FOR THE COUNCIL MEETING OF MARCH 19, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Interim Director of Finance Xenia Bradford
SUBJECT: Enterprise Resource Planning System Project Implementation
Description:
The City Council will c onsider approving the Enterprise Resource Planning System Project Implementation.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATIONS:
1. Adopt a Resolution approving the Master Services Agreement with Cognizant Worldwide Limited - Cognizant Technology Solutio ns U.S. Corporation for implementation of the Enterprise Resource Planning System; and
2. Adopt a Resolution approving the Master Subscription Agreement with SpryPoint Services, Inc.; and
3. Adopt a Resolution approving the Master Services Agreement with C an/Am Technologies, Inc.; and
4. Adopt a Resolution to ratify the Master Subscr iption Agreement with Workday signed by Interim City Manager Alex Posada on January 30, 2024; and
5. Adopt a Resolution approving a budget amendment in the amount of $3, 481,081 and establishing 10 F ull-Time Equivalent positions for a limited two-year term for the project implementation.
BACKGROUND:
The City of Santa Maria has been using Tyler Eden as its core financial system since 1998. The technology is outdated and provides minimal functionality compared to the financial systems available today. The system only maintains core financial records, whereas most of the City’s financial processes are handled via paper workflows, email, or Excel spreadsheets. The City also utilizes NeoGov for Human Resources ( HR) management. While NeoGov provides certain preferred features for recruitment, 2 onboarding, and performance tracking, it does not provide functionality for comprehensive Human Capital Management.
The City began the process of planning for an Enterprise Resource Planning (ERP) System implementation with the Fiscal Year 2018 -20 Financial Plan. Addit ional funding was set aside with the Fiscal Year 2020 -22 Financial Plan with total appropriations set aside for this project of $4,905,000.To date, $165,081 has been spent on the project for consultants to prepare the requirements specifications and select a preferred vendor. The remaining budget is $4,739,919. The total budget for the two -year implementation is estimated at $8, 221,000. The subscript ion costs for the software total $729,547 for the initial two-years. An additional $3,481,081 is requested to be allocated to the project.
A Request for Proposals was issued in October 2022 (Attachment B), and a total of four proposals were received. The selection committee selected a proposal from Cognizant/Collaborative for the implementation of Workday, SpryPoint, and CanAm/Teller technologies. Core Financials, Human Capital Resources Management, and Payroll will be managed through the Workday system. SpryPoint will be used for Utility Billing and CanAm/Teller for cashiering. These systems will be integrated to provide seamless workflows. Unlike the current system, Eden, the planned ERP products are modern systems with open interfaces that enable integr ation with other systems and workflows. These integrations will improve staff efficiency and reduce errors and rework due to disparate applications and manual data entry and processing.
The project is scheduled to commence in June of 2024 and be complete d in the Spring of 2026. The newly established ERP system is anticipated to have a life of at least 10 years before the City may require a significant upgrade.
DISCUSSION:
The ERP System is essential for the City to meet its statutory obligations for fi nancial reporting, provide necessary tools for payroll and human resources management, enable electronic workflows for major citywide processes such as procurement, grants, projects, accounts payable, accounts receivable, timekeeping, payroll processing, cashiering, and utility billing. The twenty-five-year-old financial system currently in place and the lack of a comprehensive system for human resources capital management leads to inefficiencies, inadequate internal audit capabilities, and higher risk for human error due to disjointed systems and multiple points of data entry. As the City is expected to continue to grow, modern information technology tools will enable economies of scale, faster processing times, higher accuracy, and improved analytical abilities and data-driven decision making.
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2018 2019 2020 2021 2022 2023
Accounts Payable 6 year historical
trend (Avg per month)
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The number of transactions has been growing over time. If efficiencies through the ERP system are not implemented, the investment in additional staffing will be required to maintain current levels of service. For example, the following trends are seen in Accounts Payable workloads.
The following Accounts Payable workflow is an example of the current state vs. proposed future more efficient state. As shown below the workflow is improved through utilization of information technology and business process re-mapping.
4 The following table shows the functionality of the proposed Enterprise Resource Planning System.
Functional Area Phase
FINANCIALS
Core Financial Management, Accounting, and Finance 1
Financial Accounting 1
Commitment Accounting 1
Budgets 1
Banking and Settlement 1
Procurement 1
Supplier Accounts 1
Business Assets 1
Expenses 1
Revenue Management 1
Project and Work Management 1
Grants Management 1
Planning 1
Utility Billing 1
5 Cashiering 1
CROSS-FUNCTIONAL
Prism 1
Mobile Solutions 1
Employee Self-Service 1
Manager Self-Service 1
HUMAN CAPITAL MANAGEMENT (“HCM”)
HCM: Core 2
Compensation: Core 2
Benefits 2
Talent & Performance Management 2
Learning Management 2
Absence Management 2
Time Tracking 2
Payroll 2
The proposed project timeline is as follows.
Phase 1
Financials
Phase 2 – Human Capital Management/Payroll Absence Time Tracking:
The ERP implementation will be a transformative endeavor for the City. The implementation of the proposed modern technology will enable the City to re -imagine its business processes, organize and analyze financial and human capital data, leading to better-informed decision-making, enhanced analytical abilities, and improved security of data and accuracy. The project will transform these internal administrative processes not only for the core implementation departments responsible for the implementation of Finance and Human Resources functions but for all departments citywide. The two-year project will require dedication to the project from the City. The diagram below shows the
6 Position Personnel Costing Accounting Utility Billing Revenue Payroll Total (FTE) Positions Annual Cost Business Program Leader 165,500$ 0.5 0 0.5 0 1 165,500$ Confidential Technician III 133,400$ 0 0 0 1 1 133,400$ Accounting Technician I/II 113,200$ 0 0 1 0 1 113,200$ Finance Clerk I/II 98,800$ 1 2 0 0 3 296,400$ Move-Up Pay for Division Management Back-Fill 82,000$
Total 510,900$ 1.5 2 1.5 1 6 790,500$
project organizational structure for the City and the City’s implementation partner, Cognizant/Collaborative.
In order to implement the ERP, additional staff will be necessary to back-fill Finance and Human Resources functions. The City will need to continue to service these two key internal functions while dedicating expert staff to the project implementation. Staff has performed a thorough analysis of existing processes, the scope of work for the project, and interviews with other government agencies who have implemented similar systems.
Finance Department Staffing Request: 1.0 F ull-Time Equivalent Business Program Leader, 1.0 F ull-Time Equivalent Confidential Technician I/II, 1.0 F ull-Time Equivalent Accounting Technician I/II, 3.0 Full-Time Equivalent Finance Clerk I/II.
The Finance Department requests the following resources for the duration of the project.
The established positions will be a limited term of up to two years. The Department of Finance will engage in an organizational assessment study in Fiscal Year 2025 -26 to establish adequate long -term resources for the Finance function based on the new business processes and utilization of the ERP system. The ERP system is anticipated to have a life of at least 10 years.
7 In Finance, the Accounting and Revenue Divisions will share a Business Program Leader with a solid background in government accounting and the ability to oversee the day-to- day operations of these divisions, as well as fiscal year -end processes, such as preparations and completion of the Annual Comprehensive Financial Report.
Accounting Division requires additional capacity from one Finance Clerk I/II to support the Accounts Payable cycle and other accounting duties as the existing Finance Clerk serves as the subject matter expert developing that function’s Standard Operating Procedures, documenting workflow, and conducting business process testing in the new ERP.
Revenue Division requires additional capacity from one Accounting Technician I/II that will work alongside the existing Accounting Tech nician III to maintain the department’s efficiency and support ongoing training initiatives during ERP implementation as the existing Accounting Technician III assists with developing and testing Standard Operating Procedures for the Revenue and Business License functions in the ERP system.
Utility Billing will require additional capacity from two Finance Clerk I/II positions necessary to ensure data converted into the new ERP system is accurate. It is anticipated that some of these positions may also sup port data entry and other configurations necessary to implement a grants module in the new ERP system.
Payroll requires the additional capacity from a Confidential Technician III to ensure payroll cycles are not disrupted, as well as the processing of sa lary adjustments, workers compensation adjustments/calculations, and other payroll calculations required, as existing Payroll staff develop a handbook that will provide guidance and references for common and frequently asked questions.
The estimated cost for the additional staff for the duration of the project is $1,581,000.
Human Resources Staffing Request: 2.0 Full-Time Equivalent Business Program Leader,
1.0 Full-Time Equivalent Confidential Technician II.
The Human Resources Division of the City Manager’s Office requests the following resources for the duration of the project. The established positions will be a limited term of up to two years.
Position HCM
Core Benefits Talent
Management Learning Total FTE
Positions Annual Cost
Business
Program Leader 1 0.25 0.5 0.25 2 $ 331,000 Confidential
Technician II 0.5 0.25 0.25 1 $ 117,500 Total 1 0.75 0.75 0.5 3 $ 448,500
8 From the Employment Services team of the Human Resources division, additional support for one Business Program Leader as a subject matter expert to establish workflow and standard procedure elements for the HCM core functions of the new system will be required. Additionally, Business Program leaders skilled in benefits and training will support with a portion of their time, for establishing the benefits workflow portion of the system and providing staff training respectively, while Confidential Technician II ’s will assist with data input, research, and logistics to ensure accuracy in the areas of benefits and training.
From the Labor Relations and Management team, one Business Program Leader will support with subject matter expertise on talent management and performance to establish the workflow and standard procedures, and a Confidential Technician II will assist with backup and research for those procedures to be entered into the system.
The estimated cost for the additional HR staff for the duration of the project is $897,000.
Information Technology Division Staffing Request: 1.0 F ull-Time Equivalent Senior Project Manager.
The Information Technology Division has assigned its only project manager to the ERP initiative to coordinate project phases with the solution providers, schedule internal resources, provide status reports to the Steering Committee, resolve issues, mitigate project risks, and oversee the project as a whole. The requested project manager backfill position will take on the ongoing, non-ERP related projects (e.g., hardware and software life cycle replacement, system upgrades, capital IT projects, etc.) for the two-year duration of the ERP implementation project. The estimated cost will be $400,000 over two years.
Alternative:
The City Council could elect not to invest in the ERP system. This action is not recommended as the existing systems and procedures are inadequate to sufficiently safeguard the assets of the City and provide quality financial and human resources services to the organization. Man y of the current processes such as procurement, projects, and grants management are decentralized with minimal or no oversight from the centralized oversight functions of finance and human resources.
The City Council could also direct staff to seek altern ative implementation and software options for an ERP. It should be noted, however, that the City has gone through a thorough review to develop these recommendations over the period of the past two years.
The alternative recommendation, based on the needs o f the City, is not anticipated to yield savings in ongoing costs or implementation costs.
Fiscal Considerations:
The following are the categories of costs for the ERP Project: implementation services from Cognizant, software licensing for Workday, SpryPoint, and Teller, additional staffing, facilities improvements, equipment, and travel costs. This project will consider a two-year outlook for these costs to match the pace of the implementation. Some expenses such 9 as limited travel costs are included in th e implementation, but any additional expenses shall require a formal change request approval by the Steering Committee. A separate “Lean On Services” agreement from Cognizant will provide support beyond the implementation.
Cognizant Implementation: $3,948,442
Workday Implementation: $305,011
Software licensing for 2 years: $729,547
Additional staff to backfill project team positions for 2 years:
o Finance: $1,581,000
o Human Resources: $897,000
o Information Technology: $400,000
ERP Workroom improvements: $50,000
New computer systems: $60,000
Travel Costs as incurred $50,000(Kick-Off, 2 go-lives, integrations, etc.) Contingency: $200,000
Total project cost: $8,221,000
The following budget was previously allocated through Financial Plan adoptions for the project: $4,739,919.
The following additional Budget Amendment is requested: $3,481,081, the allocations are prorated to all operating funds (as shown below) based on the anticipated use of the system due to operating activities.
Account Number
%
Allocatio
n
$ Amount
Transfers From:
002-011-080-66-03 Water 17.70% $580,751
004-011-060-66-03 Solid Waste 3.60% $118,119
003-011-053-66-03 Wastewater 6.60% $216,551
010-011-052-66-03 Solid Waste Disposal 5.10% $167,335
031-015-042-66-03 Northwest Landscape District 0.20% $6,562 032-015-043-66-03 Northeast Landscape District 0.50% $16,405 033-015-044-66-03 Southwest Landscape District 1.10% $36,092 038-015-041-66-03 Southeast Landscape District 1.00% $32,811 Budget in 066-011-079-
52-34 Santa Maria Public Transit 4.70% $154,211
Budget in 801-005-010-
53-06 ERP General Fund 59.50% $1,952,244
Contingency N/A 200,000
10 Total Budget Amendment $3,481,081
Approximately $80,000 in support cost savings for Eden (Financial System) are anticipated on an annual basis after the ERP go-live date. An additional $45,000 in annual savings is anticipated from the discontinuation of two of the NeoGov modules that will be replaced with the ERP.
Impact to the Community:
The Enterprise Resource Planning System will bring forth modern technologies to the City’s financial and human resources operations. The City organization and the community will benefit from the efficiency of operations, enhanced security of City assets, and transparency of information.
Attachments
A. Business Case Short Form – ERP Project 2024-001
B. Request for Proposals
C. Cognizant Implementation Master Services Agreement
C-1. – Cognizant Santa Maria SOW FINAL
D.Workday Master Subscription Agreement
E. SpryPoint Master Subscription Agreement
F. CanAm/Teller Master Services Agreement
G. ERP Project Organizational Chart