Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DIRECTOR OF FINANCE AND INFORMATION TECHNOLOGY

DATE: FEBRUARY 17, 2004

SUBJECT: PROPOSED UPGRADE OF ACCOUNTING SOFTWARE

Staff Coordinator: Kathryn Downs, Accounting Manager

RECOMMENDATION

  1. Authorize Staff to upgrade the City’s accounting software from SunGard HTE CitySoft to SunGard HTE Financials;
  2. Adopt Resolution 2003- , amending Resolution 2003-42, the budget appropriation for FY03-04, to increase budgeted appropriations in the Equipment Replacement fund in the amount of $80,000 for the cost of performing the upgrade from SunGard HTE CitySoft to SunGard HTE Financials; and
  3. Authorize the Mayor to execute the attached agreements between the City and SunGard HTE, Inc. for the upgrade from SunGard HTE CitySoft to SunGard HTE Financials.

EXECUTIVE SUMMARY

The City purchased and installed the HTE "CitySoft" accounting software from HTE, Inc. ("HTE") during FY98-99. The City concurrently purchased and installed HTE "Financials" Payroll and Business Licensing software modules along with the CitySoft accounting modules.

SunGard Data Systems, Inc. ("SunGard"), the successor to HTE, notified all CitySoft customers near the end of 2003 of its decision to terminate support of all CitySoft modules, effective September 30, 2004. SunGard HTE has offered a transitional discount (described later in this report) to upgrade to SunGard HTE Financials from existing CitySoft accounting modules used by the City.

Finance and Information Technology Staff ("Staff") believes that the initial costs of purchasing and implementing an alternative new accounting software solution would likely exceed $180,000 ($150,000 for software, installation and training plus $30,000 for a dedicated server and printer). The total cost to upgrade to the SunGard HTE Financials solution will not exceed $80,000, a savings of about $100,000.

The original cost of about $90,000 for SunGard HTE CitySoft software and hardware has been fully depreciated within the Equipment Replacement fund. As described in the separate staff report titled "FY03-04 MIDYEAR FINANCIAL REPORT ", the estimate of the June 30, 2004 Equipment Replacement fund balance is $1,901,508. In the event the City Council authorizes the budget adjustment proposed to enable the upgrade to SunGard HTE Financials, the estimate of the June 30, 2004 Equipment Replacement fund balance would be decreased by $80,000 to $1,821,508. The proposed upgrade from SunGard HTE CitySoft to SunGard HTE Financials will not use General fund reserves.

Staff believes that an alternative accounting solution could not be researched, purchased and implemented prior to the termination of CitySoft support services in September 2004.

BACKGROUND

The City purchased and installed the HTE CitySoft accounting software from HTE, Inc.. The CitySoft accounting software includes integrated General Ledger, Accounts Payable, Purchasing, Cash Receipts, Cash Disbursements and Project Cost Accounting modules. The CitySoft accounting software was developed for small and medium size governmental agencies.

The City concurrently purchased and installed HTE Financials’ Payroll and Business Licensing software modules along with the CitySoft accounting modules during FY98-99. HTE’s Financials modules generally offer greater set-up and operational choices with more intensive computer programming. Therefore, the HTE Financials modules are more expensive than CitySoft modules. The Payroll and Business Licensing modules currently integrate with the CitySoft accounting modules. The total cost of the HTE system purchased was about $90,000, including software, hardware and third party software used for forms and report generation.

The CitySoft and Financials modules currently run on an IBM 9406-170 Model server using the IBM AS400 operating system. The AS400 operating system continues to be the standard for the financial services industry. Therefore, IBM will continue to support the AS400 operating system in the foreseeable future. Staff has successfully used both the CitySoft and the Financials modules for five years. City Staff has been satisfied with customer support provided by HTE.

In February 2003, HTE was purchased by SunGard Data Systems, Inc. (NYSE:SDS), a leader in the software marketplace. SunGard renamed HTE to "SunGard HTE" at the time of the purchase. SunGard staff has provided the following information:

SunGard currently serves more than 20,000 clients worldwide, including 47 of the world’s 50 largest financial services institutions. SunGard has been providing financial software for 22 years and has annual revenues of more than $2 billion annually. SunGard currently has approximately 550 city clients and 220 county clients. SunGard has excellent client retention, as thirty-two percent (32%) of their local government clients have use SunGard products for at least ten years.

Until recently, CitySoft was supported by a subsidiary of SunGard HTE located in Canada. SunGard sold the Canadian subsidiary and consolidated support with HTE’s support service center located at its main offices in Lake Mary, Florida during early 2003. SunGard notified all CitySoft customers near the end of 2003 of its decision to terminate support of CitySoft software, effective September 30, 2004. SunGard’s decision to discontinue the CitySoft solution was motivated by a lack of profitability of the CitySoft solution, especially the cost of its dedicated support staff. SunGard HTE has offered a transitional discount (described later in this report) to upgrade to SunGard HTE Financials for all CitySoft accounting modules used by the City.

DISCUSSION

Staff quickly established the following criteria during its assessment whether to upgrade the City’s accounting software from SunGard HTE CitySoft to the SunGard HTE Financials:

  1. The length of time required to purchase and implement an alternative accounting software solution from another vendor similar to the City’s current system;
  2. The cost of replacement of an alternative accounting software solution vs. the upgrade from SunGard HTE CitySoft to SunGard HTE Financials; and
  3. Staff’s level of satisfaction with SunGard HTE’s software and support and the expectation for continued satisfactory support by SunGard HTE.

The Length Of Time Required To Purchase And Implement An Alternative Accounting Software Solution

Staff broadcast an email to all members of the California Society of Municipal Finance Officers Association ("CSMFO") listserver system to inquire about the following:

  • Whether or not the city has replaced its computer accounting system during the last year.
  • If the city has replaced its computer accounting system during the last several years, the length of time required to implement the replacement computer accounting system, as well as the cost.

After reviewing the replies from CSMFO members, Staff made additional inquiries with several responding cities that recently purchased a new accounting software system. The following Table A, - Summary Of Responses From Other California Cities, provides a comparison of the cost and the length of time experienced by other California cities to purchase and implement an alternative accounting software solution from another vendor similar to the City’s current system:

Table A - Summary Of Responses From Other California Cities:

 
   

Approximate

 

Implementation

First Year

Agency

Time

Cost

City of Antioch

> 12 months, not complete

$ 220,000

City of Elk Grove

27 Months

150,000

City of La Quinta

13 Months

190,000

City of Rio Vista

18 Months

150,000

City of Rohnert Park

15 Months

200,000

City of Solvang

18 Months

200,000

The process of researching and selecting an alternative accounting software solution may require Staff to conduct a formal bid process. The selection, purchase and implementation of the HTE CitySoft solution took about 15 months.

Even if the City Council directs Staff to immediately begin searching for an alternative accounting solution, Staff believes it’s unlikely that it could be selected, purchased and implemented prior to the September 30, 2004 support termination date for the SunGard HTE CitySoft solution. In that event, the current SunGard HTE CitySoft solution would have to be used without support until the implementation of an alternative accounting solution were completed. Staff believes that the use of unsupported accounting software, even during a period of transition to an alternative accounting solution, would place the City under an unacceptable level of risk for the possibility of corrupt data resulting in erroneous financial reports. In the event a data or a CitySoft accounting program file(s) became corrupted after September 30, 2004, SunGard HTE may not be able to repair them. Additionally, SunGard HTE may not be able to assist the City with disaster recovery of the CitySoft solution after September 30, 2004.

Staff believes the proposed upgrade to SunGard HTE Financials modules could be completed in conjunction with the beginning of FY 04-05, prior to the termination of support of CitySoft on September 30, 2004. In the event the proposed upgrade to SunGard HTE Financials modules is completed on or about July 1, 2004, Staff could avoid the migration of live data during the middle of FY04-05, thus saving a substantial amount of time and avoiding unnecessary risk of errors during a mid-year migration.

The Cost Of Purchasing An Alternative Accounting Software Solution Vs. The Upgrade From SunGard HTE CitySoft To SunGard HTE Financials

Based on the information summarized in Table A, Staff believes that the initial costs of purchasing and implementing an alternative new accounting software solution would likely exceed $180,000 ($150,000 for software, installation and training plus $30,000 for a dedicated server and printer). The total cost to upgrade to the SunGard HTE Financials solution will not exceed $80,000, a savings of about $100,000. The following Table B – Comparison Of Estimated Cost Of Purchasing An Alternative Accounting Software Solution vs. Upgrade To SunGard HTE Financials, provides a comparison of the details of the estimated cost of purchasing an alternative accounting software solution vs. the cost to upgrade the current CitySoft solution to SunGard HTE Financials:

Table B - Comparison Of Estimated Cost Of Purchasing An Alternative Accounting Software Solution vs. The Upgrade From SunGard HTE CitySoft To SunGard HTE Financials

     
 

Purchase An Alternative

Upgrade to

 

Accounting Software Solution

SunGard HTE

 

From Another Vendor

Financials

Software Purchase

$75,000

-

Installation and project management

20,000

$1,500

First Year Licensing & Support

30,000

13,166

Dedicated server and printer

30,000

39,478

Sales tax

-

3,712

Training (maximum)

25,000

18,000

     

Total Initial Cost

$180,000

$75,856