Reform 1.3: ERP System and Cost Accounting

Review of Implementation of Enterprise Resource Planning (ERP) System – Initiate Full Cost Accounting for Major Services

Other Information:

The City of San Diego is in the middle of implementing a costly Enterprise Resource Planning (ERP) System. The goal of the system is to improve the quality, timeliness, and usefulness of financial information inside each city department. While our office supports implementation of these kinds of systems, it remains to be seen whether this system is being properly implemented. City staff reports that the implementation is progressing, but we propose that the audit committee evaluates progress implementation independently. (See Memorandum dated November 3, 2010.) Organizations that measure their costs can manage their costs. The ERP system has the potential to support full cost accounting on a “cost-per-unit” basis of service. Full cost accounting lays the groundwork for eventual implementation of “performance-based budgeting” in city departments. To jumpstart full cost accounting, recommend releasing full cost accounting studies on the top 10 city service areas in FY 2012 – with expansion of services undergoing full cost accounting calculations thereafter.

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