0. The Need for Finance Transformation
NASACT Conference, Chicago, Illinois
Sharon Minnich – Deputy Secretary for Finance Administration
Christina Dorfhuber – Principal, Deloitte Consulting LLP
August 12th, 2008

1. Agenda Highlights of Deloitte’s Global Finance Transformation Survey
Deloitte’ Finance Transformation Framework and Methodology
The Commonwealth of Pennsylvania’s Finance Transformation Journey
Embarking on Your Journey – Implementation Considerations
Questions & Answers

2. Background of Global Finance Transformation Survey
Deloitte Research conducted a global survey to understand the maturity of the financial function in governments across the world.
The survey results were supplemented with secondary research and case studies.
More than 200 responses from across the world. 68 31 54 2 13 3 2 2 8 4
Source: Deloitte Research Global Study on Finance Transformation 2

3. Summary
Significant gaps exist between current finance capabilities and government needs.
Most finance organizations do better in the tactical roles than in the strategic roles that are the most critical to addressing many of government’s biggest fiscal and operational challenges.
The greatest need in government finance today is for a finance function that can offer timely information and advice to government leaders on key operational and strategic decisions.
Twenty-four percent of respondents are “Finance Masters” who support the business in making strategic decisions and act as a catalyst for change, built on a foundation of excellence in finance stewardship and operations.

4. Understanding Finance’s Roles
Stimulate behaviors across the organization to achieve strategic and financial objectives
Provide financial leadership in determining strategic business direction and align financial strategies
Strategist
Steward
Operator
Catalyst
CFO
Focus
Triangle
Finance
Function
Execution
Performance
Efficiency
Control
Leading Edge
Threshold
The Four Roles: four distinct roles, all played at the same time, all requiring different leadership and organizational competencies, as well as different operating models for efficiency.
Note the sense of a hierarchy (Maslow), and that fulfilling each role at least decently is table-stakes for “moving up” to the next one.
First, Steward
Second, Operator
Third, Strategist
Finally, Catalyst
Protect and preserve the assets of the organization
Balance capabilities, costs and service levels to fulfill the finance organization’s responsibilities 4

5. Mastering Finance in Government – Finance Masters Represent 24% of Responders
Most respondents fit into what we classify as “Novices” or “Intermediates” 3%
24%
27%
42%
High
Strategist + Catalyst
Low
Steward + Operator
Invalid responses comprise 4%.
Source: Deloitte Research Global Survey on Finance Transformation

6. A Framework for Assessing Finance Transformation Opportunities

7. To Become a Leading Finance Organization: You Need to Drive Value
Finance organizations can use six “Value Drivers” and four “Enablers” to improve their operations and better achieve their objectives towards becoming a Finance Master.
Value Drivers
Enablers

8. The Commonwealth Applied the Diagnosis in Five Critical Areas
Process Maturity Assessment
Procure to Pay
5.0
4.0
3.0
2.0
Internal Audit
Revenue /Cash Management
1.0
0.0
Current State
Future Vision
CAFR and Financial Reporting
Accounting Operations
Stage Rating Scale
Stage 1 – Nonexistent: No formal process, technology, organization is in place
Stage 2 – Developing: Process, tech., org. is partially defined and informally communicated
Stage 3 – Defined: Process, tech, org. is defined, documented, understood and operational
Stage 4 – Advanced: Process, roles, tech, is defined, documented and introduced throughout the organization
Stage 5 – Leading: Continuous planning process is fully integrated into all parts and aspects of the organization

9. The Commonwealth of Pennsylvania’s Finance Transformation Journey

10. Foundational Initiatives and Their Objectives
ERP Implementation: IMAGINE, PA
Access to real time, on line data
Adopt best practices
Replace aging systems
Enhance customer and employee service

11. Foundational Initiatives and Their Objectives
SRM: SAP Procurement Upgrade
Implement end to end e-procurement
Implementation of XML for transmittal of PO and Invoices
Improve vendor service
Register as a supplier, maintain company data as an administrator
Set up additional users for the company for bidding (or other administrators)
Maintain order addresses and remit to information
Update banking details for electronic payment processing
Respond to bid invitations
Revenue Initiative
Eliminate duplicative revenue entry systems
Standardize revenue processing
Provide real time revenue reporting

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

13. ERP Implementation: IMAGINE, PA
Results to Date – ERP
ERP Implementation: IMAGINE, PA
Commonwealth Employees Can: View their benefits, pay, and leave balances on-line change or modify personal information on-line
Select their benefits on-line
Request leave and track the approval process
File travel claims on-line and be paid electronically
View W-2 Federal Tax information
Monthly Transactions: Electronic paychecks processed: 192,000
Travel expense vouchers processed: 25,000
Human resource actions processed: 206,000
Financial transactions processed: 1,300,000
Budget transactions processed: 1,666
Procurement transactions (requisitions, purchases, etc) processed: 143,000
Business reports processed: 25,000
Total Monthly Transactions Processed: 1,892,666
Recurring Major Activities Supported: Creation of the comprehensive annual financial report and creation of the Governor’s budget

14. Results to Date – SRM Implementation
Established online catalogs for agency and Commonwealth use. Over 83 “warehouses” have been loaded to date resulting in proper price and item data, streamlines process
Established Auto POs for suppliers. Today there are 10,349 orders flowing through. 7 percent of POs are Auto.
P-card enabled for payment on PO to eliminate manual invoice entry
Suppliers register themselves in database and maintain their profiles. More than 10,800 suppliers currently

15. Results to Date – Revenue
Eliminate duplicative revenue entry systems
Approximately 600 end user trained between November 2007 and April 2008
Decommissioned legacy revenue entry system – July 1, 2008
Provide real time revenue reporting
SAP Reporting running parallel to Department of Revenue reporting
All current revenue reports able to be replaced with new reports
Improved reporting functionality
Receipt of Treasury data directly to SAP
Planning to decommission Department of Revenue legacy reporting system end of 2008

16. 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
Develop a strong internal audit function
Develop training organization

17. Project Scope 17 Procure to Pay Chart of Accounts/GL
Policy & Process
Procure to Pay
Chart of Accounts/GL
Revenue/Cash Management
Accounts Receivable
Grant Accounting
Budgetary Accounting
CAFR/Financial Reporting
Special Accounting
Quality Assurance/Management Reporting
Internal Audit
Talent & People
Office of the Budget, Agencies, and External Partner:
Change Management and Communications
Organization Impact
Training
Systems & Information
SAP ECC 6.0 Configuration
SAP Workflow
Optical Character Recognition (OCR) and/or Imaging 17

18. Timeline 2008 2009 Commonwealth Technical UpgradeJ F M A M J J A S O N D J F M A M J
Development & Unit Testing
Integration/Regression Testing
Commonwealth
Technical Upgrade
Check Out
Cutover
Stabilization
Phase 1 – Vision/Plan/Design
Phase 2 - Build
Phase 3 – Deliver & Operate
Prepare
And Doc.
Review
Finance Transformation Project (FT)
Executive Session
Design of Business Processes -
Technical and Organizational
Assessment
FT Go -
Live -
November 1
Stabilized Production Environment
Complete Integration Testing
Provide a Copy to the FTT

19. Workshops and validation sessions across all scope areas:
Current Status
Workshops and validation sessions across all scope areas:
Draft design and recommendations document for processes in scope
Imaging and workflow analysis
Preparing for prioritization session for recommendations 19

20. Embarking on Your Journey - Implementation Considerations

21. Path to Finance Mastery – Two Stage Process
Almost no agency in our analysis or experience has been able to master strategist and catalyst capabilities without a foundation in stewardship and operator capabilities
Stage One
Improve Core Capabilities
Stage Two
Provide More Strategic Insight
What government does:
Set strategic priorities
Improve resource allocation
Evaluate policy alternatives
Set performance measurements and targets
How government should do it:
Provide better value for money
Protect value through improved risk management
Support talent management
Compliance
Management reporting
Forecasts and budgetary plans
Financial policies, processes, and procedures
The Finance Masters as defined in this study have in many cases stronger stewardship and operator capabilities than the intermediates.
Thus, mastering finance as strategists and catalysts does not mean that stewardship and operator capabilities can be neglected. If anything these core capabilities need to be as robust as possible. The path to becoming a finance master thus involves a two-stage process.
Improve core capabilities. This step entails developing analytical capabilities and improving on steward and operator roles. This will be the main initial focus of organizations trying to climb out of the novice category.
Provide strategic insight. In this stage, government organizations use their strong analytical abilities to develop strategist and catalyst roles. This is the transition intermediates must make to become finance masters.
To move up the curve to finance master, Intermediates must acquire a new set of capabilities that help governments agencies first determine what they should do and second how they should operate.

22. Lessons Learned
Diagnose starting place and define expected or desired end and communicate to senior leadership
Understand tolerance and capacity for change
Create business case to bridge gaps, create focus and common ground
Secure executive decision makers who understand benefits, willing to make tough decisions, become an active participant
Address the core infrastructure and operational deficiencies before going to far into strategic role
Involve and engage all parts of the enterprise (HR, IT, Procurement, Treasury, Budget, Comptroller, Revenue, Agencies)
Stage and pilot your implementation

23. Questions & Answers

24. Christina Dorfhuber Sharon Minnich
Contact Information
Christina Dorfhuber
Principal, Deloitte Consulting LLP
Sharon Minnich

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