the need for finance transformation nasact conference, chicago, illinois sharon minnich – deputy...

The Need for Finance Transformation

NASACT Conference, Chicago, Illinois

Sharon Minnich – Deputy Secretary for Finance AdministrationChristina Dorfhuber – Principal, Deloitte Consulting LLPAugust 12th, 2008

- 2 -- 2 -Copyright © 2008 Deloitte Development LLC. All rights reserved.

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


More than 200 responses from across the world.Deloitte Research conducted a global survey to understand the maturity of the financial function in governments across the world.

The survey resultswere supplemented with secondary research andcase studies.

Background of Global Finance Transformation Survey

Source: Deloitte Research Global Study on Finance Transformation

31

54

2

2

2

4

13

68

3

8


Summary

• Significant gaps exist between current finance capabilities andgovernment 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.


Understanding Finance’s Roles

Strategist

Steward Operat

or

Catal

yst

CFO Focus

Triangle

CFO Focus

Triangle

FinanceFunction

Execution Perfo

rman

ce

EfficiencyControl

Leading Edge

ThresholdPerformance

Balance capabilities, costs and service levels to fulfill the finance organization’s

responsibilities

Provide financial leadershipin determining strategic business direction and

align financial strategies

Protect and preserve the assets of the

organization

Stimulate behaviors across the organization to

achieve strategic and financial objectives


Invalid responses comprise 4%.

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

LowLow Steward + Operator High

Source: Deloitte Research Global Survey on Finance Transformation


A Framework for AssessingFinance Transformation Opportunities


Finance organizations can use six “Value Drivers” and four “Enablers” to improve their operations and better achieve their objectives towards becoming a Finance Master.

To Become a Leading Finance Organization: You Need to Drive Value

Enablers

FinanceStrategy

Leading Edge

Risk & Capital

Regulation,Controls &

Governance

Strategy &Execution

ThresholdPerformance

Talent &People

Policy &Process

FinanceOrganization

Systems &Information

Close,Consolidate

& Report

Performance& Decisions

Enablers

TransactionProcessing


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

The Commonwealth Applied the Diagnosis in Five Critical Areas

Process Maturity Assessment Procure to Pay

Revenue /Cash Management

Accounting OperationsCAFR and Financial Reporting

Internal Audit

Current State

Future Vision

0.0

1.0

2.0

3.0

4.0

5.0


The Commonwealth of Pennsylvania’sFinance Transformation Journey


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


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


Pennsylvania’s Timeline for Beginning Finance Transformation

ImaginePABudget, 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

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Go Live 3 Phases between July 2002 and January 2003

Go Live January 2004

EBP Upgrade August 2006

Procurement Upgrade March 2007

XML Go Live July 2007

Agency Kick Off

June 2007

Go Live Training November 2007 Reporting

July 2008

Scheduled Go Live May 2009


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


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


Results to Date – Revenue

• 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


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


Project Scope

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


Timeline

Co

mm

on

we

alt

hT

ec

hn

ica

l U

pg

rad

eF

ina

nc

e T

ran

sfo

rma

tio

n P

roje

ct

(FT

)

November 1Complete Integration

Testing

Stabilized Production Environment

Provide a Copy to the FTT

Development & Unit Testing

Executive Session

PrepareAnd Doc.Review

Design of Business Processes

FT Go-Live

Integration/Regression Testing

-

-

J F M A M J J A S O N D J F M A M2008

J

Check Out

Cutover

Technical and OrganizationalAssessment

2009

Phase 1 – Vision/Plan/Design Phase 2 - BuildPhase 3 – Deliver

& Operate

Stabilization


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


Embarking on Your Journey - Implementation Considerations


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 andoperator capabilities

Stage OneImprove Core Capabilities

Stage TwoProvide 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


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


Questions & Answers


Contact Information

Christina DorfhuberPrincipal, Deloitte Consulting LLP

[email protected]

+1 717 651 6230

Sharon [email protected]


This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering business, financial, investment, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation.


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the need for finance transformation nasact conference, chicago, illinois sharon minnich – deputy...

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