Monday, July 21, 2008

FLASHBACK: Accounts Receivable Operational Review Report

Today, one of our favorite topics here at VACostCutting, Accounts Receivable. Again, we look back and share with you again the report presented by the Accounts Receivable Operational Review Team.

Accounts Receivable Operational Review

The final Operational Review Team report on Accounts Receivable has been completed. The Operational Review Oversight Committee has yet to accept the report or make revisions, but the preliminary goals and recommendations are summarized below.

Accounts receivables are taxes due to the Commonwealth that have not yet been collected. Collecting these taxes can result in mllions on dollars in additional revenue. In 2003, 98.3 million was collected as a result of renewed efforts by the Department of Taxation.This report is an update to the Governor’s Commission on Efficiency and Effectiveness Final Report published in late 2002.

That report made the following recommendations:

  • Standardize collections management across all Commonwealth agencies;
  • Shorten the time period for declaring accounts delinquent;
  • Use multiple collection agencies to foster competition; and
  • Consider legislation enabling the use of “debt sales” to provide cash.

The first three recommendations have already been implemented and are resulting in improved state revenue flow. Accounting policies and procedures were revised, and the deliquency designation was shortened from 90 to 60 days. Private collection agencies were also contracted to strengthen collection efforts. The fourth recommendation of the Governor's 2002 report will be harder to implement. There are significant constitutional and legislative barriers to debt sales. Before this can be accomplished, the General Assembly and Office of the Attorney General must address the legal issues.

There is still work to be done as Virginia adapts to new technologies and economic uncertainty. The report notes that Virginia needs to maximize collections from accounts receivable in order to offset declining cash flows from several revenue streams that are showing the effects of falling markets. The most effective way to do this is to use the new technologies to speed up collections and simultaneously reduce collection costs.

The Operational Review team has identified six areas where small investments could yield large returns in maximizing collections:

  • Enhance agencies’ abilities to skip trace. Several agencies, notably the Department of Social Services, now access current address and other contact information from new data sources including cell phone records, cable user records and insurance company records. These new information sources should be identified and made available to all agencies and institutions, including local governments.
  • Revise setoff procedures to stop uncompleted matches. Currently, debtors are informed of their rights of due process at the time a payment or refund is intercepted. This after-the-fact approach has cost approximately a million dollars a year in lost setoff payments. The current methodology should be changed. Debtors should be notified what the debt is and what their rights are as soon as claims are submitted to the setoff programs. The responsibility for exercising the identified rights should be placed on the debtor, not the State agencies. This way, successful matches will be final and available for timely deposit.
  • Establish one master database of debtors’ contact information. Information from TAX, Virginia Employment Commission, State Corporation Commission, Motor Vehicles and several other license-granting agencies should be selectively combined in one secure database that other agencies and institutions would have read-only access to. Combine repositories into one new “debtors’ database.
  • Do not issue business or personal licenses to delinquent debtors. Match state and local government permits, licenses (both business and personal), and registrations against setoff records. This would be facilitated by using a central database. Debtors would be encouraged to pay the entire amount or follow signed payment plans in order to retain current permits and licenses or apply for new ones.
  • Leverage the economies of scale and specialization for smaller agencies. Small and medium sized state agencies have a disadvantage when it comes to collecting accounts receivable. They lack the capacity to dedicate full time positions to the business of collecting money from slow or non payers. This disadvantage can be overcome by outsourcing delinquent accounts to a vendor that would receive all of the debt files from the agencies, distribute the files to the private collection agencies under State contract, and monitor the ongoing efficiency of those private collection agencies. Good experience has resulted from the operation of a centralized payroll services bureau which has covered the cost of its operation through users’ fees. This model can be used to build a receivables management bureau from resources created through service arrangements made between smaller agencies and larger agencies to provide administrative and business functions.
  • Measure agencies’ efficiency and effectiveness at collecting receivables. Measure individual state agency performance in collecting the dollars they have billed. The agencies’ performances should be disclosed and reported quarterly. One measure is Collections as a percentage of Billings. This measure shows the effectiveness of agencies in getting paid for providing services when the service is provided. The second measure is the percentage of Delinquent (over 60 days past-due) Receivables compared to Gross Receivables. This measures the efficiency of agencies in following up on unpaid billings and obtaining subsequent payments. These two measures would reflect the agencies’ efficiency and effectiveness at managing their accounts receivable and help ensure the Virginia Debt Collection Act is being followed.

Thanks again to everyone who contributed their time and work to this report. Participants include Robert Meinhard Department of Accounts, Deborah Madison Department of Corrections, Karen Stephenson Department of Medical Assistance Services, Jerry Lewis Department of Social Services, Thodore Darden Department of Social Services, David Jordan Department of Taxation, and Wendell Vest Virginia Polytechnic Institute and State University.

Friday, July 18, 2008

FLASHBACK: Printer, Copier, and Paper Operational Review

While yesterday we looked at the Commonwealth's Mail programs, today we look back at the findings of the Printer, Copier and Paper Operational Review team.

Printer, Copier, and Paper Operational Review

The final Operational Review Team report on Printer, Copier and Paper has been completed. The Operational Review Oversight Committee has yet to accept the report or make revisions, but the preliminary goals and recommendations are summarized below.

We all recognize that printers, copiers and paper are essential to government operations. At first glance, they might not sound like a major expense, but when you consider the number of printers and copiers purchased and maintained by the state and the amount of paper those devices consume, the cost adds up. Virginia departments and agencies currently have a printer inventory of 34,221 and thousands more copiers. In FY06 the state spent $7,499,837 on paper, stationery and forms (carbon paper, employment application forms, ledger sheets, letter sheets, mailing envelopes, other informational and record forms, other paper, and similar stationery items).

In addition to the printer, copier, and paper expenditures, the state spent $37,702,417 on printing services that include designing, printing, collating, and binding.

The Printer, Copier, and Paper Operational Review Team was formed to accomplish these goals:


  • Goal 1: Research and document the current environment as related to statewide printer and copier inventory, regulation, cost, and utilization within the state.
  • Goal 2: Research and document the current environment as related to paper standards, regulation, and cost within the state.
  • Goal 3: Research and document the current environment as related to print services and print management (outsourcing printers, copiers, fax machines, paper, and consumables) within the state.
  • Goal 4: Research and document best practices as related to printer, copier and paper procurement, utilization, and consumption within the state--best practices that can be leveraged across the enterprise to bring about operational efficiencies and effectiveness, bargaining power, and cost savings.
  • Goal 5: Document findings and make recommendations for achieving operational efficiencies and effectiveness and cost savings as related to printer, copier and paper procurement, utilization, and consumption within the state.

After completing the review, the team offered the following recommendations:


  • Recommendation 1: Promote a printer, copier, and paper savings awareness campaign—promoting print efficiencies, cost-savings, and best practices.

  • promote print best practices,
  • promote paper recycling and paper standards,
  • educate the agencies and departments about print management,
  • encourage agencies and departments to document their current print environment and to envision their future print environment,
  • encourage agencies to develop and implement a plan for realizing their future print environment,
  • reduce agency and state cost of print and,
  • place the right printer and copier (or multifunction machine) at the right place, at the right time, and for the right purpose.

  • Recommendation 2: Implement print management best practices

  • Replace standalone copiers, faxes, and printers with multifunctional products
  • Rent copiers, printers, and multifunctional products (instead of purchase)
  • Centralize the procurement of copiers, faxes, printers, and multifunctional machines
  • Establish print manager roles (print output czar) in each agency
  • Develop policy aimed at reducing paper consumption and printer/copier consumables
  • Implement document management systems (electronic records) for reducing paper consumption and printer/copier consumables

  • Recommendation 3: Move toward phasing out fax machines. Personal computers and multifunction machines now have the capability to fax documents. Significant cost reduction could be realized by eliminating fax machines and performing these functions on personal computers or multifunction machines.

  • Recommendation 4: Move toward or transition to the implementation of managed print services--as appropriate for meeting agency and department mission and goals. Managed print services (MPS) are services offered by an external provider to optimize or manage an organization’s document output. A MPS contract can include assessment services, asset management, output management services, and support services. The external service provider either owns or leases the hardware, with the customer paying a monthly or quarterly fee—based on a cost per page or cost per seat. Gartner suggests that candidates for MPS are midsize or large organizations with 100 or more employees. Agencies and departments should document their print needs and determine if the use of managed print services would reduce their print cost.

  • Recommendation 5: Encourage agencies use of high-volume print shops for large print jobs. Virginia Correctional Enterprises (VCE), a printing service within the state, continues to demonstrate its ability to produce quality and timely print for state agencies and departments—at a cost savings. In addition, state procurement regulation mandates that goods and services produced or manufactured by state correctional facilities be purchased by all departments, institutions, and agencies of the Commonwealth (there are some waivers to this regulation).

Thanks again to everyone who contributed their time and work to this report. Participants included Senator Fred Quayle, Delegate Dave Nutter, Gwen Baily Assistant Clerk of the Senate, Linda Belflower of the Virginia Employment Commission, Paula Dehetre of the Office of Workforce Development, Fred Duball of VITA, David Nims of the Department of General Services, Tiffany Moklebust of Gartner Group, Stephanie Holt of Xerox, and Jim Dougherty and Tony Williams of Virginia Correctional Enterprises.

Efforts like this will ensure Virginia remains the best managed state in the nation.

Thursday, July 17, 2008

FLASHBACK: Mail Operational Review Report

Back to our Operational Review Reports today with the report from the Mail Team.

The Operational Review team examining mail has finished its review. Mail operations certainly drive costs in state government to a tune almost $300 million on mail related services in the last five fiscal years. Inefficient mail operations can result in excess spending on postage and equipment. The Review team examined best practices which could be implemented, consolidation and standardization of mail operations, and mail security.

Operational/Cost Efficiency

Current Situation

State Mail Services (SMS) that has positioned itself to start the consolidation of mail operations. SMS is currently providing metering services for over 25 state agencies’ outgoing mail. Since the hiring of the State Mail Manager in August, 2006, SMS has continued to show progress with this initiative.

Increased Postal Services: SMS has begun providing postal services to all agency customers that may not have been available before the consolidation effort. Some of these services include:

  • metering of outgoing mail,
  • pick-up of mail from Post Office Boxes,
  • reducing the number of USPS permits agencies have to purchase,
  • electronic USPS special services,
  • training regarding postal operations,
  • and consultation with agencies about mail issues including envelope or mail piece design.

Presort: Streamlining mail operations for smaller state agencies will help the Commonwealth take advantage of the various discount programs offered by the USPS to large mail operations. SMS currently works with a vendor to combine mail volumes from smaller state agencies to allow them to receive discounted postage rates for presorting. Agencies are now processing their mail at $0.41 per piece. Under the SMS presort program, presorted mail can be processed by the USPS at $0.36 or less.

Policy and Procedures: Much headway has been made toward standardization of procedures for processing mail at the Seat of Government. The SMS Mail Services Guide outlines uniform methods for preparing mail at all agencies for which SMS services are provided and is a standard for other state agencies


The following recommendations are offered about Operational/Cost Efficiencies:

  • Develop a mechanism to charge for special services. This would allow for the development of special services and accurate cost sharing for these services. With SMS positioning itself to become a full service mail center, a formula must be in place to recover costs for SMS while at the same time saving agencies that utilize the services money.
  • Increase presort usage by either obtaining a presort machine and performing this function in-house or by careful oversight of a private vendor.
  • Consider print-to-post technology.
  • Conduct a current survey of carrier services used by agencies. This may identify opportunities for consolidating services or offering a statewide contract.
  • Obtain a better picture of the mail operations of agencies that are not currently utilizing SMS services.
  • Look into their reasons for not doing so and address these issues.
  • Consolidate USPS permits across agencies to decrease fees and increase postage savings.
  • Expand the use of barcodes to increase efficiency in cost accounting of outgoing mail.
  • Eliminate costly postage meters and other duplicate equipment used by agencies.
  • Physically position the SMS operations closer to the Seat of Government.
  • Require agencies to consult with SMS before printing mail pieces or envelopes to ensure the piece is properly designed for USPS standards and efficient processing.
  • Standardize envelope size, type, and font to obtain maximum postage discounts and efficiencies.
  • Reduce the number of P.O. boxes held by state agencies.
  • Standardize the design of inter-agency envelopes to prompt users to fill in all necessary information
  • Increase mail runs to encourage more agencies to utilize the services
  • Expand the SMS inter-agency routes to increase the network that agencies can send mail for free.
  • Further develop best practices and rollout to agencies.
  • Continue to consolidate mail operations from smaller agencies.
  • Utilize the state contract for presorting abnormal size mail that offers a substantial cost savings over regular USPS rates.
  • Increase reliability of SMS mail with scanner equipment to track routes and packages.
  • Reduce unwanted mail like promotional mail pieces that costs agencies time to process and handle.
  • Educate and take a statewide approach to address cleansing of mailing address lists by looking at software solutions that could be utilized by all agencies.
  • Create a centralized drop box(es) for SMS to pick-up mail for agencies that occasionally need a late drop.
  • Explore opportunities with colleges and agencies outside of Richmond.

Performance Measures

Any state agency that meters outgoing mail should be required to gather and report data on that operation. The data should be sent monthly to SMS to compile a consolidated report. This data should be broken down into two sections: data from Richmond area offices and data from field offices outside of Richmond. The items listed below need to be a part of any performance measure related to SMS:

  • The number of postage meters owned or rented.
  • The number of P.O. boxes rented.
  • The monthly piece count for incoming mail.
  • The monthly piece count for outgoing mail.
  • The monthly count of letters that are presorted.
  • The amount spent on postage for outgoing mail.
  • The number of reportable mail incidents each month as defined by SMS.

A more detailed survey about agency postal operations could be conducted every couple of years to gather additional data.

Mail Security

The second study by Federal Engineering (June 2005), Commonwealth of Virginia Mail Services Initiative, found that the Commonwealth does not have an overall security master plan in place that addresses the current and future security requirements necessary for being considered as an integrated approach to mail security.The Federal Engineering study offered that an effective mail security program must have many objectives, including:

  • Protecting employees and building occupants;
  • Minimizing the likelihood of workers compensation claims and litigation resulting from providing an unsafe work environment;
  • Avoiding unwarranted, costly, and disruptive business efforts and evacuations;
  • Preventing the shutdown of facilities related to threats resulting in building damage or contamination;
  • Developing and implementing effective security best practices;
  • Maintaining a quality oriented employee security awareness training curriculum;
  • Providing training to employees on the use of security equipment;
  • Having effective and tested occupant emergency plans, communications plans and continuity of operations plans; and
  • Establishing facility and systems security standards, specifications and guidelines.

Current Mail Security Practices

Currently, a limited number of large state agencies and institutions practice some form of mail security and have procedures in place to provide such security. It is believed that these measures vary widely and only a few agencies have adequate procedures in place to alert mail personnel to a potential problem with incoming mail. The large majority of other agencies have no such procedures or training in place. For the most part, these agencies rely on the USPS mail screening.

The 2006 Virginia Acts of Assembly charged the Department of General Services’ State Mail Services (SMS) with the task of enhancing and implementing a more uniform mail security program within state government. As a result, SMS has made mail security a top priority. SMS has created the Commonwealth Mail Security Guide as a uniform resource to assist state agencies and their employees in keeping the mail stream safe and secure.

The Commonwealth Mail Security Guide provides best practice guidance for the following issues:

  • Recognizing suspicious mail and knowing how to handle it, including prevention of exposure, development of administrative controls, use of protective equipment, and engineering controls;
  • Developing a strong mail center security plan, supplemented with regular training exercises, rehearsals, and reviews helps instill a culture that emphasizes the importance of security;
  • Conducting a threat assessment that identifies: the assets and missions that must be protected; potential threats; vulnerability of agency assets and missions; impact or consequences if that asset was lost, damaged, destroyed or otherwise prevents the agency from performing its mission; and the risk level for each asset or mission;
  • Developing comprehensive incoming mail procedures to include: limiting access to individuals who deliver mail to the mail center; making personal protection equipment available to employees; requiring employees to wear photo identification; instructing employees to challenge any unknown person in the facility; considering beneficial equipment such as X-ray machines which can enhance security; inspecting mail for suspicious characteristics; giving extra care to letters and packages to senior officials whose names or positions give them higher public visibility; and establishing procedures for handling unexplained or suspicious packages;
  • Developing a loss prevention plan that prevents the theft of supplies, postage, mail and valuable information contained in sensitive mail;
  • Developing physical security in a mail center focused on the location and design of the mail center to mitigate threats;
  • Testing and training mail center employees in order to develop a culture of security awareness to enable them to handle threats and reduce the risk of an incident.

The following recommendations are offered about Mail Security:

  • The Commonwealth Mail Security Guide should be distributed to all agency heads and their mail center managers. Agency management should include mail security as a top priority to demonstrate to all employees that management is committed to their safety.
  • This Guide should be distributed by the Office of Commonwealth Preparedness and posted to their website.
  • Upon completion of a mail security risk assessment all agency and institution mail centers should develop a comprehensive mail screening and training program for their mail center personnel based on the Guide. Such training should be made mandatory for mail center personnel. The Department of Human Resource Management (DHRM) maintains an internet-based Learning Management System (LMS) with a number of educational and training programs for Commonwealth employees. SMS should work in concert with DHRM to make use of this training system by developing a mail security program as one of the modules of the LMS for training staff throughout the Commonwealth
  • Based on the risk assessment and development of a mail security plan, agencies and institutions should request sufficient funds in their budget to bring their mail operations up to a level deemed appropriate to mitigate identified risks. Agencies should consult SMS before purchasing equipment to make sure it is appropriate and opportunities for collaboration are not overlooked. SMS should geographically distribute available X-ray equipment to major mail centers. This equipment should be available to multiple agencies to reduce duplication.
  • SMS should work toward centralizing all incoming mail in the Richmond area in a remote facility for agencies and institutions that do not have the means to secure incoming mail at the level deemed appropriate to mitigate risk.
  • In addition to notifying the proper authorities (i.e. Virginia State Police) in regard to any mail incident or threat, agency and institutions should be required to track and report such security issues and incidents to SMS on the form provided in the Guide.
  • Agency and institution mail security plans should be incorporated in their COOP plans.
  • The Mail Security Guide encourages individual agencies to perform threat assessments. The Commonwealth should conduct a centralized/coordinated assessment across all mail operations.

Communication and Education

The complete report also addresses the need to educate agencies on consolidation, presorting, and security.

Mail Reduction

At one time, the Department of Taxation mailed an individual income tax booklet to every eligible taxpayer in Virginia so that they would have the applicable forms and instructions necessary to complete and file their income tax return (approximately three million). Over the years, as taxpayers and tax practitioners began using software to prepare and file the tax returns, the department decided to cease sending tax booklets to taxpayers that had filed a return electronically or had sent in a paper tax return that was printed from computer-generated software. The idea being that they did not need paper returns and instructions because these taxpayers used a computer and had access to all the information online. This shift dramatically lowered printing and mailing costs for the Department of Taxation and today less than 500,000 tax booklets are mailed.

There are potentially many areas where mail can be reduced, saving on postage as well as printing and paper.

Thanks to everyone who made this Operational Review possible.

Co-Team Leader: Senator Ryan McDougle
Co-Team Leader: Delegate Mark Sickles
Coordinator: Bobby Myers, Department of General Services
Gerald Henson, Department of General Services
Patti Higgins, Department of Taxation
Adam Jackson, Department of General Services
David McGreevy, Department of General Services
Harold Moore, Department of the Treasury
Jennifer Parker, Senate of Virginia
Thomas Rozman, Department of Labor & Industry
Robert Young, Department of the Treasury

Tuesday, July 08, 2008

FLASHBACK: Virginia's Experience with Operational Reviews

To mix it up a bit today, we wanted to repost this article, presented by Delegate Saxman and Bill Leighty, former chief of staff to Governors Warner and Kaine, to the American Legislative Exchange Council. It is a good background as to why the Operational Reviews were initiated and an additional insight about the process by which these reviews were carried out.

Virginia's Experience with Operational Reviews
By Delegate Chris Saxman, Chairman Cost Cutting Caucus and Bill Leighty, former chief of staff to Governors Warner and Kaine

Presented to the American Legislative Exchange Council

December 8, 2007

In 2005, Governing Magazine recognized Virginia as the Best Managed State in America. The Government Performance Project report stated, “There is little that Virginia does not do well in government management. That’s been true for a while. But it (Virginia) keeps looking for improvements, and very often finds them.”

Being rated by a national magazine, widely circulated in government circles, is wonderful. But as any citizen knows, the cost of government continues to grow, often at a rate that defies explanation. The taxpayers want an efficient and effective government that works toward reducing the cost of services. The taxpayers also want to know that the funds being entrusted by them are spent wisely, and only on necessities. Governments, whether they are federal, state or local, have an obligation to account for their expenditures of public funds and an obligation to constantly reexamine their expenditures. However, the public debate is often about programs that bring with them constituency groups and advocates that cause the political debate about cutting budgets to border on vitriol. Virginia decided on a course of action that looked differently at the “cost of government.”

Inspired by the efforts of the Virginia General Assembly Cost Cutting Caucus, chaired by Delegate Chris Saxman, and by the Executive Branch efforts toward formalizing and implementing performance management throughout the Commonwealth, Governor Timothy M. Kaine, then Chief-of-Staff William H. Leighty, Delegate Christopher B. Saxman and Senator Walter A. Stosch began an initiative in February of 2007 to conduct a series of Virginia state government "Operational Reviews." This effort was bi-partisan and jointly conducted by both the executive branch and both bodies of the legislative branch.

The concept was seemingly simple and similar to what taxpayer would consider when looking at their own household budgets. In other words, the same basic commodities that taxpayers would be concerned about in their own budgets were reviewed; the phone bill, electricity bill, water bill, trash bill, etc. The goal was to examine potential realized cost savings and increase employee productivity in a manner that would be readily understood by the taxpayer.

Initially the following areas were selected for review:
· Energy
· Water
· Fleet (automobiles)
· Travel
· Communications (voice and data; phones and cell phones)
· Print (copiers, printers and faxes)
· Mail (including premium overnight deliveries)
· Solid waste (paper recycling and materials)

Each review team was co-chaired by members from the legislative branch. The use of legislative chairs to review executive branch operations deserves some comment. The choice was a natural one, but not without controversy within the executive branch. Having legislators delve so deeply into such “operational issues” did not seem to come naturally to bureaucrats. But designating legislative co-chairs, it was argued, would be vitally important to get “buy in” for the reforms that would potentially follow. The executive branch felt that once fully exposed to the processes and procedures used to control costs in the executive branch, legislators would see that the executive was indeed doing a good job controlling costs. The only downside risk to the executive branch was that the teams might actually come up with ideas that would save taxpayer money. So, either way, the strategy was a “win-win.”

The Cost Cutting Caucus and the Senate leadership both readily agreed to take the lead and designate co-chairs for each review team. The co-chairs were balanced between the Senate and the House and between the parties, with a majority being Republicans because they were the majority party in both bodies. (It should be noted that Governor Tim Kaine is a Democrat)

For staffing of the review teams another innovative approach was used. Instead of asking senior agency personnel to staff the teams, a call for volunteers was put out to state employees from all branches of government. All branches of state government, legislative, executive and independent agency staff participated. The call for volunteers was targeted to the graduates of the state executive leadership training programs, both at the executive leadership level and the middle management level. The Governor’s chief of staff formally requested that all agency heads support the process by allowing volunteers release time to participate. By targeting the graduates of the Commonwealth’s leadership education programs it was felt staff with a demonstrated desire to better themselves, and that had proven they were amenable to innovation, would be recruited to staff the studies. An added bonus to this strategy was that state employees that were generally in the beginning of their careers and had not had previous experience working directly with legislators volunteered to help staff the studies. This allowed state employees unaccustomed to dealing with the legislative branch to build longer term relationships that would benefit them over their careers, and benefit the Commonwealth generally by building legislative-executive branch relationships.

The process was equally simple:
1. The teams, including the legislative co-chairs, were briefed on the total expenditures for each operational area (pulled from the state’s accounting system).
2. The teams received guidance from legislative co-chairs.
3. The teams researched the topic, obtaining necessary expertise from outside resources where necessary (Wal-Mart, for example lent a national executive to the Energy review team).
4. The teams drafted an initial report for presentation to the legislative co-chairs.
5. The legislative co-chairs reviewed/commented/approved the reports.
6. The report was sent to an Operational Review Oversight Committee for further consideration and action

Decisions to accept, revise or reject any recommendation presented in an Operational Review final report belonged to the Operational Review Oversight Committee. This committee is comprised of Delegate Christopher B. Saxman (chair), Senator Emmett W. Hanger, Jr., and Secretary of Finance Jody M. Wagner. In all cases, the committee based its decisions on the expertise and data provided in the reports in combination with expertise and data from other sources (including stakeholders) relevant to the issue(s). Their goal was to test, tune and advance the very best recommendations in an effort to improve Virginia state government performance in the most cost-effective way possible. Specific decisions to advance a recommendation were always subject to all applicable laws, policies and processes. (I.e. the procurement process)

Currently all the reports are posted online at for public comment and have been forwarded to the Governor’s office for review and implementation. Governor Kaine is currently formulating his budget and will present the 2008-2010 budget on December 17th, 2007. Should the Governor not implement the recommendations, the reports are also in the hands of the citizens and the General Assembly and available for action.

Monday, July 07, 2008

FLASHBACK: State Travel Operational Review Report

We hope that everyone had a wonderful 4th of July holiday weekend!

Following up on last week's Operational Review Report Flashback on the Commonwealth's Vehicle Fleet, today we wanted to re-post the report from the State Travel Operational Review Team.

The Travel Operational Review Team was developed to examine Virginia government travel practices and develop recommendations for improved efficiency and ways to reduce costs.

Between July 2002 and December 2006, Virginia spent over $935 million of travel and related expenses. Almost one billion dollars was spent on travel over that time period. Of that, Virginia’s colleges and universities led the way by spending more than $368 million.

The Operational Review Team found numerous areas where money can be saved. A 10 percent decrease in travel related spending could have saved more than 90 million dollars over that time period.

Top Ten Agencies for Travel Expenditures

  • Colleges and Universities $368,106,226
  • Department of Medical Assistance Services $263,754,940
  • Circuit Courts $16,592,673
  • Department of State Police $12,109,815
  • Department of Rehabilitative Services $11,283,478
  • Department of Social Services $11,116,890
  • State Corporation Commission $8,803,189
  • Department of Juvenile Justice $8,552,148
  • Department of Agriculture and Consumer Services $6,744,487
  • Department of Motor Vehicles $6,220,199

General Cost Drivers

  • Increases in allowed meals, lodging, per diem, and mileage reimbursements for employees driving personal vehicles.
  • Training requirements and certifications
  • Agency missions—visiting restaurants or nursing homes to name two examples
  • Lack of centralized management practices for travel.

Best Practice Recommendations

  • Statewide consistency in travel management and limits on travel spending
  • No receipts required beyond hotel receipts; designed to save time and dollars in the handling of paperwork
  • Enterprise contract. Reduces number of vehicle fleet and associated maintenance costs.
  • Require vehicle transportation calculations. Prior to each trip, determine whether paying mileage reimbursement for personal vehicle of renting vehicle is more cost effective.

Private Sector Travel Practices

  • Use a travel management agency to arrange all travel
  • Employees follow guidelines for meals, lodging, etc.
  • Negotiate rates with rental car companies, airlines, and hotels

Overall Recommendations from the Report

  • Automated the Travel Reimbursement Process. Currently, the travel reimbursement process is a manual one. The traveler may key travel information into the voucher but it must be printed, signed by the traveler and supervisor and a hard copy must be forwarded to the accounting department for processing. Automating the travel process would allow a person to make reservations, book tickets on common carriers, arrange for vehicle transportation on-line and when the process was completed, key the data into the travel voucher which would be approved and processed on- line, thereby eliminating paperwork and accounting entries.
  • Include travel on the Governor’s Score Card. The Governor has developed a scorecard where certain aspects of government are tracked. The committee suggests that statewide travel compliance be included in this process as its own line item and not as part of other expenditures reported to create more public awareness and agency sensitivity to these expenditures.
  • Re-evaluate travel spending after implementation of the new statewide accounting system. One of the limiting factors for the committee was the inability to obtain drill downs into the various expenditures. The current accounting system, CARS (Commonwealth Accounting and Reimbursement System) does not permit drill downs. There is a new system scheduled for implementation in 2010. The Committee suggests that after this implementation, a further review of travel costs with the enhanced ability to drill down through the data to analyze who, when, where, and why travel dollars are spent.
  • Expand the use of Computer Based Training modules for training state employees. Training is presently obtained by agencies, colleges and universities in many ways from multiple resources. Designing and developing a statewide contract with a computer based training company or companies to train employees would allow agencies to save money and time by allowing employees to train at their desks or at home, rather than traveling to another location. The committee also suggests exploring the use of more teleconferencing facilities versus physical travel to training destinations.
  • Increase the use of Teleconferencing for training. VDOT has used teleconferencing to train for several years and this innovation saved thousands of dollars in training travel. While VITA has not worked on the integration of teleconferencing equipment for all agencies to a universal one, the committee suggests that this project be given a higher priority so agencies could save more dollars teleconferencing training and other business processes.
  • Establish stricter limitations on conference travel. One of the largest uses of state travel money is for training and conference travel as a whole. These costs represented some of the largest travel expenditures by line item. They totaled twenty-three percent or $221,484,167.34 of the $935,287,354.89 of the dollars spent in all of the travel categories for the period reviewed. Does an agency really need to send five people to a conference? The problem is that it is difficult to quantify “necessary”. Currently, there is a policy and procedure limiting the number of conferences or the number of people who may attend conferences. Conferences do not necessarily include training, as they are frequently more of a networking opportunity. Stricter limitations and greater scrutiny on the frequency and number of persons attending conferences would save travel dollars.
  • Implement a mandatory statewide travel contract. There are some agencies, colleges and universities that have implemented a travel contract with one firm making travel arrangements. Some institutions also have contracts with more than one firm, which further dilutes the bargaining strength of the Commonwealth. The majority of agencies have no travel contract but negotiate every trip individually. It would reduce costs for lodging and transportation if the state would use its statewide negotiating power to obtain one contract with a firm to manage all travel. This would also create a centralized financial reporting system that would facilitate better financial management of these costs.
  • Market DGS’ Enterprise Car Rental program to all agencies. There are several features in the contract that were not listed in the travel policy. One of these features is the delivery clause in the contract. A traveler may arrange to travel in a state car and the company will deliver the state car to the site. Marketing the contract’s special features would enhance its use by other agencies and reduce the cost of travel by car.
  • Revisit the Enterprise contract in 18-24 months to determine its cost effectiveness. The Enterprise contract had only been in use for a few months when the committee reviewed the process. There has not been sufficient time to determine the cost effectiveness of the contract and consequently, it should be reviewed in 18-24 months.
  • Codify allowed training travel in the appropriations act or implement an executive order to limit this type of travel and require a 10% decrease in spending across all agencies.

Thank you to the Travel Operational Review Team for their work and the above findings. Team members include Delegate Scott Ligamfelter, Senator Brandon Bell, June Kimbriel of the Department of Corrections (Team Coordinator), Debbie Madison of the Department of Corrections, Charlotte Mary of the Senate Clerk’s Office, Seward McGhee of the Department of Correctional Education, Ray Pethtel of the Virginia Tech Transportation Institute, Liza Robison of the Department of General Services, Wendell Vest of Virginia Tech, John Wszelaki of the Department of Alcoholic Beverage Control.

Friday, July 04, 2008

FLASHBACK: Fleet Operational Review Report

First, we'd like to wish everyone a very happy and safe 4th of July! We hope you have the chance to celebrate our nation's birthday with friends and family. We would also like to send a very special thank you to the brave men and women in uniform who have, throughout our nation's history, sacrificed, and continue to sacrifice, so selflessly to defend our nation, our freedoms and the freedom of people around the world.

For us here at VACostCutting, as we celebrate the founding of our country, we recognize the importance of always striving to improve the way government operates. And with many folks on the roads this holiday weekend, we thought we'd flash back to the report from the Fleet Operational Review Team. Enjoy!

Vehicle Fleet Operational Review

The Operational Review Team report on the state vehicle fleet is complete. Virginia’s vehicle fleet includes approximately 26,000 vehicles either registered with the DMV or used for tasks not requiring DMV registration. DMV registered vehicles include vans, sedans, SUVs, pick-ups, trailers, dump trucks, tractor trailers, buses. Non-registered vehicles include specialized forestry equipment, specialized farming equipment, bulldozers, backhoes, motor graders, generators, specialized dump trucks.

This reports offers status and recommendations in the following areas:

Consider Potential for Operational and Cost Efficiencies

  • Vehicle and equipment acquisition policies and procedures
  • Fleet and equipment maintenance policies and procedures
  • Fueling processes and the Commonwealth’s fueling infrastructure
  • Vehicle and equipment operator training and monitoring

Vehicle and Equipment Acquisition Policies and Processes

  • Justification Individual agencies currently evaluate their own needs. During the review process, it was revealed that there are no consistent policies or procedures regarding vehicle mission justifications, or guidelines that specify the types of vehicles that are acceptable for certain missions. Currently individual agencies evaluate their vehicle needs. Once the agency identifies its registered vehicle requirement, the agency acquires the vehicle in accordance with applicable procurement laws and regulations. Specifically, for registered vehicles, an oversight process is currently in place. The process requires that the agency head submit to the Department of General Services, Office of Fleet Management Services (OFMS) a request to approve a registered vehicle purchase.
  • Purchase and Inventory Management After review, if the request is approved, the Department of General Services either returns the approval to purchase the vehicle to the requesting agency or adds the vehicle to its list of vehicles for purchase. The DGS, Division of Purchases and Supply (DPS), whose mission is to set procurement policy and procedures for non-technology and non-professional services and establish state-wide contracts consolidating agency requirements to achieve volume discounts, maintains a variety of vehicle contracts ranging from compact cars to school buses. DPS vehicle contracts are mandatory for use by state agencies. Each contract is written for a specific type of vehicle e.g. compact vehicles. They are allowed buy from a supplier or to factory order the vehicles. This process works well for a number of reasons. The contract price is in reality driven by the amount of concessions the manufacturer offers the dealer who wins a contract. These concessions often exceed over $5,000.00 per vehicle purchased. Virginia obtains some of the best vehicle prices in the nation.

Fleet and Equipment Maintenance Polices and Processes

Maintenance and operation of registered vehicles encompasses many functions. The two primary operators of cost in this category are the scheduled and unscheduled maintenance or repair of vehicles, and the fueling activities performed by the agencies. Maintenance practices across agencies are not uniform but a mixture of maintenance providers, state owned shops, and commercial shops are utilized.

  • DGS, Virginia Tech, University of Virginia and VDOT are the only agencies known to have a fleet management system. Some other own maintenance shops to perform repairs but do not have a fleet management system
  • Key emergency, first responder agencies own and operate their own shops to ensure that they have full operational capability during the annual series of emergencies related primarily to snow, flooding, hurricanes and other types of emergencies.
  • VDOT has a network of repair facilities strategically located throughout the Commonwealth. These facilities are staffed with some of the best trained and certified technicians and managers in the country on the widest range of heavy equipment used by the full range of agencies.
  • DGS, OFMS began an extensive re-engineering of its fleet management operations in late 2005. OFMS implemented a state-of-the-art automated fleet management system, known as FASTER. Over the first fifteen months of operation, OFMS has achieved a high level of success in capturing maintenance, operation, and cost data on DGS owned vehicles.

Fueling processes and the Commonwealth’s fueling infrastructure

In fiscal year 2006, the Commonwealth Accounting and Reporting System (CARS) documented expenditures of $47,911,449.59 for gasoline and diesel fuel.

  • The Commonwealth operates bulk fuel sites to support emergency state needs and day-to-day operations. Many of these sites are controlled by individual agencies and do not accept common fuel card.
  • No comprehensive map or information exists showing the location or the capacity of other state-owned fueling sites.
  • From an enterprise perspective, consolidated data on fuel tank levels at state owned and operated fueling sites are not readily available in real time from a centralized fuel management system.
  • The Commonwealth is not proactive in forecasting future fuel costs or leveraging its fuel volume purchasing power.
  • Fuel data from VDOT sites and fuel data from DGS commercial purchases are not centrally integrated thus requiring reporting information from two separate systems.
  • The cost to agencies for fuel at commercial fuel sites using the fuel purchase card is the same price for fuel purchased at state-owned bulk fuel sites.

Vehicle and Equipment Operator Safety Training and Monitoring

  • The Commonwealth owns approximately 26,000 vehicles and equipment over a half a billion miles on an annual basis, and experienced approximately 2.5 million dollars last year in vehicle damage claims, as reported by the Division of Risk Management. Based on current industry standards, statistically the Commonwealth has an excellent accident record.
  • Most state vehicle operators have a Commercial Operators License or a regular driver’s license. State employees that operate vehicles that require possession of a CDL are managed under strict federal rules and regulations related to training, certification, and random drug testing programs. CDL operators are required to meet rigorous operator testing and monitoring and the review team determined that state agencies with CDL operators meet testing and monitoring requirements
  • There are few statewide policies in effect that address non-CDL operators. There is no requirement that each state employee that drives a state vehicle have a pre-employment driving record review, or annual driving record reviews
  • The Commonwealth is self insured. The Division of Risk Management operates a program that charges an annual per vehicle premium to agencies based on data regarding past experience and their actuary.When a state owned vehicle is in an accident, it is a requirement that the Virginia State Police is contacted by the vehicle operator and that the State Police respond to the accident, investigate, and prepare a crash report
  • DGS reported that their approximate 4,000 passenger type vehicles were involved in approximately 300 accidents in FY 2006, 119 of these vehicles were total losses. Approximate repair and loss costs, resulting from accidents, for FY06 was approximately $500,000. Other costs experienced by the Commonwealth as reported by DGS include vehicle usage violations such as: unpaid parking tickets, photo enforcement citations for running red lights, and speeding.


Vehicle acquisition policies and procedures

  • Commonwealth does a good job procuring vehicles. In most cases the Commonwealth leverages its buying power by consolidating purchase volume into statewide contracts. EX. 2007 Malibu - State contract price = $13,075, MSRP = $20,795. Ex 2007 Dodge 1500 pick-up flex fuel • State contract price = $16,363, MSRP = $22,139

Fleet and equipment maintenance policies and procedures

  • DGS, in collaboration with affected agencies, develop and implement a plan for all agency owned sedans, SUVs, vans, and pickup trucks that are not currently managed by an automated vehicle management application to be assigned to and managed by the DGS VMCC.
  • Form a study group, facilitated by DGS and VDOT, comprised of agencies that own, operate, and maintain vehicle maintenance shops. The group will collect data on: location of each maintenance facility, type of services provided, and cost to owning agency to maintain and operate its maintenance facilities. A study group objective will be to evaluate, from an “enterprise” perspective the appropriate balance of state-owned shops, when considering commercial shop availability, needed to support the Commonwealth’s vehicle maintenance needs.

Fuel Processes and Commonwealth fueling infrastructure

  • Commonwealth purchases approximately 14,670,000 gallons of fuel annually (8,365,800 diesel; 6,305,200 gasoline). Fuel is purchased in bulk to fill state-owned bulk fuel tanks that are available for use by state agencies. A commercial fuel card for fuel purchases at commercial fuel sites is available to state agencies. Bulk fuel contracts are administered by VDOT. The commercial fuel card contract is administered by DGS.
    Commonwealth should combine the fuel volume from the bulk fuel contract and the commercial contract into a single procurement action to leverage the Commonwealth’s total fuel purchase volume to achieve most favored pricing.
  • Form a study group, facilitated by DGS and VDOT, and comprised of agencies that own, operate, and maintain state-owned bulk fuel sites, to collect data on location of each site, assets supported, volume of fuel storage, volume of fuel dispensed, and cost to own, maintain and operate the site. A study group objective will be to evaluate, from an “enterprise” perspective the appropriate balance of state-owned bulk fuel sites, when considering commercially available fuel sites, needed to support the Commonwealth’s fuel needs. Special emphasis, as part of the study group’s consideration, shall be placed on the emergency preparedness fuel infrastructure needs of the Commonwealth. Virginia Department of Emergency Management and Office of Commonwealth Preparedness representatives must be represented on the study group.

Vehicle operator training and monitoring

  • DGS develop a training program that provides basic safety instruction on the use and operation of vehicles and actions to take if involved in an accident. Also, form a study group facilitated by DGS with participants from interested agencies and institutions of higher education, to study the need for verifying operators of state-owned vehicles have a valid license prior to the operation of a vehicle.

Thanks to all those who made this report possible.
Delegate Danny Marshall
Delegate Steven Landes
Senator Nick Rerras
Joe Damico – Department of General Services (team coordinator)
Paula Dehetre – Governor's Office For Workforce Development
Quintin Elliot, Department of Transportation
John Garrett – Senate Clerk’s Office
Seward McGhee – Department of Correctional Education
Moh Mirshahi – Department of Transportation
Steve Mouras – Virginia Tech
Don Rainey – Department of Social Services
Warren Rhodes – Virginia Marine Police
Tom Rozman – Department of Labor and Industry
Cookie Scott – Department of Corrections
Brad Williams – Department of Forestry

Thursday, July 03, 2008

FLASHBACK: Energy Operational Review Report

Over the next few weeks, we'll be reposting the reports from the Operational Review Teams, led by Delegate Chris Saxman, and former Chief of Staff, Bill Leighty. (In case you missed it, you can read more about the goals and formation of these Operational Reviews here.)

These reviews across state government provide us an important roadmap for how we can increase efficiency in many areas of state government. It is imperitive that we begin implementing these recommendations to realize the full cost savings.

(For the Energy Operational Review Team's Interim update, click here.)

Energy Operational Review

The Energy Operational Review is complete. The report identifies overall costs and cost drivers, past and current state government practices related to energy management, best practices that can be applied to the Commonwealth’s operations, measures current performance against best practices, and offers recommendations on how to implement best practices and how to harness Virginia’s size as an energy consumers to reduce costs. Costs Virginia state agencies and institutions spent approximately $243 million in 2006 on energy to operate their facilities. This has increased from approximately $162 million in 2002. This is an average 12% per year growth. Commonwealth agencies and institutions also spent nearly $74 million in 2006 to repair and maintain energy-using electrical and mechanical equipment. This increased from approximately $66 million in 2002, or by approximately 3% per year.

Increased costs are driven by increases in state building square footage, increased natural gas prices and repair and maintenance costs associated with state government’s aging energy infrastructure.

The Operational Review Team offered the following recommendations to increase efficiency, performance, and cost savings.

  • A central organization to provide state government with energy management services. This group would be named the Virginia Energy Management Program (VEMP). It would reside in the Department of Mines, Minerals, and Energy. This central group would provide support, outreach, and training to agency facility staff including agency energy managers, facility operators, maintenance and operations personnel, procurement, and administrators. This group would also provide specialized technical expertise to agencies to improve their knowledge of operation and maintenance procedures, energy conservation fundamentals, new technologies, and other skills to improve building performance. Potential savings: $20 million.
  • Aggregated procurement of natural gas. The Commonwealth should aggregate its natural gas needs and have centrally employed purchasing specialists purchase natural gas for all agencies. Specialists would develop and implement a procurement plan to meet agency budget requirements, lower risk, ensure adequate supply, and obtain the lowest price available. Potential savings: $8 to 10 million.
  • Establish a Commissioning/Recommissioning Pilot for State-Owned Buildings. The Commonwealth should implement a building commissioning/re-commissioning pilot for state facilities, with program expansion based on confirmed savings in pilot state facilities. Potential savings: $2 million over 10 years
  • Automate Utility Billing. The Commonwealth should develop an Electronic Data Interchange system to track and manage energy consumption among Commonwealth facilities. EDI would allow the Commonwealth to begin measuring energy costs and consumption and identify performance-based energy opportunities while reducing the time needed to manually enter billing data. As the database becomes populated, it would allow the Commonwealth to use the data to evaluate, analyze, and measure building performance using the ENERGY STAR Portfolio Manager tool. Potential benefit: eliminate the need for manual entry of over 10,000 paper utility bills into the state accounting system each month, eliminate entry errors, and reduce utility late payment charges.
  • Self-fund Energy Efficiency Projects with a State Revolving Fund. The Commonwealth should create a $20 million energy savings project revolving fund to finance energy projects. This fund would be administered by VEMP. Agencies would use operating budgets to pay back into the fund over an agreed-upon period from the accrued energy savings. To increase the size of the fund for future projects, a fee of 1% would be added to the amount to be repaid by the agency. An agency borrowing $2,000,000 for 5 years would repay $2,020,000 over the term of the agreement. Potential benefit: This funding mechanism would allow the Commonwealth to “borrow from itself” because agencies would use existing funds. Based on the savings generated through avoided costs, money would be generated and distributed back into the fund for future projects.
  • Establish a State Facility Demand Response Program. The Commonwealth should develop a database of emergency electric generation equipment and capacity and a communication system to coordinate agency and university participation in the PJM Demand Response Program. Upon a demand peak or emergency, each agency would decide to participate in the program. The PJM demand reduction program payments would be returned to the agencies to offset other utility costs. Potential benefit: state agencies would be better prepared to meet an energy shortage.
  • Encouragement of Telework and Use of Mass Transportation. Increase the number of employees who use telework and mass transportation opportunities. This would reduce employee commute times and remove some single passenger vehicles from the road. Potential benefit: reduces energy use, environmental impact, and traffic congestion.
  • Agency Participation in the Virginia Environmental Excellence Program. State agencies and institutions should be encouraged to participate in the Virginia Environmental Excellence Program to further demonstrate a commitment to enhanced performance in building operations. Potential benefit: Dollar benefits would vary from agency to agency.

These recommendations, coupled with best practices already implemented, including energy savings performance contracting, an Executive Order in 2003 directing state facilities to reduce energy use by 10 percent, and leveraging the buying power of the Commonwealth to negotiate cheaper electric and natural gas contracts will result in millions more in savings in the coming years. Performance contracting alone has the potential to result in over 110 million in energy savings in the coming years. Additionally, some agencies as well as many of Virginia’s colleges and universities have personnel trained to improve operation and maintenance procedures, energy conservation fundamentals, new technologies, and other skills to improve building performance. Twenty five agencies already have a dedicated staff member focusing on energy management.

Thank you to everyone who worked to make this report possible. Participants included:

External Subject Matter Experts:

James Stanway, Wal-Mart
Gina Rye, Food Lion
Irene Kowalczyk, Mead Westvaco
Laura Helmke, U.S. Environmental Protection Agency
Cyrus Nasseri, U.S. Department of Energy (FEMP Division)

Internal Subject Matter Experts:
Joe Damico, Department of General Services
Tom Young and Walid Daniel, Department of Corrections
Karen Jackson, Office of Telework Promotion and Broadband Assistance
Linwood Spindle and Paul Higgins, Department of General Services
Norma Roberts, Department of Accounts
Andrew Diefenthaler and Amy Garner, Department of General Services
Sara Wilson, Department of Human Resources Management
Cheryl Gomez, University of Virginia
Steve Matsko, Bureau of Capital Outlay Management
Corey Hill and Charles Badger, Department of Rail and Public Transportation
Shirley McNutt, Department of General Services, Division of Engineering and Buildings

Department of Mines Minerals and Energy Staff:
Thomas Thompson, Energy Manager
John Broughton, Energy Program Manager
Eileen Deane, Energy Program Manager
Charlie Barksdale, Utilities and Performance Contracting Manager

Committee Members:
The Honorable Emmett Hanger, Senate of Virginia
The Honorable Harvey Morgan, Virginia House of Delegates
Tim Bass, Deputy Secretary of Technology
Stephen Walz, Senior Advisor for Energy Policy
Philip Benton, Department of Rehabilitation Services, Director of Financial Services
Kim Briele, Virginia Tech, Senior Electrical Engineer
Bruce Brooks, Department of General Services, Director of Facilities Management
Allen Mitchell, Department of General Services, Energy Manger
Elizabeth Robison, Department of General Services, Property Disposition Specialist