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Shared Services Model

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    FY2011 House 2 Budget Recommendation:
    Issues in Brief
    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor

 

As the Commonwealth continues to face difficult economic times, it is imperative that our state agencies are given the tools and flexibility to operate within their budget constraints.  Section 5 of the Governor’s budget authorizes each Secretariat to consolidate their core administrative functions, achieving efficiencies and allowing more resources to be directed to programs.  This proposal does not alter existing reporting lines or decision making, and it also does not shift funding among line items or agencies. It does provide to each Secretary the discretion to decide which back office functions can become shared, and where the administrative capacity to provide these functions will be housed.

The shared services model eliminates redundant processes and systems allowing Secretariats to integrate duplicative activities within agencies, including processing payroll, human resources, accounts payable and procurement.  The shared services model allows agencies to focus resources on the direct services they provide to the public.

Centralization vs. Shared Services

Governor Patrick’s proposal differs from typical centralization plans by focusing more on service delivery, rather than the control and structure of the staff providing services.  The Governor’s proposal allows Secretariats to develop shared services programs that best meet their needs. There are several areas in which efficiencies are anticipated: payroll and human resources; financial management, including bill payment, purchasing and contract administration; and lease and facility management.  Traditionally, these functions have been managed by individual agencies at a district or regional office level. 

Success to Date in Shared Services

There are several important areas in which a shared services model supports initiatives that gain efficiencies and savings. 

• Shared Services Support the Executive Office of Health and Human Services: In January 2003, the Executive Office of Health and Human Services (HHS) began an unprecedented effort to improve services, coordinate policy development, and streamline administration of the agencies that make up the Secretariat. An important component of the reorganization was to consolidate administrative functions, including human resources, facilities/leasing management, financial management, transportation services, and information technology. With the support of the Administration and Legislature, HHS gained authority to provide shared services and has achieved significant savings by creating a more efficient and coordinated administrative infrastructure to support. Some of the initial savings and other fiscal benefits include: 
  • a 25% reduction in human resources staffing and $3.1 million in savings, while expanding services;
  • Closing of over 20 local offices and consolidating to otherwise underutilized space, saving $3.1 million;
  • 3% or $400,000 savings in Workers’ Compensation costs from fiscal year 2004, in addition to a $100,000 decrease (10%) in the HRD administrative cost chargeback, the first ever such reduction;
  • Conversion of six Secretariat Information Technology Operations Services Division consulting positions to full time equivalents (FTEs) yielding an annual savings of $300,000;
  • The negotiation by the IT group of a contract associated with a mainframe connectivity tool for all agencies that has reduced the cost of maintenance by 50% and
  • The development of a Revenue Management Team which has secured over $20 million in new revenues, while growing the overall revenue intake for EHS to over $8.8 billion annually.
• Shared Services Support the Massachusetts Department of Transportation: The newly formed Massachusetts Department of Transportation (DOT) is building upon fiscal, human resources and legal shared service programs implemented by the former Executive Office of Transportation and Public Works in 2004.  Similar to HHS, the DOT model allows division heads authority over policy and funding decisions while implementation of those decisions is managed by secretariat staff.  This creates additional opportunities and resources for line level and division managers to focus on core mission activities. 
• Shared Services Language Supports Consolidation of Information Technology Services: In January, 2009, the Patrick-Murray Administration signed Executive Order 510, mandating that by December 30, 2010, Information Technology (IT) services be substantially consolidated within each Secretariat. This reform was supported by the Legislature in the fiscal year 2010 budget, as new line items were created that consolidated all agency IT spending at the Secretariat level. As described in the budget brief highlighting progress on the IT Consolidation, nearly 60 working groups and more than 400 people have come together to implement this reform. During its first year of implementation, many important steps were taken to establish a culture that encourages agencies to consult with Secretariat Chief Information Officers (SCIO) on all IT-related funding decisions. However, authority to provide shared services within all Secretariats – in addition to HHS and DOT – is necessary to shift from a culture that encourages agencies to include SCIOs to a culture that mandates coordination at the Secretariat-level, as required by the executive order.

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Prepared by Katie Luddy, Executive Office for Administration and Finance ·
www.mass.gov/budget/governor
For more information contact: contactanf@massmail.state.ma.us (617) 727-2040

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