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The Lane Report

Lexington Needs Up-To-Date Financial Controls to
Carefully Spend a Million Taxpayer Dollars per Day

Each day Lexington's local government spends approximately $1 million on behalf of its taxpayers. Lexington's revenues, expenditures and budgets are maintained on an accounting system that is 25 years old and utilizes COBOL software. A recent evaluation prepared by Government Finance Officers Association (GFOA) reports that the LFUCG system lacks integration, timeliness and reliability, and requires redundant data entry. The GFOA report was authorized by the LFUCG last year and released on February 11th.

The current LFUCG system is described by GFOA as user-unfriendly. In other words, it is difficult for users to enter and retrieve financial information.

Since the system is over two decades old and has been extensively modified, there are also concerns that it could fail. A computer crash obviously would create serious problems for all Lexingtonians.

There appears to be a general consensus from many of LFUCG's elected leaders and managers that a new state-of-the-art financial system is a necessary and prudent investment. Savings in operational costs and improved government efficiency would offset a significant portion of the investment in a new and modern IT system that utilizes the latest software.

A new system, when implemented, would provide a number of cost saving benefits.

• Standardized software would be upgraded annually by the vendor.
• Real-time, immediate access to financial data would be possible.
• Paper-based processes would be eliminated.
• Redundant data entries would be streamlined or eliminated.
• The best business practices for government would be used.
• Modern reporting tools for evaluating government operations and efficiencies would be readily available.

To implement a new system, investment would be required in hardware, software, database, telecommunications equipment, the hiring and training of new and existing employees, and consultant fees.

The best technology is called an Enterprise Resource Planning (ERP) System. The investment in ERP could range from $6 to $10 million. The system is anticipated to last for a minimum of ten years.

Although a $10 million investment is significant, upon consideration the cost may seem more reasonable.

Currently, 109 persons work in nine departments related to ERP. The annual cost of these departments is $7.5 million or $75 million over ten years. A new ERP system, after the initial implementation period, should reduce the growth of these costs in future years.

LFUCG's annual budget is about $350 million annually ($3.5 billion over ten years). A $10 million investment in a new ERP system amortized over ten years is about three tenths of one percent (0.3%) of annual LFUCG revenues. This cost in relationship to the improved opportunities to run a more efficient government is justified. A new system also reduces the chance of a system failure that would severely impact LFUCG services and be costly and difficult to replace on short notice. I plan to support a new ERP system and will be in a better position to evaluate this opportunity when bids are received from vendors.

Without an improved system to manage, control, and evaluate government operations, LFUCG employees and elected officials will have a difficult time making comprehensive improvements to the efficiency and effectiveness of our local government.

If you would like to contact Ed Lane, he can be reached via e-mail at edlane@LFUCG.com ; and by letter at 200 East Main Street, Lexington, KY 40507.

Councilman Ed Lane represents the 12 th District on Lexington Urban County Council. He is the owner of a commercial real estate services firm and publishes a statewide business magazine.

“I want to conservatively spend our tax dollars,
eliminate waste, and bring sound business ideas
to local government.”

To contact Ed Lane's 12th district council offices, e-mail him at edlane@lfucg.com.