Minding the money
New methods promise to change the financial and administrative processes of state government<@VM>Key financial and administrative system contracts
- By Ethan Butterfield
- Dec 11, 2005
David Wilson of Accenture
"People want to know, and be able to explain to their constituents, what they're spending money on [and] in language that their constituents can understand." ? Caroline Rapking, CGI-AMS
Look out ? with budgets recovering from years of hardship, and delayed projects getting back on track, the state and local government finance and administration market is expected to generate some substantial heat in 2006.
One of the forces driving the new projects is a simple concept, though one that industry officials said has, of late, largely been ignored by the public sector: Understand what resources you've got, where they are and how they're being used.
Having grappled since 2000 with severe budget shortfalls, states have emerged from that crucible determined to implement new automated financial and business applications that will let them save money, operate more efficiently and better understand their fiscal positions.
"It's about performance information. That really is the trend," said Caroline Rapking, vice president of consulting services for CGI-AMS of Fairfax, Va. "That's what's coming up. People want to know, and be able to explain to their constituents, what they're spending money on [and] in language that their constituents can understand."
Integrators such as Accenture Ltd., BearingPoint Inc., CGI-AMS and Deloitte Touche Tohmatsu offer states in need of financial clarity a variety of solutions, including business process re-engineering, financial consulting, efficiency improvements through integrated enterprise solutions and so-called dashboard applications that track resources and provide instant, enterprisewide business information.
Several states are likely in 2006 to issue requests for proposals for new or upgraded financial and administrative systems, industry officials said. California and North Carolina are considering human resources and payroll function upgrades. Wisconsin may put out an RFP for human resources and payroll as well as for procurement. New York is considering an enterprisewide financial system, which could be the single largest project awarded at the state level in 2006, according to industry officials who are tracking upcoming projects.
State spending on hardware, software, services and solutions in the administration and finance sectors will rise at a compound annual growth rate of 7.8 percent, from $9.1 billion in 2005 to $11.4 billion in 2008, according to market research firm Gartner Inc., Stamford, Conn.
"It's a very robust market," said Bob Campbell, national managing director for public sector with Deloitte Touche Tohmatsu of New York. "Because the state economic crisis was deeper this time around, projects were bottled up for longer, and the spike of project activity is a lot more dramatic than what we saw in the early 1980s and early 1990s recovery periods."
THE DASHBOARD VIEW
A powerful tool for viewing data held by financial and administration information systems is the dashboard. Dashboard products can monitor information and display it quickly, giving decision-makers a real-time view of their operations.
"It's like, I want to be able to get the cash position of a state government in a nanosecond, and I push this button, and boom: I know what the cash position is by fund," Rapking said.
Government agencies should consider implementing dashboards as a tool for filtering information and measuring performance against benchmarks, said David Wilson, managing director for finance and administration at Accenture Ltd.
Benchmarking is the process of comparing one organization's performance in specific functions to that of similar organizations, and identifying areas where improvement is possible.
In May, Ohio selected Accenture to implement a statewide enterprise resource planning system from PeopleSoft, now part of Oracle Corp., to modernize the state's financial, human resources and payroll operations. The three-year, $85 million Ohio Administrative Knowledge System project will replace state systems that are up to four decades old.
Accenture encouraged Ohio to benchmark its back-office functions, but it has not yet done so, a company spokesman said.
Accenture also is working on Tennessee's statewide ERP project, where the company helped the state benchmark its administrative, finance, human resources, payroll and procurement functions before moving forward on a new system implementation, said Jan Sylvis, chief of accounts for Tennessee.
The new human resources and payroll system is slated to be up and running in December 2007, with finance and procurement systems to be operational in summer 2008. Tennessee plans to benchmark its new systems' performance again in 2009 to determine savings, Sylvis said. The new systems that Tennessee plans to implement also will have dashboard functionalities, Sylvis said.
[IMGCAP(2)]Comprehensive knowledge of a state's true fiscal condition includes more than just details of cash funds, Rapking said. It also includes a state's real estate holdings, heavy equipment, office equipment, bridges, roads and other state infrastructure.
CGI-AMS lists 17 states that are clients for its statewide administrative systems products. It also recently won tentative approval of its bid to guide a statewide enterprise application implementation in Virginia. Terms of that deal are still being negotiated and have not been released.
Tracking information through benchmarking allows a better understanding of what business processes cost, how they are being performed, what the error rates are, how long it takes to process payments, even how long it takes to recruit and hire a new employee, Wilson said. This information can be used to better allocate resources, take advantage of efficiencies and possibly even save state programs that citizens care about, he said.
"In these fiscally constrained days, the last thing our governments and politicians should be doing is cutting the citizen-facing programs: the social services programs and transportation programs and all of that," Wilson said.
Given the recent state budget shortfalls, it's surprising that so few states have yet to tighten their financial controls, said Jim Krouse, manager of state and local market analysis at Reston, Va., research firm Input Inc.
"I'd bet you nine out of 10 government jurisdictions can't even come close to telling you what they spend to the penny," Krouse said. "Not even close. And I'm being nice with nine out of 10. It's probably more like 99 out of 100."
A LAYERED APPROACH
To implement a wide-ranging system, a state must have a consolidated enterprise financial system over which to layer the dashboard to extract precise and useful information.
And, according to a Gartner survey of state technology implementation wants, enterprise resource planning is still at the top of most state wish lists, said Rishi Sood, a Gartner vice president. ERP in the financial sector, if it is partnered with a dashboard application, can offer a higher level of functionality and guide better decision-making -- a fact isn't lost on high-level state officials, Sood said.
"It's certainly a part of the changing nature of government and the changing nature of how these systems are being used," he said.
Many states have adopted or are working to adopt financial enterprise resource planning, but even integrators with which the states have worked are questioning the usefulness of those systems in the absence of further applications to produce more useful information.
"It has been kind of a knee-jerk investment, where ERP was the latest hot thing, so let's go ahead and put an ERP system in," Wilson said. "But it wasn't grounded in a good understanding of how the environment in these states actually operated, and where they really needed to make the investment."
The result was some efficiency and some cost savings, but no real business process changes, said BearingPoint Senior Adviser Donald Edmiston. Before joining BearingPoint of McLean, Va., Edmiston was director of Pennsylvania's ERP project, ImaginePA, which revamped the state's accounting, budgeting, personnel, payroll and purchasing functions.
Although some states are willing to implement new systems, not all are ready to change the way they do business. Without making that shift, the new systems won't be as beneficial, Edmiston said.
"If you're not willing to go in and change your business processes, then all you're doing is paving the cow path," he said.
Tightening audit standards should have loosed a flood of new ERP financial system projects in states over the last few years, Edmiston said.
Such implementations have been relatively rare, however, with states choosing instead to pay for the additional manual labor required to put out more complex audit reports without revamping their systems, he said.
But that could change. As many as 15 states could start ERP projects in finance and administration over the next two years, said Terry Blake, principal of public-sector consulting for Deloitte.
This fall, Deloitte completed a nine-month, $10 million implementation of an ERP system from SAP America Inc. for the Colorado Transportation Department. The new system integrated the department's more than 50 standalone IT systems.
Many of the ERP proposals that are expected over the next 24 months likely will be for new payroll systems, and that could be the first step toward broader implementations, Gartner's Sood said.
"The focus has moved away from the big-bang, all-in-one approach to the more modularized approach of perhaps implementing HR first, then financials, then maybe a procurement module," he said.
Payroll tops many states' wish lists, because a potential failure in that system could be damaging politically, BearingPoint's Edmiston said.
"You make a mistake in that system, and you don't pay someone, it's newspaper headlines," he said. "In your procurement system or finance system, if you miss a payment to a vendor, you don't hear anything about it. So they're trying right now to mitigate risk if they're going with HR and payroll."
Staff Writer Ethan Butterfield can be reached at email@example.com.CALIFORNIA CORRECTIONS AND REHABILITATIONS DEPARTMENTProject:
Enterprise Resource Planning Solution and Systems IntegrationValue:
$10 million for one yearRFP:
The California Corrections and Rehabilitations Department wants a contractor to serve as the prime for an ERP implementation and related systems integration services. The department wants a commercial ERP package to automate, integrate and standardize its business processes for financial and budget management, human resources and supply-chain management.NORTH CAROLINA IT SERVICES OFFICEProject:
Asset Management System ImplementationValue:
$4.5 million; length to be determinedRFP:
First quarter 2006Summary:
The Fiscal and Financial Services Division may want a contractor to offer products and services for an asset management system. The system would address budget development and maintenance, financial report preparation, accounts receivable and accounts payable management, payroll, fixed-asset accounting and agency purchasing.DELAWARE FINANCE DEPARTMENTProject:
PeopleSoft Financials Re-engineering ProjectValue:
To be determinedRFP:
The Delaware Finance Department wants a contractor to implement a PeopleSoft financial management module to replace a legacy financial management system installed in the mid-1980s.LOS ANGELES CITY COMPTROLLERProject:
Financial Management System ProjectValue:
$21.5 million over three yearsRFP:
The city comptroller wants a software vendor and a systems integrator to replace its financial management system. The system should include modules to handle general accounting, budget control, accounts receivable and accounts payable.MICHIGAN MANAGEMENT AND BUDGET DEPARTMENTProject:
Time and Expense Management SystemValue:
The Michigan Management and Budget Department wants a contractor to enhance its time and expense systems and processes. The contractor must integrate the new system with an existing ERP system that handles human resources, payroll and benefits administration.MESA, ARIZ., INFORMATION SERVICES DEPARTMENTProject:
Financial Management SystemValue:
$25,000; length to be determinedRFP:
The Mesa Information Services Department wants a contractor to replace its financial management systems with a modern, integrated system. The new system will replace about a half dozen standalone systems and might need to be integrated with as many as eight other systems.