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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
IT Budgeting and Decision Making, Chapter 3
o Identifying technology needso Prioritizing technology investmentso Assigning accountabilityo Aligning IT Department activities
Reasons for IT Governance
IT Budgeting and Decision Making, Chapter 3
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.”
IT Budgeting and Decision Making, Chapter 2
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.”
IT Budgeting and Decision Making, Chapter 2
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
IT Budgeting and Decision Making, Chapter 3
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
IT Budgeting and Decision Making, Chapter 7
Developing IT Business Cases
1. Clearly Understand Vision and Goals2. Evaluate Existing Systems3. Identify Alternatives4. Run the Numbers5. Establish Performance Measures
IT Budgeting and Decision Making, Chapter 7
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
IT Budgeting and Decision Making, Chapter 6
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
IT Budgeting and Decision Making, Chapter 6
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
IT Budgeting and Decision Making, Chapter 11
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
IT Budgeting and Decision Making, Chapter 10
Types of IT Expenditures
o Hardware/equipmento Personnel/staffo Systems design and implementationo Internal services/service desko Cyber securityo Planning/policy/standardso Training
IT Budgeting and Decision Making, Chapter 10
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
IT Budgeting and Decision Making, Chapter 10
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
IT Budgeting and Decision Making, Chapter 10
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
IT Budgeting and Decision Making, Chapter 13
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.
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
Roadmap to Success
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
IT Maturity Continuum
Basic Services
Maturing Services
IT Maturity Continuum
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
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
IT Budgeting and Decision Making, Chapter 13
Online Payments
Over the Counter Payments
Web Suite Hosting
G2G Marketplace
More to come…
Wrap Up&
Take-AwaysPhil Bertolini – bertolinip@oakgov.comLaurie Van Pelt – vanpeltl@oakgov.comLynn Sonkiss – sonkissl@oakgov.com
www.oakgov.com/it/presentations
embrace the chaosembrace the chaos
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