ProjectONE Report to the 82nd Legislature

ERP in Texas

When financial crises pushed two of Detroit’s “Big Three” car companies into Chapter 11 bankruptcy in 2009, the world learned some shocking news about the state of finances at one of those companies.

General Motors (GM) executives had no idea how much money the company had.

As U.S. Treasury Auto Industry Advisor Steven Rattner told MSNBC, “This was a company that could not tell us on any given day within $500 million how much cash they had.“

The Wall Street Journal later reported that a draft of GM’s initial public stock offering (IPO) registration statement reads that by June 30, 2010, “... we concluded that our disclosure controls and procedures were not effective … because of the material weakness in our internal control over financial reporting.”

GM’s inability to report quickly and accurately on its financial position is a sobering reminder of the speed at which money moves in today’s economy. Without fast-paced, robust technological systems in place, large companies – and states – can find themselves relying on faulty, outdated information.

By creating fast, reliable, interactive business systems, ERP changes the way companies operate, and Texas is joining many other states in applying this technological solution to the needs of government.

ProjectONE – Our New Enterprise – is bringing ERP to Texas over the next several years with a system called CAPPS (Centralized Accounting and Payroll/ Personnel System). With this system in place at all state agencies, Texas can lead the nation in fiscal accounting and taxpayer transparency. ERP promises to provide the tools needed to shine the brightest light on the state’s finances, give decision makers seamless access to state data, and allow the state to make better use of the data at its fingertips.

Benefits of CAPPS

Unlike existing statewide accounting and payroll systems like the Uniform Statewide Accounting System (USAS) and the Uniform Statewide Payroll/Personnel System (USPS) and the various internal systems used by state agencies, CAPPS will:

• Give state decision makers a single source for reliable, real-time information that can be compared across agencies.
• Provide easy, direct, secure access to the state’s vast array of financial and HR information.
• Eliminate data conflicts often encountered when using financial accounting programs that lack integration.
• Provide better tracking and standardization of financial information, such as:
  • Method of finance – The state will be able to identify the funding source used to pay for any item or service (such as appropriated receipts, federal funds, grants, interagency contracts, etc.).
  • Appropriations/budgets/expenditures – Every state dollar will be traceable, from the initial appropriation to a state agency budget through the final expenditure.
  • State assets and budget planning – State assets will be easily tracked, leading to improved budget planning and accountability at the statewide level. In addition, the CAPPS system will report on replacement schedules and costs for big-ticket items such as computers and vehicles, giving budget planners more flexibility in scheduling major purchases.
• Create real-time transparency. Legislators and citizens will be able to track spending and know how agencies and institutions are spending the funds they receive throughout the year.
• Allow users to estimate carry-forward or lapsing federal funds or grants. This is a difficult and problematic exercise at the statewide level today. With the CAPPS system, decision makers will be able to track and monitor expected federal receipts and compare them against actual usage across agencies.

CAPPS will also allow agencies to redirect employees from time-consuming data entry positions to mission-critical tasks and core business functions. After the upgrade to PeopleSoft 8.3 in 2002-2003, Texas Health and Human Services (HHS) agencies recognized gains in efficiency and speed in HR/ payroll functions by using an HR contract provider and a variety of self service applications. By the end of October 2005, the agencies were able to reduce more than 400 HR/payroll administrative positions. Some employees in those positions retired or left the agency, while many others were hired into other positions across the enterprise, enabling HHS to retain institutional knowledge while filling positions that offered a higher return to the agencies.

Reporting is another area that will see increased efficiency. The Texas Department of Transportation (TxDOT) has identified a number of reports that CAPPS will be able to generate that address recommendations of the Grant Thornton management and organizational review. Activity-based costing reports can be created, and data can be pulled from multiple sources, creating reports that are more detailed and more accurate.

In addition, enhanced set-up screens will ensure that payments to historically underutilized businesses (HUBs) will be recorded and reported accurately, so the state can assess the effectiveness of its program. For samples of these and other reports that will be available, see Appendix D: Sample Reports.

CAPPS will provide exceptional value to the Comptroller’s office, state agencies, the Legislature, oversight agencies and the general public. It will provide benefits that will save time, improve customer service, improve transparency, create economies of scale and enhance security by accomplishing the following:

• Eliminating obsolete business processes, including manual processing, duplicate data entry, paper processing and manual reconciliation.
• Eliminating redundant databases.
• Increasing security while maintaining transparency.
• Improving response time to inquiries from legislators, oversight agencies, media and the public by utilizing real-time processing and integrated databases.
• Establishing a common data language, which provides for consistent reporting and better analysis of how the state’s money is spent.
• Establishing a procurement system that will be fully integrated with the financial accounting, asset management and inventory management modules, thus providing strategic sourcing data that can reduce the state’s cost of goods and services.

It should be noted, however, these benefits will have minimal impact until CAPPS is implemented at all state agencies. Until then, agencies will continue to use the current statewide systems (such as USAS and USPS), maintaining redundant databases, housing conflicting data and providing limited access to crucial information. In addition, the state will continue to pay for maintenance and operation of duplicative systems and will not take advantage of the full range of CAPPS capabilities.

Project scope

Before appropriating funding to implement ProjectONE, the 81st Texas Legislature assessed A Plan for the Implementation of Enterprise Resource Planning (ERP) for the State of Texas, the master plan submitted by the ERP Advisory Council, and also considered the fact that certain other states have attempted and failed to successfully implement ERP statewide. Legislators also assessed which Texas agencies had the most compelling need to implement an ERP solution in the short-term. As a result, the Legislature approved a modified version of the report’s Option 3 with an approach that presented less exposure to the state and lower risk of failure.

With this approach, TxDOT, the Department of Information Resources (DIR) and the five Health and Human Services (HHS) agencies were each funded to implement an ERP project during the 2010-2011 biennium. Section 17.03 (f ) of the General Appropriations Act directed the Comptroller’s office to enter into an interagency contract to manage the development and implementation of the projects. In 2009, the Comptroller selected an implementation vendor and project oversight vendor.

The original project scope called for TxDOT and DIR to implement the full suite of PeopleSoft financials and HR/Payroll modules. The Health and Human Services Commission (HHSC) was to upgrade and enhance the current HHS PeopleSoft HR/Payroll system.

The HHS system would be used as a baseline for the new HR/Payroll component of CAPPS. This involved a two-stage software upgrade from PeopleSoft 8.3 to 8.9, then from 8.9 to 9.1. The first stage of the upgrade was completed according to schedule in March 2010.

However, as part of the established management review checkpoint before the second upgrade, it was determined that the existing HHS HR/Payroll system did not have the depth of coding documentation necessary to continue within the original project timeline.

In addition, another 90,000 hours of software development would be needed to code customizations, including interfaces, conversions, enhancements and workflows, required to maintain current functionality and efficiencies for the participating agencies.

At that point, HHSC assumed responsibility for upgrading the base HR/Payroll system to PeopleSoft 9.1 before adding final CAPPS customizations. HHSC, working with NorthgateArinso, planned to complete the HR/Payroll upgrade plus some ERP enhancements at an estimated cost of $10 million. HHSC requested authorization to transfer available agency funds to ProjectONE for these services. This request was not approved. HHSC then submitted an alternate request and received preliminary authorization to complete the upgrade. The project plan is being scaled accordingly.

Although the timeline for the HR/Payroll component is still being determined, HHSC anticipates completing the upgrade from PeopleSoft 8.9 to 9.1 in May 2012. This upgrade will include the majority of the HR customizations prioritized and approved by the ProjectONE Steering Committee for inclusion in CAPPS.

Meanwhile, work on the Financials component will continue on its own timeline. The Requirements Gathering phase identified additional functionality that is needed, including enhanced tools for fleet management, federal and state project billings, investments and both short- and long-term bonds. This functionality is especially critical for TxDOT, which currently maintains $1.5 billion in bonds and $448 million in investments on a series of individual spreadsheets. By incorporating these requirements into CAPPS, TxDOT would receive additional functionality within a single statewide integrated system.

However, to complete all the changes necessary for the Financials component to meet TxDOT needs, an additional 37,000 hours of software development is required. TxDOT requested approval to move $34 million from available agency funds to ProjectONE so this functionality could be added to CAPPS, but to date approval has not been granted.

Without this additional funding, CAPPS cannot be implemented for TxDOT. The Financials component for DIR and the Central Texas Turnpike System CTTS), a division of TxDOT, will go live as planned on Sept. 1, 2011. For more information, see Appendix C: ProjectONE Timeline.

These changes to the project plan were made with an eye toward long-term needs of state agencies. A state as large and multifaceted as Texas requires more than the standard “out-of-the-box” software package, however, and during the past year, representatives from each of the participating agencies have carefully analyzed and cultivated the list of requirements for CAPPS. The result will be a system that will meet current needs while allowing for future changes and growth.

In order to provide necessary ongoing maintenance and support to agencies that have converted to CAPPS, the Comptroller’s office originally requested $39.9 million for the fiscal 2012-13 biennium. As a result of the recent change in project scope, this request is being revised. Funding is necessary to provide ongoing services to support, maintain and enhance the system, including hardware, software, maintenance and disaster recovery services. For more information about the original request, see Appendix E: Project-related Financial Information.

Current and future agency participation

Other agencies are recognizing the need to implement ERP, and in 2010, 13 agencies contacted the Comptroller’s office to request evaluation and approval of ERP solutions. These agencies and requests include the following:

Agencies Requesting Approval of ERP Solutions

Bringing more agencies onto CAPPS is only possible with additional funding from the Legislature. Therefore, approval for these requests had to be delayed until CAPPS funding becomes available, as approving individual requests for different software programs will perpetuate the state’s existing problem of multiple, incompatible platforms and applications. Ideally, all of these agencies will be brought onto CAPPS in a timely manner.

The legislative appropriation requests (LAR) submitted by the Department of Public Safety (DPS) and Texas Department of Motor Vehicles (TxDMV) for the 2012-2013 biennium include requests for $18.6 million and $4.3 million, respectively, to deploy CAPPS.

Implementing CAPPS for these and future agencies will ensure that Texas moves toward a unified, transparent and efficient statewide accounting and HR/payroll system, rather than a fragmented, ad hoc system that cannot be maintained and upgraded on a regular, long-term basis.

The DPS request is part of the department’s ongoing initiative to create a streamlined IT infrastructure that responds to the changing demands of 21st century law enforcement. This will allow DPS to replace its outdated, mainframe-based financial and HR systems, including an obsolete inventory system based on unsupported technology and a highly customized grants processing system. Implementing CAPPS at DPS will also allow better tracking and draw-down of federal funds for counterterrorism, drug interdiction, border security and other crucial public safety programs.

TxDMV was originally scheduled to implement ERP in the 2010-2011 biennium, but with only four full-time administrative employees on board in fiscal 2010, the newly created agency did not have the bandwidth for a project of this scope. CAPPS will provide TxDMV with fully integrated, automated financial and HR/payroll applications. This will facilitate the independent preparation of the agency’s annual operating budget and year-end financial statements and administer salary, position control and employee data for its 647 full-time employees (FTEs). Establishing effective accounting systems at the department will be essential to operations as the staff takes on the technological and logistical demands of handling 21 million vehicle registrations and 5.4 million titles each year.

The next logical group of agencies to implement ERP, perhaps in the 2014-2015 biennium, would be those now using the Integrated Statewide Administrative System (ISAS) as their accounting system in either the Application Service Provider (ASP) database hosted by the Comptroller’s office, or a version of ISAS the agency has customized to fit its needs. These agencies include the Comptroller’s office, the Texas Department of Insurance, Texas Workforce Commission, Texas Department of Housing and Community Affairs, Texas Education Agency and the five HHS agencies.

The version of PeopleSoft used by non-ASP agencies is no longer supported by the software vendor. Moving these agencies to CAPPS would result in reduced maintenance costs to agencies and the state, eliminating the effort now required when changes have to be made to multiple systems whenever federal or state requirements change.

Building on lessons learned

Past system implementations have yielded valuable information about what works – and what doesn’t – when launching organization-wide changes. Implementing a technical system is relatively easy. But if users are not properly trained, or if there is insufficient buy-in, then early problems will create resistance to change, and the organization will become mired in a pattern of using state-of-the-art technology to support outdated and inefficient business processes.

Effective change can only be achieved when the people who will be using the technology are includedand engaged in the development and decision-making process, informed about the advantages to the change and able to see real benefits as a result of the change.

With that in mind, ProjectONE leadership has established processes, outreach and training activities to emphasize three components fundamental to business innovation: user participation, communication and training. For ProjectONE, reporting is another key component, reflecting the principle that CAPPS must create immediate value and efficiency for its participating agencies.

User Participation

Agency subject matter experts (SMEs) and end-users have been and will continue to be involved in each phase of the project. A variety of outreach activities have been designed and conducted to provide agencies with a better understanding of their roles and responsibilities as the project transitions to each new phase. These activities provide opportunities for the agencies to fully engage and participate in defining the statewide standards:

• To prepare for their participation in the Requirements Gathering and Fit/Gap phases, nearly 1,000 SMEs and ProjectONE team members attended PeopleSoft training between November 2009 and March 2010. ProjectONE also conducted awareness sessions before each phase to set expectations and ensure participants understood their role in the process.
• In December 2009 and January 2010, ProjectONE staff facilitated and hosted 41 As-Is workshops to document the functionality and interfaces among the various systems currently used by participating agencies.
• Between January and April 2010, more than 600 staff from TxDOT, DIR and the HHS agencies participated in 272 Requirements Gathering workshops. Participants identified 4,081 financial requirements and 5,612 HR/Payroll requirements. These workshops yielded the most comprehensive list of statewide requirements ever compiled – a key step in developing a system that multiple agencies can deploy.
• During 307 Fit/Gap sessions in April and May, agency SMEs reviewed these requirements and determined which ones could be met by out-of-the-box PeopleSoft 9.1 software (Fits) and which ones would require software customizations or work process changes (Gaps). By the end of the process, many requirements had been consolidated or reclassified. The steering committee ultimately approved 2,414 “Fits” and 1,335 “Gaps” for Financials, and 2,674 “Fits” and 2,732 “Gaps” for HR/Payroll.
• Agency SMEs also reviewed and approved process designs and are now reviewing functional design documents that will be used by the technical team to code the new system. As coding is completed, agency staff will be involved in the testing phase as well.

Leadership structure

Project leadership has established an effective governance structure to oversee project activities and make decisions. The governance structure includes the Executive Council, Steering Committee, Change Control Boards for Financials, HR/Payroll and Technical, and Employee Work Groups for the various modules comprised of representatives from each of the participating agencies.

These groups have established their roles and are providing the appropriate oversight to the project.

For more information about the project governance structure, see Appendix F: ProjectONE Governance Structure.

Communication

The Change Management team for ProjectONE is responsible for supporting the participating agencies in their efforts to ensure that affected staff members are engaged and ready to implement and sustain improved business processes. Team members work with specific agencies and assist contacts in completing the activities outlined in the project’s Change Management and Communication plans. These activities include stakeholder analysis and involvement, employee and leadership alignment, change readiness assessment and creation of a change agent network within each agency.

Team members provide articles and project updates to agency staff for agency newsletters, websites and other publications. The team also maintains the ProjectONE website which includes information about the project’s history, participating agencies, timelines, presentations and monthly updates. This provides a “one-stop shopping” opportunity for all project-related information.

Training

Training staff began creating plans and materials even as system requirements were being mapped. Participating agencies have already received preliminary information about the number of trainers they will need, estimated class sizes, course descriptions and equipment required for each classroom.

ProjectONE trainers are developing standard course materials and documentation to assist the participating agencies in developing individual training, logistics and implementation plans. ProjectONE will provide end-user training for DIR and CTTS.

Agency training leads will tailor the ProjectONE training plan to fit their agency needs, selecting trainers and managing the logistics and course roll-out for each agency. Agency training staff will assist with the development of the standard course materials and be responsible for any agency-specific customizations needed. They also are responsible for delivering training to the agency end-users.

In all cases, the project will use role-based rather than system-based training. This means that employees will learn what they need for their jobs rather than irrelevant system functions. Role-based training is a proven method to increase productivity and user acceptance, which increases the immediate effectiveness of the system.

Together, these strategies create a framework for user training that can be adapted to any state agency.

Reporting

For ProjectONE, reporting is a priority. If users can’t access the information that’s in the system quickly and easily, and count on the accuracy and consistency of the data, then the system is not providing value to the agency, Legislature or taxpayers.

The reporting team is working closely with participating agencies to determine their reporting needs and has developed a strategy that standardizes common reports across agencies and provides appropriate ad hoc reporting capabilities for agencies’ day-to-day operational needs.

This strategy will establish a single source for statewide reporting and include both summary and detail data. With improved access to detailed expenditure data, participating agencies will be better equipped to forecast expenditures, take advantage of volume discount purchases and produce the Agency Financial Report with minimal manual intervention. The strategy also includes a publicfacing reporting component that complements existing reports on Comptroller.Texas.Gov, thus adding to the state’s commitment to increase transparency in public spending.

Noteworthy accomplishments to date

Software development projects typically consist of six phases: Vision, Plan, Design, Build, Deliver and Operate, and with CAPPS already in the Build phase during its first year, we are well over halfway through the steps needed to create and launch the initial version of the statewide system. ProjectONE was conceived as a seven-year plan to implement an ERP solution for all Texas agencies, but the final timeline will depend on how quickly other agencies are funded for implementation.

To date, the ProjectONE team has identified at least 19 legacy systems and numerous manual processes and desktop applications that will be retired when CAPPS is implemented at DIR and TxDOT. In addition, we have reviewed 450 reports now used by agencies and determined that more than 75 percent of these can be eliminated by combining multiple criteria in a single CAPPS report.

As of December 2010, the first eight milestones have been completed on time; a significant achievement for a project of this size and scope. Deliverables produced for these milestones include a detailed project work plan, documents outlining plans for the technical architecture, interface system requirements and standards, data conversion, training, knowledge transfer, communication and change management activities.

For a detailed list of additional accomplishments, see Appendix B: Accomplishments to Date.

Next steps

During the Build phase, CAPPS will be developed based on the state of Texas business and technical requirements. Reports, interfaces, conversions, customizations and workflows will be developed and tested, security profiles will be created and multiple environments (e.g., testing, training and production) will be established. Once the system is developed, unit testing will be conducted, followed by integration testing, user acceptance testing and training.

Agencies will then transition from their current systems onto CAPPS during the Deliver phase. This phase includes final system testing (user acceptance), mock conversions to test the system with typical agency transactions and user training. A key part of this phase is the deployment of a Help Desk at the Comptroller’s office to provide additional technical assistance to agencies using CAPPS. CAPPS will be ready to support business operations at the end of this phase.

Finally, in the Operate phase, agencies will move from a pre-production environment to routine business operations. During this phase, the implementation team will transfer responsibilities to appropriate agency teams, optimize overall system performance and initiate a continuous improvement program to refine the syste and increase its efficiency as we get feedback from users and bring more agencies onto CAPPS. The ProjectONE team will also solicit and analyze agency feedback to prepare “Lessons Learned” for future CAPPS implementations.

Planning for the future

In this report, we have outlined the needs of ProjectONE through 2015 and explained why this is a mission-critical venture for the state of Texas. In future reports to the Legislature, we will continue to relate progress and outline a plan of execution that extends beyond 2015 and includes an implementation schedule for all remaining state agencies.

Much of the work on this initial round of ProjectONE is laying the groundwork for future CAPPS implementations by creating templates, processes, procedures and training materials. By September 2011, a core team of state employees will have the skill sets, experience and expertise to better assist the implementation or maintenance vendor in supporting future implementations and providing ongoing agency assistance.

Delaying the CAPPS rollout to other state agencies could be costly for the state due to expected increases in legacy system maintenance costs and the cost of ERP software. Further, continued reliance on archaic systems and time-intensive manual processes will impair the state’s ability to make effective financial and staffing decisions.

ProjectONE is creating real momentum for a better way of doing business for the state of Texas. This momentum provides the opportunity to bring Texas to the forefront of fiscal accounting and transparency.

Conclusion

As Texas continues to outpace other states in population growth, a greater demand will be put on state agencies to provide services, maintain the state’s infrastructure and promote economic expansion. To meet this challenge, the state’s decision makers need access to the best tools and information available. At the same time, Texas taxpayers will demand increased accountability and transparency in state government.

CAPPS is the best tool available to meet these diverse demands, and ProjectONE is well on its way to delivering this tool to all Texas agencies. In the first year of its multi-year effort, ProjectONE has already created the most comprehensive list of statewide requirements ever compiled — a key step in the ERP process.

In addition, ProjectONE has created a strong cooperative effort among the Comptroller’s office, participating agencies and oversight agencies, with more than 600 employees from the agencies participating in the process to identify and prioritize CAPPS requirements. This outreach effort will be continued in future implementation phases, ensuring that all agencies can contribute their ideas for refinement and improvement of CAPPS in the future.

Full statewide implementation of CAPPS will eliminate hundreds of stand-alone agency systems and at least 19 legacy systems, as well as numerous manual processes and desktop applications. These efficiencies will allow agencies to devote more time and resources to core business functions, and with all agencies using the same platform, lawmakers and other state leaders will be able to view true “apples to apples” comparisons of agency revenue, spending and hiring.

CAPPS offers a win-win-win scenario for state decision makers, agencies and the people of Texas. Decision makers will gain a single source of real-time, reliable information and a clear picture of the state’s full financial picture. Agencies will gain increased efficiency in operations and ease of reporting. And the people of Texas will gain improved transparency, better tracking and standardization of information and a better value for their tax dollars as agencies operate more efficiently and effectively.