University of Maine System

Transcription

1 Unified Finance & Administrative Structure Strategic Integration Targets 2 & 3 April 2015 ThinkMissionExcellence.Maine.edu

2 Table of Contents I. Executive Summary. 3 II. Preamble 5 III. Governance. 7 IV. Financial Reforms Implemented Since V. Progress to Date on Unified Administrative Structure 10 A. Information Technology B. Strategic Procurement` C. Human Resources D. Facilities Management VI. VII. Strategic Integration Targets 2 & 3: Unified Finance & Administration.27 Options for Change.28 VIII. Recommendations 31 IX. Transition and Implementation 35 X. Benefits of Functionally Aligned Finance & Administrative Services..37 Appendix Links Board Resolution dated November 6, 2014 Board Policy 701 Operating and Capital Budgets Unified Finance & Administrative Structure 2

3 I. Executive Summary In July 2014, the Board of Trustees adopted a set of strategic outcomes to guide the work of the Chancellor and the Presidents Council in pursuing mission excellence. Together, Strategic Integration Targets 1-4 define the Chancellor s primary strategies for One University for all of Maine - a multi-campus, mission-differentiated model with significantly reduced and reformed administration, as well as educational programs that leverage and integrate academic resources system-wide. This report addresses the high-level recommendations related to: Strategic Integration Target 2: Comprehensive Financial Management Structure Develop and implement a comprehensive financial management structure for the entire System that enhances transparency, enables appropriate fiscal control, and advances comprehensive intra-system collaboration. Strategic Integration Target 3: Comprehensive Administrative Plan and Reduced Administrative Costs Develop a comprehensive administrative plan that reduces total administrative costs to peer system benchmarks or below. Since last July, the Board of Trustees has explored the governance of financial affairs as set forth in the Charter for the University of Maine System, Maine law, and the Board s Bylaws and Policies. The Board has also explored the range of options available to achieve the outcomes set forth in Strategic Integration Target 2: Comprehensive Financial Management Structure and took public comment on these options through a System-wide survey of campus constituents in the fall of Additionally, the pilots chartered by the Chancellor and the Board in July 2012 which resulted in the functional alignment of Information Technology, Procurement, and Human Resources, although not yet mature functionally aligned organizations, have achieved proof of concept for matrix reporting and functional alignment of administrative services. As a result of this work, in November 2014 the Board of Trustees revised its policy governing the development and management of operating and capital budgets to align more closely with existing Maine law and Board Policy. Additionally, the Board instructed the Vice Chancellor for Finance and Administration and Treasurer to develop a comprehensive financial management structure Unified Finance & Administrative Structure 3

4 reflecting unified finance and administrative services that are functionally aligned to the degree possible. This report, in Section VIII, sets forth the Vice Chancellor s recommendations for an enterpriselevel unified operating budget by FY2017 that reflects the priorities established by the Board of Trustees, Chancellor and the Presidents Council. The recommendations also call for a functionally aligned finance and administrative structure with matrix reporting. The recommendations include a reorganization of existing staff (without additional cost) to create an enterprise Chief Financial Officer and an enterprise Chief Facilities and General Services Officer under which financial services and the remaining distributed administrative services can be aligned respectively. The recommendations also call for revisiting the HR Administrative Review plan approved by the Board in November 2014, to ensure consistency with the unified finance and administrative structure. Upon approval of the high-level recommendations by the Chancellor and the Board of Trustees, the transition to a unified finance and administrative structure will commence (May July 2015). This will be followed by an implementation period during which the unified budget for FY2017 will be developed, and the enterprise functional leaders will work with their respective teams to: adopt policies and procedures; align operations for optimal delivery of services; and establish baseline operational costs and FTE levels (July 2015 January 2016). Once a steady state has been achieved, Phase II of this work can begin: utilizing LEAN principles to streamline the work and focus on customer value; identify gross savings, investments and net savings; and practice continuous improvement of services (calendar years 2016 and 2017). Under the plan for a unified operating budget and a unified finance and administrative structure our campus presidents will continue to provide critical leadership at the executive level by working closely with the Chancellor and the Board of Trustees to identify enterprise funding priorities, while also developing campus requests reflecting local budget needs. Additionally, the presidents will serve as the governance council advising the Vice Chancellor and the functional service leaders on service priorities and establishing service commitments for quality and responsiveness. Presidents will continue to have executive authority to manage campus affairs within their respective budgets as approved by the Board of Trustees. And the presidents, sitting as the Presidents Council with the Chancellor and Vice Chancellor, will work to ensure the goals of the whole enterprise are balanced with the goals of the individual campuses. Unified Finance & Administrative Structure 4

5 II. Preamble In 1967 Maine s infrastructure of public higher education represented a disparate group of institutions. The oldest of which, Farmington, was authorized as a normal school by the Legislature in The University of Maine was created under the Morrill Act in 1865 and was originally known as the College of Agriculture and Mechanical Arts. Next, a training center located in the northern Maine community of Fort Kent in 1878 and a normal school in Gorham that same year. This was followed by two more normal schools for Presque Isle in 1903 and Machias in The University of Maine in 1961 acquired Portland University, creating a southern presence for the state s land grant, and in 1965 acquired property in Augusta to create a Continuing Education Division center. The discourse surrounding public higher education in 1967 reflected the growing belief that a college education would soon be necessary to gain employment; that our separate, autonomous institutions of higher education had become complacent and programming needed modernization to reflect the interests of students and the needs of the state; investments in distance education were required to meet students where they lived; and transferability of credits between institutions was critical to ensure the quickest path to a degree. Then Governor Curtis submitted a resolve to the 102 nd Legislature calling for a study of public higher education. The study, which became known as the Coles Commission for its chairman, issued a report in January of 1967, which called for a single unified university system of public higher education. In 1968, during the debate on the enabling legislation that created the University System under a single Board of Trustees and Chancellor form of governance, Senator Berry of Cumberland stated, Not many years ago when our nation s railroads were being built -- competing companies sometimes built tracks right alongside of each other. The width of the railroad track was Governor Curtis not standardized, so that a car could not move from the track of one line to another. --Now all of that has changed in the railroad industry We must establish standards in our public higher education and we must end duplication. Senator Berry went on to advocate for a single unified university budget, he stated this proposal is educationally sound and should give Maine people the most education for their tax dollar We had a situation which was costing the taxpayers of the State of Maine needlessly a great deal of money, a situation which resulted from the headlong competition of competing higher education institutions. Unified Finance & Administrative Structure 5

6 By 1970, the Legislature adopted many of the initial recommendations of the Higher Education Planning Commission convened by the first Chancellor of the System and Maine s public university system took on its current seven-institution form with seven universities located in Orono, Augusta, Farmington, Fort Kent, Machias, Presque Isle, and Portland. Today, many of the issues that led to the formation of the System have resurfaced: The formula for funding institutions a problem from the beginning -- has never been fully resolved as obvious inequities exist between institutions with no justification other than historic funding levels; our institutions struggle amidst increased and intense competition to produce programs that interest students and meet the needs of the state; distance education is once again in revolution as faculty work to migrate courses and programs from outdated instructional television to online media and to reach out to placecommitted students in rural Maine to meet them where they live; the need for credit hour portability to reduce time and cost to degree for our students and our state -- is only now, finally, being addressed; and lastly, we still struggle to effectively communicate the contribution of higher education to the economic well-being of the State and its citizens. This was true then and remains true now, as still too few of our high school graduates choose college. Yet all evidence suggests: Increased educational attainment leads to higher personal income; higher personal income contributes more to cover public costs; and in turn, increased education and greater tax collections contribute greater resources, both intellectual and financial, to the resolution of major social and economic problems facing our state. Additionally, the System currently lacks a fluid mechanism to fund priorities across the enterprise and our existing financial structures and systems encourage and reward internal competition between our campuses. Unified Finance & Administrative Structure 6

7 III. Governance of Financial Affairs Policy Statement Maine law sets forth the fundamental policies to be adhered to in support of its public higher educational planning for the University of Maine System (20-A Maine Revised Statutes Annotated, Section 10902). In addition to recognizing higher education as an organized program of instruction, research and service and supporting the basic principles of the academy; the policy statement calls for the development, maintenance and support of a structure of public higher education in the State that will assure the most cohesive system possible for planning, action and service in providing higher educational opportunities. The policy statement further continually calls for a high priority in the allocation of public funds to the development of services, programs and institutions designed to provide opportunities for those who do not now share equitably in the advantages of higher education. Finally, the policy statement sets forth, that in return for the allocation of public funds to support financially the programs of the University System, the expectation of appropriate public accountability. Board of Trustees The Charter of the University of Maine System (P&SL 1985 chapter 532 as amended, Section 4-B.1.; Bylaws of the Board of Trustees Section 1.3) states the Board of Trustees is the governing and planning body of the University and charges it with the responsibility for preparing and approving the operating and capital budgets. Further, it states the Board of Trustees shall, among other duties, provide sound financial management and exercise prudent stewardship of the assets of the system, as well as plan strategies for programs and allocation of resources that most effectively serve the educational needs of the citizens of this State. The Bylaws of the Board of Trustees (Section 1.3 Powers & Duties) states the Board has the final authority over all matters within its jurisdiction. Noting the jurisdiction of the Board relates to and is exercised over, among other things, all educational, public service and research policies, financial policy, and the relationship of the University System to the state and federal governments. Chancellor The Charter (Section 4-A, 4-B.2.) also states that the Board of Trustees shall appoint a Chancellor of the University System who shall serve at its pleasure and be the chief administrative and education officer thereof. Among other duties, the Chancellor is charged with promoting system planning for financial operations, capital plans and resource allocations; preparing all operating and capital budgets, appropriation requests and bond issues; and providing a centralized Unified Finance & Administrative Structure 7

8 management oversight of services. The Chancellor may delegate powers and responsibilities to members of the Chancellor s staff as necessary. (see also Bylaws of the Board of Trustees 1.3; Board Policy Section 203 Chancellor Appointment and Responsibilities). Treasurer The Charter (Section 2) states the Board of Trustees shall appoint a Treasurer, who shall be sworn, hold office at the pleasure of the Trustees, and be required to give suitable bond. Title 20-A Maine Revised Statutes Annotated, Chapter 411, defines the duties of the Treasurer. The Treasurer shall receive and have custody of all moneys received for the university; make all expenditures upon authentication; exercise revenue bonding authority with the approval of the trustees; and prepare the annual financial report for the University. Board Policy for Governance and Legal Affairs (Section 207 Signatory Authority) rests all signatory authority to draw funds and to sign contracts, grant applications, research proposals, purchase orders and similar instruments with the Treasurer. The Treasurer is authorized to delegate this authority for specific purposes and within specific limits to designated officers and employees of the University and to revoke and modify any authority so granted. The Treasurer is also one of three officers that may sell, assign, and transfer any and all securities and perform other essential acts for the administration of the endowment with the approval of the Board of Trustees. (The other officers are the Chair of the Board and the Chair of the Finance Committee.) In current practice the Vice Chancellor for Finance and Administration also serves as the elected Treasurer of the Board of Trustees and exercises the powers reserved to the Treasurer under Maine law. In addition, the Vice Chancellor fulfills the other financial and administrative duties assigned by the Board and delegated to that position by the Chancellor in his role as the chief administrative officer of the System. Presidents The Charter (Section 3) states the head of each campus is the chief administrative and educational officer thereof and is responsible for the day-to-day operation and development of its academic program within the limits defined by the Board of Trustees and the Chancellor. Board Policy (Section 204 President Appointment and Responsibilities) charges a president with implementing the plans, policies, and directives from the Board of Trustees and the Chancellor including, among other responsibilities: the development and administration of the institution s operational and auxiliary budgets as approved by the Chancellor and the Board of Trustees; and the long-term planning, development, maintenance and operation of the physical plant within the mission and guidelines set forth by the Board of Trustees. Unified Finance & Administrative Structure 8

9 IV. Financial Reforms implemented since 2008 Multi-Year Planning the UMS annually prepares a five year structural gap analysis and utilizes this information to inform leadership in budget decisions and long-range planning. Outcomes Based Funding the UMS implemented Outcomes Based Funding to link state funding with state priorities by allocating a percent of funding to reward performance at the campus level that reflects Maine s needs in general educational attainment, workforce education, economic development, and increased academic and research productivity. Current Year Forecasting the UMS utilizes current financial data to project year end performance at three key intervals during the fiscal year (October, February and April) Financial Ratio Analysis the UMS annually performs System and campus level ratio analysis to monitor its financial health using an industry accepted approach identified in Strategic Financial Analysis for Higher Education, published by KPMG; Prager, Sealy & Co., LLC; and ATTAIN. Interim General Ledger Soft Close a soft close of the general ledger as of March 31 st allows for earlier detection of potential issues and more accurate forecasting. Budget Stabilization Fund the UMS established a Budget Stabilization Fund to supplement revenues and stabilize the budget during enrollment declines and economic downturns. The Fund currently holds $21 million and will be accessed to stabilize four campuses in FY2015 and FY2016 (UMFK, UMM, UMPI and USM). Strategic Investment Fund - as a result of various administrative reviews, $5 million in ongoing savings has already been realized in FY2016 and is currently being targeted for strategic reinvestment within the System. An additional $2 million in ongoing savings is anticipated to be realized over the next three years, for a total identified ongoing savings of $7 million. Revised Budget Schedule for FY 2016 the UMS introduced a new budget process and schedule designed to ensure Trustees have sufficient opportunity to exercise their fiduciary responsibility for budget development. The new schedule ensures detailed budget information is available two months in advance of final Board approval. New Budget Policy in November 2014, the Board of Trustees adopted a new budget policy governing: the schedule and process for developing the unified unrestricted budget; the format of the budget document by cost center, fund and program; and the process for monitoring and adjusting the budget once approved. The policy also governs the use of unbudgeted assets (see Appendix B). Unified Finance & Administrative Structure 9

10 A. Information Technology V. Progress to Date on Unified Administrative Structure On December 31, 2012, a commitment was made to the Chancellor and President s Council to evaluate the information technology landscape and create a unified, strategic and efficient IT organization. In January of 2014, an updated plan was presented to highlight details of the strategy and changes necessary to achieve the expectations anticipated in the Administrative Review. Overview University Services Information Technology (US:IT) was formed as the new unified information technology organization to provide infrastructure, services and expertise to the entire University of Maine System. Staff were re-assigned to this organization in July of 2013, including strategic elimination of management and supervisory positions to achieve year one goals. During that time, several campuses made direct adjustments to their IT expenditures, increasing the overall savings within IT. In July of 2014 (FY2015), US:IT was realigned to streamline operations, creating service delivery teams designed to provide highly skilled services to the entire University of Maine System. By reducing redundancy in these services, US:IT maintained capacity by leveraging expertise, and reduced the need to have many staff with generic skills juggling the same services. Very few staff have been physically moved during this process, except for the relocation of staff from the System Office at 16 Central Street in Bangor to a campus. Central IT staff across all campuses and the system office were unified into a single organization, reporting to the Chief Information Officer. July, 2013 A unified service desk was established to integrate call center operations. May, 2014; Services have been organized into a unified delivery team model providing UMS-wide services in the following areas: end-user technology, academic technology, enterprise technology, infrastructure, web services, and support services. July US:IT recognized the challenges to further cut IT costs to reach the FY2016 goal, while attempting to maintain service level and quality. The current combination of several existing solutions to any system and lack of well documented processes and inventories is evident. In late fall of 2014, US:IT Unified Finance & Administrative Structure 10

11 2.0 was launched to address these issues head on. US:IT 2.0 introduces a new form of governance, changing from a model of only high level IT Directors forming the major decision-making governing body to a model that leverages the talent within the organization by including representation from all levels. Three teams were created, focusing on: strategy, portfolio management and operation excellence. The teams are tasked to bring the decision making and communication processes together and specifically to establish a more process centered organization. This work is already underway and having a positive impact on the organization as a whole and the pace that projects are addressed. Savings Targets The original target savings goal and actual savings for Information Technology appear in the tables below. GOAL Year Actual New Savings Cumulative Total Position Reductions Cumulative Total FY2014 $174,000 $174, FY2015 $1,810,000 $1,984, FY2016 $1,274,000 $3,258, ACTUAL Year Actual New Savings Cumulative Total Position Reductions Cumulative Total FY2014 $1,002,464 $1,002, FY2015 $981,536 $1,984, FY2016 $1,274,000 $3,258, FY2014 Summary US:IT exceeded the savings goal of $174k with a savings of $221k contributed to the strategic fund. Campus budgets accrued an additional $781k in structural savings by eliminating services and reassigning and/or reducing positions. Four positions were eliminated within US:IT; three positions were originally targeted. One time savings over this fiscal year were invested in two strategic priorities, solutions for recruitment and retention to directly benefit campus efforts. Unified Finance & Administrative Structure 11

12 FY2015 Summary An additional $1.1 million to meet the cumulative FY2015 goal of $1.8 million has been achieved by reducing positions, reducing the cost of external services, and cuts in lines within IT budgets for supplies, professional services, as well as other categories. 24 positions were eliminated with eight new positions created to support the new service delivery model. Two of those positions were project based only. The net permanent position reduction is 18 positions. Position cuts included mid-level managers, as well as significant reductions is telecommunications and distributed development capacity. FY2016 Overview The $1.3 million savings target is achieved by reductions in service delivery cost in all areas. o Campus and system IT budgets from FY2015 were consolidated into US:IT. o US:IT directors and team managers built budgets to support necessary services at o all locations. Additional cuts necessary were made to meet the savings targets. This was done without further position reductions to avoid significant impact on necessary services. Network costs, licensing, equipment replacement lifecycle adjustments all contributed to this effort. Successes Savings targets met. Reductions in management level positions (down by 5). The implementation of the University Technology Support Center has been a success from a number of perspectives: o Using talent from all IT units to respond to our users no matter where they are located. o o o Identifying processes and services across the campuses that can be improved through training, documentation and standardization. An early experience with learning how to bring diverse teams together to accomplish common processes to improve quality of services. Expanded hours of service. Consistency/standardization of tools underway. Strategic architecture and accessibility a primary focus. Improved communication within US:IT itself. Particularly with the US:IT 2.0 work, conversations and collaborations across people to leverage various skills sets and talents has continued to improve and pull IT forward. Unified Finance & Administrative Structure 12

13 Challenges The specific challenges for IT have been in the areas of culture, process, quantity and diversity of services, and finance. Culture: IT has been on a path to a single organization, it has done so in a context of seven separate institutions. The One University strategy should help promote a common culture for IT. Process: Need for processes evident, skill set with US:IT for formal development is weak. Training by and use of Contextus team materials will improve this. UMS must reduce its portfolio of services. The overlap and redundancy of services can be eliminated, and it needs leadership support. New service and system requests are increasing. An investment and approval/prioritization process is needed. The individual strategies related to IT budgets across the campuses have made the identification of IT costs challenging and at times inaccessible. Additionally, while some campuses perceive their costs have increased, the reality is that costs have gone up for all campuses due to the last round of across-the-board salary adjustments that benefitted all employees, e.g. this cost increase would also have occurred if IT staff were part of the campus as before. For years, the value of services received versus the direct cost to the campuses have been out of balance. This created the haves and have not s. The transition to properly allocate costs by campus has been difficult, but the costs are now balanced fairly and at or under peer for IT services. Unified Finance & Administrative Structure 13

14 B. Strategic Procurement As a result of recommendations adopted by the Board of Trustees in March 2013, a unified Strategic Procurement unit was created and now serves as part of enterprise-wide University Services. During the implementation phase of the new unit, three major areas of activity were pursued to improve service and achieve savings for reinvestment in the University s mission: 1. Strategic sourcing of key goods and services to generate savings, including travel and travel services; 2. Update of the University s Procurement Card program; 3. Creation of the office itself and the implementation of the associated structural and governance changes. Strategic Procurement has reported routinely on its progress. Overview Starting in July 2013, Strategic Procurement was created using a combination of existing and new positions. The structure and recruitment was largely completed and positions filled as of October of Nearly all the positions were hired on a competitive basis. Successful candidates came from both within and outside the University. Approximately 78 percent of the employees were University employees while 22 percent were hired from outside the University. University Services for Strategic Procurement includes three primary business units: Strategic Sourcing; Procurement Services; and, Procurement Operations. The first unit targets financial savings and value through competitive procurement of goods and services, the second provides campus-based customer-facing services, training and support; and, the third manages daily operations including accounts payable, travel and expense, vendor payments, procurement cards, and other systems that make procurement run. There currently are 27 authorized FTE positions in Procurement. This is a reduction of 5.5 positions or nearly 17 percent in the number of positions dedicated to procurement compared with the number of positions dedicated to the task prior to creation of the single work unit. This is 1 position fewer than the 28 FTE which were set in the administrative review as the target. This is further detailed in the footnote below regarding FTE reductions. Currently Strategic Procurement has staff located on 4 campuses. The primary physical locations of the Strategic Procurement staff are UMaine, UMA and USM. The reorganization of procurement services was intended to increase efficiency, reduce costs and maintain or improve service. The data indicate it is working. Savings is being achieved; position Unified Finance & Administrative Structure 14

15 counts are reduced; and data regarding performance shows improvement with ongoing measurement through customer surveys and other tools. Savings Targets The original savings targets and actual savings for Strategic Procurement are below. GOAL* Year New Savings Cumulative Total Position Reductions Cumulative Total FY2013 $26,086 $26,086 FY2014 $160,660 $186, FY2015 $832,421 $1,019,167 FY2016 $661,010 $1,680,177 Total FY13-FY16 $2,912,176 ACTUAL (FY13/14)/PROJECTION (FY15/16) Year New Savings Cumulative Total Position Reductions Cumulative Total FY2013 $62,376 $62,376 FY2014 $84,819 $147, FY2015 $610,443 $757,638 FY2016 $950,284 $1,707,922 1*** 1*** Total FY13-FY16 $2,675,131 *See Chart 2, page 7, of Administrative Review Final Report March 2013 **The Administrative Review in Procurement called for an organization of not more than 28 FTE rather than the 34.7 FTE that were identified as existing prior to the consolidation of staff into the new work unit. Strategic Procurement has met this goal and stands at 27 FTE. ***No position is currently identified for further elimination. However, one further position reduction is built into the existing FY2016 savings estimates. Those estimated savings will need to be generated but it remains under review precisely how those savings will be achieved, whether from position reductions or other strategies. Unified Finance & Administrative Structure 15

16 FY2014 Summary and Selected Highlights Entirely new work unit created, positions established and defined, and largely staffed. Net E&G savings exceeds target. Verified by a third party assessment. Accounts Payable service improvements included managing an invoice processing backlog, which stood at more than 1,200 in early 2013 to less than 300 later that year. Enterprise collaboration through procurement increased with assignment of Sourcing Managers to key projects. Conducted first of its kind enterprise public solicitation within the University for a proven, leading edge travel and expenses management system. Start-up of new organization required more time than estimated, including for routine reporting, and delayed but did not defeat some future savings. Increased collaboration with State of Maine procurement officials and engaged in first arrangement to take advantage of a state contract, or piggy-back, arrangement. Engaged with numerous stakeholder groups around general issues and specific projects including staff, faculty and students. Overall, included hundreds of stakeholders, a practice which continues. Customer service surveys commenced for new work unit. Updated Administrative Practice Letters issued for Procurement Card as well as Travel and Expense. 5.5 positions eliminated reducing procurement staff from 32.5 FTE to 27 FTE. FY2015 Summary and Selected Highlights Completed 66 Sourcing initiatives in FY2015 with an estimated E&G savings of $2.3 million over the life of those agreements (not all savings within FY2015). Established Training and Communications strategies for rolling out the new Procurement systems including on-site and on-line training options plus on-going support. Conducted first How to Do Business with the University workshops for the business community in partnership with State of Maine executive branch procurement officials. Completed recruitment for the new Strategic Sourcing work unit. Received more than 950 individual responses to a customer satisfaction survey done in partnership with Organizational Effectiveness. Established baseline Procurement customer satisfaction rating of 3.54 on scale where 1 is highly dissatisfied and 5 is highly satisfied. Partnered with the Organizational Effectiveness Office to conduct a four-module communication and customer support workshop for the entire department. Welcomed interns and work study students to the Procurement team for the first time. Unified Finance & Administrative Structure 16

17 Updated the University s Administrative Practice Letters issued for Travel and Expense as well as for Procurement Card issuance and use. Positioned three major initiatives targeted at improving efficiency and customer service for completion by the end of the fiscal year: New electronic travel and expenses management system and travel service provider is in implementation. This will virtually eliminate inefficient paper-based travel processing. New module in the electronic accounts payable system will greatly increase control and visibility into the invoice approval and payment processing. This is in implementation. It will also increase efficiency and improve opportunities to reduce cost or increase savings through timely and sometimes expedited payments. Roll-out of completely new and separate travel cards and procurement cards for all eligible University employees is in implementation. The new card systems are intended to improve integration, controls, and convenience while increasing efficiency and reducing administrative costs. The Education Advisory Board has reached out to the University of Maine System as one of a handful of sites from which they intend to draw best practices and benchmarks for highperforming procurement work units. FY2016 Forecast Cumulative savings through FY2016 are on track to exceed $2.6 million and reach 90 percent of the target set in the Administrative Review. Complete procurement of major enterprise-wide sourcing initiatives including food service, card access security systems, and facilities master planning. Customer satisfaction surveys to measure service improvement compared to the baseline surveys compiled in FY2015. Establish management reporting and performance tracking for new systems and processes implemented in FY2015 including: travel and expense; procurement card; and invoice and payment processing. Implement a contract document management process utilizing existing imaging system. Improve Strategic Procurement web page and on-line training offerings to support and enhance access to procurement services Successes On track to exceed $2.6 million in savings through FY2016, which is 90 percent of target set in the Administrative Review, and more savings thereafter. Examples of specific goods and services where savings is being achieved include: desktop computing, hazardous waste Unified Finance & Administrative Structure 17

18 removal, custodial paper and plastics, electricity and heating fuel, and enterprise software licenses. Nearly 17 percent in position count reduction from baseline through FY2015. Improved consistency and standardization of procurement processes and their application. Use of the Office of Organizational Effectiveness for professional development of Procurement staff around change management, effective communication and customer service. Challenges Strategic procurement has created an enterprise function within a federation that does not yet function as an enterprise. The legacy of seven separate institutions is strong and these cultural challenges are significant. However, we are starting to see some emerging success to these strategic procurement efforts among some groups. A perception that the assessment of savings at the start of the fiscal year is a cut to the campus. The alternative, however, is to defer assessment until the end of a fiscal year but the funds would likely be diverted for other purposes before they could be assessed. The time required to create and staff the new Strategic Procurement unit resulted in a greater amount of time to achieve the interim savings target. Unified Finance & Administrative Structure 18

19 C. Human Resources On June 23, 2013, the BOT approved Phase I of the Human Resources Administrative Review. The report contained recommendations on three major components: Human Resource Structure Strategic Human Resources Human Resource Delivery Model The Chief Human Resource Officer was hired in December 2013 and tasked with leading the HR Leadership Team in its efforts to move to strategic HR, realize efficiencies, improve HR services, reduce costs, and realize Phase II of the effort. In the second half of FY2014, the HR leadership team provided input to the establishment of a vision, strategy, and structure to position Human Resources to deliver on its commitment of improving HR services while identifying opportunities for cost savings. Out of this work Phase II of the Human Resources Administrative Review was developed and presented for approval at the November 16, 2014 Board of Trustees meeting. Successes The following specific actions and accomplishments were achieved in support of the HR Administrative Review through April Human Resource Support Structure UMPI/UMFK The Human Resource functions at UMPI and UMFK have been restructured to provide support across both Universities. This has resulted in a 2.5 FTE headcount reduction and a more strategic approach to HR services. 2. EAP Outsourcing at UMaine The onsite Employee Assistance Program (EAP) at UMaine was outsourced to Cigna. Cigna was the provider of EAP services for the rest of the University System. This resulted in a 2.5 FTE headcount reduction at a cost of $57,000/year. 3. Restructured the Employee Benefits Function The Director of Benefits and the Supervisor of the Employee Benefits Center positions were eliminated in This resulted in a 2.0 FTE headcount reduction in University Services. Restructuring of our Wellness function will result in a 1.0 FTE headcount reduction 7/1/2015. Unified Finance & Administrative Structure 19

20 4. Restructured Administrative Support The Administrative Assistant position supporting the Labor Relations group has been eliminated effective 7/1/2015. This will result in a 1.0 FTE headcount reduction effective 7/1/2015 and the work will be absorbed by other Human Resource Administrative Assistants. 5. Movement of Payroll work from USM to UMA USM s hourly payroll will move to UMA to be absorbed by existing staff. This will result in a 0.5 FTE reduction effective 6/1/ Automation of the Retirement Process The retirement process is being moved from a manual process to a fully automated process. The implementation will be done in stages with full automation by August This is estimated to result in a 1.0 FTE reduction effective September Applicant Tracking System to be Implemented HireTouch applicant tracking software is being implemented for all campuses and UMS. This software will increase compliance with affirmative action requirements, allow for visibility to applicant pools across the System, and is estimated to result in a 1.0 FTE reduction effective September Opportunities realized in HR Administrative Services Savings $380,000/yr RFP for Benefit Broker and Actuarial Services Termination of Communication Vendor Termination of EHPTF Consultants (using internal resources) Termination of Data Services utilizing services of Healthcare TPA and Benefit Broker Changes to Wellness Program 9. Human Resources Centers of Excellence established in the following areas: Compensation: Compensation Manager hired; Job Description Project initiated; identification and prioritization of critical work. Employee & Labor Relations: Director hired; 2 managers hired; trainer for labor and contracts hired; restructured administrative support resulting in a 1.0 FTE headcount reduction. Communications: Internal Communications Manager hired start date 5/11/2015. Project Management: Project Manager hired; developed Project Oversight Committee; portfolio of projects - Applicant Tracking Software, Retirement Automation, Dependent Audit, Payroll Efficiencies, Labor Database. Unified Finance & Administrative Structure 20

21 Impact of FY2014 and FY2015 actions on FY2016 HR STRUCTURE Action Compensation (Salary & Benefits) FY2016 Headcount Change EMPLOYEE BENEFITS BUDGET FY2016 Services & Administrative Costs Headcount Savings Action Savings Headcount Benefit/Actuarial Services RFP UMaine EAP $246,853 Terminations of Communication Vendor Elimination of ,532 Termination of Director Benefits EHPTF Position Consultants Elimination of EBC ,500 Termination of Supervisor Position Hired Communications Manager Data Services ,000 Changes to Wellness Program $60,000 $30,000 $120,000 $130,000 $40,000 Hired HR Project ,650 Outsource -$57,000 Manager UMaine EAP Salary Adjustments ,000 Reduction of ,000 UMFK/UMPI Staff Reduction UMS ,000 Payroll Staff Reduction Wellness ,000 Staff Reduction UMS ,743 Admin Staff Total $512,978 $323,000 Unified Finance & Administrative Structure 21

22 FY FTE Action (net) Estimated Net Savings After Investments Through FY2019 New HR Total HR Annual Structural Structural Technology Net Compensation Compensation Investment Savings Savings Savings Total Cumulative Savings FY $228,235 $228,235 $30,000 $198,235 $198,235 FY $284,743 $512,978 $1,200,000 ($687,022) ($488,787) FY17-3 $360,000* $872,978 $250, ,978 $134,191 FY ,000 $932,978 $250,000 $682,978 $817,169 FY $932,978 $250,000 $682,978 $1,500,147 *Includes savings that will be used by USM though FY2016. Challenges Culture The greatest challenge faced in accomplishing the goals of the HR Administrative Review is culture. The transition has generated concerns that moving to a shared services environment is a loss in service employees. Technology In order to gain efficiencies, IT support is essential. There are strong demands on the IT team which may delay the ability to meet deliverables. Quantity of Work/Need to Leverage Talent The current infrastructure is not sufficient to support the work in process across the System and UMS is not optimally leveraging the HR talent in ways that benefit the full enterprise. The ability to address immediate needs, harness efficiencies, and move to a strategic model is challenged. Cross Pollination The current Human Resource staff on the campuses have tasks other than HR. Many have responsibilities in finance, student affairs, safety, and facilities. This makes the identification of staff and the movement of work more difficult during the transition. Unified Finance & Administrative Structure 22

23 C. Facilities Management The Facilities Management Review Team delivered its final report in March 2015 and is just beginning the implementation phase. A summary of their recommendations follow: 1. UMS should right-size the facility portfolio to reduce costs and improve the quality of facilities. Examples of recommendations include: Establish a long-term Net Asset Value (NAV) goal, with an interim goal of steadily improving the NAV annually starting in Attempt to achieve a net asset value systemwide of 70 percent or better, with an interim goal of 63 percent by Fiscal Year The facility portfolio currently has a net asset value of approximately 59 percent. Work to right-size the overall UMS facility portfolio using the density factor metric. Attempt to achieve a systemwide density factor of at least 340 users per 100,000 gross square feet of space by Fiscal Year 2022 and ultimately a density of 400 users or more. Strategies to improve density generally involve increasing the users or reducing space in some manner. Update Board policy and System procedure to require Trustee review and approval for any project that would increase the amount of square footage owned or occupied by the University of Maine System or which would increase operating costs. 2. Identify and fund the long-term capital needs of the System. Examples of recommendations include: Adopt a 3-tiered planning strategy across the enterprise that involves each campus having and maintaining a campus master plan to guide the general direction of the campus; a 5-year capital plan that is aligned with the master plan and a component of the multi-year financial analysis; and a 1-year capital work plan that is aligned with the other layers and is a component of the annual budget considered by Trustees. The one-year work plan should include not only improvements, but also the annual identification of any surplus real property which should be or could be considered for disposal or repurposing. Update the budget procedures to include capital budgets as a distinct component of the annual budget process. Continue to strive to reach the 100 percent funded depreciation goal and to avoid losing ground from gains achieved while still being open to adjustments in the timeline for achieving the goal in a way that is consistent with the annual budget proposed to and ultimately adopted by the Board of Trustees. Unified Finance & Administrative Structure 23

24 Implement the Total Cost of Ownership principle throughout the University of Maine System, with required reporting and eventual goal setting. 3. Review current prioritized processes for best practices or improvements. Examples of recommendations include: Functionally align the current capital project management function to better serve the needs of the University of Maine System and improve the ability of industry to work with the System. Work toward the consolidated processing of work orders and the establishment of a centralized work control or work coordination processing function. Formalize and make permanent the pilot project in enterprise Safety and Environmental Services to serve those needs Systemwide. Implement the LEAN management team s findings to streamline lease processing and lease administration. Increase efforts and opportunities to promote sharing of best practices and expertise statewide, including in the areas of grounds, trades and custodial. Monitor the Strategic Integration Target 2 and 3 initiatives in particular and be prepared to consider and to achieve additional structural reorganization as may be necessary for facilities management to remain effective and efficient in a changed organizational landscape. 4. Benchmark UMS operations and institutionalize selected benchmarks. Examples of recommendations include: Implement the suggested twelve Key Performance Metrics across the University of Maine System to measure and monitor facility quality, costs and performance. Key among these measures are: Density; Net Asset Value (NAV); Capital Expenditures on Existing Space; Annual Facilities Operating Expenses; Total Cost of Ownership (TCO); and Energy consumption and cost. Ensure the adoption and beneficial use of the Integrated Workplace Management System, now in implementation. Update and formalize the procedural matrix for UMS capital projects and offer periodic professional development regarding UMS capital procedures. Monitor and report on staffing ratios to ensure UMS continues to function at least as aggressively as benchmark zone indicators suggest should be achievable, including in the functional areas where most facilities management personnel work: grounds, trades and custodial. Unified Finance & Administrative Structure 24

25 Implementation The team recommends that the Chancellor, Vice Chancellor for Finance and Administration and Presidents assign personnel as necessary to carry out these recommendations if adopted by the Board of Trustees. In particular, the team recommends that the System Director of Facilities Management and General Services be assigned to lead and coordinate the implementation, including making the further recommendations and decisions that will be necessary to the task. Financial Impact The greatest economic impact is likely to come from inaction, and the impact of inaction will not be advantageous to the University of Maine System s mission, including its talent recruitment, retention efforts, and its financial future. With current systems and practices, the overall condition of the UMS s facilities has declined since 2006; density has declined by nearly 20 percent, the deferred maintenance and lifecycle reinvestment need has increased to nearly $1 billion; the percentage of space with a renovation age of 50 years or greater has grown to 38 percent of all space; and the System s daily service costs as measured by Sightlines LLC have remained higher than peer benchmarks. Those trends make facilities more costly to maintain and renovate, more likely to fail, and more expensive to operate. There will be implementation costs. Potential examples include the investments that will be needed in master planning, functional reorganization and space reductions or reorganization. It is important to note that some of the largest potential one-time costs that might have been associated with these recommendations already are in place with the funding for the Integrated Workplace Management System a key technology project that has been the type of efficiency recommended by other reviews but which in this case already is in progress and the facility and ongoing financial assessment services provided by Sightlines LLC. There will also be long-term costs, notably in addressing the improvements needed in the existing facility portfolio. The University of Maine System will need a sustained annual capital investment in the range of up to $50 million annually to make progress against the major quality and cost recommendations in this report. The team recommends the identification of up to $250,000 to support the initial implementation of its recommendations and suggests that strong consideration be given to off-setting that investment with the proceeds of the sale of UMS real property as such sales occur or as the implementation effort finds other ways to monetize the System s facility assets. The team further Unified Finance & Administrative Structure 25