State of Michigan’s Project SIGMA - SAAABA

1 State of michigan s Project SIGMA Presented to State Association of Accountants, Auditors and business Administrators ( SAAABA ) Ruth Schwartz, CPA, Project Director April 21, 2015 Topics for Today Project Overview, Targeted Improvements, and Functionality Schedule, Team, and Accomplishments Phase 1, Budget Development Phase 2, Core Financials, Procurement, Employee Time & Expense, and Labor Distribution End User Benefits 2 Project SIGMA Statewide Integrated Governmental Management Applications ( SIGMA ) is the State of michigan s Enterprise Resource Planning (ERP) business process and software implementation. SIGMA will integrate systems and provide end-to-end support in one system for statewide administrative functions including financial management, procurement, asset management, performance budgeting, time and expenses. It will ultimately be used by all 50,000 State employees, external vendors, local units of government, and colleges & universities.

2 3 Project SIGMA Overview 4 Eliminates operational risk related to critical financial systems that have outlived their usefulness including MAIN and DCDS Provides built-in best practices and business rules for government accounting that expands the tools for existing staff, protects us with retiring staff, and attracts new talent Provides sophisticated statewide controls while providing the flexibility Departments need to operate efficiently Provides timely management information that supports operational improvements and performance reporting Fiscally conservative business case Key Rationale for SIGMA 1. 2. 3. 4. 5. Targeted Improvements Increase Accounting Detail Posted from Agency Systems Support Treasury Functions: Debt Reporting Support for Investment Accounting Bank Reconciliation Warrant Writing Automate Interfaces with Banks Implementation of Positive Pay Banking (if feasible) Automate Vendor File Synchronization Reduce the Number of Applications Supported and Interfaced Integrated Procurement Automate and Streamline Budget Preparation Reform Chart of Accounts /Uniform Coding Block Usage Enhance Transparency & Accountability Portal MIDB Currency and Reporting Move to Vendor Supported, Upgradeable COTS Solution Automate and Streamline CAFR Production Project & Grant Reporting, Budgeting, and Processing Cost Allocation 5 SIGMA s Integrated System 6 MIDB Time, Expense Reimbursement, and Labor Budget Development Self Service For Employees Management Self Service Fixed Assets Accounts Payable Inventory Purchasing Financial Management Vendor Self Service 7 Today !

3 Tomorrow 8 ..to ! Tomorrow, Continued 9 ..and this! ! Forecasting Project Schedule Budget Preparation 8/2015 Core Financials 10/2016 2014 2015 2016 2017 Phase 1: Budget Development Phase 2: Core Financials for All Agencies Budget Dev Implemented 8/2015 Load Budget for FY17 Core Financials Implemented 10/2016 (13 months) (27 months) 10 2013 Ongoing Support Project start 7/2014 > 8000 Requirements business Case RFP for software, implementation services, hosting and managed services Procurement Added to Scope 12/2014 Phase Functionality Phase 1 Budget Preparation Statewide Budget Development Legislative Tracking Salary Benefit Forecasting System Budget Bill and Budget Book Publication Phase Budget Preparation Agency cost accounting structures added to budget development Foundation for performance based budgeting (objectives, measures, and metrics) Solution upgrade Integration with financials Budget Control Phase 2 Core Financials General Ledger and Financial Reporting Accounts Payable and Disbursements including Vendor Self Service Vendor Tax Reporting and Backup Withholding Accounts Receivable Asset Management, Inventory Management Budget Control Cash Reconciliation Cost Allocation Grant and Project Accounting Employee Time and Attendance, Expense Reimbursement, and Labor Distribution FHWA Billing Grants Management (Grantee and Grantor) Positive Pay Banking Procurement Data Warehouse Transparency and Accountability Portal 11 Roadmap 12 Strong Project Team Staffed by ~ 200 Members Agency Implementation Leads & Teams Consisting of: SOM employees from 11 Agencies 3 Contract Partners.

4 CGI System, Integrators, Managed Services ISG Quality Assurance Advocate - PMO 13 Co-located in the Victor Center Validated all in scope requirements Managed environments available and in use Phase 1 design complete with no modifications Phase 1 system test and mock conversions over 50% complete, preparing for User Acceptance Testing Phase 2 business process designs well underway Key design decisions: SIGMA budget structures Chart of Accounts (COA) Budget Bill Publishing approach Budget Fiscal Year Point of Sales and Cashiering Grants Project history conversion Key Accomplishments To Date 14 Engaged stakeholders Collaborated with Office of Internal Audit and IT Investment Fund Project Assurance Multiple Agencies in 100+ validation, Core Design, and business Process sessions Delivered 24 system overview sessions in open forums and received good feedback Agency Implementation Guide rolled out to Agencies week of 4/13 Training for Phase 1 User Acceptance Testing this week Key Accomplishments To Date 15 Budget Development Phase 1, , and 2 Key gains upon full Project implementation Automate and streamline budget development processes Single data repository Automated workflow Integration with financials Projections, what-if capabilities, modeling.

5 Trend analysis Improved baseline economic processes Eliminate duplicate data entry 16 michigan s Budget Process 17 michigan s Budget Process is made up of 5 major processes Budget Development Executive Budget Book Budget Bills Legislative Tracking Budget Administration Budget process begins with the Budget Instructions and ends with the loading of the budgets to Financial SIGMA Budget will be utilized to complete all 5 of the major processes 18 Phase 1 Current Services Baseline Proposals for Change Capital Outlay Salary and Benefits Forecasting Publication of Executive Budget Book and Budget Bills Tracking of Legislative Changes Phase Load enacted budget to SIGMA Financial Statewide Spending Plans Work Projects Foundation for performance-based budgeting Phase 2 and Beyond Post enactment budget changes The ability to develop budgets at lower chart of account elements Integration with actual revenue and expenditure data Trend analysis, projections, and What-If scenarios Performance-based budgeting capabilities Budget Development Phase 1, , 2, and Beyond Salary and Benefit Forecast (SBFS) 19 The Salary and Benefit Forecasting (SBFS) tool within SIGMA Budget is designed to use position and employee data to develop highly accurate estimates of personnel related budget costs.

6 The following Query is an example of data available as an output from the SBFS process. Current Services Baseline (CSB) 20 A CSB adjustment is a level of funding appropriated and/or the caseload or workload actually funded in the current fiscal year appropriations. Adjustments remove one-time items and reflect non-discretionary budget costs across the budgeting horizon. Proposal for Change (PFC) 21 A PFC adjustment is a discretionary initiative, including a fee proposal, which reduce or enhance a department's enacted budget. These adjustments are ongoing, one-time, or both upon submission and are tracked through the process by the type of funding. Form created at the department level. Upcoming Activities For Phase 1 Go Live 22 Phase 1 Go Live Activities Version Date: 4/15/2015 23 Phase 2 Core Financials Looking forward to: Standardized use of coding block/COA Data coding reduction options Automated Cost Allocation Elimination of Administrative Revolving Funds (ARFs)

7 Integrated Time & Expense, Procurement, Fixed Asset and Inventory modules Integrated Procurement functionality Improved Project and Grant budgeting, accounting, billing and reporting Increased Reporting and Workflow functionality Online queries Parallel and sequential Design Approach 24 Standardized use of coding block/COA 25 Increased accuracy and effectiveness of the COA Improved Transparency Portal reporting Flexibility, as agencies can use detailed elements and still maintain centralized data integrity Improved access to summary level data while still providing drill down capability to detail level data Increased accuracy and efficiency by the use of additional detail COA elements that are standardized across agencies Increased flexibility, as agency ledgers and the central ledgers are based on single transaction processing that updates affected ledgers and balances COA Mapping R*STARS to SIGMA Sample 26 COA elements to be used in Phase 1: Department Fund Appropriation Object Revenue BFY (= AY) SIGMA Chart of Accounts 27 Budget Fiscal Year (BFY) 28 Work projects and capital outlay appropriations will remain available to spend for the statutorily authorized length of time by using a unique multi-year BFY code.

8 Rolling this budget authority forward for qualifying encumbrances is a recognized best practice in accounting, and provides greater online transparency of total budget dollars spent. Unspent budget authority that is not a qualifying encumbrance, capital outlay appropriation, or work Project appropriation will continue to lapse and not roll forward. Budget Control 29 A multi-level budget structure will track budget amounts for both spending and revenues. COA Combination Validation pages are being developed to supplement michigan s Budget Control needs. Management budgets allow agencies more granularity than the State -wide appropriation budget. Management Allow monitoring expenditures and revenues with budget versus actuals. Allow agency variation, but at a minimum, will include Event Types to record the initial budget amount and any adjustments for comparison to the Spending Plan in SIGMA Budget. Appropriated in Budget Bills Tracking and Establishing Control of work projects Performance Budgeting Budget Control Planned Defaults 30 Formula Default Severity Budget Line / Allotment Line Unobligated >= $0 Warning Budget Current Budget - Cash Expenditures - Accrued Expenditures >= $0 Override Budget & Allotment Total Revenue - Cash Expenditures - Accrued Expenditures - Encumbrances >= $0 No Action Budget Total Revenue - Cash Expenditures - Accrued Expenditures >= $0 No Action Budget & Allotment Severity Levels can be set as a default on most budget lines.

9 Exceptions are made in SIGMA Financial by users with appropriate security. Example of a potential Budget Control list is shown below: Integrated Procurement functionality: Req to Check Vendor Creation Vendor Modification Prevent duplicate vendors Accounting quick codes Real-time budget validations/posting Create award documents right from requisitions Minimized data entry from requisition Reusable Templates Powerful search on Award # and other identifiable fields Partial receipt and invoice Reoccurring payments Receive/Invoice 3-way matching P-Card reconciliation Travel Reimbursement Payment Request & Disbursement Procurement Accounts Payable 31 Vendor File Purchase Requisition Award Workflow Workflow any document, any field, any value Real-time Validations and GL Posting Validations against budgets in real-time Transactional documents post to GLs at the time of entry Reporting Delivered Reports Ad-Hoc Inquiry Reporting from Advantage BI Procurement Functionality 32 Procurement Workload management Information governance Solicitation management Bid evaluation and award Contract management Full lifecycle for requisition to disbursements Vendor Self-Service Vendor web registration E-mail bid notifications Vendor bulletin board Electronic response Financial transaction inquiry Invoice submission Financials Encumbrances 2 or 3 way match Automated Payment Disbursements Single vendor/customer file Automated updates to Inventory and Fixed Assets TBD- pre-encumbrances business Intelligence Vendor Self Service Invoice PO Flip 33 Invoice Coming from Vendor to Accounts Payable 34 Three Way Match 35 SIGMA for End Users Less manual.

10 Paper-intensive work Greatly improved reporting and data analysis Less redundant data entry Less reconciliation across systems Easier, more automated tracking and approvals Streamlined business processes that work similarly across departments Export/Import capabilities, powerful inquiries, improved data warehouse functionality One system for budgeting, procurement, and accounting, with expanded capabilities Ease in moving from one agency to another and one job to another Reduced training time for new hires 36 Project Communications Website - Newsletter Frequently asked questions Presentations Project announcements Training Agency Implementation Guide Contact Us 37 Newsletter Image from Website Questions? 38 Upcoming Town Hall Meeting Thursday, April 30, 8:30-10:30 Capitol Commons Center - Conference Rooms A/B/C/D (Basement)