Transparent and Efficient Cost Structures

When the inhabitants of Baden-Württemberg affectionately refer to their “little state”, it conjures up images of a tranquil little part of southwest Germany. Yet in actual fact, Baden-Württemberg is capable of competing with the other large industrial and commercial regions in Europe. The development of human mobility has been more pronounced here than in any other region in the world. It was in Baden-Württemberg that “the wheel learnt how to turn” when Dr. Carl Benz patented the first automobile in 1886.
Modern administrative structures have long been a significant factor in the area. In order to ensure Baden-Württemberg’s leading position is sustained, the state began a comprehensive reform project for the state authorities and completed the first phase in November 2002.

New controlling instruments for streamlined and modern service administration

The state administration is looking to use the “new controlling instruments” to create an improved platform for decision-making processes in order to respond more efficiently to changing conditions. Taking as a starting point the liquidity-oriented principle of fiscal accounting, which is the traditional method of financial accounting in public administration, the efficiency of administrative processes is now being increased and greater competition among state authorities is improving the services offered to the population. SAP solutions for IT-supported funds management with decentralized budgeting, integrated cost and results accounting, a management information system and end-to-end controlling for the state authorities are all key elements of the project.

Greater cost-effectiveness in the administrative process

When the program began in December 1999, pilot projects at over 20 state authorities had already been successfully completed. The state government acknowledged this success, stating that the creation of business management control tools provides the basis for an administrative culture that is more strongly oriented toward cost-effectiveness than before.
The general contractor recommended SAP solutions as offering the best conditions for business management planning, control and monitoring of administrative procedures as the funds management and controlling system are interlinked. The industry solution SAP for Public Sector with funds management (IS-PS), Financial and Controlling (FI/CO) and Asset Accounting (AA) modules was introduced across the board. The state administration placed great value on the fact that, besides the central demands of the state, specific departmental wishes were also taken into account. This ambitious task was implemented by IT service provider and general contractor T-Systems, who won the Europe-wide invitation for tender. “The roll-out for around 1,000 individual authorities was the greatest challenge during the first phase,” says Manfred Essl, Program Manager for NSI at T-Systems, looking back.

Greater transparency across costs and performance

Since November 2002, the first cornerstones of the project have been laid. A key funds management system, cost center accounting and cost type accounting have all been implemented. The funds management system provides the IT platform for performing classic funds administration processes. The system also performs all the authorities’ payment processes automatically. Following this, the first phase of decentralized budgetary responsibility was set in motion by the state parliament. The various state authorities are increasing their decision-making powers, meaning responsibility for administration and finance is now combined. And a greater degree of individual responsibility for employees means efficiency should be considerably improved. A further benefit is that billing data collected by one department can be forwarded to the state finance directorate without any media changes. More than 5,000 users in around 1,000 authorities are currently managing the budget using the new system.

Mapping strategic goals in the future

The second phase of the project is currently underway and will see cost object controlling and other fully integrated controlling functions implemented. The cost and results accounting function based on the SAP R/3 components IS-PS and CO delivers the information required for cost-effective control of decentralized budgets. The entire range of services offered by the state administration is organized, described and rendered quantifiable in a state-wide product catalog. An authority’s expenditure can thus be compared directly with its performance, enabling decision-makers to see exactly where costs are incurred. This allows the work of different departments to be compared. “NSI is heralding a new era in the administrative culture,” states Essl. “It will soon become clear why the processing of an income tax assessment incurs more administrative costs in one tax office than in another.” The results will enable the authorities to analyze their cost and performance structure continuously and consequently set goals to optimize them in the future.

State-wide management information system

T-Systems is developing a cost object-based time and quantity recording system in order to account for human resources. The state is also planning a state-wide management information system, based on the SAP components for controlling and financial accounting and the SAP Business Information Warehouse (SAP BW). The information system will enable managers to control administrative processes from start to finish. As costs and performance are transparent, any deviations from agreed goals can be quickly identified and counteracted. The overall project will be completed in 2004.
The state administration is also examining the use of SAP software for e-procurement in a pilot proposal. The use of a Balanced Scorecard in selected business units in every department is currently being tested to help map out strategic goals and to make constant amendments to these goals. All in all, the “little state” has remained true to its motto, “we can do everything except speak proper German” and has adopted a truly forward-looking approach to IT.

Hannes Ziegler