F–4 STANDING COMMITTEES Finance and Asset Management Committee

F–4/211-19 11/14/19

Finance Transformation Update INFORMATION This informational item provides background information for a December request for Stage 2 approval of the UW Financial Transformation project (UWFT). UWFT’s multi-year mission is to transform the University’s legacy financial systems, policies and processes and to deliver a modern, cloud-based system (Workday) that will improve how the University tracks, spends, collects, manages and reports financial information. UWFT is a necessary step in ensuring strong financial management and responsible stewardship of the University’s finances. BACKGROUND Following an eighteen-month Readiness Phase, which concluded at the end of June 2019 and used significant benchmarking, data gathering, and broad stakeholder input to identify the best approach to accomplish this transformation, the Board of Regents granted Stage 1 approval to UWFT in July 2019. This initiated a six-month Design Phase running through December 2019. During the Design Phase, the program team and its many stakeholders and partners defined future-state business processes, refined future-state information technology architecture based on business design, gained alignment on the operating model construct, reviewed policies and processes, and finalized the program’s scope, schedule and budget for the Implementation Phase. Planned phases of UWFT implementation (Readiness, Design, Implementation, and Stabilization) align with standard Workday implementation phases, but include additional activities to support business transformation at the UW. Implementation is planned to begin January 1, 2020, with go-live on July 1, 2022. The December action item will request authorization for total project budget and funding, including use of Internal Lending Program reserves. Attachments

1. University of Washington Finance Transformation (UWFT): Program Baseline, November 2019

2. Finance Transformation Risk Assessment Summary 3. Quality Assurance Readiness Assessment for the University of

Washington’s Finance Transformation Project: Implementation Phase, October 31, 2019

University of Washington Finance

Transformation (UWFT)

Program Baseline

November 2019

As of November 1, 2019

ATTACHMENT 1F-4.1/211-19 11/14/19

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Contents Program Background .................................................................................................................................... 3

Purpose and Benefit ...................................................................................................................................... 3

Existing Systems ............................................................................................................................................ 3

Benchmark Study .......................................................................................................................................... 4

Enterprise Transformation Goals .................................................................................................................. 4

Business Case ................................................................................................................................................ 5

Baseline Program .......................................................................................................................................... 7

Scope ......................................................................................................................................................... 7

Schedule .................................................................................................................................................... 9

Budget ..................................................................................................................................................... 10

Governance structure ............................................................................................................................. 11

Management structure ........................................................................................................................... 13

Risk Management ................................................................................................................................... 13

Appendix ..................................................................................................................................................... 17

All Enterprise Transformation Goals as of October 15, 2019 ................................................................. 17

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Program Background UW has been on a path to update its legacy financial and procurement systems for over a decade. In

2008 the University completed its Roadmap for Administrative Services and in 2010-2013 it completed

the Financial Needs Assessment study. This study resulted in two recommendations: implement e-

procurement enterprise wide using the ARIBA system, and initiate planning work for HRP

Modernization. The HRP Modernization program evaluated several vendor software options and

selected Workday HCM, a software as a service solution, to replace their legacy mainframe payroll and

benefits system. Workday HCM went live in June 2017. During this same time period, the University

invested in studies to assess finance system replacement options, implementation options and

estimated costs and benefits.

The UWFT program was initiated in 2015. Between 2015 and 2018 the program evaluated the costs and

benefits related to several implementation scenarios, finally agreeing to a big bang implementation that

included both the UW Academy and UW Medicine. The program was subsequently funded for a

Readiness and Design preparation phase. During these two phases the program refined scope, schedule,

budget, governance and management structures.

Purpose and Benefit The objective of UWFT is to modernize the University’s finance and procurement policies, processes and

systems in order to move to a single system of record for all of UW. This transformation will result in a

consistent and common set of business practices and data that enable ongoing timely, accurate and

informed decision-making and reduce risk.

While efficiencies and productivity gains will take time to realize, the program will immediately

seek to achieve improved accuracy of reporting and data analytics for accounting, budgeting,

planning, procurement, cash and grants management.

To empower the institution to continue to meet its core missions of research, education and

patient care, UWFT will build a framework that enables the reduction of total institutional costs

for finance and procurement administration over the next 10-15 years.

Prior to go-live, benchmarks for administrative operational and process efficiencies at the unit level will

be established and tracked to guide an overall reduction in UW administrative expenses. The program

will seek to reduce total institutional costs for finance and procurement administration by 15 percent

over 2018 levels by 2027.

Existing Systems Financial management and procurement systems at UW are current highly decentralized and

fragmented. The existing enterprise financial accounting systems are over 46 years old with limited

functionality. During this time, UW’s central, academic and medical units procured or built over 800

separate finance and/or procurement systems to obtain greater functionality not available at the

enterprise level. To consolidate financials across the institution, all these systems had to integrate with

the central accounting system, resulting in complex, redundant and often manual processes to reconcile

between systems.

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Below are examples of critical enterprise systems that will be replaced by UWFT:

Central Accounting, payables and project cost accounting: FAS/PAS and OASIS;

State and Grant Budgeting: BGT;

UWM Financials: McKesson (seven general ledgers; three installed instances);

Reporting and internal transactions: My Financial Desktop;

Grants: J.D. Edwards; and

Procurement: ARIBA1, Purchase path, (auxiliary systems TBD).

Benchmark Study In 2018, UW partnered with the Hackett Group to perform a comprehensive finance and procurement

benchmark study. This study estimated that UW is spending $226 million annually on its finance,

procurement and supply chain processes, which is about twice the level of resources spent by UW’s

average peer institution2.

The study found that UW has over 800 finance and procurement systems, and over 3,000 employees

across the University spending at least 10 percent of their time on finance and procurement activities.

These findings are supported by a Gartner Group study in 2015 indicating that UW has the most

fragmented and decentralized financial and procurement systems and processes that they had ever

seen.

Enterprise Transformation Goals UWFT has established nine key business processes areas to encompass the scope of the program and

set business transformation goals for each area. The following is a sample of key goals, and the full list

can be found in the Appendix.

1. Record to Report: Create single financial system of record, move from cash to accrual

accounting, move to monthly close;

2. Asset Acquire to Retire: Move from manual to automatic depreciation, provide automatic

integration between purchasing, assets and general ledger;

3. Requisition to Payment: Record all non-student and non-patient receivables into a single

system of record;

4. Grant Award to Close: Consolidate post award grants management into single system;

5. Manage Cash & Financial Assets: Provide budget and forecast for endowment payouts;

6. Procurement & Supply Chain: Establish spend in one system, enhance reporting, enable three-

way or four-way match;

7. Project Inception to Close: Standardize project cost accounting, integrate project details with

financial accounting activities;

8. Hire to Retire: Expand Workday functionality with implementation of integrated Workday

finance modules;

9. Plan and Manage the Business: Upload budget directly into system of record, provide visibility

into financial plans, budgets, commitments and performance and unit and subsidiary levels.

1 Ariba system will be replaced with a combination of Workday Procurement and a 3rd party system to support the end to end procurement requirements for both the Academy and Medicine 2 References Peer Institutions within Hackett’s database

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Business Case The program represents a substantial investment of scarce University resources and it is critical to establish and manage the program to realize the full benefits of UWFT. The estimated implementation costs for UWFT are $269 million and annual operating costs in FY2025 are $18 million. There will be three primary areas of program benefits: functional benefits in new and improved system capabilities, cost avoidance of maintaining and upgrading existing systems and efficiencies in new business processes and organization. Functional benefits have been defined within each of the nine end-to-end process areas that support all finance functions. Examples of these benefits include the ability to do monthly, quarterly and annual budget to actual financial statements on a timely basis, having a single system of record for all financial data, having all spend and receivables in a single system, improving visibility of capital project spend, and being able to ensure connection between long term plan with annual budget and short-term ad hoc forecasting for better decision making. The primary driver for UWFT is to move off of a 45-year legacy system that does not provide adequate financial management functionality to meet the needs of UW. Unlike the existing financial management system, UWFT will provide for:

Full accrual accounting within a single system of record adequate to produce auditable financial statements and reports;

Timely and current budget/actual reporting for the Enterprise and units; Modern supply chain functionality that supports on demand procurement and reduces

requirements for maintaining large inventories of supplies; Central accounts receivable system supporting grants and miscellaneous accounts receivable -

Patient and Student receivables will be integrated from the UWM Epic system and the UW Academy’s Student Data Base;

Improved integration pre-to-post award grant management; Consolidated platform for UWM and remainder of UW to produce consolidated financial

statements and reporting.

Avoided Costs By moving to a new Workday platform, the UW will avoid additional costs of maintaining existing systems, even without improving their functionality. The current FAS system is a UW developed COBOL based application that would require substantial ongoing investment to maintain as other UW applications are updated. As compliance requirements evolve over time and external reporting requirements change, investments would need to be made to update FAS and associated financial systems. Given the highly decentralized current IT financial architecture, every such update would entail significant risks and sizable investment to ensure that even the current limited functionality is maintained. No estimate has been made for the magnitude of these avoided costs. Efficiency Benefits

UWFT is anticipated to provide substantial productivity and efficiency gains over time versus the current legacy systems. The Workday platform is anticipated to provide substantial improvements in the form of streamlined and standardized business processes. In addition, it is anticipated that UWFT will also include organizational changes to rationalize and standardize its administrative functions. Generally, these changes will move towards an “operating model” that moves to an organization with more work completed in regional/shared services centers. The program has established a goal of a 15 percent savings vs. 2018 spending levels by 2027. This savings goal is supported by national survey work done by

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Deloitte Consulting and the Gartner Group on savings from modernizing ERP systems by public and private companies.

Cost/Benefit Analysis

The program has completed a costs/benefit calculation for UWFT. The costs of the program include all operating and capital costs for implementation and stabilization from the Readiness and Design Phase, through Implementation phase. It includes one year of stabilization costs after Go Live (July 2022). The costs of operating and maintaining the system include all Workday licensing fees (growing at 5 percent annual) and central application support (growing at 3.5 percent annually). Debt service is also included, consistent with the funding plan below, assuming 4.5 percent interest rate for a 10 year period, with level amortization. The program continues to explore the opportunity for lower interest rate, longer term and a “wrapped” amortization structure. The benefits of the program are calculated at two levels. First, direct savings of $11.8 million annually (starting in 2023) are estimated, primarily from eliminating the costs of licensing and support of existing systems that will be replaced/eliminated by Workday. The underlying direct system costs are assumed to grow at 3 percent annually. These savings are assumed to start at 50 percent in 2024, and reaching full savings levels beginning in 2025. Second, indirect savings from business process efficiencies of 15 percent are applied to existing staff expenditures of $129 million annually for financial related staffing and $49 million annually for procurement related staff. These levels were established by the Hackett benchmark study that was conducted across all UW units in 2018. These efficiencies will gradually increase, beginning at 25 percent in 2024, 55 percent in 2025, 75 percent in 2026 and are fully realized by 2027. Using these cost and benefit savings estimates, the annual benefits exceed costs in 2027 (+$2.4 million) and the cumulative savings, where savings fully offset the initial capital costs, are positive in year 16 of operations (2038). Net savings increase substantial upon retirement of debt (and ending of debt service) in 2033.

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10

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UWFT Costs/Benefits ($M)

Hard Savings Productivity Gains Costs

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Baseline Program

Scope Operating Model

The UWFT Sponsors have approved a directional move towards an organizational structure where more

work is done in a shared environment and less work is done at the unit level. The UWFT team has

engaged the existing current shared service centers on campus and is talking with several key peer

institutions nationally (including Berkeley, Kansas, Michigan and others) to establish the optimal

approach to gaining efficiencies under UWFT while still providing strong unit level service and support.

The full organizational structure will be defined during implementation, but the Sponsors and

governance groups have agreed on an operating model that shifts activities, resulting in 70 percent of

finance and accounting activities occurring in a shared environment, leaving 30 percent to occur locally.

For procurement and supply chain, 35 percent of the activities will remain at the local level with 65

percent of the activities being shared. Depending on the type of activity, the level at which it will be

performed in the organization will vary. The most significant transition will be for UW Academy, moving

from unit/local level activities to many transactional activities performed at a Regional Shared Service

Hub level.

Examples of these type of Hub activities include:

Initial point of contact for units for finance and supply chain questions;

Transaction processing (e.g., purchase orders, travel & expenses entry, cost transfers, invoice

generation) – may either be initiation of transaction or approval depending on the transaction; and

Post awards grants management analysis and reporting.

Functional Scope

UWFT will implement Workday financial and procurement/supply chain functionality, including

accounting, banking and settlement, supplier accounts/contracts, customer accounts/contracts,

business assets, endowment accounting, procurement, inventory, travel, expense management,

revenue management, gifts, post award grant management, effort reporting, budget and planning. The

program will also remediate the necessary elements of Workday Human Capital Management in order

to preserve all existing HRP functionality within the new configuration.

UWFT will incorporate business process improvements, with the goals to standardize, simplify and

streamline policies, processes, and procedures across the enterprise, in the following areas:

Foundation Data Model (FDM, includes Chart of Accounts);

Record to Report;

Asset Acquire to Retire;

Customer Requisition to Payment (represents misc. AR);

Grant Award to Close;

Manage Cash and Financial Assets;

Procurement and Supply Chain;

Project Inception to Close/

Hire to Retire; and

Plan and Manage the Business.

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Technical Scope

With the implementation of Workday Financial Management, UW will transform the technical landscape

for financial and supply chain systems and pave the way for the enterprise as a whole to pursue future

transformation opportunities as a result. To achieve this, the enterprise must maintain the UWFT

Technical Transformation goals as a top priority, these goals include:

Establish a single, modern system of record for financial, HR, payroll and supply chain information across the enterprise with common definitions and classifications;

Rationalize and replace enterprise-wide financial and supply chain systems, reducing complexity and redundant costs;

Improve access to consistent, high quality financial information, enabling timely and accurate decision making across UW Academy and UW Medicine;

Rationalize, replace or remediate unit side systems reducing complexity and overall costs; and

Prepare technical staff across the University for changes to the technical landscape and new opportunities to retire, remediate or replace existing legacy systems.

Beyond these goals of transformation, UWFT will also define the scope and transformation

opportunities for five focus areas of technology which are heavily impacted by the overall UWFT scope.

These five focus areas are: Information Delivery, Data Conversion, Systems Remediation and

Retirement, Data Integrations and Strategic Infrastructure. Additionally, other technical considerations

in scope for UWFT are technical oversight, coordination, security/tenant management and testing. In

partnership with the functional workstreams of UWFT, technical transformation may include custom

developed enterprise-wide gap applications to address unique UW requirements which Workday

functionality does not meet at go-live.

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Schedule Implementation will begin on January 1, 2020 with go-live for Workday Financial Management (Wave 1)

targeted for July 1, 2022. Implementation for Workday Adaptive Insights for Planning (Wave 2) will

follow shortly after with a go-live date of November 1, 2022. This 30-month implementation plan aligns

with initial scope estimates and accounts for other active major projects across the University.

Based on lessons learned from UW’s implementation of Workday HCM, UWFT is planning for a 12-

month Stabilization phase. This is particularly important given the degree of process transformation the

University plans to achieve through UWFT.

While these are the known phases of UWFT, additional areas of scope may be identified throughout the

program that cannot be accommodated in the Wave 1 or Wave 2 implementation. UWFT may add new

Waves following this initial implementation.

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Budget The program budget was developed by the program team in coordination with the program consultant, UW IT, UWM IT and key stakeholders throughout campus. The budget has been reviewed by program governance groups, budget committee and independent quality assurance consultant. Stage 2 approval by the Board of Regents will constitute the baseline budget and variance reporting will be maintained against the baseline budget. The budget will be reviewed regularly within the UWFT Implementation governance. Stage 2 Regent approval may include identification of scope elements related to the project which have higher scope/cost/schedule uncertainties which final approval will be sought at a later date. A 20 percent contingency has been established in the baseline budget to reflect the levels of project risk and uncertainty. This level is consistent with best practices for large, complex IT projects and was affirmed at the October program Risk Workshop’s Monte Carlo budget risk analysis. The program contingency can only be used with advanced authorization from the program Executive Sponsor (the UW Provost).

Phases Costs

Readiness + Design $24,520,000

Implementation & Stabilization $244,726,000

Total Program Costs $269,247,000

Funding Uses of Funds

Labor $178,869,000

Non-Labor $47,457,000

Contingency $42,921,000

Total Program Costs $269,247,000

Debt Service $9,227,000

Total Uses $278,474,000

Sources of Funds

Provost Funding $19,825,000

EVPFA Reallocation $13,471,000

Finance Reserves $57,212,000

Debt $180,477,000

UWM $7,490,000

Total Sources $278,474,000

The $269 million program costs includes over $90 million for IT costs, including enterprise

system remediation, side system remediation, document management and other IT

costs. Substantial effort has been put into estimating these costs by the UWFT program staff,

central IT staff, UWM IT staff and Deloitte consulting. However, the Workday system will be

implemented within a highly complex IT environment that includes critical legacy systems that

will be impacted by Workday. Until these systems are fully examined and tested during the

implementation phase, it is not possible to more accurately estimate the program impacts on

these critical system. The risks of enterprise and side system remediation is one of the top

program risks. Reducing and mitigating these risks requires that the program move into the

implementation in an industry standard, phased approach starting with a 9 month Architect

Phase so that more information can be gained.

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A number of major revenue managing enterprise systems will be impacted by the UWFT

project. A particularly complex and critical enterprise system is the Student Database (SDB) --

an internally built system that manages student enrollment, registration and a large number of

student financial calculations. The $269 million UWFT baseline cost estimates includes only a

limited budget for providing data translation tools from Workday to SDB. However, if a

translator tool proves infeasible, initial conceptual estimates indicate a full remediation of SDB

could cost up to $50 million plus the cost of a potential impact the UWFT project schedule.

If the Regents approve the baseline UWFT budget in December 2019, the program will enter

implementation. During CY 2020, as more is learned about the impact to remediation and

integration of enterprise and side systems and more accurate cost estimates can be developed,

staff will return to the Regents with either proposed adjustments to the program budget or

request for new related project authorization and funding.

Governance structure The current UWFT program charter details the roles and responsibilities of the following governance groups:

Core Team: The Core Team consists of functional unit leads from across the enterprise to provide detailed review and input on design and implementation of UWFT.

Technical Leadership Team: The TLT consists of technical leadership from UW-IT and UWM to review and approve key technical elements of the program, such as data conversion, integration and IT system architecture.

Program Leadership Team: The PLT members represent organizational leaders for those units most impacted by UWFT, including representatives from UWM, academic, administrative, auxiliary and research units.

Sponsors: The Sponsors are the highest governance group for the program, providing key executive leadership and decision making for the program. The Executive Sponsor of the group is the Provost.

The charter will be updated prior to Implementation to support effective program governance and oversight of Implementation.

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Program Management

The Program Management Plan (PMP) has been developed that details how UWFT will be managed

throughout its lifecycle, including program organization, managerial processes, technical processes and

supporting processes. Some critical elements of the PMP are:

Monthly reporting on program status and key metrics;

Governance approval will be required for material changes to scope, schedule and budget;

Defined training program;

Defined tenant management;

Documented testing program and approach;

Formal risk monitoring and reporting;

Technology infrastructure management plans, including data integration, conversion,

BI/Analytics and system architecture;

Strong oversight function provided by UW Internal Audit, independent Quality Assurance

Consultant, Workday Delivery Assurance, State Office of Chief Information Officer oversight.

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Management structure

Risk Management The complexity and size of UWFT will require ongoing management and resolution of keys risks. The

program team has developed a Risk Register that will be maintained and updated. The Risk Register was

established in a risk workshop that was conducted in October 8, 2019. Status of key risks will be

reported both through the UWFT governance structure as well as to the UW Regents and the Audit and

Advisory Committee. UWFT’s independent QA consultant will also report on risk status.

Current program risks and mitigation plans, include:

Program Risk Summary Mitigation Plan

1 Inability to hire program resources according to

plan may negatively impact schedule and

execution of early program deliverables

Develop formal Talent Management

Strategy

Roll-out streamlined recruitment and

onboarding process and coordinate with

Administrative/Central HR (i.e., bulk

hiring, limiting interview steps, ID Hiring

managers who have decision making

authority)

Explore creative sourcing solutions (i.e.,

networking events, internet outreach,

recruiting campaigns)

2 Inability to effectively integrate key enterprise

systems may result in Student, Research or

Clinical Enterprise operations not meeting

Effectively collaborate with UWIT, UWM

IT and Research IT partners leveraging

their expertise to solution integrations

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financial regulatory requirements or critical

functions being delayed, inaccurate or inoperable

Interview other institutions who have

already implemented similar solutions

and take their lessons learned into

consideration

Perform sufficient analysis early in the

implementation to identify appropriate

solutions

3

Ineffective unit level system remediation may

result in reporting, tracking or other business

functions to not be available at go-live creating

frustration at the unit.

Fund unit side-system remediation from

a pooled budget based on to be

determined evaluation criteria (this

approach has been successful at other

institutions)

Actively deploy a governance process to

monitor unit status

Engage units with effective technical

change management

4

Inability to create effective data integrations for

remaining Unit level systems could result in

critical functions being delayed, inaccurate or

inoperable

Review and acceptance of guardrail and

strategy by stakeholders

Prioritize discovery and architecture

design for very complex systems, data

warehouses and key integration

platforms related to major UW funding

sources: SDB, SAGE Suite, Kronos, Epic,

UWM EDW, UW-IT EDW, VP Finance Data

Group, Cloverleaf and UW-IT Data

Platform

Enumerate specific areas of complexity or

risk for the major systems

Simplify and standardize common

integration types through the use of

standard templates

5

Poor Organizational Change Management (OCM)

resulting in the UW community not

understanding and embracing the level of change

that the program will bring may result in not

meeting our transformation goals

Establish clearly defined process

transformation goals and stand up

Process Transformation Teams

VP of Finance for UW Academy and CFO

for UWM to appoint Business

Transformation Leaders in each end to

end process area who are accountable

for transformation goals

Ensure buy-in of transformation goals by

program governance groups

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Draft communications and change

management strategy to include a

change champions network which will

establish buy-in by broader levels of

organization

Craft transparent messaging to Board of

Deans and Chancellors (BoDC),

President's Cabinet and other key leaders

related to impacts of operating model,

technical and other transformation

Ongoing key messaging from President

and Provost to institution to convey

priority of program, transformation goals

and change impact

Forming faculty advisory to provide input

to business transformation from faculty's

perspective

6

Lack of institutional alignment or institutional

commitment to a common vision for the

Operating Model for Shared Services and

associated transformation may negatively impact

schedule, budget, and benefit realization

Communicate with President/Provost

often about Op Model direction to

ensure buy-in from top

Leverage sponsor decision making

process to ensure alignment throughout

the life of the program

Communicate with BoDC, President's

Cabinet and other key leaders early and

often

Have sponsor directional decision

communicated from President, Provost

to BoDC, SCPB and Admin council

Engage a Provost supported faculty

advisory group

Key administrative leaders to serve on Op

Model working group and Process

Transformation Teams to inform

direction

Op Model direction decision approved by

Sponsors in January 2019

7

Lack of Program Sponsor alignment and active

engagement, full visible support, and ownership

of the program goals and objectives, may result

in not meeting scope, schedule and/or budget /

transformation goals

Engage critical stakeholders/sponsors in

discussions to gain clarity and alignment

behind key program goals and methods

for costing and achieving those goals

Seek out executive Sponsor leadership

and direction to close gaps in alignment

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8 Inability to maintain alignment with our UW-IT

partners may result in not meeting business and

technical expectations of the program

Develop more robust engagement model

with IT partners via additional program

leadership

Dedicate UW-IT resources to the program

team and create a strong program

governance model to support ongoing

alignment

9 Inability to establish our program infrastructure

which may cause productivity loss and fail to

meet one or more program objectives

PMO to work with Program Leadership to

prioritize list of early implementation

deliverables and determine the level of

resourcing needed to complete

Update PMO team roadmap and

prioritized its deliverables, obtain

approval

Engage senior PM from Deloitte to work

on PMP structure and content

Hire additional PM program resources

10 Lack of continuity of experienced Deloitte

(vendor) resources may impact the efficiency and

effectiveness of the Implementation

Develop formal vendor management

strategy

Develop and distribute an RFQ for

additional qualified vendor resources

Define key resources in vendor contracts

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Appendix

All Enterprise Transformation Goals as of October 15, 2019 For each of these business process areas, UW developed an initial set of transformation goals to guide

the desired level of change. These goals include both achievement of goals in Wave 1 and Wave 2, as

well as aspirational goals desired over time as UW continues to optimize the Workday product.

Process Area Transformation Goals

Foundation Data

Model (FDM,

includes Chart of

Accounts)0F

3

• Design and standardize use of consistent FDM definitions across the enterprise

• Create a central governance structure to support and maintain consistent FDM definitions and structures enterprise wide to ensure consistent use going forward

• Provide for financial statement and management reporting generation at multiple levels (unit to enterprise) and groupings (alternate hierarchies and consolidations)

Record to Report • Have a single financial system of record • Produce monthly, quarterly and annual budget-to-actual financial

statements timely, including consolidated statements and eliminations where needed

• Standardize accounting methodologies and policies across the enterprise (e.g. accrual accounting, month end close, expense reimbursement)

• Automatically capture and track Accounts Receivable and other supported accrued assets in General Ledger

• Provide timely and effective reporting to enable proactive decision making • Automate intercompany • Increase transparency for internal billing transactions • Automate reporting for the state • Streamline and standardize reconciliation processes • Provide embedded, visible, and readily available business processes within

the system

Asset Acquire to

Retire

• Align fixed assets policies, processes and procedures • Integrate technologies with workflow across the enterprise in a single tool • Enterprise adoption of automated depreciation calculation • Change from annual to monthly depreciation calculation • Provide automatic integration between Purchasing, Fixed Assets, Receiving

and the General Ledger within Workday • Provide depreciation forecasts for in-service assets • Capital procurement process to be streamlined and aligned across entities,

where applicable

Customer

Requisition to

Payment

• Record all receivables (non-grant, student, patient and POS revenue) across the enterprise in a single financial system of record

3 Foundation Data Model includes Chart of Accounts and is within the Record to Report End-to-End business process

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(represents misc.

AR)

• Increase transparency and visibility of ownership and collection and application of cash

• Consolidate customer master in Workday

Grant Award to

Close

• Sponsored Agreement data flows automatically from pre- to post-award systems

• Streamline grant/contract set up process • Streamline and standardize subcontract process • Provide ability to apply rules/workflows consistently across all awards based

on grant attributes like sponsor type • Streamline documents management processes • Provide robust grant tracking (financial/administrative) across the enterprise • Consolidate post-award grants management in Workday • Increase granular tracking of expenditure types within a grant • Establish automated reconciliation between Grants Ledger & General Ledger • Provide automated exception reporting • Provide more timely, transparent, and accurate grant accounting and effort

certification

Manage Cash and

Financial Assets4

• Examine, optimize and manage banking structures to maximize benefits across the system where possible

• Automate and centralize bank reconciliation activities where possible • Visibility into cash inflows and outflows to be able to report on current

period activity and enable short and medium-term cash flow forecasting capabilities

• Enterprise visibility into retained earnings and cash balances • Enable timely recording of external debt and Internal Lending Program loans • Establish ability to track the lifecycle of the endowment and/or gifts to help

ensure with donor intent. This should be inclusive of: user restrictions, integrated gift and endowment data, and classified in appropriate GAAP net position categories and NACUBO codes

• Provide ability to track both CEF units and endowment distributions • Provide ability to budget and forecast endowment distributions

Procurement and

Supply Chain

• Establish all spend in one system • Move to common vendor and item master, eliminating duplicate

records/reconciliation and utilizing consistent and best practices for maintenance

• Create system-enabled three-way or four-way match2F

5 for all of UW Academy and UW Medicine

• Provide opportunities to negotiate better contract terms, and ability to take advantage of quick pay discounts and flexible payment options

• Enhance reporting that will allow for improved vendor performance management

4 Gifts and Endowments is within the Manage Cash and Financial Assets End-to-End Process 5 Three-way match: Reconciliation between Customer Purchase Order, Supplier Invoice, and Receipt Information; Four-way match: Reconciliation between Customer Purchase Order, Supplier Invoice, Receipt Information, and Quantity Accepted

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• Provide ability to create consolidated reports utilizing purchasing data in combination with other data

• Drive efficiency through consolidated process workflow automation • Provide suppliers more efficient onboarding; leading to better access and

categorization of information • Improve supplier/vendor master to negotiate better terms and eliminate

duplicate records/reconciliation • Create a central repository for all contracts shared among the Enterprise • Streamline requisition and approval process to support the teaching,

research, and clinical missions

Project3F

6 Inception

to Close

• Integrate project details with financial accounting activities for major capital projects including IT projects

• Standardization of capital project accounting and integration with Workday FDM

• Simplify capital project funding allocation processes • Improve visibility to capital project spending

Hire to Retire • Reduce administrative burden and increase paycheck accuracy for UWM employee population with shift to an ATR model

• Expand Workday functionality with implementation of integrated Workday Financial Management modules

• Ensure ability to do Payroll Accounting Adjustments in support of reporting on faculty effort in Workday

Plan and Manage

the Business

Wave 1

• Provide reliable, relevant, comparable and consistent budget to actual

management reporting at required levels of granularity on a monthly

basis

• Provide timely visibility across the enterprise into financial budgets,

commitments, and actual performance at varying levels of granularity to

support strategic direction, values-driven decision making, resource

stewardship, and risk management

Wave 2

• Move to standard tool for UW Academy and UW Medicine planning and

budgeting

• Provide greater visibility into budget drivers (e.g., volume, rates, etc.)

along with the ability to plan by and adjust budgets by those same

drivers in real-time

• Enable a strong connection between long-term planning, annual

planning, and interim forecasting

6 Major IT, construction and capital projects

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UWFT Risk Summary UWFT Mitigation PlanCurrent Level of

Mitigation1

Inability to hire program resources according to plan may negatively impact schedule and execution of early program deliverables

- Develop formal Talent Management Strategy- Roll-out streamlined recruitment and onboarding process and coordinate with Administrative/Central HR (i.e., bulk hiring, limiting interview steps, ID Hiring managers who have decision making authority)- Explore creative sourcing solutions (i.e., networking events, internet outreach, recruiting campaigns)

Partially Mitigated

2Inability to effectively integrate key enterprise systems may result in Student, Research or Clinical

Enterprise operations not meeting financial regulatory requirements or critical functions being delayed, inaccurate or inoperable

- Effectively collaborate with UWIT, UWM IT and Research IT partners leveraging their expertise to solution integrations - Interview other institutions who have already implemented similar solutions and take their lessons learned into consideration- Perform sufficient analysis early in the implementation to identify appropriate solutions

Unmitigated; planning only

3

Ineffective unit level system remediation may result in reporting, tracking or other business functions to not be available at go-live creating frustration at the unit

- Fund unit side-system remediation from a pooled budget based on to be determined evaluation criteria (this approach has been successful at other institutions) - Actively deploy a governance process to monitor unit status- Engage units with effective technical change management

Unmitigated; planning only

4

Inability to create effective data integrations for remaining Unit level systems could result in critical functions being delayed, inaccurate or inoperable

- Review and acceptance of guardrail and strategy by stakeholders- Prioritize discovery and architecture design for very complex systems, data warehouses and key integration platforms related to major UW funding sources: SDB, SAGE Suite, Kronos, Epic, UWM EDW, UW-IT EDW, VP Finance Data Group, Cloverleaf and UW-IT Data Platform- Enumerate specific areas of complexity or risk for the major systems- Simplify and standardize common integration types through the use of standard templates

Unmitigated; planning only

5

Poor Organizational Change Management (OCM) resulting in the UW community not understanding and embracing the level of change that the program will bring may result in not meeting our transformation

goals

- Establish clearly defined process transformation goals and stand up Process Transformation Teams- VP of Finance for UW Academy and CFO for UWM to appoint Business Transformation Leaders in each end to end process area who are accountable for transformation goals - Ensure buy-in of transformation goals by program governance groups- Draft communications and change management strategy to include a change champions network which will establish buy-in by broader levels of organization- Craft transparent messaging to Board of Deans and Chancellors (BoDC), President's Cabinet and other key leaders related to impacts of operating model, technical and other transformation- Ongoing key messaging from President and Provost to institution to convey priority of program, transformation goals and change impact- Forming faculty advisory to provide input to business transformation from faculty's perspective

Partially mitigated

6

Lack of institutional alignment or institutional commitment to a common vision for the Operating Model for Shared Services and associated transformation may negatively impact schedule, budget, and benefit

realization

- Communicate with President/Provost often about Op Model direction to ensure buy-in from top- Leverage sponsor decision making process to ensure alignment throughout the life of the program- Communicate with BoDC, President's Cabinet and other key leaders early and often- Have sponsor directional decision communicated from President, Provost to BoDC, SCPB and Admin council- Engage a Provost supported faculty advisory group- Key administrative leaders to serve on Op Model working group and Process Transformation Teams to inform direction- Op Model direction decision approved by Sponsors in January 2019

Partially mitigated

ATTACHMENT 2F-4.2/211-19 11/14/19

Page 1 of 2

7 Lack of Program Sponsor alignment and active engagement, full visible support, and ownership of the program goals and objectives, may result in not meeting scope, schedule and/or budget /

transformation goals

- Engage critical stakeholders/sponsors in discussions to gain clarity and alignment behind key program goals and methods for costing and achieving those goals- Seek out executive Sponsor leadership and direction to close gaps in alignment

Partially mitigated

8Inability to maintain alignment with our UW-IT partners may result in not meeting business and

technical expectations of the program

- Develop more robust engagement model with IT partners via additional program leadership- Dedicate UW-IT resources to the program team and create a strong program governance model to support ongoing alignment

Partially mitigated

9

Inability to establish our program infrastructure which may cause productivity loss and fail to meet one or more program objectives

- PMO to work with Program Leadership to prioritize list of early implementation deliverables and determine the level of resourcing needed to complete- Update PMO team roadmap and prioritized its deliverables, obtain approval- Engage senior PM from Deloitte to work on PMP structure and content- Hire additional PM program resources

Partially mitigated

10Lack of continuity of experienced Deloitte (vendor) resources may impact the efficiency and

effectiveness of the Implementation

- Develop formal vendor management strategy- Develop and distribute an RFQ for additional qualified vendor resources - Define key resources in vendor contracts

Mitigated

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Quality Assurance Readiness

Assessment for the

University of Washington’s

Finance Transformation

Project: Implementation Phase

October 31, 2019

Prepared by

Bluecrane, Inc.

• ®

bluecrane

Management Consulting

for

State and Local

Governments

Quality Assurance

Executive Advisement

Project Oversight

Project Management

Independent Verification and Validation (IV&V)

Risk Reduction

ATTACHMENT 3F-4.3/211-19 | 11/14/19 Page 1 of 8

Corporate Headquarters 655 Deep Valley Drive, Suite 300 Rolling Hills Estates, CA 90274 www.bluecranesolutions.com 310-792-6241

October 31, 2019 Mr. Brian McCartan Program Sponsor, Finance Transformation Program Vice President for Finance University of Washington 4311 11th Ave. NE, Suite 600 Seattle, WA 98105 Dear Mr. McCartan:

bluecrane is pleased to present you with our Quality Assurance (QA) Readiness Assessment for the Implementation Phase of the University of Washington’s Finance Transformation Project. This readiness assessment is provided to you in compliance with the State of Washington’s Minimum QA Activities – Readiness Assessment 132.20 Policy.

Please contact me with any questions or comments.

Sincerely,

Allen Mills

F-4.3/211-19 | 11/14/19 Page 2 of 8

®

QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page i

Table of Contents

1. Executive Summary ............................................................................................................ 2

2. Executive Dashboard .......................................................................................................... 4

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®

QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page 2

1. Executive Summary

The purpose of the University of Washington’s (UW) Finance Transformation (FT) Program is to develop, implement, and support an expansion of its existing Workday system that will: (1) transform the University’s finance functions, (2) ensure consistency with accounting and budgeting best practices, (3) allow for informed decision making, and (4) enhance the University’s financial resources.

Over the past three years, UW and its FT Program have been in an extensive planning effort. This effort has involved three phases: (1) Discovery, (2) Readiness, and (3) Design. Combined, these three phases have included conducting extensive internal and external discussions, business and technical analyses, and making plans for implementing additional features within its existing Workday system while remediating its legacy systems. It has been doing all of this planning in order to provide timely and accurate financial information for both its Academy and Medical operations and to address the many Lessons Learned from its previous Workday implementation for its Human Resources/Payroll (HR/P) processes.

By October 2019, and toward the end of its Design Phase, UW had achieved the following accomplishments:

• Completed an extensive bench-marking study which illuminated the business and technology opportunities that UW and its medical operations would likely achieve through embracing transformed financial business processes and implementing modern technology systems.

• Conducted three Total Cost of Ownership (TCO) efforts to determine the investment value in developing and implementing the envisioned financial system. All three TCOs have resulted in similar outcomes: the investment would likely be in the $100 million range but would result in significant quantifiable and quantitative benefits.

• Consistently reached out and engaged the University’s many stakeholders in a number of key activities such as designing the future business processes, creating a Foundational Data Model (FDM), seeking a path forward for Actual Time Reporting (ATR) and Biweekly Payroll, and setting a direction for the University’s conceptual operating model.

• Conducted one of the most comprehensive Implementation Phase budget estimates we have had the opportunity to be involved in. In the case of the forthcoming UW FT budget estimate, all efforts, that can be accounted for at this time, are included in the final budget estimates and a substantial contingency has been included for the various unknowns that large scale organization-wide program’s typically experience as they move along their lifecycle.

➢ Established goals for future cost reductions that are expected to be achieved as result of the modern systems and transformed business practices. By establishing these goals now, the University has provided itself with a significant amount of time for its various organizations to begin planning for future budget reductions.

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®

QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page 3

Additionally, over the past three years, the University and its FT Program have completed many frameworks, strategies, and approaches for how the Program plans to address the many opportunities and challenges ahead. In particular, the University has established goals directions for how it wants to conduct its financial operations, transform its business processes, and approach the upcoming technology changes.

Even with all of these accomplishments, at the time that we conducted our Readiness Assessment, there were still several unknowns and not much detail to support many of the Program’s frameworks, plans, and approaches. For example, it is not yet known whether or not the proposed technology solution to interface between the University’s legacy Student Data Base system and the modern Workday-based financial system will meet UW’s needs. Additionally, the detailed Implementation Phase schedule was still under development and had not yet been shared with important key stakeholders such as the Integrated Service Center (ISC), UW Information Technology (IT), UW Medicine IT Services, and the Office of Research. Furthermore, it was not yet known what technology deliverables or artifacts will be produced during the various time periods indicated in the preliminary timelines for the Program’s Implementation Phase. Moreover, the Program had not yet established its formal Organizational Change Management Team and plan.

Even with these unknowns, we are supportive of the Program being allowed to move to its Implementation Phase. But, given the various unknowns and that some of the Program’s planning activities will be underway for several more months, it is not clear if some of the Program’s initial assumptions, timelines, and estimates will continue to be realistic as more becomes known in the coming several months. As a result, it would be a good risk mitigation action to report, prior to entering into the Configure and Prototype time period, to the Provost, President, and Board of Regents any impacts or challenges that the Program has found with its initial budget and schedule estimates. This should provide: (1) transparency as to any updating to the initial estimates submitted in December 2019 and (2) assurance that adequate oversight by the University’s highest governance levels is being provided—while at the same time allowing the Program an opportunity to adjust as necessary for a successful go-live.

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®

QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page 4

2. Executive Dashboard

Assessment Area Risk Level bluecrane’s Summarized Findings

People

Organizational Change Management (OCM):

Business Readiness

Risk

Even though the Program has taken positive steps toward addressing the University’s business readiness needs, much of the work to date has been high-level and lacks many details such as what the specific business changes will be and how those changes will impact various UW entities.

Organizational Change Management (OCM):

Technical Readiness

Risk

There is still much uncertainty as to how and when technical changes will need to occur. Also, many of the details necessary to organize that future workload is not yet available and are not expected to be ready until later in the Program’s lifecycle.

Business Case No Risk

Identified

The Program’s recently developed baseline document is consistent with industry best practices and provides a good basis for holding the Program and the University, as a whole, accountable for achieving the business transformation goals and objectives that the Program is expected to achieve.

Measures of Success No Risk

Identified

The Program’s baseline document indicates that many business improvement opportunities could be achieved as a result of the Program’s future phases and activities.

Agency Awareness/ Stakeholder Engagement/

Communications

No Risk Identified

Key stakeholders consistently report that the Program has done a very good job in reaching out and engaging the University’s various constituents; and, in particular, in addressing one of the significant Lessons Learned from the HR/P Project in which there was limited communication and transparency.

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QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page 5

Assessment Area Risk Level bluecrane’s Summarized Findings

Project Management and Sponsorship

Program Sponsorship and Governance

Risk

Going forward, having most decision-making authority occurring at the highest governance level will most likely create risks for the Program in making timely decisions. It is imperative that the Program adjust now in its governance structure, decision-making thresholds, and information sharing in order to be well-positioned for making timely decisions in its Implementation Phase.

Program Staffing Risk It is not clear if the Program’s hiring plans are realistic—given the extremely competitive Seattle labor market—and if the Program and other centralized organizations will be able to hire experienced personnel in the designated time periods.

Program Schedule Not

Assessed

At the time that this assessment was performed, the Program had not yet completed its detailed Implementation Phase schedule. It will be important, once the detailed schedule is complete, that it be shared with the key stakeholders to verify timeframes and resource commitments.

Program Budget Risk Being Addressed

We commend UW for conducting one of the most comprehensive Implementation Phase budget estimates we have had the opportunity to be involved in. Our assessment found that UW’s FT budget estimate encompasses all known activities that can be accounted for at this time. Additionally, the estimate includes a substantial contingency that can be used for the various unknowns that large scale, organization-wide programs typically experience as they move along their lifecycle.

Project Management Methodologies and

Practices

Risk Being Addressed

We are pleased that the Program has begun preparing the plans and processes for its project management practices. The recent creation of the Program Management Plan (PMP) has been a good step forward and should provide a better understanding of how the Program intends to proceed in some important key areas; it should also help position the Program for success as it prepares to enter its more intense Implementation Phase.

Acquisition Planning/ Vendor Management

Planning

No Risk Identified

Our review of the Program’s vendor acquisition strategy found it to be adequate, and the Program’s current process of receiving assistance from various UW centralized organizations to assist in acquiring vendor expertise is also adequate.

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QA Readiness Assessment

Implementation Phase UW-FT Project

Bluecrane, Inc.

October 2019 Page 6

Assessment Area Risk Level bluecrane’s Summarized Findings

Solution/Data/Infrastructure

Architect and Configuration Methodology/Process

Not Assessed

At the time this assessment was conducted, information was not yet available regarding the Program’s architecting and configuration methodology. It will be important that the Program and Deloitte specify what technology deliverables or artifacts will be produced at each of the various proposed lifecycle phases. Additionally, the Program will need to verify with its key stakeholders (i.e., UW IT, ISC, Office of Research, and UW Medicine IT Services) whether or not those artifacts will be adequate for them to meet their responsibilities to the Program.

Testing Not

Assessed

At the time this assessment was conducted, information was not yet available regarding the Program’s testing phase. However, the high-level testing timeline does not include all of the industry best practices for testing cycles that are typically included in large scale complex software implementations. Additionally, it is unclear whether or not the proposed testing cycles and practices are consistent with UW’s current testing methodology for its existing Workday system.

Requirements Management Risk Being Addressed

Our review of the Program’s requirements taxonomy found it to be: (1) able to accommodate the challenges of requirements traceability in a Workday system; (2) consistent, to the extent possible, with industry best practices for requirements management; and (3) “testable”—in that it will allow for the testing of business functionality during the Program’s Implementation Phase.

Data Conversion No Risk Identified

Our assessment found that the Program’s data conversion strategy includes all of the components that are found with industry best practices. In fact, the data conversion strategy is a good example of the types of strategies that we would expect to be in place on large complex enterprise-wide technology endeavors. Additionally, we are pleased that the Program’s data conversion team is well versed and knowledgeable in good data conversion practices and activities; and, in particular, they are knowledgeable in how the Workday system’s data conversion process operates.

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