F–9 STANDING COMMITTEES Finance and Asset Management Committee

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UW Finance Transformation Update INFORMATION The administration is presenting information to outline the University’s strategy for continuing the incremental modernization of its administrative systems and processes with the focus on finance. This item is for information only. BACKGROUND The University of Washington is a premier global research, educational and academic medical institution with a $6.2 billion budget, and over 42,000 students. The UW supports a large, complex and diverse workforce of over 40,000 people including faculty, researchers, clinical personnel, student workers and administrative staff, making it the third largest employer in the state. Despite the size, scope, and complexity of the institution, the UW’s core legacy financial system— that supports critical business operations—is nearly 50-years old. This legacy system is long past meeting the University’s current financial business needs and the strategy of building side systems and making incremental enhancements to keep up with changing business and regulatory requirements is no longer sustainable. The University recently implemented updated procurement and HR/Payroll systems and it has now reached the point where the core financial systems need addressed as well. The resulting operational inefficiencies are negatively impacting the productivity of faculty and staff at every level of the institution. Departments and units have developed hundreds of redundant shadow systems to compensate for missing functionality at considerable cost and effort. University faculty and staff cannot get the information they need to support effective management and decision-making. Preliminary planning is underway with the help of Deloitte consulting services. Requests for Proposal for implementation partners, external quality assurance, and software are being drafted. Readiness phase approval requirements for the State of Washington Office of the Chief Information Officer (OCIO) and the Board of Regents (planned for January 2018) are being drafted. Initial staffing of the project team is also underway.

STANDING COMMITTEES Finance and Asset Management Committee UW Finance Transformation Update (continued p. 2)

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STRATEGY The University is continuing its strategy to replace its core legacy administrative systems. The magnitude of the replacement efforts allows for only one system replace at any given time. The new HR/Payroll system went live in June 2017. Stabilization of that implementation will continue over the next 6-8 months. The financial system replacement will include core financials (general ledger, accounts receivable, revenue, and expense management, etc.), post-award grants management, procurement and supply chain, and corresponding reporting and data management. The University’s overall strategy focuses on building an architecture that integrates across systems (where possible), and provides flexible, next-generation functionality to support the institution’s current and future business needs. The University will use a combination of cloud-based commercial solutions, open-source, and emerging platforms to enable integration and reporting across the enterprise. Preliminary assessment confirms with a few key exceptions that Workday, the system implemented for HR/Payroll, will meet most functionality needs for finance. This will result in an integrated solution for the highest volume transaction activities (salary, benefits, and procurement of goods and services). The University will fund the financial system replacement through a combination of operating and capital dollars. Capital funding is included in the UW’s One Capital Plan, pending its approval by the Board of Regents. IMPLEMENTATION ALTERNATIVES Two implementation alternatives are currently being assessed:

1) Phased Implementation - The core (non-clinical) units going live with the new financial system in approximately July 2020, followed by a short implementation of planning and budget, with the clinical enterprise going live in approximately July 2021. This timeline would include a 6-month “readiness” phase to develop a new chart of accounts, detailed technology integration planning, and future state business process development key areas, such as grants management. The primary risks to this alternative are upgrades in functionality required for UW Medicine to integrate, especially given the complexity of the chart of accounts. In addition, the readiness phase of 6-months is extremely

STANDING COMMITTEES Finance and Asset Management Committee UW Finance Transformation Update (continued p. 3)

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short and may not provide adequate time for planning the implementation phase.

2) “Big-Bang” Implementation - The entire University would go live in

approximately July 2021. This timeline includes a 12-month readiness phase. The risk to this alternative is the complexity of change management efforts that are required for go-live. The primary benefit of this alternative is the UW Medicine integration required in the phased option would not be necessary.

The University is at a crossroads where maintaining the momentum of system modernization efforts is critical. Upgrading the system infrastructure and operating approaches will provide essential information needed for effective decision-making and reporting and a more efficient environment that aligns with best practice organizations. The status quo is not acceptable or sustainable. Attachment Finance Transformation Update, November 2017

FINANCE TRANSFORMATION UPDATE

Board of RegentsNovember 9, 2017

ATTACHMENT Page 1 of 8F-9.1/211-17 11/9/17

WHY FINANCE TRANSFORMATION?

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BUSINESS CASE – THE OPPORTUNITY

Financial Management

• Close books on a timely basis

• Improve visibility into financial performance and accountability for results

• Improve ability to manage operating margins more closely and prevent operating deficits

• Deploy funds more effectively for maximum impact

Reporting & Information Management

Operational Efficiency & Effectiveness

Risk Management

• Improve quality and accuracy of reporting and make it easier to manage operations with more accurate and up-to-date information

• Pull data rapidly to make better decisions and avoid mistakes as conditions change or opportunities present themselves

• Enterprise-wide view of academic and clinical operations

• Strengthen support for core finance functions across the university

• Reduce investment in side systems used to compensate for deficiencies in legacy system

• Drive more consistent and standardized processes across the university and lay foundation for greater efficiency

• Strengthen internal controls and reduce risks including risk of fraud and security breaches

• Reduce reliance on legacy system knowledge and risk of operability or system failure

Modern platform for changing times:

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BUSINESS CASE –DEANS, CHAIRS, PRINCIPAL INVESTIGATORS, FACULTY AND CLINICAL OPERATIONS

Deans and Chairs

• Single source of truth that sheds light across Schools, Departments, Divisions and units

• Robust reporting that promotes shared understanding and alignment and facilitates collaboration

• Timely and reliable information that supports proactive decision-making instead of reactive

• Reduced number of disparate and duplicative side systems

• Administrators and staff freed up from manual entry and reconciliation of data in order to support higher value activities aligned with mission

Faculty, Principal Investigators and Clinicians

• Easier access to information and insights into funds available for mission-driven activities

• Real-time updates to projects such as research grants and gifts

• Comprehensive, timely management and financial reporting across all academic and clinical entities and services

• More time for activities in the classroom, laboratory, clinic or hospital

• Improved services from support staff

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UW Campus Units

UW Clinical Enterprise*

Organizational

Core Financials (including new Chart of Accounts)

Grants Management

Supply Chain and Inventory Management

Planning

Functional

Technical: Integrations

Reports

HRP Remediation

Pre-Award Grants Remediation

Student System Remediation

Other “side system” remediation

Change Management

Readiness

Other

SCOPE

*Excludes Valley Medical Center (VMC)5F-9.1/211-17

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YR1 YR2 YR3 YR4 YR5

Wave 0:

Readiness

Wave 1: UW Campus Units and UWM Integrations

Wave 2:

Planning

Wave 3: UWM Clinical Enterprise*

Wave 1: All Units

Wave 2:

Planning

Key

UW CampusBoth UW Campus & UWMUWM

#2: Big BangOR

Wave 0:

Readiness

UWM Participates Throughout

*Excludes Valley Medical Center (VMC)

#1: Sequenced

1 2 3

X Go Live

1 2

DEPLOYMENT SCENARIOS

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One TimeCost

~$195M to $205M ~$180M to $195M

TimingBetter Aligned for Success:

• Allows More Time to Stabilize After HRP• Provides Necessary Time for Readiness Activities

TechnicalLower Technical Risk:

• Avoids Temporary Integrations• Provides More Time for Supply Chain Functionality

BusinessStronger Benefits Across Entire

University:• Big Bang Approach Enhances

Reporting and Improves Efficiency of Operations Enterprise-wide

• Less Operational Complexity for UWM

Somewhat Higher Program Risk:*• Larger Scope• Paradigm Shift to Enterprise-wide

Decision-Making• Competing Priorities

ChangeManagement

Operational

Sequenced Big Bang

RECOMMENDED SCENARIO –BIG BANGA “Big Bang” deployment provides a stronger foundation for achieving business benefits because design decisions will be integrated across the enterprise

*Risks will be managed through mitigation strategies

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• Determine funding model

• Define approach for procuring partner services to support Readiness phase

• Seek Regent decision to contract with partners for Readiness Phase in January

• Seek WA State Office of the Chief Information Officer (OCIO) approval in January

• Start working on integration / implementation RFP –due September 2018

IMMEDIATE NEXT STEPS –Nov/Dec

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