration platform required Project risk increases as additional workload accelerates ahead of the OSC go-live Moderate increase in complexity of governance Enhanced governance for common system development and ongoing maintenance and operation Extra effort during OSC design phase or significant rework later on Enhanced governance for common system development and ongoing maintenance and operation with substantial risks in an adversarial political climate Note: Red Italics denote critical items

Conclusion: #3 best balance of risks and rewards #1 and #2 further automate financial management for OSC and Executive Agencies, but independently Easiest to implement Do not improve business process integration across agencies/systems #3 affords a significant improvement in business process for agencies Improves end-to-end workflow and near real-time processing Reduces need to reconcile the two systems Enables the “black box” translator, links to external systems, and future integration with Executive Agencies systems Presents moderate risk to timeline #4 and #5 offer even greater integration and business benefits; however they Require a common data center Increase project risk substantially Costs may initially be higher to implement #4 and #5, but over the long term ongoing maintenance costs go down

Solution Overview and Related Challenges Daniel Keene Senior Manager Deloitte Consulting

New York Financial Systems Integration Solution New York’s solution connects two instances of PeopleSoft Financials using Oracle’s Fusion middleware SOA architecture. SOA Integration Layer Near real time transactions Orchestrates interagency approvals Keeps budgets and ledgers in synch Streamlines processing OSC PeopleSoft Governor PeopleSoft Chart of Accounts Crosswalk – Converts old chart of accounts to new chart of accounts Interfacing Agencies

Statewide Financial Systems Timeline 2009 2010 2011 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr SI Procurement IAM Build & Deploy Phase 1 Go-Live H/W Env. Est. DR & HA Plan Prod H/W Env Est. NYFMS Team Training Training Requirements Fit-Gap Design Configuration Testing Agency Interface Dev & System Mods UAT Agency Data Conversion Statewide COA Definition Agency Specific COA Definition Ongoing COA Governance and Maintenance Statewide Vendor File Design Procurement Domain Governance and Statewide Vendor File creation, cleansing, agency support Statewide Vendor File Live JOINT SOA Governance SOA Design SOA POC and Build SOA Integration Test SOA UAT Identity & Access Management Design IAM POC and Build IAM Integration Testing IAM Governance and Maintenance Functional Design Configuration Test Prep Sys. & Integration Testing Prepare and Conduct OSC UAT Technical Design Develop Enhancements Agency Interface Certification Design Interfaces Construct Interfaces CAS Go- Live FOCAS Design & Construct Reports Map/Convert Data Data Conversion Testing Mock Conversions Procure & Install Prod. Env. Training Design & Development TTT End User Training OSC IAM Build & Deploy Copy of FOCAS Instance to NYFMS Change Impact Analysis Implement Business Transformation Implementation Guides Deploy Imp. Guides Bulkload Layouts to Agencies

Top Challenges Challenge New York Methodology Defining a uniform statewide chart of accounts Dedicated joint COA team Accounting Domain owners empowered to make decisions Active participation by agency SMEs SOA requires integrated business process transformation Dedicated joint SOA team Business owners review proposed business processes and identify “biggest bang for the buck” - evolve to greater integration over time Competing priorities of separate constitutional offices Creation of formal governance body to resolve issues and make decisions Identify “best approach” vs. current approach Define implementation and post production governance structures for joint components (e.g., COA, SOA, Statewide Vendor File, Identity & Access Management) Managing scope and resources of two system implementations under a single program Reviewed the OSC project for integration opportunities that leveraged completed or planned work. Manage deliverable schedule around distractions due to state budget crisis and seasonal activity JGB controls budget across the program and resolves integration issues (people, process, costs)

Questions? Joan Sullivan jsullivan@osc.state.ny.us Terry Blake tblake@deloitte.com Daniel Keene dkeene@deloitte.com

Commonwealth of Pennsylvania Building on a Solid Foundation The Next Wave of Finance Transformation NASACT August, 2009

Pennsylvania’s Timeline for Finance Transformation 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 ImaginePA - SAP Budget, Finance, Procurement, Reporting – (Start - March 2001) HR, Payroll (Start – March 2001) Go Live 3 Phases between July 2002 and January 2003 Go Live January 2004 SRM (Start - February 2006) Procurement Upgrade March 2007 EBP Upgrade August 2006 XML Go Live July 2007 Go Live Training November 2007 Revenue Initiative (Start - Within OB 2006) Agency Kick Off June 2007 Reporting July 2008 Finance Transformation (Start - February 2008) Scheduled Go Live – May 2009 Go Live May and June 2009

PA Finance Transformation Project Goals Identify and implement strategies to reduce cost Use available resources more efficiently Manage accuracy Reduce transaction processing time Improve invoice processing and imaging Improve cash management and revenue processing Design quality assurance function Improve accountability Develop a strong internal audit function Develop training organization

Finance Transformation Project Scope Policy & Process Procure to Pay Chart of Accounts/GL Revenue/Cash Management Accounts Receivable Grant Accounting Budgetary Accounting Talent & People Office of the Budget, Agencies, and External Partners Change Management and Communications Organization Impact Training Systems & Information SAP ECC 6.0 Configuration SAP Workflow Imaging

Project Governance Was a Key to Success Steering Committee Secretary of Budget Secretary of Administration Treasurer Secretary of Revenue Secretary of General Services Chief Accounting Officer PMO Members PMO Project Manager Business Leads Technical Leads Communications Lead Implementation Lead Functional Leads Advisory Committee Comptrollers CAO CIOs Treasury, Revenue, Procurement Chief Procurement Officer PMO Agency Deputy Secretaries for Administration Deployment Team Leads and Agency Liaisons Project Team Agency CIOS and HR Officials

Finance Transformation Project Specific process impacts to Invoice Processing include: Vendor requirements and mailing procedures for invoice submission were changed and enforced Invoice Processing moved from a paper-based process to an electronic document-based process using workflow and work items in SAP The review and resolution of most issues related to Invoice Processing is shared among the agency and the Comptroller Exception Processing Unit or the Quality Control Unit within Office of Budget. Documents are routed electronically to the groups involved in invoice processing.

Finance Transformation Project Business practices were and are being standardized across all agencies: Even though they were all using SAP, Agency-facing Comptroller units each had significant differences in financial processes Now that the Office of Comptroller Operations has been reorganized, financial processes are changing so that they will be consistent across the Commonwealth Printing of Revenue documents is done centrally by the Comptroller; agencies no longer have to print and mail documents Utility billing for our largest vendors is now done electronically between the vendors’ systems and SAP

Finance Transformation Project As a result of the FT Project, the organizational structure of the Office of the Budget changed to support the project goals. Changes to the current organization include: Relocation of most Comptroller staff to one site in Harrisburg Organization by functional expertise: Centralization of Comptroller Services around business functions Creation of a Payable Services Unit to manage the Accounts Payable function across the Commonwealth in a centralized structure, including separate units for PO and Non-PO Invoice Processing Creation of a Comptroller Exception Processing Unit (including a Quality Control function) to resolve invoice issues Creation of a Call Center within the Payable Services Center (PSC) to serve as the primary point-of-contact for Commonwealth vendors and agencies regarding payment issues.

Previous Structure of Office of Comptroller Operations Chief Accounting Officer Anna Maria Kiehl Previous Structure of Office of Comptroller Operations Bureaus Bureau of Financial Management Herbert A. Maguire Director Bureau of Audits Michael P. Brennan Director Bureau of Commonwealth Payroll Operations David L. Kessler Acting Director Decentralized Comptroller Operations Structure did not accommodate the tracking and management of invoices or maximizing efficiencies within processes No Training organization No Continuous Process Improvement organization No support function or strategy function for CAO Audit Policy and Subrecipient Review Christine Wegemer Assistant Director Accounting Operations Mike Burns Assistant Director Financial Operations Vacant Assistant Director Payroll Accounting David L. Kessler Assistant Director Commonwealth Reporting Eric Bartholomew Senior Manager Financial Program Support Kenneth Walker Manager Payroll Processing Bobbi L. Sweeney Assistant Director GAAP Accounting Lauren M. Dungan Manager Special Projects Richard Cardamone Manager Quality Assurance Donald Uleau Assistant Director Commonwealth Accounting Dennis Peachey Manager Central Vendor Management Susan S. Fortini Manager Budgetary Accounting Scott Heisey Manager Comptroller Offices Labor Education and Community Services Connie L. Huber Comptroller Public Health and Human Services Joyce Haskins Acting Comptroller Public Protection and Recreation Mary K. DeLutis Comptroller Liquor Control Board and PA Port Authorities Joseph Lawruk Comptroller Central Services Joseph C. Natoli Acting Comptroller Transportation Timothy A. Guss Comptroller Accounting Stanley J. McCollum Assistant Comptroller Accounting Joshua Naylor Assistant Comptroller Accounting Deb Chernicoff Assistant Comptroller Accounting Linda Sieber Assistant Comptroller Accounting Catherine J. Kelly Assistant Comptroller Accounting Gregory R. Sides Assistant Comptroller Audits John Gargiulo Assistant Comptroller Audits Thomas R. George Assistant Comptroller Audits Steven L. Swalm Assistant Comptroller Audits Alan R. Miller Assistant Comptroller Audits Joseph C. Natoli Assistant Comptroller Audits Jenny Righter Assistant Comptroller Medical Assistance Joyce Haskins Assistant Comptroller

New Structure of Office of Comptroller Operations Developed approximately 60 new position descriptions to account for technology and process changes Union communication throughout project Increased span of control for many positions Decreased organizational layers Organization Chart Legend Budget Secretary Primary Level Advisory relationship Out of scope Chief Accounting Officer, Office of Comptroller Operations Office of Workforce Development and Training Bureau of Planning and Management Audit Committee BCPO² Bureau of Liquor Control Board (LCB) Services Bureau of Commonwealth Accounting Bureau of Payable Services Bureau of Financial Management Bureau of Quality Assurance Bureau of Audits [2] Out of scope [3] This LCB Services Organization will not be apart of the centralization

Key Cooperation Across Many Agencies Office of Budget – Comptroller Operations Department of Revenue Office of Administration (Statewide HR and IT) Treasury Auditor General

Significant Results in a Short Timeframe Invoice Processing Within the first two months improved processing times from an average of 1200 daily to 1500 daily All Purchase Orders and non-Purchase orders are handled in a centralized location and either received electronically or are immediately scanned and imaged (one more wave of agencies to implement) All processing now handled via workflow and moves automatically between agencies and the comptroller Doing more with less – consolidation of offices and budget demands led to a reduction of positions (vacancies) Treasury Review Treasury is no longer scanning invoice documents, reducing the invoice processing time by 5-11 days. Vendor Accountability Vendors now receive returned invoices if they have not prepared them correctly Utility Billing 852 invoices totaling $1.5M have been received and posted via electronic billing since 6/8/09 Elimination of “Paper Pushing” 200-300 documents are typically printed per day. Since 6/8/09, approximately 4500 documents have been printed centrally instead of being printed and mailed by agencies Human Resources Changed many professional positions from civil service to non-civil service to enable better hiring and professional development opportunities in the future Accounting Better utilization of existing staff resources through standardization, reprioritization, and realignment. Auditing Of Comptroller activities on a state-wide perspective

Lessons Learned & Next Steps Don’t underestimate the time needed to get the operational support components defined and organized Keep all critical stakeholders involved and frequently engage them in critical decisions Training is needed at various intervals for the same employees throughout the change process. Begin Early with Change Management meetings to get managers comfortable with their role in the change and the reporting tools available to them to manage the change. Next Steps… Improvements are Ongoing Continued process improvement of invoices processing and support functions Internal Audit improvements Accounting standardization of processes Steering Committee continues to meet to indentify areas of interagency collaboration and cost savings

Change Management After Action Review is important to encourage “we’re in this together” approach to change On going Communication of expectations and results are essential with all stakeholders Continue to Refine Roles, Responsibilities, Workflow, training materials, and expectations Inspect what you Expect/Measure Performance Empowering Managers to Resolve Issues

Questions? Anna Maria Kiehl Chief Accounting Officer/Comptroller Office of the Budget Commonwealth of Pennsylvania akiehl@state.pa.us Christina Dorfhuber Principal Deloitte Consulting cdorfhuber@deloitte.com (717) 503-0819

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