AST White Paper - Budgeting in Municipal Governments With PSPB

Budgeting in Municipal Governments with Oracle Hyperion Public Sector Planning & Budgeting

By: Praveen Kumar

Managing Principal

AST Corporation

Email:[email protected]

April, 2012

We Bring IT Together For You.

1755 Park Street, Suite 100 | Naperville, Illinois 60563 | 1.888.278.0002 | www.astcorporation.com

A p p l i c a t i o n s S o f t w a r e T e c h n o l o g y C o r p o r a t i o n

Budgeting in Municipal Governments with Hyperion Public Sector Planning & Budgeting Page i

Contents

INTRODUCTION ...................................................................... 2

HIGH LEVEL SOLUTION ............................................................ 3

SOLUTION DETAILS ................................................................. 4

PRE‐BUILT MODELS FOR SUPPORT OF VARYING BUSINESS NEEDS .................................................................................. 4

DEVELOPING ALTERNATIVE SCENARIOS WITH DECISION PACKAGES .................................................................................. 4

INTEGRATION WITH EXTERNAL ERP APPLICATIONS ............. 6

COLLABORATIVE BUDGET PREPARATION ............................. 8

PERFORMANCE BASED BUDGETING ................................... 10

PUBLISHING BUDGET BOOK ................................................ 12

BUSINESS BENEFITS............................................................... 14

SUMMARY ............................................................................ 16

Budgeting in Municipal Governments with Hyperion Public Sector Planning & Budgeting Page 2

Introduction

The process of budget development and administration is an integral

part of any state and local government’s management activity. This

process is used for allocating scarce resources, which reflects the

priorities and goals of the community it serves. A good budgeting

process involves not only management of revenues and expenditures,

but also aligns long‐term organizational strategy with short‐term

organizational goals, and serves as a communication and performance

management tool. Budget development and administration is a

collaborative process involving all stakeholders – citizens, elected

officials, and employees.

Within an increasingly complex budgeting and planning process, state

and local governments spend significant amounts of time with the

major components of the budgeting process:

Revenue budget

Expense or line item budget

Capital budgeting

This paper focuses on the position budgeting part of an expense/line

item budget. Budget development requires extracting data from

multiple sources that are often incomplete and stale. Oracle Hyperion

Public Sector Planning and Budgeting (PSPB), is a solution that speeds

up the budget development process, improves collaboration among

various stakeholders, and improves the reliability and quality of budget

numbers.


High Level Solution

The Enterprise Performance Management (EPM) suite of

products can be deployed in multiple configurations depending

on the modules selected, the size of the organization and its

performance needs. Following is a example deployment plan in

distributed environment.

Figure1: Solution architecture in distributed environment.

The solution includes following

modules:

Oracle Hyperion Planning

Oracle Hyperion Public

Sector Planning and

Budgeting

Oracle Hyperion

Performance Scorecard

Oracle Hyperion Financial

Data Quality

Management

Oracle ERP Integrator

Oracle Essbase

Oracle Data Integrator

Oracle Hyperion Financial

Reporting


Solution Details

PRE‐BUILT MODELS FOR SUPPORT OF

VARYING BUSINESS NEEDS

Oracle Hyperion PSPB provides a flexible approach for detailed

compensation modeling. It supports the following budgeting

models:

Employee: Employee information is used for developing

and tracking detail cost at the individual employee level.

Position: Position information is used for developing

and tracking budget detail cost at the individual position

level.

Position and Employee: This is most comprehensive

model in which information is captured at position

level, employee level and employee assignment to the

position. This model not only tracks filled positions but

also vacant positions and partially vacant positions,

bringing the budgeted amount closer to potential cost.

This is the most popular model in state and local

governments.

DEVELOPING ALTERNATIVE SCENARIOS

WITH DECISION PACKAGES

In an uncertain economic environment, a public sector

organization needs agility to respond to changing revenue and

expenditure situations. Such organizations respond by

developing alternative scenarios and prioritizing additional

resource and revenue needs. Hyperion PSPB enables users by

allowing them to define an unlimited number of scenarios and

Key Features:

Prebuilt data forms

Prebuilt task list

Prebuilt calculation logic

Supports grade as well as

grade & step based salary

structure

Ability to define

breakdown cost elements.

Supports mass updates of

data

Allows multiple allocations

across fund, cost center

and programs

Unlimited what if

scenarios

Online Data Validation

Context sensitive menu

Configurable Budget

hierarchies

MS Office integration

Budget Book Publishing

capabilities


decision packages. These decision packages are used for

identifying revenues, expenditures, and new positions in a

separate bucket, thus allowing organizations to differentiate

between the necessary and desirable budget items. Hyperion

PSPB allows organizations to capture decision package details,

such as their purpose and whether the budget request is one

time activity or recurring. Further, organizations can also

capture key results/objectives as well as the cost and revenue

impacts of the decision package.

Once decision packages are submitted, each package can be

tracked separately using a configurable electronic workflow

feature of Oracle Hyperion PSPB. Users can define separate

approval paths for each decision package, separately and

independently if needed. Management can evaluate each

decision package separately and approve or reject it as per

business needs.

Figure 2:The decision package screen in the latest release of Hyperion PSPB


INTEGRATION WITH EXTERNAL ERP

APPLICATIONS

In order to develop and deploy a budget, organizations need to

bring in data from external ERP systems. The sheer volume of

data, its quality, and the timeliness of data is a challenge for any

implementation. Most organizations require data integration

with Financials and HRMS systems, and Oracle Hyperion PSPB

provides out‐of‐the‐box integration with packaged ERP systems

like Oracle EBS and Oracle PeopleSoft, leveraging Financial Data

Quality Management (FDQM) and ERP Integrator with ERP

adapters. These integrations also allow synchronizations

between budget planning and external systems, thereby

reducing the burden of maintenance on budget planning

administrators. Hyperion PSPB data integration improves

following processes:

Building dimensional hierarchies: The integration with

Oracle EBS allows a quick and efficient build of

dimensional hierarchies, which serves as a foundation

for planning applications. Integration with Oracle

General Ledger enables users to extract dimensions like

Fund, Account, Cost Center, Project, Program and other

segments if chart of account. It also allows building

hierarchies defined in Oracle General Ledger. The HR

integration allows extraction of Position, Employee, Job,

Salary Structure, etc.

Populating smart list: Hyperion PSPB uses several smart

lists which increases the efficiency of data entry and

validates data during data entry to reduce errors. The

integration with external systems along with the built‐in

synchronization process keeps dimensions and

Major Integration Tasks:

Source System Mapping

FDM application creation

Target Application

Mapping

Source accounting

definition

Category mapping

Financial Period Mapping

Import format definition

Dimension member

mapping

GL Write‐Back mapping


corresponding smart list synchronized. This reduces

smart list population and maintenance time.

Extracting Budget and Actuals: Budget users typically

reference historical budget amounts before deciding on

next year’s budget. In Hyperion PSPB historical budgets

and actual amounts are provided on the same screen

and enables budget users to determine propose next

year’s budget amount. Budget users can simply increase

or decrease the historical budget or actual amounts

either by percentage or amount, if needed. It also

improves the reporting of variances and develops

graphs for trend reporting, as multiple years of data

reside in the same application.

Extracting position, employee and employee

assignment to position information from HRMS

system: For many state and local governments, the

total personnel budget constitutes a significant portion

of total expenditures. Therefore it is imperative to get

the right data from the HRMS system for the projection

of total personnel. Data extracted from HRMS is then

utilized for developing detailed positions and/or

employee budgets, providing vital insight in the

organization’s cost structure.


Figure 3: Mapping for importing Actuals and Budget amount from Oracle General Ledger

Deploying budget in transactional system: The two‐

way integration between Planning and Oracle E‐

Business Suite/Oracle PeopleSoft via ERP adapters

allows users for loading an adopted budget back to

General Ledger. This process reduces manual data load

to General Ledger thereby improving efficiency.

COLLABORATIVE BUDGET PREPARATION

The budget preparation process involves several government

departments, sometime working as independent agencies

following different mandates and rules. Typically, the Office of

Management and Budget (OMB) guides and co‐ordinates the

budget development process.

Oracle Hyperion PSPB supports top‐down, bottom‐up and

middle‐out budgeting processes. The pre‐built, web‐based data

forms in Oracle Hyperion PSPB facilitate data entry, allowing

Key Enablers of Collaboration:

Web based data forms

Electronic workflow

integrated with email

systems

Task list based processes

integrated with MS

Outlook task list

Multi layered security

providing necessary control

and flexibility

Auditing capabilities


users to work simultaneously on budget worksheets. Users can

enter or modify budget amounts as needed, enter supporting

details, and annotate and attach documents in support of their

budget requests. The multi‐layered security ensures that users

have an appropriate amount of access to data forms, business

rules and dimension members like access to certain funds, cost

centers, object codes, and programs.

The task list‐based approach in Hyperion PSPB ensures that

users have the necessary instructions and complete tasks in a

specified order before submitting a budget. If any rule is

violated as predetermined by OMB, then the submittal

automatically fails and points towards violation; this helps

business users correct mistakes before a budget is submitted to

and reaches OMB. The workflow‐based process management

allows budget administrators to track a budget status online,

and have a single report to determine the status of each

planning unit; these tools reduce unnecessary emails and phone

calls and greatly improve productivity.


Figure4: Task List Imported in MS Outlook

PERFORMANCE BASED BUDGETING

State and local governments have traditionally managed their

resources through line‐item budgets and program‐based

budgets. Program‐based budgeting focuses on resource

allocation to different programs approved by local government

leaders, and mandates from state and federal government. The

recent financial crisis has forced government organizations to

rethink this approach.

Now governments are trying focus on outcomes of the

programs to determine which programs are providing better

values to their citizens. In performance/outcome‐based

budgeting, resource allocation is tied to program performance,


a process that leads to cutting back on inefficient programs or

programs whose outcome is not satisfactory. Performance‐

based budgeting helps government leaders prioritize activities

based on input of resources as well as their outcomes. The

Hyperion EPM solution allows the capture of performance

metrics combines these with budgeting to facilitate

performance‐based budgeting. The process enables

organizations to align short‐term resource allocation to long‐

term organizational strategy.

Figure5: Example of Performance Management Data Form in Planning


PUBLISHING BUDGET BOOK

In the government sector, budgeting is not just an exercise of

resource allocation but also a mechanism of communication of

policies and programs. The budgeting process takes input from

communities and citizens through a public hearing process,

along with input from elected officials, to serve as guiding

principles for a budget. Once a budget is finalized, the

government publishes its budget book.

The budget book typically includes financial information, along

with charts and graphs providing a comparison of the current

budget with the historical budget and actual amounts. The

budget book also includes a significant amount of textual

information explaining guiding principles, budget assumptions,

and goals and objectives.


Figure6: Budget book publishing process diagram

Oracle Hyperion PSPB supports budget book creation. The

budget book combines data from various sources and allows the

definition of sections and sub‐sections within the book. The

budget book can be refreshed with changes made within the

source data, a process that significantly cuts time from adopting

a budget to publishing a budget book. It also simplifies the

process for updating a budget book, if required after initial

publishing. The budget book process supports publishing in PDF

and HTML formats, and deploying a budget book to a static

HTML website.


Business benefits

The following are among the benefits of using a Hyperion PSPB

solution:

Reduced deployment time by leveraging pre‐built data

forms, task lists and the calculation engine. This in turn

reduces implementation cost and total cost of

ownership.

Prepackaged position, employee and position &

employee budget models incorporates best business

practices of the industry. The business models include

online data validation which reduces data entry errors

and directs users to correct data before it ever reaches

budget administrators.

The application provides the ability to track costs at

individual position levels. Moreover the position cost

can be further broken down for identifying individual

cost elements. This provides insight in the personnel

cost structure, helping organizations improve

management of their costs.

The application allows users to configure budgetary

review and approval hierarchies. This process is

integrated with MS Outlook, which improves

collaboration among budget stake holders. This process

cuts approval cycle time and provides an audit trail of

budget submittals and approvals with annotations.

The out box integration and available adapters allows

Hyperion PSPB to integrate with virtually any ERP

application. Data integration dramatically improves

meta‐data management process, and reduces the time


to load data from external systems and load back to

external ERP system; this reduces the cycle time for

end‐to‐end budget development and deployment

process.

The built‐in budget book feature reduces the time

required for publishing a budget book after a budget is

adopted.


Summary

Financial Planning and budgeting is a complex and time‐

consuming process. It typically involves a large number of

stakeholders, making collaboration a critical factor for success.

Hyperion PSPB is new breed of web‐based software with multi‐

dimensional engine and pre‐built data forms and business rules.

Since the data forms and business rules are designed to include

the best practices of municipal governments, it reduces need

for developing of such forms and rules from scratch, which in

turn reduces both the total cost of ownership and

implementation time. Moreover, organizations can leverage

the available integrations with external ERP systems, thereby

significantly reducing budget development time. With the

capability to prepare and publish a budget book with data from

various sources, Hyperion PSPB becomes an indispensable tool

for formulating and deploying budgets in municipal

governments.

Budgeting in Municipal Governments with Hyperion Public Sector Planning & Budgeting AST Corporation 1755 Park Street, Suite 100 Naperville, Illinois 60563 Phone: 888-278-0002 Fax: 630-778-1179 www.astcorporation.com Copyright © 2012 AST Corporation AST Corporation is a privately held company founded in 1995 to serve commercial and public sector organizations in utilizing the full potential of their investment in Oracle Applications. We have built our practice by providing top quality full life cycle and turn-key consulting services for Oracle Applications implementation and upgrade projects, among other specific services. Our mission is to insure that you, as a valued client, receive the highest level of expertise and personalized service for your Enterprise Applications. We endeavor to help you realize the full benefit from your investment in software applications and integrate them seamlessly to your business processes. Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

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AST White Paper - Budgeting in Municipal Governments With PSPB