Financial Management System Needs Assessment Study Update State of Kansas Financial Management System Needs Assessment Study Update Briefing for Agency CFOs October 3, 2006

Agenda Welcome and Introductions CFO Representation Project Overview Project Scope Key Activities Business Case Analysis Contact Information Questions

CFO Representation Stakeholder Agencies Sixteen agencies have been identified as “stakeholder agencies” Adjutant General Department on Aging Department of Agriculture Department of Administration Department of Health and Environment Department of Transportation Highway Patrol Department of Labor Department of Commerce Juvenile Justice Authority Department of Corrections Department of Revenue Social and Rehabilitation Services Kansas Health Policy Authority Judicial Branch Department of Wildlife and Parks

STA Experience Statewide ERP/eProcurement Systems State of Arkansas State of Tennessee State of Nebraska State of Texas Commonwealth of Kentucky State of Minnesota State of Wisconsin State of Texas State of Nevada

Project Overview What is ERP? FMS? Enterprise Resource Planning (ERP) – A comprehensive suite of integrated modules delivered by a single software vendor that provides end-to-end support for statewide administrative services For purposes of this study, we will use the term ‘Financial Management System’ (FMS) rather than ERP since the scope of the project includes financials and procurement only – due to current / future investment in the SHARP system FMS is a proposed solution that provides functionality similar to STARS, SOKI, Central Setoff System, and other agency administrative systems, but in a fully integrated manner

Project Overview Why FMS? Satisfy the needs of the agencies Eliminate the proliferation of stand-alone agency systems Avoid the cost associated with new agency administrative systems Avoid the cost associated with maintenance/upgrades of current systems Significantly improve the quality, quantity, and timeliness of information Effective decision-making Efficient and accurate research capabilities Enhanced ad hoc reporting and inquiry functionality Streamline processing and control of electronic “documents” through workflow management Facilitates document routing, review and approval

Project Overview Why FMS? Streamline and simplify State’s business processes Financial Budgeting Procurement Other administrative operations Improve operational efficiency Commercially-available FMS systems include many features representing best management practices Support Web-enabled self-service State employees Vendors conducting business with the State

Project Overview Why FMS? Replace existing disparate systems Costly to maintain Difficult to administer Automate and integrate State’s financial accounting, procurement, asset management, and other administrative business processes within a single database Provide single point of entry Eliminate duplicate points of data entry Eliminate duplicate databases Simplify reconciliation Reduce/eliminate paper documents Reduce paper and handling costs (e.g., vouchers) Simplify record retention and audit compliance

Project Overview Proposed FMS functionality for consideration PROCUREMENT Solicitations (RFx) Catalog Procurement Reverse Auctions Inventory Management Commodity Management Vendor Management CORE FINANCIAL General Ledger / Budgetary Control Accounts Payable Accounts Receivable & Cash Receipting Cash Management Cost Allocation Grant Accounting Project Accounting Asset Management HR / PAYROLL Automated Interfaces to/from SHARP Common Database BUDGET DEVELOPMENT INTEGRATION Appropriation Budget

Key Activities FMS Needs Assessment Update the system requirements for a new integrated FMS Update the business case analysis associated with implementing a new FMS Determine whether there is a compelling business case for procuring/implementing an integrated statewide FMS Submit recommendations regarding: Organizational best practices Implementation best practices

Key Activities Timeline FMS Needs Assessment Update Validate Functional / Technical Requirements Project Start-Up Validate the Business Case Sept Oct Dec Nov Summary project schedule From the BAFO document that meets their revised project timeline Business Case Analysis Report Updated Needs Assessment Organization / Implementation Best Practices Key Deliverables

Project Scope Update/Validate FMS Requirements Functional Components Procurement Grants / Projects Cash Management General Ledger / Cost Allocation / Activity Based Costing Accounts Payable / Accounts Receivable Inventory / Asset Management Budget Development / Integration HR / Payroll Integration Data Warehousing / Reporting General and Technical

Project Scope Update / Validate FMS Requirements Functional and Technical Requirements Development Process Requirements from 2001 Needs Assessment Study Baseline Draft Final Project Team Focus End User Community Requirements Requirements Requirements Group STA Requirements Toolkit

Business Case Analysis Costs versus Benefits Standard financial analyses will be performed using dollar-quantifiable costs and benefits: - NPV (Net Present Value) - IRR (Internal Rate of Return) - Payback Period FMS Costs Software Hardware Implementation Upgrades Ongoing Maint. & Mgmt. Training FMS Benefits/Avoided Costs System Savings Replacing current systems Not implementing planned systems Process-Improvement Benefits Value Pocket benefits 1 2 vs. 3

Business Case Analysis Financial Analysis Illustrative 1 2 3

Business Case Analysis Information We Need From Agencies Information Needed Data-Gathering Approach FMS Costs: Estimated costs of implementing, maintaining, and upgrading Information provided by vendors and other statewide ERP projects STA experience 1 System Savings: Estimated cost savings from: Replacing existing statewide & agency-specific systems Not implementing planned/anticipated systems Agency System Survey Interviews with statewide administrative systems SMEs 2 Process-Improvement Benefits: Estimated cost savings and other benefits that an FMS system would likely enable/yield 3 Value Pocket Survey Interviews with State employees who are process/functional SMEs SMEs = Subject Matter Experts

Business Case Analysis Agency System Survey Walk-through of Agency System Survey

Contacts for Agency System Survey If you have any questions whatsoever regarding this survey, please do not hesitate to contact: Chip Julian at: chip.julian@staconsulting.net (281) 794-1391 mobile Mitt Salvaggio at: mitt.salvaggio@staconsulting.net (512) 797-7338 mobile Please complete and return the survey via e-mail attachment to Chip Julian no later than the close of business on October 18, 2006

Business Case Analysis Cost versus Benefits Standard financial analyses will be performed using dollar-quantifiable costs and benefits: - NPV (Net Present Value) - IRR (Internal Rate of Return) - Payback Period FMS Costs Software Hardware Implementation Upgrades Ongoing Maint. & Mgmt. Training FMS Benefits/Avoided Costs System Savings Replacing current systems Not implementing planned systems Process-Improvement Benefits Value Pocket benefits 1 2 vs. 3

Business Case Analysis What Are Value Pockets©? Most likely sources of significant value (i.e., cost savings and other benefits) to be found in each process/functional area within the scope of an FMS implementation Provide quantified justification STA’s proprietary formulas and calculations Used to quantify process-improvement benefits obtained through the implementation of a statewide FMS

Business Case Analysis Value Pocket© Categories Dollar-Quantifiable System Benefits/Cost Savings (Tangible Items) Improved Process Outcomes/Results, for example: Decreased cost of goods and services Decreased inventory carrying costs Reduced Cost of Executing the Process. For example, reassign/reduce headcount (FTEs) by: Reducing the number of FTEs required to enter data into systems: Avoid entering the same data/transactions into multiple systems Avoid entering data on a form that is then entered into a system (instead of entering into system directly) Reducing the number of FTEs require to generate needed information by no longer being required to obtain and consolidate data from multiple sources (also results in faster and better decision making) Reducing the number of FTEs required to reconcile data among multiple systems Reducing the number of FTEs required to track transactions spread over multiple systems (e.g., avoid keeping tracking data in spreadsheets, using paper logs, etc.) Non-Dollar-Quantifiable System Benefits/Cost Savings (Intangible Items) Reduced Cycle Times In Support of Strategic Initiative(s) Increased Accuracy Improved Usefulness of Information

Business Case Analysis Examples of Value Pockets© PROCUREMENT Solicitations (RFx) Catalog Procurement Reverse Auctions Inventory Management Commodity Management Vendor Management CORE FINANCIAL General Ledger / Budgetary Control Accounts Payable Accounts Receivable & Cash Receipting Cash Management Cost Allocation Grant Accounting Project Accounting Asset Management HR / PAYROLL Automated Interfaces to/from SHARP PROCUREMENT VALUE POCKETS Reduce cost of goods and services Reduce cost of conducting solicitations Reduce cost to maintain vendor file Reduce inventory carrying costs Reduce inventory reorder cost Common Database BUDGET DEVELOPMENT Appropriation Budget

Business Case Analysis Examples of Value Pockets© PROCUREMENT Solicitations (RFx) Catalog Procurement Reverse Auctions Inventory Management Commodity Management Vendor Management CORE FINANCIAL General Ledger / Budgetary Control Accounts Payable Accounts Receivable & Cash Receipting Cash Management Cost Allocation Grant Accounting Project Accounting Asset Management FINANCIAL VALUE POCKETS Increased compliance with State prompt payment law (interest savings) Increase collection of receivables Reduce time responding to vendor inquiries Reduce time maintaining the chart of accounts Reduce mailing costs HR / PAYROLL Automated Interfaces to/from SHARP Common Database BUDGET DEVELOPMENT Appropriation Budget

Business Case Analysis Value Pocket© Components For each Value Pocket in each process/functional area, we identify: Specific Nature and Source of the Value FMS Enabler Formula for Calculating the Value (i.e., Benefit or Cost Savings), if applicable Source of Value for Each Variable in the Formula

Business Case Analysis Value Pocket© Components – Example Source of Value Reduce the prices the State pays for goods and services Integrated FMS functionality, including eProcurement functionality, would enable the State to better leverage its purchasing power via consolidated reporting and reduced maverick spend FMS Enabler Relevant State spend x Savings factor Formula & Source for Values of Variables Division of Purchases Experience of Other Organizations

Questions?