Meeting Recap

by Rick Osborn

The presentation actually covered two projects involving Benchmarking.

The first project – “HR and Finance Baseline Assessment and Benchmark Project in Washington State” was presented by Kathy Rosmond from the Office of Financial Management of the State of Washington.

The genesis of the project was the Personnel System Reform Act of 2002. `This resulted in a complete change in the Civil Service system, Collective Bargaining, Competitive Contracting and required the acquisition and implementation of a new Human Resources Management System (HRMS).

The objective of the Benchmarking project was:

1. To support the implementation of the new HRMS and assist in strategic planning for future statewide financial systems.

2. Identify processes that were overly complex, cumbersome, or duplicative.

3. Compare state human resource and finance processes with benchmarks and best practices.

4. Provide a credible model for benchmarking agency performance based upon the best benchmarking practices.

5. Prioritize opportunities for process improvement.

The project was broken into three phases the first involving Human Resources (last half of 2003), the Finance (first half of 2004), and finally a designed re-measure to be performed in 2006-2007.

The actual project specifically involved twelve state agencies.  The Project Team was drawn from the Office of Financial Management (OFM), the Governor’s Office (GO), and the Department of Personnel (DOP).  The state contracted with two firms – Mercer, Inc. and Sierra Systems to provide consulting support.

Ms. Rosmond indicated some of the factors critical to the project’s success included the Executive Sponsors sending out letters and e-mails explaining the project and setting expectations for the twelve agencies selected as participants.  Additionally, the availability of baseline assessment and benchmarking experts and finally, periodic communications and reports issued during the project.

The tools used went beyond a typical “time and motion” study to apply web-based costing, the identification of human resource and financial functions and the identification and application of best practices.

The results indicated that four functions – payables management, general accounting, financial systems, and operations budgeting consumed 62% of the labor costs for the participating agencies.

Ms. Rosmond presented an example finding for Payables processing.  The assessment noted that there was no common process or statewide system for processing payables; a lack of interfaces with purchasing and contracts systems resulted in duplicate data entry; the use of Excel spreadsheets was significant; accruals were often inaccurate due to communication challenges between the central finance staff and the field; and finally, the field staff was not adequately trained.  A couple of standard benchmarks for payable processing are average cost and time to process a vendor payment.  For 10 agencies reporting this information, the State lagged behind other governments by 86% and industry by 75%.

The report presented a variety of Near, Medium, and Long Term recommendations.  It is these recommendations that will be used as part of the re-measurement process.  Overall the conclusion was that the State will benefit from this process.

The second project was presented by Sadie Rodriguez-Hawkins, Assistant Director of the Office of Financial Management of the State of Washington.  Her project was sponsored by the National Association of State Auditors, Comptrollers, and Treasurers and the presentation was titled – “NASACT Benchmarking Overview”.  This was a Pilot benchmarking project performed in 2004 and involved 6 states.  These included Alaska, Arizona, Nebraska, Oregon, Tennessee, and Washington.

The project was designed to assess:

1. The value of benchmarking data and analysis in helping state governments improve financial processes.

2. To understand the process and level of effort required to do benchmarking

3. To discuss how to use the resulting information within individual states

The Pilot focused on capturing FTE’s for Transaction Processing for Cash Disbursements (Accounts Payable), General Accounting, External Reporting and Planning and Analysis for Performance Management (internal management reporting).  There were 21 metrics derived from the Pilot survey.

Ms. Rodriguez-Hawkins listed four key observations or findings resulting from the state surveys –

• Best practice utilization in the use of technology lags the private sector.

• Productivity in the high transactional areas is significantly lower than in the private sector.

• The differences in cost structure seem to be more dramatic from state to state and large agencies to small agencies, but less dramatic among types of agencies.

• There is significant cost variability in the cost structures between states and between states and the private sector.

The major implications of these observations was that states would be at a disadvantage in the long-term in staff recruiting and retention of top talent and they would continue to be unable to adapt quickly to public and legislative demands.