[491] in magellan
Notes from 7/20/2000 ITLT meeting
daemon@ATHENA.MIT.EDU (Greg Anderson)
Mon Jul 24 12:09:52 2000
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Date: Mon, 24 Jul 2000 12:09:48 -0400
To: magellan@mit.edu
From: Greg Anderson <ganderso@MIT.EDU>
Good morning,
I'm sending this edition of ITLT notes for your particular
attention. At last Thurs. Magellan meeting we discussed Project Accounting
issues as a follow-up to the ITLT meeting.
There's a lot to discuss and carry forward in this message. We've
cancelled our next meeting on Aug. 3, but we should probably plan to talk
more at the Magellan meeting on Aug. 17.
Thanks,
Greg
-----------
Note: because of the importance of this meeting's major agenda item, the
notes are being sent out of sequence. This material will also be covered
by Directors in Team Leader meetings and other forums. There were several
decisions/agreements from today's meeting that are effective 'immediately'.
***ITLT notes and communications are intended for an internal MIT
audience only, and should not be forwarded beyond that intended
audience.****
IT staff are encouraged to provide any feedback, comments, concerns
about any topic by replying to this note, sending email to the ITLT mail
list, or talking to any Director. Suggestions regarding possible future
ITLT agenda topics are also welcome.
----------------
7/20/2000
Meeting Summary: Discussion of principles and proposed processes for IS
financial management, to be implemented for current fiscal year; short
roundtable.
Present: ITLT and IS Finance Team (ISFT); Theresa and Dani absent
-----------------
Jim Bruce led the discussion re: IS Finances or 'What are the Rules of the
Road
for Budgeting and Tracking our Expenses'.
The outcome of today's meeting was an agreement on a set of principles and
an approach to developing processes to enable ITLT, ISFT, and the TL's to
rebudget FY 2001 and to charge our expenses to the proper cost objects and
general ledger accounts.
Having these principles and process will enable us to better understand the
unit costs of doing IS work, permit IS to better manage its work, and
ensure that IS conforms to Institute and Federal cost accounting
requirements.
So, why does IS need Standing and Project Team Accounting?
Having better accounting would enable us to
- better plan and manage our work
- better manage resources to satisfy work requirements
- understand our costs, including allocating costs correctly (so we aren't
reworking numbers because things are in the wrong place)
- measure and assess the quality of our work (which will help us
communicate more effectively with our customers), and
- enable IS to better defend the allocation of our resources (when asked by
customers and/or senior management)
What is our accounting 'philosophy'?
We want to design our new processes for the lowest administrative overhead
that will allow us to meet our objectives. This includes defining a
'standard of reasonableness' in terms of the precision with which we
estimate budgets and track costs. This is not about getting every nickle
and dime in the right GL account. This is about getting sufficient detail
to inform decisions and communicate effectively within IS and with those
outside IS regarding the work of IS. The 'standard of reasonableness' will
be developed over time based on an interative review of current practices
and financial management objectives.
TL's and TM's will define, plan and budget for their work. The goal is to
increase team ownership and accountability. These plans and budgets will be
reviewed by Directors and/or ITLT via a process which first ties the work
to the IS Strategic Plan, its initiatives and priorities, and then
estimates the relevant costs, and identifies the funding.
ISFT will own the financial process - they will provide the process
guidelines and help ensure that IS stays on course. TL's, however, will be
responsible for meeting the team's work plan, for assuring costs are
appropriate and charged to the right account, and for following the
financial process in terms of timely reporting of relevant information.
We also need a consistent approach across IS in terms of the processes we
use, and the guidelines we use for decisions that have a budget impact,
including IS funded salary increases, equipment and SW purchases, travel
and training etc.
-----
'Disaggregation' -
One of the first questions to ask is how large or how important does an
activity need to be in order to require a separate account? This leads to
the question 'why do we want to separately track an account? Those reasons
include:
- MIT policy requires us to do so (e.g. for software project capitalization)
- the size of the $$ is such we want to do so
- we may want to highlight certain work (e.g., if we are doing something
on behalf of the Instititute - e.g., the Libraries, we may want to be able
to point this out to senior management)
- there may be 'political' reasons to do (e.g. if we are working jointly
with another department, we may want to track our costs because the other
group is tracking theirs)
- there may be personnel development reasons (e.g., a TL may value the
opportunity to 'manage a budget')
The following 'rules' were agreed to as the decision criteria for creating
a new account:
- if the project/team cost is estimated to be $100K/year
- if the activity is funded from outside IS
- if, in the judgment of ITLT, the activity needs to be tracked separately
What gets charged to these accounts? Essentially everything (people,
equipment, materials and services) that is associated with the team's work.
(Keeping in mind the philosophy of low adminstrative overhead, there may be
some fixed costs/per person costs that are allocated to accounts based upon
agreed to algorithms for cost distribution.)
The standing or project team leader will manage the account (working
closely with the assigned financial analyst (FBC)); i.e., the TL will be
responsible for seeing that the correct procedures are followed, charges
are appropriate for the cost object, the GL account is correct, the
necessary receipts are on file, etc.
In order to do project and standing team accounting, money has to follow
the work that IS has prioritized to be done. This requires a change in how
IS budgets staff (for those familiar with the 'whole person budgeting', we
will not be doing 'whole person budgeting' in the future)
When people are assigned to teams - either staffing of a new project, or a
person changing from one standing team to another - it is expected that
there will be discussion and documenation of the following:
- who is overseeing the work (e.g. the Team Leader)
- who will do the team member's performance appraisal (note: it is expected
that a 'performance appraisal' of some form be done at the end of a project
before the person moves on to another project)
- what will happen to the person at the end of the project (in general,
there will be new opportunities for people at the end of a project; while
we can't 'guarantee' a position at the end of the project, IS is committed
to working with each person to identify work that meets the person's
needs/interests as well as IS' needs/interests.)
For the Team Leader, this team initiation phase will also include a review
of the leadership roles, including issues re: developing a plan, estimating
costs, managing a budget to plan, as well as non-financial issues, such as
team building.
-----------
Revising/updating budgets:
Doing team accounting will require regular revisions of the budget. Care
must be taken to ensure that the changes do not impact the IS bottom line
budget. ISFT will ensure that adequate an 'audit trail' of debits and
credits is maintained.
ITLT has agreed that if a decision is made to do some new work, part of
that decision must be agreement on how the work will be funded. Such
funding decisions will then be reflected in formal changes in the budget.
NOTE: FBCs are not authorized to change a budget. They will implement the
changes agreed to by Directors/TLs
---------------
SLAs:
There are 2 distinctly different kinds of SLAs - those that are external to
IS (non-IS departments are charged for services) and those that are
internal (one IS department charges another IS dept for services).
The external SLAs are statement of the services to be delivered at what
price (i.e., rate). All rates should be documented in the budget process
along with a description of the methodology used to develop the rates.
Although in the past ITLT has not regularly reviewed SLA rates, the
expectation is that there will be regular reviews in the future.
The internal SLAs were used primarily as a 'simple' way to distribute IS
costs to various cost centers in IS, primarily to Practice cost centers.
The Practice Directors would use the information about SLA cost as part of
their communications with customers (i.e., 'this ACP service/cost includes
x% from Support, y% from Service etc)
It turns out that this mechanism for distributing costs is more complex
than it appears and has several undesireable consequences. It has been
agreed that a new mechanism will be developed; IS will no longer use the
term 'SLA' for internal cost distribution. The specifics of the new
mechanism have yet to be worked out - that will be primarily an ISFT
responsibility to develop.
However, there is another key part of an SLA that has not been done
internally, and needs to be done: namely the statement of services.
Therefore, associated with any internal-to-IS distribution of costs, there
needs to be a 'plan' that documents the statement of work; how it will be
measured including standards for the work; and the budget. This plan must
be approved by all of the relevant Directors (i.e. Support can't define
what they will charge to ACP unless ACP agrees those are appropriate
services delivered at an appropriate cost). The Director/TL that is
receiving the services can then hold the service provider accountable for
meeting the plan. In the event of changes during the year, the plan can be
discussed and renegotiated. As in the case of budget revisions, ISFT will
not be responsible for 'approving' a plan; rather, they will implement the
approved cost distribution.
--------------
Defined sources of money
IS receives funding from several different sources for defined purposes.
Our principles for deciding how our restricted monies can be used to fund
IS activities include:
- service center revenues should be spent on defined products of that
service center
- the sponsor/ITLT needs to buy-in to any redirection of funding
- any redirection needs to be documented (ISFT will be the repository of
the documentation, albeit not the authorizor of any reallocation)
Consistent with the overall principle of 'standard of reasonableness', the
intent is not to get every nickle and dime mapped to the absolutely right
funding source. There may be gray areas, or shared expenses, or other
justifiable reasons for some redirection of funding.
----------------
Special Funding
In some cases IS has received special 'one time' funding (e.g., Microsoft
$$ to fund Pismere; $$ from the Provost for the initial phase of wireless
etc)
It is our policy to use any special funding for the purpose for which it is
intended.
In the event that people are moved to do the work represented by the
special funding, we want to quickly evaluate how best to use the regular
budgeted $$ represented by the staff that has moved - i.e., backfill for
the people that moved (so the 'old' work continues to get done) or perhaps
reallocate the regular budget $$ to another IS project that needs more
funding.
------
As mentioned above, ITLT plans to communicate/discuss this financial
management topic with Team Leaders over the next few weeks. The above
agreements are effective 'immediately'. In several cases, the specific
mechanics have yet to be worked out. However, TL's can begin (or update)
the work on their 'plan' - define their work, how they will measure their
work, and what their costs will be.
============
Roundtable
Bill Fitzgerald provided an update on W92 - things seem to be in good shape.
ITLT talked about how to effectively use the upcoming *MG meetings
Vijay provided a short update on a recent Microsoft visit.
Dennis reported that the Portals discovery project is close to finalizing
their report re: what students want in a portal. At this point, the next
steps are not clear. ITLT will revisit this topic when the report is
complete.
Jim discussed the plans for next week ITLT offsite - July 27 and 28 - which
will focus on the IS Strategic Plan. Jim, Brian McDonald and Dani will be
finalizing the agenda.
