FINAL - Budgeting for IT - Budgeting for IT.pdf · BUDGETING FOR IT • Phil Bertolini ... IT Budgeting and Decision Making, Chapter 10. IT Budget Benefits ... Capital Budgets o 5

Presenters:

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Date:

BUDGETING FOR IT

• Phil Bertolini, Deputy County Executive/CIO• Laurie Van Pelt, CPFO Director of Management &

Budget• Lynn Sonkiss, Manager of Fiscal Services

May 19, 2014

Logisticso Scan the QR code to download the presentationo This session is 100 minutes long. There will be time for Q/A at the end. • Please use the microphones for Q/A

o This session is worth 3 CPE credits• Self‐scan for credits or see a GFOA staff person

o Please complete the session evaluation

Our Speakerso All three speakers are from Oakland County, MIo Phil Bertolini, Deputy County Executive/CIO has 26 years of governmental experience and is currently responsible for IT and Facilities

o Laurie Van Pelt, CPFO, Management and Budget Director/CFO has 35 years of governmental experience and is responsible for Fiscal Services, Equalization and Purchasing

o Lynn Sonkiss, Fiscal Services Manager, has 23 years of governmental experience with an extensive background in accounting and budget functions as well as system implementations.

Roadmap for the Sessiono How to integrate IT into the budget process

• IT is not an expense, it is an investment• What is the return on investment• How can performance measures play a role• Leadership is an important role in the integration• IT as an Internal Service Fund

• Pay for Service Model• General Fund Support• IT – Budget Benefits

• 910 Square miles

• 62 Cities, Villages and Townships

• 1.2 million residents

• 82 departments and divisions of county government

• County Executive form of government with 21 Commissioners

Oakland County, MI

Why are we here?

o Costs are becoming more manageableo Standards have emerged to make

integration easiero Markets have maturedo People are more cognizant of the

importance of technologyo Technical expertise is easier to findo Citizens expect and depend on

technology

Technology is Integral to Government Operations

IT Budgeting and Decision Making, Chapter 1

Doing MoreWith Le$$

Doing LessWith Le$$

Executive Sponsorship

What Are We Trying to Accomplish?

o Achieve Buy-In From the Topo Educate and Nurture Key Stakeholderso Adhere to the Vision of the Entire

Organizationo Measure IT Value for the Organizationo Build and Maintain Trust

Executive Sponsorship

“Efficient and progressiveCounty Operations, bothnow and in the future, willrely heavily on thesuccessful delivery of ITprojects. For this reason,this will be one of themost strategic initiativesfor this department.”

L. Brooks PattersonOakland County ExecutiveProject Kick Off MeetingSeptember, 1996

“A system of management processes and structures that help to steer and define how an

organization operates through rules of engagement, rather than to administer or

manage particular functions directly.”

Define IT Governance


o Identifying technology needso Prioritizing technology investmentso Assigning accountabilityo Aligning IT Department activities

Reasons for IT Governance


Customer Service for IT

Customer versus Partner

o Create buy-in through partner engagement

o Partners are involved in decision making process

o Customers simply desire services to be provided

o IT is a service bureau that provides services for everyone else in government

Perception of IT

o Desire to be perceived as a strategic partner

o Simple service providers can be replacedo Constantly measure the successes or

failures of ITo IT is not a “spend” it is an “investment”

Why do finance officers need to understand IT?

Roles of the CFO & CIO

Working Together to Maximize Value

By Shane Kavanaghwww.Public-CIO.com

Trust and Communications

“Finally, the CIO and CFO must maintain totally open communications. This is a product of trust and working together on projects and ongoing governance processes.”


Working Together

“Technology is becoming more pervasive and a greater factor in both parts of the public value equation: producing outcomes of value to constituents and providing cost-effectivegovernment services. The CIO and CFO . . . must work together closely if technology’s full potential for improving the lives of the public is to be realized.”


o Creating value through technologyo Managing risko Understanding short-term and long-term

costso Producing information of value to governmento Improving data and transactional

transparencyo Control IT costs

Importance of IT to Finance Officers


CFOs and CIOs Speaking the Same Language

The Transformational Effect of IT Governance 2012

o CFO and CIO must work closely togethero CFO understands the financial impact of

technology investmentso CIO understands the technology and the

needs of the end userso Business cases are importanto Avoid acronyms in communications…no

need to confuse one another

IT Business Cases

The Essentialso A Return on Investment Analysis (ROI)o A Standard Set of Evaluation Criteriao Alignment and Integration with Budgeting

Processo Intra-organizational Cooperationo Accountability for Results


Developing IT Business Cases

1. Clearly Understand Vision and Goals2. Evaluate Existing Systems3. Identify Alternatives4. Run the Numbers5. Establish Performance Measures


Oakland County Process

o Leadership Group (LG) Process• Provides IT customers to direct & allocate IT

development resources to initiatives that are most beneficial to the organization as a whole

• Organized by functional areao Develop a Scope and Approach Document/ROIo Clearly identify costs, tangible and intangible

benefitso Gain LG approval to do a project sizingo Gain LG approval to include the project in the IT

Master Plano Funding must be determined prior to LG

approval

Leadership Group Documents

o Process and Procedureso Scope & Approach Instructionso Return on Investment (ROI) Analysis

Instructionso Documents and samples are available at

http://www.oakgov.com/it/pmo/Pages/leadership_grp/default.aspx

Leadership Group Roles

31

ROI Analysis of Virtualization Project

Description Year 1

Benefits/SavingsTangible Benefits Subtotal $1,287.390

Cost Avoidance Subtotal 0

CostsDevelopment Service Subtotal: $267,340

Hardware Subtotal: $679,642

Software Subtotal: $269,680

Infrastructure Subtotal: $33,638

Annual StatisticsAnnual Total Savings $1,287,390

Annual Total Costs: $1,250,300

Annual Return on Investment: $37,090

Annual Costs/Savings Ratio: 97.12%

Year Positive Payback Achieved

Year 1

Planning for IT

Critical Design Features of the Planning Process

o Joint Decision Making• Work together with functional partners

o Involvement of Top Decision Makers• Involve the entire “c” suite

o Standard Evaluation Method• Shared understanding of how the project will

be judgedo Screen for Technical Considerations


Critical Design Features of the Planning Process (cont.)

o Formal Business Case Made• Must understand the tangible and intangible

benefitso Partnership with Finance Office

• Working together to understand the financial impact

o IT Strategic Plan• Multi-year plan for technology


Strategic Planso Do you have an IT Strategic Plan?o Define the mission of the entire organizationo Plan to develop enabling technologies that

solve the problemso 2 to 3 years in lengtho Overarching document to guide IT forwardo It is a living document that takes care and

feedingo Ensure every project undertaken ties back to

planIT Budgeting and Decision Making, Chapter 6

Project and Portfolio Management (PPM)

o Creation of a Project Management Office (PMO) may be necessary to lead the effort

o Must meet with key stakeholders to understand their business and their needs

o Must understand the overall needs of the organization

o Approve the project charter and manage resources

o Assess and mitigate risksIT Budgeting and Decision Making, Chapter 11

PPM Critical Success Factors

o Secure top management commitmento Understand that implementation is a business

change efforto Devote the necessary resourceso The Project Manager ruleso Set clear goals, scope and expectationso Track project progress, results and scopeo Communicate effectively and ofteno Understand and address riskso Control project scope and minimize disruptions by

managing changeo Test every way you can


Budgeting for IT

Oakland County’s Modelo 3-Year rolling line item budgetso Use of Proprietary Funds

• Information Technology Fund• Telephone Communications Fund• Courts & Law Enforcement Management

Information System (CLEMIS) Fund• Radio Communication Fund• Fire Records Management System (FRMS)

Fund

Oakland County’s Model

o Budget located in internal support section of department budgets for internal customers

o Budget allocations and chargebacks to user departments are based on utilization of services

o Operating like a business creates transparency to the organization

o Impact of technology on customers

IT Budget Challengeso Requires Capital and Operational

componentso Return on Investment can show short

term, long term, and intangible benefitso Good long term planning enables the

annual budgeto Must provide organizational valueo Centralized versus decentralized

budgetingIT Budgeting and Decision Making, Chapter 10

IT Budget Benefits

o Planning and budgeting are linked together

o Assures IT spending accountabilityo Monetizes technology for a total cost of

ownershipo Ongoing value can be recognized for

sustainability


Types of IT Expenditures

o Hardware/equipmento Personnel/staffo Systems design and implementationo Internal services/service desko Cyber securityo Planning/policy/standardso Training


Capital Budgetso 5 to 10 year projectionso Hardware replacements and laboro Large system replacements/upgrades

and laboro Sustainability is key to strong capital

planningo Funding options

• Rates, General Fund appropriation, Grants, Bonding


Operational Budgets

o 3-year rolling line item budgetso Salary and fringe benefit allocationso Professional services/supplemental

staffingo Consumable IT resourceso Software purchases and licensingo eCommerce costs


Chargebacks

o Fully understand all costs and their sources• Include both direct and indirect/administrative

overhead costso Consider using third party to assist in user

fee analysis o Closely monitor actual performanceo Review and adjust rates in a timely mannero Determine billing intervals (i.e. monthly,

quarterly)

Chargebacks – I.T. Fundo Direct Labor Rates

• Services billed based on actual time and labor and applied to customers based on systems used

• Include both employee & professional services• Referred to as “I.T. Development” and billed on quarterly basis

• General Fund departments are budgeted in non‐departmental General Fund and budget is allocated to departments on a quarterly basis pursuant to a resolution adopted by the Board of Commissioners

Chargebacks – I.T. Fund

o Service Rates• End‐user services based on number of units consumed or licenses assigned

• Mainframe• GIS

Chargebacks – I.T. Fund

o Equipment Rates• Address the cost of providing support to different types of equipment

• Types of support:• Customer Services

– Installation – Troubleshooting / diagnostics – Training– Hardware & Software upgrades and maintenance– Help Desk

Chargebacks – I.T. Fundo Equipment Rates continued

• Include “behind the scenes” benefits to customers• Cyber Security• Networking and data storage• Standard software & operating systems• Ability to update software remotely

o Billed Items• Address unique, customer specific

• Non‐standard software & maintenance• Training courses offered by IT

o Make sure your customers understand what goes into the rates!!!!!

General Fund Supporto Oakland County invests heavily in technologyo General Fund provides transfers to the IT

Funds for on-going operations and/or one-time project initiatives• Cyber Security initiative• Annual General Fund appropriation to cover

County contribution for operations: • CLEMIS Fund• FRMS Fund • Information Technology Fund

Summary Commentso Leadership Groupso IT Master Plano Scope & Approach with ROI Analysiso Planning, budgeting and prioritizing

initiativeso Chargeback model to recover costs

The IT Roadmap

Roadmap to Success

Where are you?• Assessment

Where do you want to go?• Planning• Governance/Management

How do you get there?• Budgeting• Strategy• Communications


Roadmap to SuccessThe Assessment

Where is your organization along the IT maturity continuum?An assessment can be taken on‐line at: http://www.gfoa.org/downloads/TheITServiceRoadmapAssessmentMkII.pdfAfter knowing where you are you must understand how to get where you want to go.


Roadmap to SuccessHow mature is your organization in

it’s use of IT?IT Maturity Continuum

• Basic Services• Maturing Services• Mature Services

10 20 30

Basic IT Services Maturing IT Services

Mature IT Services


Roadmap to Success


1. Government’s Perception of IT2. Governance/Leadership

Structure3. Customer Service4. Sourcing Strategy5. Project/Portfolio Management6. Business Cases7. IT Finance

IT Maturity Continuum

Basic Services



Basic Services

Maturing Services


Basic Services

Maturing Services

Mature ServicesIT Budgeting and Decision Making, Chapter 13

Roadmap to Success1. Government’s Perception of IT

How the organization views IT• Just another cost of doing business?• A means to achieve public service

excellence?The level of perception will dictate the role IT plays in the organization

• IT can range from being a simple provider of services to a strategic benefit to the overall organization

• IT decisions can be made from deep in the organization or at the highest level of government


Roadmap to Success2. Governance/Leadership Structure

The level of involvement of IT customers in shaping and guiding the direction of technology in the organization.

•Improved quality and quantity of IT services•Active role in leadership of IT initiatives

IT governance can range from being dispersed throughout the organization to being a centralized unit led by a CIO.

•As IT matures the structure will be more centralized and of an enterprise nature


Roadmap to Success3. Customer Service

How the IT function relates to the departments it serves

• Active feedback mechanisms• Are the expectations met in a timely fashion

As IT matures the need to involve the customer becomes more important

• IT begins with little customer need for their services to eventually making the customers partners


Roadmap to Success4. Sourcing Strategy

Outsourcing is a potentially valuable tool for IT service delivery

• Right sourcing will benefit the IT organization

• Must rationally evaluate the outsourcing opportunitieso Drive down costso Effectively leverage human resources

Sourcing can range from little or no effective policies to being an integral part of an organizations success


Roadmap to Success5. Project/Portfolio Management

IT investments are often implemented as discrete projects or initiatives

• Investments span all functional areas• Must be managed in a portfolio to ensure

effective cost management

PPM can range from having decentralized ad hoc efforts to having a strong methodology

• PPM may be disjointed and ineffective• A centralized PMO may bring stability


Roadmap to Success6. Business Cases

Business cases are an integral part of successful technology initiatives

• Strong business cases become strong communication tools

Business cases can ranges from little or no customer involvement to total integration with the customer.

• Clearly understanding the benefits is paramount to building a strong ROI


Roadmap to Success7. IT Finance

The methods by which IT costs are tracked and IT services are funded

• The importance of IT funding models will impact the organizations success

IT finance can range from budgets being buried within other budgets to being funded as an independent agency

• CIO and CFO must work together as partners• Charge backs for services may be effective in

understanding the total cost of ownership for IT


Online Payments

Over the Counter Payments

Web Suite Hosting

G2G Marketplace

More to come…

Wrap Up&

Take-AwaysPhil Bertolini – [email protected] Van Pelt – [email protected] Sonkiss – [email protected]

www.oakgov.com/it/presentations

embrace the chaosembrace the chaos