2011 NASCIO Nomination Business Improvement and Paperless Architecture Initiative. Improving State Operations: Kentucky

Transcription

1 2011 NASCIO Nomination Business Improvement and Paperless Architecture Initiative Improving State Operations: Kentucky Kevin Moore 6/1/2011

2 Executive Summary: Accounts Payable was a time consuming, inefficient and semi-automated process that resulted in Department Business Office and Accounts Payable staff spending a considerable amount of their time on mundane low-value tasks such as filling out forms, copying, mailing and filing approximately 125,000 invoices every year. Payments to vendors averaged over 30 days as invoices waited for signatures and were shipped between buildings across the city. Handling exceptions was even more difficult and the organization was unable to leverage beneficial payment terms from their business partners. Image and Process Management was selected for the following reasons: Ability to easily capture invoices from multiple channels (fax, mail, EDI), invoice matching functionality, management of exceptions (partial shipments etc.), enforcement of best practices, management oversight and auditing, and the ability to initiate automated approval workflows for Accounts Payable process approvals. Less than two years after purchasing the solution, more than 98% of the Metro Government s Accounts Payable activities are managed by the system. Invoice processing time now averages 3-5 days which allows them to pay suppliers and leverage beneficial payment terms, negotiate more competitive long term contracts and virtually eliminate late payment penalties. Average time spent processing an invoice has decreased from 40 minutes to 10 minutes and the initiative is calculated to deliver an ROI of over 800% over 5 years. The Office of Management and Budget (OMB) is now looking for other innovative ways to leverage the Image and Process Management Solution to improve operations across Metro Government.

3 Description: Louisville Metro Government needs to provide efficient and cost effective services to over 700,000 residents. We are driven to provide the best service to our community with the most efficient and effective use of resources. Key tenents of our strategy are Accountability, Agility and Collaboration. Recently, government budgets have come under increasing pressure further emphasizing the need to maximize efficiency. In 2010 we had a strategic review of our IT plans including a third party benchmark assessment (Gartner). The findings were that we rated well (34% lower cost and 27% lower FTE count than peer group average) and validated our plan to upgrade our Enterprise Financial and HR Systems to be paperless and more efficient. The Business Improvement and Paperless Architecture Initiative was driven by our need to cut costs, reduce paper, reduce processing times (internally and externally), increase collaboration, and comply with Office of Management and Budget best practices. We chose to prioritize the imaging and automated workflow of our invoicing for all our Metro Departments (over 45) as we determined it has the best Return on Investment (ROI) and least risk. Our ROI model shows an 800% ROI over 5 years ($8.5 Million Savings 1.1 Million Costs). Our focus on Accountability, Agility and Collaboration has paid off. We have maintained our operational efficiency and effectiveness (34% lower cost and 27% lower FTE count than peer group average). Our Business Improvement and Paperless Architecture Initiative successfully deployed the automation and paperless invoice processing system across all departments in fewer than 12 months. Because we focused on business driven IT investments with proper focused and well researched investments we maintained accountability and has proven to be agile both from our IT infrastructure and our organizational structure allowing us to deploy new capability quickly and with the proper governance. The project team worked closely with each department OMB to both tailor the new system for their needs while complying with OMB best practices. Additionally, we have been able to increase government transparency and accountability by providing public access from our e-transparency page ( The projects focused on the invoicing processes across our Enterprise (over 45 departments, where we found significant opportunities for improvement: Lengthy delays in processing of paper documents requiring multiple approvals across the enterprise Invoice payment deadlines were generally always missed by agencies using standard paper based process Inability to take vendor early pay discounts Enforcement of OMB policy and management oversight

4 During our analysis we found these challenges: Complex workflow between multiple departments in multiple locations Acceptance of the use of electronic signatures Variance in business processes between departments Challenge of moving from paper to electronic o Requirements analysis meetings and conference room pilots with each department, training, testing, and help documentation available o Timely and appropriate notifications to users, management o System designed so can be used by user with low technical skills As we built our business case we found opportunities to improve our operations: Rollout provided an opportunity to better understand and eliminate inefficiency and invoice processing issues within each business office Existing process was inefficient and time consuming, lack of adherence to Finance policy, invoices misrouted, lost and paid late System designed to make it as easy as possible for users Can quickly manage invoices that have issues Wrong amount, misrouted, supplemental information, management signoffs required More efficient auditing and year end processing This project was deemed to fit our Lean Enterprise Architecture (LEA) strategy to provide the best service to our community with the most efficient and effective use of resources. Key tenents of our EA strategy are Accountability, Agility and Collaboration. As part of our governance process we built our project charter with both a project plan and timeline; a 5 year Return on Investment (ROI) estimate; and a risk assessment. After reviewing both our internal analysis and the 3 rd party (Gartner) assessment we chose to source for an Imaging and Process Management solution from Oracle. This was after review of multiple workflow solutions. This assessment weighed project risk, available resources, ease of integration to existing systems and vendor commitment. The initial first year cost of the complete system (software, hardware, and implementation) is $634,000 with an estimated annual cost of $107,000 for years 2 to 5. The project is managed by our IT group with oversight from our Office of Management and Budget. The new system went into production through a phased roll-out schedule that started in June We also calculated some baseline metrics estimates to measure the success of the project: - Approximately 125,000 invoices annually - Invoice processing takes over 30 days -.25% Lost Invoices -.50% Misfiled Invoices

5 Because we already had a strong EA focus on Accountability, Agility and Collaboration we did not face significant challenges collaborating with our stakeholders (IT, the functional departments and OMB). This allowed us to work together so that each department s workflows and other requirements were met while complying with OMB. Still many hours were spent with the functional experts because each department had slightly different processes that had to be considered. And while we standardized where possible we also proved the agility of our EA by meeting (and improving where necessary) the businesses operational requirements. We also had a strong communication and rollout plan that provided project overviews and expectation management to our stakeholders (also training and support). Our IT group was cross-functional as the new system spanned and integrated both new technology (Imaging and Workflow) and existing assets (E-Business Suite, Active Directory, internal and external website). We used virtual server technologies to federate our imaging and workflow servers across the departments and used active directory for user profiles, security, and access control. Some of the challenges were: Identifying the various users and creating the appropriate AD groups for access and approval levels; Integration between new and existing IT assets; Producing and publishing PDF documents for e-transparency; and Creating the workflows for each department including the appropriate rules and validations and help in processing, approving and validating invoices. We also realized that line of business stakeholder acceptance is essential to the success of this project. Our project includes a communication and engagement plan throughout all phases of the project. We found engaging with the line of business stakeholders throughout design and implementation enabled the solution to better fit the way each department operated and ultimately how successful it is. Significance: The Invoicing project is the first step in our Business Improvement and Paperless Architecture Initiative. Our goal is to drive increased transparency and transformation of Government work processes from paper based to electronic to reduce the use of natural resources and increase the speed and efficiency of government operations. Over the next year we will be continuing to measure and monitor the invoicing project to ensure it meets our initial ROI estimates. In parallel we will assess opportunities to expand the use of workflow and imaging to other processes across Louisville Metro operations (modify - initial assessment has been done, so we will be implementing these). So far our Business Improvement and Paperless Architecture Initiative is aligned to the key tenents of our Lean Enterprise Architecture strategy: Accountability, Agility and Collaboration. Benefits: Our recent initiative is on track to meet our 5 year ROI goal of 800% with: - Significant reduction in processing time from over 30 days to 3-5 days and can be done in 1 day if necessary

6 - Workflows configured to conform with OMB best practices for invoice processing - Full audit trail for every invoice and performance metrics for management - Invoices are immediately routed to the next step in the approval process avoiding delays associated with routing physical documents between locations across the city - Approximately 125,000 invoices will be processed annually eliminating paper usage of over 1,000,000 sheets along with associated toner costs - Invoices are scanned the day they are received or directly injected into the workflow if electronically submitted by vendors. This helps ensure Louisville Metro can take advantage of early payment discounts - Users are immediately alerted via when an invoice needs to be processed - Departments and OMB are no longer required fill out PayDocs or make copies of and store paper invoices which significantly reduces the time needed to process an invoice (40 mins to 10 mins) - Misrouted invoices can be quickly reassigned to the appropriate department - Invoices can be processed in as little as one business day - Invoices are immediately routed to the next step in the approval process avoiding delays associated with routing physical documents between locations across the city - Time taken to process each invoice and aggregate duration for a department will be tracked and reported on to help ensure that all invoices are paid within the required 30 days - Lost and Misfiled Invoices are eliminated (.25% and.5% estimated) which could cost hundreds of thousands of dollars. The Project team is part of the Enterprise Architecture group within Metro and can be classified into Systems, Operations and Network teams which in unison with the Service Desk, work in ensuring the clients needs are met. The EA group has been operation since the merger of City & County (2003) and they have specific tools today that help measure their goals. Our annual budget is around $11.5 Million with 75 Full Time Equivalents. We were recently (2010) evaluated by Gartner to have 34% lower cost and 27% lower FTE count than our peer group average. We are also accountable to the Office of Management and Budget (OMB) and to our ultimate stakeholders the residents. Metro Technology furthermore has a PMO and has been instrumental in using this to manage various projects and the portfolio. There is a Service Level Manager, for assigned departments and are responsible for meeting with them and helping define, identify and follow up on the departments (clients) needs and solutions. All our projects include need/solution/roi definition, governance processes, communication plans, implementation, and measurement analysis and follow through. Specifically for this project we worked with the different departments (every department) and OMB to meet

7 the automation needs of their invoicing processes including process analysis, improvement, and workflow. Part of the success of the implementation was also conformance with policy, procedures and OMB best practices. The following requirements were fullfiled by the new system: Adherence to Finance Policy & Procedures Each invoice must be linked to a Purchase Order (PO). Invoices that do not already have a PO must be routed to an exception queue until PO is created. Exceptions are monitored and corrective action is taken if necessary The separation of duties which are required by OMB Policy are built into the system. A person signing off for receipt of goods and services cannot also authorize payment of that invoice Invoices over $25,000 automatically require senior level approval by department and Accounts Payable. Ensures invoices with high dollar amounts are approved at the appropriate level Workflow configured to accommodate the attachment of supporting documents, for example for special events Notes can be attached to invoices to provide processing instructions and explanations where necessary. Security levels are assigned to control who can add and remove notes Management Oversight & Auditing Only users that have been approved by OMB and/or each Department Business Office have access to the system OMB and Department management have strict control over which tasks can be performed by users User access controlled by Active Directory Groups, integrated with Metro Login A full audit trail available for every invoice, from the moment it is entered into the system until payment is approved by OMB Accounts Payable Reports show number of invoices processed and time taken to process those invoices Metrics to monitor agency performance and identify issues with processing speed, down to employee level enabling management to take timely corrective action Auditors have instant access to all invoices through a variety of search methods and can view the full audit trail for each invoice and links to PO s The project has proven to be Accountable, Agile and Collaborative and aligns with NASCIO goals of a more efficient and effective government operations.