File Ref. #190
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DATE:
March 13, 2000
CITY OF MIAMI BEACH
INTERNAL AUDIT REPORT
TO:
Lawrence A" Levy, City Manager
VIA:
FROM:
Mayra Diaz Buttacavoli, Assistant City Manager
James J. Sutter, Internal Auditor ~
AUDIT OF PURCHASE OF P~OLL I HUMAN RESOURCE SOFTWARE
(CYBORG)
SUBJECT:
PERIOD:
October 1, 1997 through February 29, 2000
At the request ofthe City Commission, we examined the events leading to the purchase of the City's new
Payroll/Human Resources software system (Cyborg). Included in our review was the examination of the
planned update to the City's Financial Management System and the purchase of a new Utility Billing
system.
INTRODUCTION
The City was faced with the task of replacing most of its computer application software in order to be
compliant for the year 2000. In 1997, the City began to upgrade several critical software applications
within the City. The first systems identified as critical and targeted for upgrading were the Public Safety's
Computer Aided Dispatch/ Record Management Systems (CAD/ RMS) and E911 system. Some of the
other critical systems to be addressed at a later time were the Financial Management, Utility Billing and
Payroll/Human Resources systems.
Initially, the City looked into purchasing an integrated system for the City's Financial Management,
Utility Billing and Payroll/Human Resource systems. On October 17, 1997, a Request for Proposal (RFP)
was sent out and resulted in bids from eight separate companies. An Evaluation Committee reviewed
those bids, and recommended a new strategy based upon the contents of the proposals and the lack of time
and resources to implement an integrated system. The City Commission authorized a plan on July 1, 1998
which included rejecting all proposals, implementing an upgrade to the current Financial Management
System (FMS) and evaluating and purchasing Utility Billing (UTB) and Payroll / Human Resource
software from existing local government contracts.
Upon the recommendations of the City Administration, the City Commission approved agreements to
upgrade the FMS system (7/1/98, $104,500), purchase a UTB system from Aquilium Software
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
Corporation (1/6/99, $151,450) and purchase a Payroll/ Human Resource package from Cyborg Systems,
Inc., (1/6/99, $332,414). As implementation of these systems began, additional costs were projected and
the Administration went to the City Commission for additional funding" As a result, costs for the
implementation of these systems increased significantly over the amounts originally anticipated.
OVERALL OPINION
In our opinion, the selection of the software for the above items was in accordance with the City's policies
and guidelines . We noted no improprieties in the selection and purchasing process. The information
reported in the Information and Technology (IT) Department's Chronology Report dated March 1, 2000
properly reflects the sequence of events in the selection and purchasing process. However, we wish to
make the following observations:
· Costs for the implementation and modifications of the payroll software far exceeded the original
software proposal cost of $332,414 approved by the City Commission. The original amount did
not contain costs for modification. As a result, costs associated with the extensive modification
required for the City's payroll increased the cost of the payroll system by $239,512. Of this
amount $177,827 has been subsequently approved by the Commission" The remaining $61,685
is being presented at the next Commission meeting.
· Additional costs are likely for modifications to Cyborg's Human Resource Benefits and Position
Management modules. The IT Department does not know the exact amount of these costs, but has
estimated an amount of $225,000. If these modules are to be used, then the City should review
them in depth in order to arrive at a more precise estimate for the Commission to authorize.
· The total amount incurred for implementing the UTB software currently exceeds the amount
approved by the City Commission by $14,244. Total incurred costs to date amounts to $164,694.
Of this amount, $52,320 represents invoices for services incurred but not paid. These additional
costs were necessary to make the system operational. It is anticipated that additional costs of
$60,680 are required to enhance this system for the City's needs. The City is working on a final
estimate which will be presented to the City Commission at a later'date.
· The Financial Management System was upgraded to be year 2000 compliant. However, the new
FMS II software which operates on a client server environment has not been implemented. A
meeting is scheduled later this month to discuss the implementation schedule for this upgrade
targeted for this year.
· The pricing quotations from the original RFP for the Financial Management, UTB, and Payroll
/ Human Resources were for basic integrated packages and did not contain necessary modification
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
costs for customizing the software for the City's needs. As a result, the proposed quotations for
these packages are not directly comparable to final costs associated with current selection of
individual software systems.
Overall, the City did an acceptable job in completing its year 2000 critical projects considering the late
start they had. Added to these circumstances, the City had three different IT Directors during this time
and was working with limited funding for the projects. As the year 2000 approached, additional
expenditures were necessary due to unforeseen software modifications and the over burdening of all
departments involved in the implementation. It should also be realized that the implementation for these
systems could have been more efficient and cost effective if the City had started at a much earlier date in
1995.
The City's staff should be commended in getting the systems operational in the limited time available.
Most of the staff in the IT and Finance Departments worked many extra hours including weekends, to
accomplish this enormous task. This effort by City staff further saved consulting time.
PURPOSE AND SCOPE
The purpose of this audit was to determine if the purchase of the Payroll / Human Resource software was
in accordance with City policies and guidelines. Our initial objective centered on verifying the
information contained in the IT Department's Chronology Report dated March 1, 2000. In addition, we
examined City records which included RFP packages, minutes of pertinent meetings, audio tapes and
recordings of City Commission and RFP Evaluation Committee meetings. Further departmental records
maintained in various City departments, including both the Procurement and IT Departments, were
reviewed, and City staff members were interviewed to gain further clarification of these events.
SUMMARY OF FINDINGS
1. Finding - Implementation / modification costs for Cyborg increase~ total cost of payroll system.
Costs for implementation and modifications of the payroll software far exceeded the original cost
approved by the City Commission. It was difficult to foresee and estimate all the costs of
implementation for the extensive modifications required by the City. The full degree of
modification could not be known until the package had been installed and operational.
The primary focus for the Evaluation Committee at their October 23, 1998 meeting was to insure
that a system was implemented before year 2000. Several vendor demonstration meetings had
been held in the previous months and the choice of software was narrowed down by City staff to
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
Cyborg. A site visit by the City was still necessary to observe the system in use. Time was
critical and it was observed that other vendors were no longer accepting new clients before the
year 2000.
The Evaluation Committee was looking for a system which would require the least modification
so that the system could be up and running before year end. The Evaluation Committee was
concerned that they did not know the extent of any modification costs. Usually a "fit analysis"
would be done by a consultant. This analysis would attempt to determine the amount of
modification necessary for implementation. It would take several weeks and the cost would be
excessive. The suggestion for a fit analysis was rejected due to high cost. The IT Department did
not have the personnel available to do this fit analysis in-house. A committee member from
Metro Dade County noted that a separate fit analysis done for the County was incorrect and could
not be used by the County. The Evaluation Committee believed Cyborg would offer the best
solution to the City's payroll processing needs. It was decided to purchase the basic package and
have the payroll operational with minimal modifications.
When the City attempted to "piggy back" upon the Broward County Agreement, it was determined
that it could not be done since the Broward County Agreement was based on different computer
hardware. Instead, the City entered into an agreement using Cyborg's standard agreement form,
with a separately prepared two page addendum which was approved by the City's Legal
Department. The Agreement provided that, besides the standard installation fees, additional work
if needed, would be charged at an hourly rate plus travel expenses. There were no discounts
available due to the nature of the environment (closeness to the year 2000).
On January 6, 1999, the City Commission followed the administration's recommendation and
waived the formal bid process and authorized the issuance of a contract to Cyborg in the amount
$332,414. Any costs for additional modifications were not mentioned in this Commission Memo.
At a minimum, reference to these unknown costs should have been disclosed. The City
Commission asked if any future waivers of the bidding process for Y2K issues were anticipated.
City Staff responded that they could not answer at this time. At this point it was crucial for the
City to have those known systems corrected. In terms of the broader picture, a consultant was
scheduled to come in and focus on the remaining uncertainties as to further requirements. Once
the staff had a better idea, they would be able to come back with an answer. The City
Commission requested that they act quickly on this matter.
During the initial phase of installation, it was determined that additional customization was
necessary. Cyborg estimated additional costs of $177,827 and the City Commission awarded a
Purchase Order to Cyborg on July 21, 1999. In order to reduce costs, the IT Department
contacted ABC Computer Service to do the same work for an estimated $79,565.64, resulting in
a savings of $98,261.36. On September 22, 1999, the City Commission authorized this amount
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
be transferred out of the amount allocated to Cyborg and reallocated to ABC Computing Services
through a personal service contract. This left $98,261 allocated to Cyborg for other
implementation costs. The amount of $54,071, plus $9,276 for related travel was used for
additional costs associated with setup and parallel testing.
Costs totaling $32,225 for annual support and maintenance from Cyborg (2/1/00 to 10/31/00)
were inadvertently paid from the purchase and implementation standing order. This is being
corrected, and the $32,225 should be available for future costs.
The Cyborg system purchased includes a Human Resource Benefits and Position Management
modules. It is expected that additional costs will be incurred for customization. The IT
Department does not know the exact amount of these costs, but has estimated an amount of
$225,000. If these modules are to be used then the City should review them in depth in order to
arrive at a more precise estimate for the Commission to authorize.
A summary of costs relating to the purchase of Cyborg is as follows, as of March 1, 2000:
Approval Amount
Vendor Phase Approved Pendin2 Expended Difference
Cyborg I $ 332,414 $ 330,709 $ 1,705
II $ 98,261 $ 63,108 (a) $ 35,153
ABC Computing I $ 79,566 $ 76,350 $ 3,216
II $ 61,685
Cyborg III $ 225,000 (b)
Subtotal $ 510,241 $ 286,685 $ 470,167 $ 40,074
Grand Total (Approved and Pending) $ 796,926
(a) $32,225 annual support maintenance cost is not included in the $63,108 amount.
(b) $225,000 represents a very rough estimate in completing the Human Resources Benefits and Position
Management modules.
2. Finding - Costs for Utility Billing software were in excess of approved amounts.
On January 6, 1999, due to year 2000 time constraints, the City Commission waived the formal
bid process and approved the purchase of Utility Billing software from the Aquilium Software
Corporation in the amount of $151,450. The following table lists the total costs incurred to date:
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
Approval Amount
Vendor Phase Approved Pendin2 Exnended(a) Difference
Aquilium I $ 151,450 $ 165,694 $ (14,244)
Total $ 151,450 $ 0 $ 165,694 $ (14,244)
(a) Includes $52,320 for services incurred but not paid.
The City experienced problems with getting the software operational. Support from IT personnel
was limited due to other year 2000 projects in process. As a result, the Finance Department
requested that Aquilium support personnel assist in the implementation process. This added to the
original cost of the project. These additional expenditures were justified in that it was critical to
have this system operational. Even so, the system still encountered problems causing billing
statements to be sent out as much as two to three months late.
It was subsequently determined by the Finance Department that additional required features were
necessary to make the software fully operational. An estimated cost of $60,680 was proposed by
the vendor. An amount of $74,924, representing the current shortage in funding plus the
additional costs for enhancements, will need to be submitted to the City Commission for approval.
3. Finding - City's Financial Management System has not been upgraded to FMS II.
The software upgrade for the City's current Financial Management System to FMS II has been
delayed by other year 2000 projects. Even though sufficient funding was approved for this
project, there may be an exposure for some additional costs once implementation is started.
In July of 1998, the City's Financial Management System was modified with a patch in order to
bring it into compliance for the year 2000. As part of the City's plan to upgrade software
applications, the Evaluation Committee recommended that an upgrade for the financial system be
purchased from the current vendor. This upgraded system is to include Accounts Payable,
Accounts Receivable, General Ledger and Purchasing components. This purchase was approved
by the City Commission on July 1, 1998 for $104,500.
The City needed to add a Fixed Asset Module and a Project Accounting Module for an additional
$72,000. This was approved by the City Commission on February 17, 1999. The Fixed Assets
Module, which is an FMS II application, was installed since the existing hardware was not year
2000 compliant. The Project Accounting Module will be installed with the other FMS II
components.
The Finance Department is scheduled to meet with representatives from Mitchell Humphrey later
this month to discuss a timetable for implementation this year. The discussion will also focus on
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INTERNAL AUDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
the remaining costs for implementation.
Total cost to date for this project is as follows:
Approval Amount
Vendor Phase Approved Pendin2 Expended Difference
Mitchell I $ 104,500 $ 0 $ 104,500
Humphrey II $ 72,000 $ 44,519 $ 27,481
II $ 4,000 $ 0 $ 4,000
Total $ 180,500 $ 0 $ 44,519 $ 135, 981
4. Finding - Total Costs for the all three Financial Systems.
We concur with the IT Department's review of the initial price quotations received from the RFP
for an integrated Financial Management, Utility Billing and Payroll/Human Resource system.
Price quotations for the basic integrated packages ranged from $494,000 to $8,429,000. Most of
the quotations did not contain implementation, conversion and modification costs. In addition,
these quotations were misleading and subject to changes based on additional modifications
requested by the City. Also, some proposals did not meet the City's computer hardware
requirements. As a result, these proposed quotations for an integrated system cannot be directly
compared to the total costs for the implementation of the City's selected individual software
systems without taking into consideration additional modification costs.
The following table summarizes the total projected costs of the three financial systems:
Approved Pending
Application Vendor(s) Costs Approval Total
Payroll / Human Cyborg / ABC $510,241 $286,685 (a) $796,926
Resources Computing
Utility Billing Aquilium $151,450 $74,924 $226,374
Financial Management (a) Mitchell Humphrey $180,500 $0 (b) $180,500
Total $842,191 $361,609 $1,203,800
(a) Includes a rough estimate of $225,000 for Human Resources Benefits and Position Management
modules. See Finding #1 for recommendation.
(b) There may be an exposure for some additional costs.
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INTERNAL A UDIT REPORT MARCH 13, 2000
AUDIT OF PURCHASE OF PAYROLL / HUMAN RESOURCE SOFTWARE (CYBORG)
If a comparison was to be made it appears that the above total costs are in line with the range of
the integrated packages, when the packages are adjusted for modification costs. Since sufficient
time was not available to implement a fully integrated package from the time of selection (April
of 1998), to the beginning of the year 2000, we believe that the City, by purchasing and upgrading
the financial system software as they did, took the most appropriate option available.
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F:\BUDG\$AUD\DOC99-OO\REPORT\CYBORG .REP
cc: Robert Parcher, City Clerk
M. Kay Randall, Director, Information and Technology
Patricia D. Walker, Director, Finance Department
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