Greg Babinski, Finance & Marketing ManagerKing County GIS Center201 South Jackson Street, MS: KSC-NR-0706Seattle, WA 98104Voice: 206-263-3753Fax: 206-263-3145Email: [email protected]
A BUSINESS-LINE APPROACH TO ENTERPRISE GIS FINANCE
Abstract: This presentation outlines King County GIS (KCGIS) Center’s three funding methods to provide enterprise services for King County, Washington. Enterprise GIS management provides operational efficiency and cost sharing benefits. Some local governments fund enterprise GIS operations from a single central source. However, many enterprise GIS operations are expected to obtain funding directly from the departments they serve. KCGIS Center is an internal service fund, responsible for full operational cost recovery, with three ‘business lines’ each focused on the unique value provided and fair cost allocation. The KCGIS approach may benefit other city and county enterprise GIS operations when considering options for long-term funding methods.
INTRODUCTIONEnterprise city or county GIS management usually provides operational efficiency and cost sharing benefits. Maturing local government GIS operations often consolidate core enterprise GIS services in a central organization. Some local governments fund enterprise GIS operations from a single central source. This approach is simple, with low administrative overhead and strong end-user support. Many enterprise GIS operations however are expected to obtain funding from the departments they serve. This approach is not simple. End-users may question the value of GIS services and the fairness of the cost allocation model.
This presentation will outline the King County GIS (KCGIS) Center’s three funding methods to provide enterprise services for King County, Washington. KCGIS has developed an entrepreneurial, business-line approach to providing GIS services and obtaining funding from client
departments. Local government GIS managers, finance/budget managers, and elected officials may benefit by studying and applying the service costing principles adopted by KCGIS. In addition, GIS managers and practitioners may benefit by applying the customer service focus that is a core component of the KCGIS finance approach.
THE KING COUNTY GIS CENTER INTERNAL SERVICE FUNDThe King County, Washington, Metropolitan Council established the “Geographic Information System Fund” in 2001, effective January 1, 2002. KCGIS was created as a consolidation of GIS resources from a number of County departments, with the majority of staff and resources provided by the Information and Telecommunication Services (ITS) Division. KCGIS, with 31 staff, was placed in the Department of Natural Resources and Parks (DNRP), reporting administratively to the DNRP Director. However, KCGIS is chartered on an entrepreneurial basis to provide GIS services not only to all King County departments and agencies, but also to external customers.
As a county internal service fund, KCGIS has a number of responsibilities and advantages that distinguish it from the typical GIS operational unit that might be found in a city or county IT department, assessor’s office, planning department, or other normal administrative GIS ‘home.’ Advantages of a county internal service fund for enterprise GIS operations include: The fund develops its own budget proposals, free from
departmental interference. The fund manages its own finances. GIS revenue is deposited into
the fund where it is available to pay the cost of GIS operations. Money can be saved in the fund from year to year, to cushion a
temporary decline in revenues or to build a reserve for major equipment (server) or data (digital orthophoto) replacements.
The fund owns its own equipment. The fund has its own dedicated staffing level.
The KCGIS internal service fund was established with an initial fund balance of $250,000, transferred from ITS as the calculated portion of that fund’s reserve attributed to previous GIS operations. As an internal service fund, KCGIS is the organizational peer of County departments and divisions that have budgets in excess of $100 million (Sheriff, Wastewater, Transit, etc.).
County internal service funds have a number of responsibilities that the typical local government GIS operational unit is normally free of:
Internal service fund budgeting and financial management is an overhead activity that can distract from GIS development and service delivery.
County internal service funds are responsible for recovery of all direct and overhead costs – including rent, phones, ITS services, County and department overhead, administrative and HR services, etc.
County internal service funds are responsible for identifying, budgeting, and collecting revenue for GIS operations and services.
The typical GIS manager may perceive this last responsibility, to obtain funding for GIS operations, as very difficult and/or a distraction from the core interest of most GIS professionals. However, it is useful to recall that most GIS development / implementation projects are approved only after a cost/benefits analysis convinces decision-makers that the required initial investment will produce sufficient value for the agency. Once initial GIS development is complete, the ability to convince decision-makers, year after year, that continued GIS operations provide value to those agencies using the services, represents an ongoing cost/benefits analysis. Rather than being a distraction, this process of convincing decision-makers of the ongoing value of GIS should be seen as one of the highest responsibilities of a GIS manager.
To facilitate this process, KCGIS has segmented its operations into three ‘business lines,’ each focussed on common GIS services and resources. Each business line focuses on the unique value of the specific services offered. Each business line also supports a logical cost allocation methodology, to help GIS users understand the basis for individual GIS service cost components. A clear understanding of logical cost components for GIS services allows end user agency managers to make an informed business decision to either use or not use GIS as a tool for their agency’s operations.
Enterprise GIS Operation Services Business LineKCGIS Center’s core business line is built around enterprise GIS infrastructure and operation services. Specific enterprise GIS operation services are defined on an annual basis in coordination with the King County GIS Technical Committee (comprised of a representative from each County agency that has ‘desktop’ GIS users). For KCGIS’ proposed 2004 budget, these services will be provided by 10.5 FTEs and include: Countywide GIS coordination Regional GIS contact and coordination Development and monitoring of GIS standards
Coordinating department GIS data maintenance and managing data QA/QC
Managing the county metadata program GIS Data Warehouse database administration GIS Data Warehouse system administration Back-end (data maintenance) application development &
maintenance Front-end (data access) application development & maintenance Countywide GIS contract management Countywide GIS communications User group management GIS help desk Coordination of designated countywide priority GIS initiatives
A key characteristic of core services for mature enterprise GIS operations is that they are ‘fixed-cost’ in nature. Total budget costs can be increased or decreased by adding or removing entire ‘service offerings,’ but costs are typically not affected by the total number of individual users or by the number of agencies who fund the services.
Once enterprise GIS operation services levels for the coming year are developed in cooperation with the Technical Committee, KCGIS develops a proposed budget to cover the cost of the services. This proposed budget is presented to the GIS Oversight Committee, comprised of managers with budget authority for the major departments served by KCGIS. The GIS Oversight Committee works with KCGIS through the budget development process on two major high-level components of the budget: a) total budget amount, and b) cost allocation model.
It is at the GIS Oversight Committee level that county agency managers need to be convinced of the business value of each of the core enterprise GIS services being proposed. The KCGIS budget typically includes specific FTE and cost allocation for each service offering, to allow a business analysis of the value of providing the service.
Once the GIS Oversight Committee concurs with the proposed budget, they consider the funding allocation model. Typically, KCGIS provides an analysis of funding model alternatives for consideration by the GIS Oversight Committee. The 2004 funding model will be based on a weighted calculation of the benefit and cost of GIS services provided to all county departments that use desktop GIS capability. Specific components that comprise this funding model include: Core GIS data layers used by the agency Core GIS applications used internally by the agency
Core GIS applications that support external clients of the agency Geographic extent of GIS data needs (local service area or
countywide) Extent of GIS data criticality to agency operations Positional accuracy requirement for GIS data Extent of GIS integration within agency
An alternate model which will likely be considered in future years eliminates the somewhat subjective weighting calculation outlined above, in favor of five equal funding sub-allocation pools. Department funding shares within each of these sub-allocation pools will be based on easily quantifiable criteria. The five pools include: 20% of budget allocated equally to each agency represented on the
GIS Oversight Committee. This reflects a policy level management interest in KCGIS operations.
20% of budget allocated equally to each agency represented on the GIS Technical Committee. Any agency with desktop GIS users is represented to reflect technical and operational level interest in KCGIS operations.
20% of budget allocated equally to agencies on the basis of the number of desktop GIS software licenses in use by the department. This reflects variation in the level of desktop GIS integration by individual departments.
20% of budget allocated equally to each agency on the basis of the volume of web-based GIS application usage by the department. This reflects variation in the level of Internet based GIS application use by individual departments.
20% of budget allocated equally to each agency on the basis of the volume of external (public) web-based GIS application usage by clients of the department. This reflects variation in the level of benefit (via enhanced services) or cost savings (via elimination of public inquiries) from use of Internet based GIS application for individual departments by the public.
Once GIS Oversight Committee concurrence for the proposed budget and funding model has been secured, the budget is still subject to the same review and approval process that each fund faces for their annual budget. This process includes extensive review by the county budget office, followed by further review and approval of the proposed budget by the county executive for his budget submittal to council. Once approved by the council, the budget is finalized. However, because of the extensive preliminary work done by KCGIS with the GIS Technical Committee and the GIS Oversight Committee, the formal review process posses little risk for final approval.
Once the budget year begins, the approved budgeted funding is automatically transferred on a quarterly basis from each agency to the KCGIS internal service fund by the county’s accounting services division.
GIS Staffing Services Business LineSeveral county departments have dedicated business specific GIS units or individual GIS staff. KCGIS Center directly manages and staffs GIS operations for one large county department and offers this service to other departments as well. Staff levels for four individual divisions within the one department are agreed annually on a ‘negotiated level of service’ basis. The divisions benefit by reduced costs from pooled management and enhanced efficiency resulting from higher professional standards, cross training, redundancy, and best practices.
Each division designates a GIS matrix manager, who is responsible both for evaluating the level of business need for direct GIS services within their division, and coordinating the assignment of allocated staff to work on specific projects. Typical services provided by the 11.0 FTEs budgeted for this business line in 2004 include: Data development and maintenance Custom application development Mapping GIS data analysis End-user training and support
KCGIS includes costs and revenues for GIS staffing services as it develops its proposed annual budget. Costs include an allocated proportion of KCGIS Center overhead, management, and administration. Initial budget review and approval is with the division GIS matrix manager, as well as division and department finance managers. This process ensures that there is customer support for proposed budget, based on the business value provided by the GIS staffing services. This component of the proposed budget is subject to the same review and approval process as outlined above.
Once the budget year begins, the approved budgeted funding for GIS staffing services is automatically transferred on a quarterly basis from each division to the KCGIS internal service fund by the county’s accounting services division.
GIS Client Services Business LineKing County experience has been that all county agencies require customized, on-demand GIS services on occasion. This is true of departments with their own GIS staff (perhaps during periods of peak work load or for very specialized service) and of departments with no
integral GIS capability (perhaps needing services as simple as making a map or helping an employee learn to use a web based application).
KCGIS Center provides on-demand GIS client services to meet the unique or unanticipated needs of county business units. Typical services provided by the 9.5 FTEs budgeted for this business line in 2004 include: GIS training GIS programming Custom mapping GIS data development or maintenance Short-term GIS staffing GIS needs assessment, planning, and implementation support GIS data sales
Because of the on-demand nature of client services work, budget projections are highly speculative. KCGIS includes estimated costs and revenues for GIS client services as it develops its proposed annual budget. Budgeted costs include an allocated proportion of KCGIS Center overhead, management, and administration. As the budget is developed, an hourly billing rate for the budget year is calculated by dividing total projected costs (labor, overhead, management, administration, and other direct costs) by the total number of projected billable hours. In addition, a budget is proposed for other direct non-labor reimbursable costs (media, software, commercial data, contracted consulting, etc.) that would typically be billed to clients separately.
During the budget development process, KCGIS typically seeks budget commitments from departments for client services work for the coming year. In the past, these revenue commitments have totaled approximately 55% of the proposed client services budget. For budget purposes, an additional 25% of proposed revenue is described as contingent from county agencies, and another 20% as contingent from outside agencies.
Even though departments may commit to reserve funds in their budget for KCGIS client services work, they are under no obligation to actually spend the funds with KCGIS. The decision to spend budgeted funds (or other department funds if agency workload warrants) is made on a case by case basis by individual agency business unit managers. In effect, these managers are making an individual cost/benefit analysis when they decide to spend agency funds for specific on-demand GIS client services.
For KCGIS client services, budget review and approval does not directly involve client agencies. The KCGIS case to the budget office, executive, and council for this portion of the proposed budget is based on the funding reserve commitments, previous years actual client services activity, and a recognition of a reasonable contingency to accommodate peak demand or emergency workload. Other than the lack of direct agency review and approval, the client services portion of the proposed budget is subject to the same review and approval process as outlined above for Enterprise Operations and Direct GIS Staffing.
Once the budget year begins, agencies are billed for GIS client services work only after work is completed, or monthly for projects that may extend over two or more months. Revenue is posted as received to the KCGIS internal service fund by the county’s accounting services division.
CONCLUSIONSThe business like approach to service delivery and financial management that characterizes KCGIS Center operations has multiple interesting consequences. The most significant bottom-line consequence is that during several years of declining county budgets, KCGIS Center has been able to maintain and even expand the level and improve the quality of service provided to client agencies.
Other consequences include an expanded role for GIS marketing, both to promote the use of GIS by county business, but also to communicate agency business needs back to KCGIS management and staff. This reverse communication helps KCGIS see how its services can be integrated into critical county business processes. This leads to a culture where all KCGIS Center staff become proponents of business process improvement, where GIS is a tool that may be of value.
KCGIS Center staff are all GIS professionals and civil servants, but the business-line approach requires that they see the big picture of King County government. This promotes a strong customer service focus that is a key characteristic of KCGIS staff. They recognize that the needs of King County citizens set their priorities. Their recognition that GIS is a business tool – not a toy for techies, results in an enterprise GIS operation that is both financially viable and highly relevant to the needs of King County.
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