FC 109/27

Finance Committee

Table of Contents

I. ORACLE FINANCIALS

II. PROGRAMME PLANNING, IMPLEMENTATION, REPORTING & EVALUATION SUPPORT SYSTEM (PIRES)

III. ORACLE HUMAN RESOURCES MANAGEMENT SYSTEM (HRMS)

INTRODUCTION

1. This report provides information to the Finance Committee on progress made with the Administrative Information Systems between February 2004 and January 2005, and plans for the period February 2005 – January 2006.

I. ORACLE FINANCIALS

Progress between February 2004 and January 2005

2. During the period from February 2004 to January 2005, the main areas of work covered were as set out below:

1. Developments in the Accounts Payable (Payments) application. The project to improve the quality of vendor bank masterfile information completed in October 2004. The main achievements of this project have been to significantly increase the straight-through-processing (STP) rate of electronic funds transfer payments to levels which are now well above industry benchmarks¹; decrease banking charges; standardize banking data maintained in the Oracle Accounts Payable Application; and introduce international banking standards in the maintenance of such data. During this period new workflow functionality was also implemented to improve the cash payment process cycle.

2. Development of interface monitoring reports. The review of interface processes, identification of current controls and specification of monitoring reports has been completed for all interfaces included within the scope of the review. Standard reports on interface activity are now prepared on a monthly basis which provide positive assurance on this activity.

3. Preparation and publication of the Corporate Accounting Manual. A review has been made of the existing financial procedures referred to in the Manual Sections and a preliminary assessment of the relevance and applicability of each has been undertaken. Procedural documentation for the Accounts Receivable and other groups has been prepared and has been published on the AFF intranet site.

4. Further developments in the Data Warehouse. Reporting functions were expanded to include information sourced from the Accounts Receivable and Human Resources sub-systems.

5. Split Assessment Reporting. Work was undertaken on the development of new reports to support corporate and budget holder requirements for the monitoring of Regular Programme resources.

6. Improved use of standard functionality in purchasing business processes. A number of system changes have been specified and developed in order to make better use of existing Oracle Financials release 11i functionality. This has included the development of new reporting and data analysis functionality for both Oracle Purchasing and Oracle Fixed Assets.

7. Oracle Financials Upgrade Project. The upgrade of Oracle Financials is a prerequisite for the successful implementation of the HRMS project. This is because, in order to benefit from the substantial improvements that have been made in later versions, the Oracle HRMS application will be introduced on a version that is higher than the current version of Oracle Financials in place at FAO. As an integrated suite of applications it is necessary that all elements operate on the same version. The requirement for this project was agreed in the October 2004 meeting of the Oracle Project Management Committee.
   It is estimated that the project will require a minimum of eight months preparation based on previous similar projects. Project mobilization activities to release core project team staff members from their current duties were completed by the end of February 2005 to allow the main project activities to start.

8. Field Accounting Replacement Project. The current Field Accounting System (FAS) was deployed in the field offices in 1999 and has since undergone several revisions. The architecture of the system and its now obsolete technological platform continue to command substantial resources to maintain daily field office operations. Furthermore, the system does not fully capture the current business needs and user requirements and lacks robustness, security and flexibility. The FAS replacement project commenced in June 2004 and is expected to last approximately 24 months with a target implementation of the 3rd Quarter, 2006.
   During the period from June 2004 to January 2005, the main focus of work was on project start-up and activities associated with establishing the project management structure, defining the project charter and scope and gathering of user requirements.

Plans for February 2005-January 2006

3. The main focus of work for the period February 2005 to January 2006 will be on the implementation of the Oracle Financials Upgrade Project which is estimated to require a minimum of eight months preparation. The project activities which will be completed during this period are divided into 3 phases:

1. Phase 1 – review of business requirements and determination of the project boundary;
2. Phase 2 – introduction of the changes agreed as being within the project boundary;
3. Phase 3 – testing of changes, training in changes and introduction of new system, including immediate post-implementation support

4. Work will also continue in the following areas:

1. Field Accounting Replacement Project. The project team will continue the task of gathering, validating and finalizing user requirements. Following review, discussion and approval of user requirements, the technical team will proceed with the task of developing technical specifications.
2. Developments in the Accounts Payable (Payments) application. This project will now be extended to include payroll bank records which are maintained in a separate application and masterfile.
3. Preparation and publication of the Corporate Accounting Manual. Work will continue on the review and revision of existing financial policy, procedures and other documentation necessary to constitute a comprehensive corporate accounting manual.
4. Further developments in the Data Warehouse. Further analysis and development work in the Data Warehouse will be completed to expand the reporting functions available.
5. Split Assessment Reporting. The new reports to support corporate and budget holder requirements for the monitoring of Regular Programme resources will be finalized.
6. Improved use of standard functionality in purchasing business processes. This is an ongoing activity which will continue throughout 2005.

Resource Utilization

5. The cost of work undertaken in relation to Oracle Financials is being funded wholly from arrears:

6. In addition, funding requirements for the Oracle Financials Upgrade project are estimated to be US$1 550 000 and the most likely funding source is to advance funds from the FAO HRMS Project (please see paragraph 24).

Issues and Comments

7. During the period of the Oracle Financials upgrade project, system development will be frozen to ensure that significant changes are not implemented in the production system while the new system is undergoing testing. This will limit the scope of other system developments which can be completed during the upgrade and throughout the remaining period of the HRMS implementation. It will nevertheless be necessary to accommodate those developments that are recognized to be high priority in their own right such as the Field Accounting System Replacement Project.

8. The budgeted amount for the FAS Replacement Project is US$675 000, which is approximately one third of the US$1.8 million spent in 1998 on the existing field accounting system. The Organization will look for a flexible solution that will allow additional functionalities to be potentially added in the future. However, the initial functionality envisaged by this project will be limited to financial and budget management aspects of the FAOR office.

9. The project to replace the Field Accounting System is funded from arrears. Given the scope of the business requirements and that the project has only recently started, it will not be possible to fully deliver the arrears funded portion of the project by the end of the 2004-2005 biennium. The freeze on system development due to the Oracle Financials Upgrade will also have a potential impact on the ability to fully deliver the other administrative information systems projects funded under the arrears heading (“Unbudgeted Cost of Consolidating Oracle Financials”) by the end of the 2004-2005 biennium. It is proposed that any unspent balance on these projects be therefore carried forward into 2006 within the Capital Expenditure Facility.

II. PROGRAMME PLANNING, IMPLEMENTATION, REPORTING & EVALUATION SUPPORT SYSTEM (PIRES)

Progress between February 2004 and January 2005

10. All of the planned outputs presented to the Finance Committee at its 107th Session in May 2004 have been achieved:

1. Budgeting, Workplanning and Annual Assessments. PIRES was used to compile and analyze the adjustments to the Programme of Work and Budget 2004-05 at the approved budget level, and to assemble the required documentation (FC 107/14). The new workplanning module was placed into production in June, following the release of the 2004 adjusted allotments in PIRES. The new Annual Assessment/PIR 2002-03 module was also released, in mid-April 2004, and used to prepare summary assessments for all technical programme entities and to collect the data required for preparing the PIR 2002-03 (C 2005/8). In January 2005, the initial versions of the workplanning and assessment modules were updated and integrated to provide a more comprehensive Departmental Programme Managers’ Toolkit.
2. Medium-Term Plan 2006-11. Through expanded features in the PIRES MTP module, the “Non-technical” and Technical Cooperation programmes were reformulated under a results-based budgeting model. The collection and review of MTP proposals for all programmes was completed in July.
3. Corporate Budget Monitoring and Forecasting and Regular Programme/Field Programme Interactions. The project team provided support to three working groups of the Field Programme Committee (FPC) in analyzing the policy framework for field programme planning and monitoring. The FPC approved the pilot evaluation of approaches to integrate country strategies into corporate planning systems. Assessment of actions required to support the recommendations of the Independent Evaluation of FAO’s Decentralization is ongoing.
4. Integration with Oracle HRMS. The analysis of integration points between PIRES and the HRMS project began in April and proceeded throughout the reporting period.

11. While not explicitly foreseen in the plan, the MTP 2006-11 and PIR 2002-03 documents were produced using new technology which will streamline the related document production, translation and publishing workflows.

Plans for February 2005-January 2006

12. The planning of the coming months is of considerable importance since the PIRES arrears funding will be exhausted in September 2005. Thus, in the absence of additional resources, PIRES must be brought to a sustainable state of development within the next year.

13. The workplan which has been endorsed by the Project’s Inter-departmental Working Group (IDWG) comprises two types of workstreams: (1) those representing specific systems development objectives under PBE control and (2) those associated with integration points with other corporate systems and processes, with priority given to rationalizing the applications.

14. Within this framework, the following outputs will be completed during 2005:

1. Programme of Work and Budget (PWB) 2006-07. An integrated assessment of the PWB 2004-05 and MTP 2006-11 was conducted in the fourth quarter of 2004 and feedback from this assessment contributed directly to updating the design of the PWB 2006-07 preparation module. Apart from further streamlining no major system changes are envisaged for the PIRES PWB module.
2. Support for Information System (IS) Planning. PIRES has supported the collection of initial data related to proposed IS projects in the MTP 2006-11. Support for AFI’s efforts in this area will continue in the PWB 2006-07, including the linking of specific biennial outputs to any associated IS project, which will assist AFI in developing a Biennial IS Plan within the broader context of a Medium Term IS Strategy.
3. Workplanning, Monitoring and Assessment. Further refinement to the Departmental Toolkit is envisaged based on the adoption of the result based model for the Non-technical and Technical Cooperation programmes and user feedback.
4. Corporate Budget Monitoring and Forecasting. This is a key integration point workstream. As previously envisaged, this will be tackled by defining the requirements of the various working level roles in corporate budget monitoring and forecasting before formulating information system proposals.
5. RP/FP Interactions. Priority areas to be developed or supported in this integration workstream include improved integration of extra-budgetary support in processes related to results-based budgeting, with particular reference to the PWB 2006-07 process.
6. Evaluation Support. The PIRES Project Charter anticipated that the software would provide support for the evaluation process. The PIR/Summary Assessment 2002-03 module provides a facility for recording implementation progress towards the achievement of both outputs as well as intended results. The purpose of this PIRES Workstream is to identify and put into place the basic functionality, supplementary to that of the Annual Assessment module, to further support evaluation processes, particularly the feedback loop, whereby implementation experience can lead to programme adjustments.
7. HRMS Support and Integration. Progress is accelerating in the examination of broad integration issues such as post management, performance management, payroll and other areas. Nonetheless, the practical implications for PIRES will not be known with any precision until the latter part of 2005.

Resource Utilization

15. The resources envelope for the PIRES project has not changed significantly since the earlier reports to the Finance Committee, and spending is proceeding according to plan.

Issues and Comments

16. As noted earlier the arrears funding for PIRES will be exhausted within 2005 and, therefore, the workplan for 2005 focuses on bringing the system to a sustainable state of development, with as many of the Project's objectives achieved as possible by the end of this year.

17. To ensure the existence of in-house skills, a training programme for the two PBE technical staff is being implemented based on the PIRES technical architecture. The various integration points noted above are likely to require additional effort, particularly in the context of the HRMS project, and longer term staffing requirements for maintaining PIRES will be determined in the PWB 2006-07.

III. ORACLE HUMAN RESOURCES MANAGEMENT SYSTEM (HRMS)

Progress between February 2004 and January 2005

18. There has been good progress against the workplans for the period February 2004 – January 2005. Documentation of current Human Resources business processes has been completed and review of proposals for business process improvements is almost complete.

19. A study covering the current and future Human Resource Management Model has been initiated in December 2004 and is planned to be completed in April 2005. The new Management Model will seek to extend HR coverage and improve overall HR service delivery whilst reducing costs. One of the objectives of the study is to estimate benefits and savings resulting from the HRMS implementation.

20. The main activity being executed in the October 2004 – March 2005 period is Gap Analysis, the mapping of FAO new business processes to the Oracle ERP standard functionality, in order to identify basic configuration and gaps in functionality. The project is slightly behind schedule due to difficulties in recruitment of high level technical resources, but the 2004 expenditures have been less than forecasted. It is therefore expected to absorb this delay within the current financial and time plans.

Plans for February 2005-January 2006

21. Once the above Gap Analysis project phase is complete, and the new HR Service Delivery Model defined, the project will move into its next phase, the Conference Room Pilot, where a system prototype will be demonstrated and discussed with the users over the period April – September 2005. In the second half of 2005, the development activities will also start. The project completion date is the end of 2006.

22. The project will also provide input to the Oracle Financials upgrade, and finalise the design of the integration between the PIRES and HRMS systems, specifically in the areas of post management, staff costing, performance management and HR planning.

Resource Utilization

23. It was reported to the Finance Committee in May 2004 that the cost estimate for the project totalled US$19 000 000, with a shortfall of US$5 021 000. In light of the fact that the Gap Analysis is not yet complete at the time of preparing this report, and that the gap analysis outcome is the basis for a more accurate cost prediction, a new cost estimate will be provided to the Committee in the September 2005 session. This will include an estimate of the benefits (including cost savings) that the project will deliver.

24. As reported in paragraph 20, the 2004 expenditures were lower than forecasted. The anticipated expenditure of arrears funding allotted for this project has been re-phased across years 2004, 2005 and 2006, and funds allocated to Oracle Financials upgrade as indicated in section I. The new resource allocation is summarised in the table below.

25. This will require a carry-forward of the unspent balance of arrears funding, estimated at US$1 640 000, into 2006. The project has been included in the Capital Budgeting proposal endorsed by the Finance Committee in May 2004.

26. Actions are in progress to examine areas for cost reduction. Some reductions have been achieved whilst others are under investigation:

1. the user training component will adopt a “training-of-trainers approach” to contain costs and to leverage existing resources, and its cost will be funded from the PWB 2006-2007 Corporate Staff Development funds. This will reduce the estimated project costs by US$1 500 000.
2. solutions adopted by other UN agencies, and in particular the ILO, have been reviewed for re-use in the Organization’s HRMS system, with potential savings on configuration and extension costs. The existing Memorandum of Understanding between the two organizations should allow a full sharing of project information thus reducing FAO’s implementation efforts.
3. the Organization is exploring ways of reducing the unit cost of the system development portion by relocating system development activities to a lower cost geographical location. The Regional Office in Bangkok has been identified as a suitable location. A business case is being formulated to consider availability of local resources, market rates, infrastructure costs, oversight arrangements, sustainability and ongoing costs.
4. a phased implementation of customizations will be considered as a way to contain project costs, whilst meeting the original high level objectives. Customizations can be delayed and implemented as part of system maintenance leveraging existing knowledge and skills, provided adequate resources are available.

Issues and Comments

27. Difficulties have been experienced in recruiting high level technical resources since market rates exceed maximum FAO consultant honorarium ceilings. Measures to address this problem have been taken.

28. Availability of divisional resources has been limited by other programme priorities. Stakeholder divisions have had their budgets severely cut in the 2004-2005 biennium and this has created delays in the project activities that have so far been absorbed. A risk exists, however, if new budget cuts are made that the delays in responding to project requests will start to affect project timeline and costs.

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¹ As at 31 December 2004, the STP rate for the bank accounts used to process Accounts Payable payments all exceeded 90% compared to a SWIFT industry benchmark of 76%.