We Bring IT Together For You. Budgeting in Municipal Governments with Oracle Hyperion Public Sector Planning & Budgeting By: Praveen Kumar Managing Principal AST Corporation Email:Prkumar@astcorporation.com April, 2012 Applications Software Technology Corporation 1755 Park Street, Suite 100 Naperville, Illinois 60563 1.888.278.0002 www.astcorporation.com
Contents INTRODUCTION... 2 HIGH LEVEL SOLUTION... 3 SOLUTION DETAILS... 4 PRE BUILT MODELS FOR SUPPORT OF VARYING BUSINESS NEEDS... 4 DEVELOPING ALTERNATIVE SCENARIOS WITH DECISION PACKAGES... 4 INTEGRATION WITH EXTERNAL ERP APPLICATIONS... 6 COLLABORATIVE BUDGET PREPARATION... 8 PERFORMANCE BASED BUDGETING... 10 PUBLISHING BUDGET BOOK... 12 BUSINESS BENEFITS... 14 SUMMARY... 16 Page i
Introduction The process of budget development and administration is an integral part of any state and local government s management activity. This process is used for allocating scarce resources, which reflects the priorities and goals of the community it serves. A good budgeting process involves not only management of revenues and expenditures, but also aligns long term organizational strategy with short term organizational goals, and serves as a communication and performance management tool. Budget development and administration is a collaborative process involving all stakeholders citizens, elected officials, and employees. Within an increasingly complex budgeting and planning process, state and local governments spend significant amounts of time with the major components of the budgeting process: Revenue budget Expense or line item budget Capital budgeting This paper focuses on the position budgeting part of an expense/line item budget. Budget development requires extracting data from multiple sources that are often incomplete and stale. Oracle Hyperion Public Sector Planning and Budgeting (PSPB), is a solution that speeds up the budget development process, improves collaboration among various stakeholders, and improves the reliability and quality of budget numbers. Page 2
High Level Solution The Enterprise Performance Management (EPM) suite of The solution includes following modules: Oracle Hyperion Planning Oracle Hyperion Public Sector Planning and Budgeting Oracle Hyperion Performance Scorecard Oracle Hyperion Financial Data Quality Management Oracle ERP Integrator Oracle Essbase Oracle Data Integrator Oracle Hyperion Financial Reporting products can be deployed in multiple configurations depending on the modules selected, the size of the organization and its performance needs. Following is a example deployment plan in distributed environment. Figure1: Solution architecture in distributed environment. Page 3
Solution Details PRE BUILT MODELS FOR SUPPORT OF VARYING BUSINESS NEEDS Key Features: Prebuilt data forms Prebuilt task list Prebuilt calculation logic Supports grade as well as grade & step based salary structure Ability to define breakdown cost elements. Supports mass updates of data Allows multiple allocations across fund, cost center and programs Unlimited what if scenarios Online Data Validation Context sensitive menu Configurable Budget hierarchies MS Office integration Budget Book Publishing capabilities Oracle Hyperion PSPB provides a flexible approach for detailed compensation modeling. It supports the following budgeting models: Employee: Employee information is used for developing and tracking detail cost at the individual employee level. Position: Position information is used for developing and tracking budget detail cost at the individual position level. Position and Employee: This is most comprehensive model in which information is captured at position level, employee level and employee assignment to the position. This model not only tracks filled positions but also vacant positions and partially vacant positions, bringing the budgeted amount closer to potential cost. This is the most popular model in state and local governments. DEVELOPING ALTERNATIVE SCENARIOS WITH DECISION PACKAGES In an uncertain economic environment, a public sector organization needs agility to respond to changing revenue and expenditure situations. Such organizations respond by developing alternative scenarios and prioritizing additional resource and revenue needs. Hyperion PSPB enables users by allowing them to define an unlimited number of scenarios and Page 4
decision packages. These decision packages are used for identifying revenues, expenditures, and new positions in a separate bucket, thus allowing organizations to differentiate between the necessary and desirable budget items. Hyperion PSPB allows organizations to capture decision package details, such as their purpose and whether the budget request is one time activity or recurring. Further, organizations can also capture key results/objectives as well as the cost and revenue impacts of the decision package. Once decision packages are submitted, each package can be tracked separately using a configurable electronic workflow feature of Oracle Hyperion PSPB. Users can define separate approval paths for each decision package, separately and independently if needed. Management can evaluate each decision package separately and approve or reject it as per business needs. Figure 2:The decision package screen in the latest release of Hyperion PSPB Page 5
INTEGRATION WITH EXTERNAL ERP APPLICATIONS Major Integration Tasks: Source System Mapping FDM application creation Target Application Mapping Source accounting definition Category mapping Financial Period Mapping Import format definition Dimension member mapping GL Write Back mapping In order to develop and deploy a budget, organizations need to bring in data from external ERP systems. The sheer volume of data, its quality, and the timeliness of data is a challenge for any implementation. Most organizations require data integration with Financials and HRMS systems, and Oracle Hyperion PSPB provides out of the box integration with packaged ERP systems like Oracle EBS and Oracle PeopleSoft, leveraging Financial Data Quality Management (FDQM) and ERP Integrator with ERP adapters. These integrations also allow synchronizations between budget planning and external systems, thereby reducing the burden of maintenance on budget planning administrators. Hyperion PSPB data integration improves following processes: Building dimensional hierarchies: The integration with Oracle EBS allows a quick and efficient build of dimensional hierarchies, which serves as a foundation for planning applications. Integration with Oracle General Ledger enables users to extract dimensions like Fund, Account, Cost Center, Project, Program and other segments if chart of account. It also allows building hierarchies defined in Oracle General Ledger. The HR integration allows extraction of Position, Employee, Job, Salary Structure, etc. Populating smart list: Hyperion PSPB uses several smart lists which increases the efficiency of data entry and validates data during data entry to reduce errors. The integration with external systems along with the built in synchronization process keeps dimensions and Page 6
corresponding smart list synchronized. This reduces smart list population and maintenance time. Extracting Budget and Actuals: Budget users typically reference historical budget amounts before deciding on next year s budget. In Hyperion PSPB historical budgets and actual amounts are provided on the same screen and enables budget users to determine propose next year s budget amount. Budget users can simply increase or decrease the historical budget or actual amounts either by percentage or amount, if needed. It also improves the reporting of variances and develops graphs for trend reporting, as multiple years of data reside in the same application. Extracting position, employee and employee assignment to position information from HRMS system: For many state and local governments, the total personnel budget constitutes a significant portion of total expenditures. Therefore it is imperative to get the right data from the HRMS system for the projection of total personnel. Data extracted from HRMS is then utilized for developing detailed positions and/or employee budgets, providing vital insight in the organization s cost structure. Page 7
Figure 3: Mapping for importing Actuals and Budget amount from Oracle General Ledger Key Enablers of Collaboration: Deploying budget in transactional system: The twoway integration between Planning and Oracle E Business Suite/Oracle PeopleSoft via ERP adapters allows users for loading an adopted budget back to General Ledger. This process reduces manual data load to General Ledger thereby improving efficiency. Web based data forms Electronic workflow integrated with email systems Task list based processes integrated with MS Outlook task list Multi layered security providing necessary control and flexibility Auditing capabilities COLLABORATIVE BUDGET PREPARATION The budget preparation process involves several government departments, sometime working as independent agencies following different mandates and rules. Typically, the Office of Management and Budget (OMB) guides and co ordinates the budget development process. Oracle Hyperion PSPB supports top down, bottom up and middle out budgeting processes. The pre built, web based data forms in Oracle Hyperion PSPB facilitate data entry, allowing Page 8
users to work simultaneously on budget worksheets. Users can enter or modify budget amounts as needed, enter supporting details, and annotate and attach documents in support of their budget requests. The multi layered security ensures that users have an appropriate amount of access to data forms, business rules and dimension members like access to certain funds, cost centers, object codes, and programs. The task list based approach in Hyperion PSPB ensures that users have the necessary instructions and complete tasks in a specified order before submitting a budget. If any rule is violated as predetermined by OMB, then the submittal automatically fails and points towards violation; this helps business users correct mistakes before a budget is submitted to and reaches OMB. The workflow based process management allows budget administrators to track a budget status online, and have a single report to determine the status of each planning unit; these tools reduce unnecessary emails and phone calls and greatly improve productivity. Page 9
Figure4: Task List Imported in MS Outlook PERFORMANCE BASED BUDGETING State and local governments have traditionally managed their resources through line item budgets and program based budgets. Program based budgeting focuses on resource allocation to different programs approved by local government leaders, and mandates from state and federal government. The recent financial crisis has forced government organizations to rethink this approach. Now governments are trying focus on outcomes of the programs to determine which programs are providing better values to their citizens. In performance/outcome based budgeting, resource allocation is tied to program performance, Page 10
a process that leads to cutting back on inefficient programs or programs whose outcome is not satisfactory. Performancebased budgeting helps government leaders prioritize activities based on input of resources as well as their outcomes. The Hyperion EPM solution allows the capture of performance metrics combines these with budgeting to facilitate performance based budgeting. The process enables organizations to align short term resource allocation to longterm organizational strategy. Figure5: Example of Performance Management Data Form in Planning Page 11
PUBLISHING BUDGET BOOK In the government sector, budgeting is not just an exercise of resource allocation but also a mechanism of communication of policies and programs. The budgeting process takes input from communities and citizens through a public hearing process, along with input from elected officials, to serve as guiding principles for a budget. Once a budget is finalized, the government publishes its budget book. The budget book typically includes financial information, along with charts and graphs providing a comparison of the current budget with the historical budget and actual amounts. The budget book also includes a significant amount of textual information explaining guiding principles, budget assumptions, and goals and objectives. Page 12
Figure6: Budget book publishing process diagram Oracle Hyperion PSPB supports budget book creation. The budget book combines data from various sources and allows the definition of sections and sub sections within the book. The budget book can be refreshed with changes made within the source data, a process that significantly cuts time from adopting a budget to publishing a budget book. It also simplifies the process for updating a budget book, if required after initial publishing. The budget book process supports publishing in PDF and HTML formats, and deploying a budget book to a static HTML website. Page 13
Business benefits The following are among the benefits of using a Hyperion PSPB solution: Reduced deployment time by leveraging pre built data forms, task lists and the calculation engine. This in turn reduces implementation cost and total cost of ownership. Prepackaged position, employee and position & employee budget models incorporates best business practices of the industry. The business models include online data validation which reduces data entry errors and directs users to correct data before it ever reaches budget administrators. The application provides the ability to track costs at individual position levels. Moreover the position cost can be further broken down for identifying individual cost elements. This provides insight in the personnel cost structure, helping organizations improve management of their costs. The application allows users to configure budgetary review and approval hierarchies. This process is integrated with MS Outlook, which improves collaboration among budget stake holders. This process cuts approval cycle time and provides an audit trail of budget submittals and approvals with annotations. The out box integration and available adapters allows Hyperion PSPB to integrate with virtually any ERP application. Data integration dramatically improves meta data management process, and reduces the time Page 14
to load data from external systems and load back to external ERP system; this reduces the cycle time for end to end budget development and deployment process. The built in budget book feature reduces the time required for publishing a budget book after a budget is adopted. Page 15
Summary Financial Planning and budgeting is a complex and timeconsuming process. It typically involves a large number of stakeholders, making collaboration a critical factor for success. Hyperion PSPB is new breed of web based software with multidimensional engine and pre built data forms and business rules. Since the data forms and business rules are designed to include the best practices of municipal governments, it reduces need for developing of such forms and rules from scratch, which in turn reduces both the total cost of ownership and implementation time. Moreover, organizations can leverage the available integrations with external ERP systems, thereby significantly reducing budget development time. With the capability to prepare and publish a budget book with data from various sources, Hyperion PSPB becomes an indispensable tool for formulating and deploying budgets in municipal governments. Page 16
Budgeting in Municipal Governments with Hyperion Public Sector Planning & Budgeting AST Corporation 1755 Park Street, Suite 100 Naperville, Illinois 60563 Phone: 888-278-0002 Fax: 630-778-1179 www.astcorporation.com Copyright 2012 AST Corporation AST Corporation is a privately held company founded in 1995 to serve commercial and public sector organizations in utilizing the full potential of their investment in Oracle Applications. We have built our practice by providing top quality full life cycle and turn-key consulting services for Oracle Applications implementation and upgrade projects, among other specific services. Our mission is to insure that you, as a valued client, receive the highest level of expertise and personalized service for your Enterprise Applications. We endeavor to help you realize the full benefit from your investment in software applications and integrate them seamlessly to your business processes. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.