MMARS Liaison Meeting

1
MMARS Liaison Meeting

• February 1, 2007
• 1000 1200

2
Agenda

• Welcome
• PayInfo Implementation
• MMARS Upgrade 3.5.0.9
• Security During Transition
• New Training Events
• Internal Control Preview
• Discounts
• Benchmarking Update
• Close/Open Preview
• Federal Grants Update
• E-Payments Update

3
PayInfo Implementation

• 30 Pay Periods
• Unofficial W-2
• 58 Departments Using PayInfo

4
MMARS Upgrade 3.5.0.9

• LCM
• Users can now search by Employee ID.
• Users can now process adjustments against Labor
  History records that were previously adjusted
  through a LARQ that spanned multiple pay periods.
  
• PRLDE documents will now only contain lines with
  MMARS errors that must be corrected.

5
MMARS Upgrade 3.5.0.9

• Contracts
• The system will no longer edit against closed
  lines.
• The Actual Amount in the header will be corrected
  .
• Payments
• The PRC will now edit to prevent payment quantity
  from exceeding quantity on encumbrances.
• Receivables
• Fix will update the existing finance charge line
  amount, rather than continue to create a new
  one...

6
Security During Transition

• Department Head Certification
• Designation of Security Officer
• Primary/Backup

7
New Security Officers

• Small Group Meetings

8
Security Officers

• Request Listing of Users

9
Security Officers

• Review Roles
• Review Signature Authorization

10
Signature Authorization

• Review Current Authorizations
• Assign by Functional Area
• Document Further Restrictions
• All Requests by E-Mail

11
Review Security Policyon Web
12
New Training Events

• HR/CMS (Payroll)
• March 21
• April 26
• May 30
• HR/CMS CIW (Payroll)
• May 16
• June 20

13
New Training Events

• Internal Controls
• March 28
• April 25
• May 23
• June 13

14
New Training Events

• For New Managers
• State Finance An Executive Overview
• February 20
• March 6
• March 20
• April 3
• April 24
• May 15
• June 5

15
Closing /Opening 2007-2008

• General Sessions
• C/O Basics For New Staff
• Fiscal Fair TBA (mid May)

16
Internal Control Preview
17
Internal Control At A Glance

• Internal Control Legislation (1989)
• Awareness of Internal Controls (1990 present)
• Procurement Reform (1996)
• Annual Internal Control Questionnaire (2000)
• Implementation of New Accounting System (2004)
• OSC Quality Assurance Bureau (2005)
• Internal Control Guide Update (2007)

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Internal Control Preview

• Internal Control Guide
• Training
• Business Standards
• Chapter 647 of the Acts of 1989
• COSO
• Yellow Book
• SAS 112
• Sarbanes - Oxley

19
Business StandardsChapter 647 of the Acts of 1989

• An Act to Improve Internal Controls at State
  Agencies
• Internal Control Standards
• Management Responsibilities Internal Control
  Officer
• Written internal control plan
• Annual review or as conditions warrant
• Implement audit recommendations
• Reporting unaccounted for variances, losses, and
  theft of funds or property to SAO

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Business Standards

• Committee of Sponsoring Organizations of the
  Treadway Commission (COSO)
• Generally Accepted Government Auditing Standards
  (GAGAS) or Yellow Book
• Statement on Auditing Standard (SAS)
• No. 112, Communicating Internal Control Related
  Matters Identified in an Audit

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COSO

• Internal Control Integrated Framework
• Control Environment
• Risk Assessment
• Control Activities
• Information Communication
• Monitoring
• Enterprise Risk Management Integrated Framework

22
ERM Framework

• The ERM framework requires an entity to view risk
  from two perspectives
• Entity Level
• Business Unit Level

23
ERMThere are eight interrelated components
24
The Eight Components of ERM

• Internal Environment
• Objective Setting
• Event Identification
• Risk Assessment
• Risk Response
• Control Activities
• Information and Communication
• Monitoring

25
Components of ERMInternal Environment

• The internal environment is the tone of an
  organization which, among other things,
  determines an organizations risk culture and
  provides the basis for its internal controls.

26
Components of ERMObjective Setting

• Objective setting is a critical process that
  supports an organizations mission

27
Components of ERMEvent Identification

• Event identification associates internal and
  external events that impact an organization
  achieving its objectives.
• Events that may have a negative impact represent
  risks while those that may have a positive impact
  represent opportunities.

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Components of ERMRisk Assessment

• The risk assessment allows an organization to
  understand the extent to which potential events
  may impact objectives.
• A risk should be assessed from both the
  likelihood of it happening and the impact if it
  does happen.

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Components of ERMRisk Response

• The risk response evaluates options to an
  identified risk and determines the course of
  action.
• Options
• Accept the risk and monitor it
• Avoid the risk by eliminating it
• Reduce the risk by implementing controls
• Share the risk with another entity

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Components of ERMControl Activities

• An organizations control activities include
  policies and procedures, directives, etc.
• They occur throughout the organization at all
  levels and functions

31
Components of ERMInformation and Communication

• Information and communication is the
  identification and dissemination of pertinent
  information in a form and timeframe that enables
  people to carry out their responsibilities.
• Communication occurs in all directions flowing
  down, across, and up the organization.

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Components of ERMMonitoring

• Monitoring the effectiveness of components
  include ongoing activities and/or separate
  evaluations and making modifications as
  necessary.

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Discounts
34
Discounts

• Departments must ensure that the correct Master
  Agreement (MA) is referenced
• A vendor may exist on multiple MAs
• Discount terms on each MA could be different
• Departments must verify the discount terms and
  reference the correct MA

35
Discount Terms

• Verify that encumbrance discount terms are
  inferred from the MA
• Vendor line discount terms commodity line
  discount terms
• If discount terms are different, blank out those
  on the commodity line and revalidate encumbrance
  to bring in correct terms from the vendor line

36
Discounts Terms

• Each modification of MA affects existing
  encumbrances
• Review OSD updates
• Modify encumbrances to reflect new discount terms

37
Common Encumbrance ErrorsWrong Vendor Line
Referenced in Header Reference Section
Note
Note It should have been Vendor Line 6
38
Vendor discount terms updated
Commodity discount terms not updated
To update the commodity line section correctly,
blank out discount terms and revalidate document
again this will infer the terms from the vendor
section of the encumbrance
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Key Fields

• Service To Date
• Vendor Invoice Date
• Scheduled Payment Date
• Discount Terms

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Other Key Dates

• PRC Date of Record (Date Submitted)
• Disbursement Date AD/EFT Date of Record Plus
  One Day

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Discount CountdownLater of Vendor Invoice Date
or Service To Date
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Discount CountdownContract 10 in 10 Days, 5 in
15 Days,CT 10 on 9 Days, 5 in 14 Days
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Vendor Invoice Date Greater Than Service To Date
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Vendor Invoice Date

• The Vendor Invoice Date IS NOT
• The date of the order
• The date invoice prepared by vendor
• The date invoice mailed
• The date goods and services delivered (This is
  the Service To date).
• The Vendor Invoice Date IS
• The date invoice received and date stamped by
  department!

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Hints

• Enter invoice stamped date as invoice date
• For goods, Service From and Service To dates
  should be same
• For services, Service From and Service To dates
  are the dates services were rendered
• Let MMARS calculate Scheduled Payment Date
• Check data entry

46
Commonwealth Finance Benchmark Presentation
47
Commonwealth Benchmark Finance Benchmark was all
inclusive

• All agencies and departments were encouraged to
  
• participate in the Benchmark for
  Massachusettss financial
• operations
• Ultimately 92 agencies and departments
  participated
• The time period from which data was collected
  was FY 2006
• (July 1, 2005 thru June 30, 2006)
• Best practices and FTEs were produced as of
  June 30 2006
• The Commonwealth was compared to Hacketts
  Large
• Consolidated database

48
Hacketts finance benchmark focuses on eight
process groups that are discretely defined
Compliance and Risk Management
Management and Administration
Budgeting and Analysis
Transactional

• Cash Disbursements
• Accounts Payable
• Travel and Expenses
• Program Payables
• Revenue Cycle
• Credit
• Customer billing
• Collections
• Cash Application
• Accounting and External Reporting
• Fixed Assets
• Interfund/InterdepartmentalAccounting
• General Ledger Accounting
• Project Grant and Cost Accounting
• External Reporting

• Budget Preparation and Reporting
• Long Term Forecasting
• Annual/Bi-Annual budgeting
• Budget and Performance Reporting
• Business analysis
• Department/Program Analysis

• Finance Function Management
• Function Oversight
• Personnel Management
• Policy and Procedures Oversight

• Treasury Management
• Cash Management
• Capital and Risk Management
• Compliance Management
• Regulatory Compliance and Auditing
• Process Certification

Detailed definitions were provided for each
process grouping.
49
The Comm of MA has achieved 1st quartile in
effectiveness with opportunities to improve
efficiency

• Key Effectiveness drivers
• Standards exist for data definitions and
  coding
• Customers can access account info via the web
• Integration of strategy, tactics, and
  budgeting
• Credit sales are collected within terms
• High automatic posting remittance match rate
• High return rate on invested funds
• Formal documented strategic plan
• Performance reports are forward looking
• Greater error rates in payables and billing
• - Role of Finance in strategy is a facilitator
• - No balanced scorecards
• - Less analytical focus on proactive decision
  making
• - Less staff focus on business analysis
• Key Efficiency drivers
• General Accounting cost as of operating
  budget
• Analysts spend more time analyzing information
  
• Transactional application integration

High
1Q
Comm of MA
World-Class
1Q
Finance has the right structure in place to
provide value
High
Low
How efficiently is Finance meeting business
demands
50
Transactional cycle times exceed the Median and
World Class in all categories
Transactional cycle times in days
General accounting days to close report
51
The Cash Disbursements process is highly
fragmented resulting in unfavorable performance
metrics
Cash Disbursements cost as a of Revenue/operatin
g budget
Cost per transaction (invoices/TE reports)
4 x Unit Cost Delta
Transactions per FTE
Percent cash disbursement transactions automated
52
The highly fragmented Cash Disbursements process
should be considered a candidate for shared
services
53
Accounts payable error rates are positively below
the Median and comparable to World Class
Percent AP invoice errors
54
Low automation is driving greater staffing and
process costs, effectiveness is impacted by high
billing errors
Revenue Cycle FTEs
Revenue Cycle cost as a of Revenue/operating
budget
Occurrence of billing errors
Percent customer bills processed electronically
55
Although considered easy, the budget process
takes longer to complete and has more line items
than World Class
Days to complete the budget
Percent of customers that describe the
budget process as convenient and easy
of operation managers using online budgeting
application
Number of line items in budget
56
Comm of MAs average labor rates are 19 lower
than World Class and may be masking overall
inefficiency
Average fully loaded labor rates
57
Recommendations(Discussion)
58
How do I compare? Maybe I am doing well, But
where is there an opportunity to improve?

• Do you think Tiger cares whether he makes
  progress on these measures?

 
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In summary, the overall benefits available to the
Commonwealth of MA Finance are significant

• Address fragmented processes and organizational
  structure in cash disbursements and revenue cycle
  Step Change Opportunity
• Improve transaction processing service levels
  (i.e., shorter cycle times, increased
  productivity, reduced unit costs)
• Investigate opportunities to expand current
  Centers of Excellence into a Shared Services
  strategy at the Commonwealth level
• Investigate the technical capabilities and
  functionalities of existing systems to ensure
  they are fully leveraged in support of
  transactional activities
• Maintain current levels of focus in risk
  management and decision support in order to
  identify incremental improvements in efficiency
  and effectiveness
• Performing a more strategic/advisory role vs.
  controllership/transaction oriented role will
  provide for richer jobs and enhance Finances
  reputation

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We recommend that the Commonwealth of
Massachusetts focus on two high priority actions

• Action 1 Develop best practice based solutions
  in AP and Revenue Cycle
• Action 2 Ensure existing systems and
  applications are being fully leveraged to obtain
  full benefits of investments

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Action 1 - Develop best practice based solutions
for core transactional processes

• Cash disbursement improvements to reduce manual
  invoice processing
• Increase the utilization of prompt pay discounts
• Expand the implementation of E-Payments
• Expand use of Procurement Card (reduces small
  value transactions)
• Web invoicing (ideally suited for small
  suppliers)
• Automated audits at point of entry (an online
  self-service TE system is required)
• Revenue Cycle improvements to reduce manual
  billing and cash receipt application processing
• Where possible standardize invoice/billing
  formats build approved format templates
• Begin/expand use of electronic data interchange
  (EDI) and the Internet for incoming requests for
  program services and outgoing electronic billing
  (and/or credit card payment processing)
• Consolidate invoice printing and distribution to
  take advantage of bulk mail discounts
• Install high-speed invoice insertion equipment to
  eliminate manual stuffing in high-volume
  departments/agencies where hard-copy invoices
  cannot be eliminated
• Fully deploy electronic distribution of invoices
  using email, efax, EDI, and portal presentment

62
Next Steps

• Distribute and educate stakeholders on benchmark
  findings
• Establish action item owners
• Evaluate multi-stakeholder governance to avoid
  duplication / competition of effort
• Start initiatives and measure permanent progress
• Set quarterly timelines including quantitative
  targets
• Measure, report and communicate progress on a
  quarterly basis
• Keep focus and communicate, communicate,
  communicate

63
To move from transaction processor to business
partner the best have followed the same path
Observed Best Practices
Eliminate
Simplify
Automate

• Chart of Accounts
• Allocations
• Cost Centers
• Technology standards and systems
• Data Definitions
• Customer/Supplier Databases
• ETC

• Redundant or ineffective approvals (e.g. expense
  reports, requisitions)
• Duplicate data capture
• Immaterial transactions (journal entries, small
  payments)
• Paper invoices/Checks
• Allocations
• Manual JEs
• ETC

• Employee/Customer/ Supplier Self service
• Delivery of management information
• Remaining manual JEs
• ETC

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Close/Open Information

• Close/Open Meetings
• May 3, 2007 Federal Reserve Bank, Boston
• May 10, 2007 Hoagland-Pincus Conference
  Center, Shrewsbury

65
Key Close FY07/Open FY08 Dates

• April 27 COA Changes Including Dept.
  Structures
• May 4 Table Rolls
• May 7 Evaluate COA changes for FY07 and/or
  FY08 entry
• Weeks of May 14/May 21 Roll Budget Structures
• May 25 Load House 1

66
Key Close FY07/Open FY08 Dates

• May 31/June 1 FY08 Contract Roll
  Preparation
• June 2/June 3 - FY08 Contract Roll
• June 4 FY08 MMARS Opens for Pre- Encumbering
  and Encumbering
• June 25 Last Day to Post Payroll for Pay
  Period End Date 6/23
• June 29 Last Day to Process FY07 Transactions
  Requiring CTR/ANF Approvals
• June 30 Final Day to Receive FY07
  Goods/Services MMARS Available

67
Key Close FY07/Open FY08 Dates

• July 2 Cash Cutoff 2007 Revenue Must Be
  Deposited by Noon
• July 7/July 8 RE Roll
• July 9 Last Day to Post Split Week Payroll for
  PPE 7/7
• July 11 MMARS Unavailable
• July 13 Last Day for Fixed Asset
  Transactions
• July 14 Period 12 Fringe and Indirect
• July 20 Balance Forward Begins

68
Federal Grants Update
69
MMARS Reconciliation Reports

• NCA495W CMIA Selection Report by Letter of
  Credit
• This report captures all transactions submitted
  by the Commonwealth for reimbursement by the
  federal government since the last prior draw.
   Data is grouped and sorted by department, major
  program, appropriation, letter of credit number,
  CFDA number, program, sub account and doc ID.
   This report is scheduled to be generated weekly.
   
• NCA496W BFY Non-Central Draw Grant Report
• This report captures the funds drawn for all
  non-central draw grants as a percentage of the
  amount expended, and includes activity for all
  open budget fiscal years. This report is
  scheduled to be generated monthly.  
•   NGA220W Reimbursable Grant Statement
• This report captures inception-to-date activity
  for federal budget lines in the reimbursable
  grant budget structure.  Data is grouped and
  sorted by department, major program, program,
  funding profile, funding priority and funding
  line number. This report is scheduled to be
  generated weekly.  

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NCA495W Report Doc Direct
71
NCA495W Report Doc Direct
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NCA495W Report Doc Direct
Draw COA
Disbursement Trans
Reference Trans
Draw Amt
73
Other Reconciliation Reports

• Two detailed draw status reports are loaded to
  OSC Website under the Business Function/Federal
  Grant and Cost Accounting tab.
• (1) CMIA Weekly Draw Status report and
• (2) CMIA Historical Draw Status Report.

74
OSC Website
75
OSC Website
76
CMIA Weekly Draw Report
77
Federal Payment Draw Status

• Departments should use the CMIA Weekly Draw
  Status Report to validate successful draws from
  their designated federal payment system.
• If there is a discrepancy the department should
  notify OSC immediately.

78
Historical CMIA Weekly Draw Report
79
Federal Payment Draw Status

• Departments can use the Historical CMIA Weekly
  Draw Status Report to review the status of past
  draws requests from their designated federal
  payment system.
• Currently, OSC ITD are evaluating different
  models to make the data from the Historical CMIA
  Weekly Draw Status Report available to
  departments.
• Departments can use Commonwealth Information
  Warehouse ( MA_Draw_Reimb_and_Receivable_Detail)
  table to research detailed transactions.

80
E-Payments
81
Electronic Payments Update

• Statewide ePay contract is in place and pilot
  initiative is underway (with HCF, HRD, and DEP)
• Pilot goal is to expand functionality to other
  revenue streams and payment methods
• Many departments are using credit cards pilot
  focus is ACH because it is the lowest cost option
• Evaluation of pilot projects to leverage
  experiences, identify best practices, and develop
  policies and procedures for future departmental
  implementations
• Steering committee provides assistance, guidance,
  and knowledge transfer
• For more information contact Patricia.Davis_at_MassMa
  il.state.ma.us

82
Electronic Payment Options

• Currently available under statewide ePay
  contract
• Automated Clearing House (ACH) consumer
  provides bank information and authorization we
  originate funds transfer
• Credit cards Visa/MC, AMEX, Discover
• Interactive Voice Response (IVR)
• Signature debit cards point of sale Visa/MC
• Wire transfers to TRE
• Combination of any or all of the above as needed

83
Late Breaking NewsHCF Pilot Success Story

• HCF Nursing Facility User Fee Renewals pilot ePay
  implementation went live on January 18, 2007
• 6 days of processing
• 14 ACH transactions
• Transaction cost of 11.20 to the Commonwealth
• Total 1,002,524.70 deposited directly into
  Commonwealth accounts from customers

84
Consideration For Electronic Payments
Implementation

• Which electronic payment options make sense for
  my Departments business processes? Consider
• High dollar volume, low transaction number
• High transaction number, low dollar volume
• Industry vs. individuals?
• Fees vs. data?
• Likelihood that customer wants to do business
  this way
• Other departmental considerations
• Business requirements
• Technical resource requirements
• Information (data) requirements

85
Transaction Cost Comparison

86
ePay Implementation Costs and Considerations

• Department absorbs costs
• Development and testing costs for enhancements to
  departmental web applications and interfaces
• (Dependent on payment type)

• Costs depend on level of service contracted with
  EDS and mix of services provided
• ACH is flat rate of 0.80 per transaction
• Credit cards charge a of transaction value