1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 1 CIVIC CENTER PLAZA 3 IRVINE, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JULY 14, 2016 10 11 12 13 14 15 ITEM P 16 OTHER ADMINISTRATIVE MATTERS 17 ITEM P7 18 TECHNOLOGY DEPUTY DIRECTOR'S REPORT 19 1. CROS PROJECT UPDATE AND ACTIONS 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Fiona Ma, CPA 4 Chairwoman 5 Diane L. Harkey Vice Chair 6 Jerome E. Horton 7 Member 8 Sen. George Runner (Ret.) Member 9 (Not Present) 10 Yvette Stowers Appearing for Betty T. 11 Yee, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond Chief 14 Board Proceedings Division 15 16 For Board of Equalization Staff: Brenda Fleming 17 Chief Information Officer Technology Services 18 Department 19 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 1 CIVIC CENTER PLAZA 2 IRVINE, CALIFORNIA 3 JULY 14, 2016 4 ---oOo--- 5 MS. MA: So the next item, Ms. Richmond? 6 MS. RICHMOND: Our next item is P7, the 7 Technology Deputy Director's Report, CROS Project 8 Update and Actions. 9 MS. MA: Welcome, Ms. Fleming. 10 MS. FLEMING: Thank you. 11 MS. MA: Please introduce yourself for the 12 record. 13 MS. FLEMING: Thank you very much. Good -- 14 good morning. Good morning, honorable Members, 15 Madam Chair, honorable Members. 16 I'm Brenda Fleming, the Chief Information 17 Officer and Deputy for the Technology Services 18 Department. I appreciate the opportunity, as usual, 19 to be before you to present. 20 I wish I had more exciting news for you 21 today, but it's going to be a pretty status quo. 22 We've completed, however, the evaluations of the 23 offers from the bidders. We've talked about before 24 that we had a couple of bidders that were providing 25 proposals to us to solution our CROS proposal. 26 We've completed the scoring of those evaluations and 27 we've got some rankings of those. 28 That activity still occurs under Public 3 1 Contract code 6611. And so we're working through 2 the process of that negotiation to clarify and sort 3 of streamline and refine some of the information 4 that we've received. 5 Just as a footnote, what happens in that 6 process is that we have the RFP and they provide a 7 response. And in that response sometimes there are 8 gaps between the two. And we do, again as I think I 9 shared before, want to reconcile those gaps to make 10 sure that we have a good, solid, clean approach and 11 understanding before we get into the process of 12 inking the contract. We want to make sure that 13 everything that they propose to us is manageable, 14 it's realistic, and it optimizes us for success. 15 Over the next -- there's no other key 16 issues or concerns at this time, at this reporting 17 period. 18 Within the next 90-day time frame, however, 19 between now and September, your office -- if you've 20 not already been contacted, your offices will be 21 contacted so we can schedule you for the videos. We 22 would love to have you participate in creating 23 videos to message to the staff Board-wide and then 24 specifically for your individual districts. 25 We'll follow up with the Legislature, as 26 we've talked about before, to continue to shake 27 hands with them, to keep them informed, to give them 28 the opportunity to have progress reports, etcetera. 4 1 We'll also begin to provide the status 2 report summary of what we provide here. We can 3 begin to send those to them in written form. 4 We'll assess our resource needs, which is 5 ongoing. As you know, we continue to get 6 significant legislation. So it's going to be 7 important for us to make sure that we look at the 8 balance of the workload to make sure that we've got 9 the best and the brightest available to work on the 10 project. 11 Some of the field office and headquarters 12 staff are reviewing the catalogue of business rules, 13 and that really is kind of the devil in the detail 14 level of really how business is done. All of that 15 information is documented, and it's available on our 16 eBoe internal website. And so we're asking some of 17 the field office and HQ staff who have subject 18 matter expertise to review those for quality, for 19 completeness, and for accuracy. 20 Those are going to be very important to us 21 when we sit down with the bidders, to make sure that 22 they're clear on how we do business but still gives 23 room for them to offer some process improvements. 24 The normal workload for the project 25 continues. We continue to clean data, review our 26 processes, get documentation in place, etcetera. 27 And as you know, one of the other requirements was 28 that the Legislature asked us to -- to be very 5 1 specific in our collaborations with Department of 2 Finance and with Department of Technology. And so 3 we're making sure that we're having regular ongoing 4 meetings, to keep them informed, to show evidence 5 that we are actively participating and maintaining 6 that partnership. 7 The budget information has been available 8 to you. Current month-to-date for -- we have the 9 budget report for May up and to this point, and 10 we're at about 95 percent for current month. 11 Overall, year-to-date we're a little bit over budget 12 at about 108 percent. But overall, from 13 project-to-date we're still on track at 95.3 percent 14 and we're waiting to get the final numbers for our 15 '16-'17 budget, consistent with what Mr. Holtz just 16 provided. 17 That concludes this month's report. Please 18 let me know if you have any questions. 19 MS. MA: I do have a question. Is this new 20 CROS Project, will it give it -- give taxpayers the 21 ability to pay on a more frequent basis than like 22 the prepayment, you know if they wanted to pay 23 daily, they wanted to pay their sales tax in weekly? 24 The three-month kind of window is -- is too 25 long for taxpayers to hold their money given this 26 electronic -- 27 MS. FLEMING: Process. 28 MS. MA: -- age. 6 1 MS. FLEMING: Yes, exactly. 2 As a matter of the technologically, yes, 3 Madam Chair, the system itself will allow us to 4 do -- drive our processes any way that you want. 5 What we'll do with that technology is to 6 come to us and decide through policy, you know, 7 under what conditions you want it to be configured. 8 So we could say here are some that if you want it to 9 be done daily or weekly, monthly, quarterly, you 10 know, biannually, etcetera, that'll be in the -- 11 what we refer to as the configuration rules. And a 12 lot of that will be embedded in the policy. And 13 those kinds of things we'll present to management 14 and to the Board to ensure that we are -- we're 15 configuring it in a way that's consistent with your 16 direction. 17 MS. MA: Ms. Harkey. 18 MS. HARKEY: Yes, I have one question. 19 The business rules that are supposed to be 20 reviewed by various departments, are those like 21 assigned out or are people just supposed to look at 22 will? Or do you have certain -- 23 MS. FLEMING: There are designated 24 individuals -- 25 MS. HARKEY: Okay, good. 26 MS. FLEMING: -- that are our program area 27 readiness team, under the direction of Val Williams, 28 has kind of identified those individuals and in 7 1 shaking hands with them. 2 It's -- it's on the website so others can 3 view them if they're interested. But they're 4 specific, you know, experts that we'd like to make 5 sure are assigned on that. 6 MS. HARKEY: I just wanted to be sure 7 somebody's assigned to actually do it. 8 MS. FLEMING: Owners. Absolutely. 9 MS. HARKEY: I'm good. 10 MS. FLEMING: I agree with you on that, 11 yes. 12 MS. HARKEY: Thank you. 13 MS. FLEMING: Thank you for that question. 14 Thank you. 15 That concludes my report. Any other 16 questions? 17 MR. HORTON: Madam Chair, I just wanted to 18 suggest that we may want to have concurrent 19 conversations about payments being (inaudible) prior 20 to statutory payments (inaudible) start those so 21 that in the event that there is a need for 22 legislation to allow the taxpayers to pay on a more 23 frequent basis, we can start that process, in order 24 to accommodate those, the Board would deem desirous 25 to do that. 26 MS. MA: Okay. We'll figure out a process 27 and start the discussion. I understand. 28 MS. HARKEY: Absolutely. 8 1 MS. MA: But the system's not going to be 2 up and running and ability -- and with the ability 3 to take these payments for how long? 4 MS. FLEMING: Well, that's the 5 million-dollar question. 6 At this point, as I mentioned, Madam Chair, 7 we're still in the negotiation phase. And I just 8 recently, as of this past week, have been spending 9 time in the details on exactly how long, what's the 10 timeline for that negotiation? 11 The timeline that we're working from now 12 looks like about an August time frame before we are 13 in the contracting phase. And that's a tentative 14 date, and I'm being very careful because there's 15 always give and take during that process. 16 If that's the intent, our hope still is 17 that the vendor would be onsite in the fourth 18 quarter of this year, somewhere between October and 19 the December time frame. I'm careful there because, 20 depending on -- even though they're ranked, we still 21 are working with both. And so we're very careful to 22 recognize that those two vendors have two different 23 approaches. And those approaches have some 24 distinctions and some different timelines and 25 implementation strategies. 26 And so I'm cautious with that because, to 27 the extent that I share a little bit more of that, 28 there -- there -- it's a little bit of a peek into 9 1 some of the proprietary portions of that. I'd be 2 happy to talk to you about that offline, but we're 3 very careful to protect that at this point. 4 I apologize. I wish I could -- I could 5 convey more. 6 MS. MA: Okay. So it seems like -- 7 MS. FLEMING: But it would not be -- it's 8 probably in terms of the actual -- the 9 functionality, we hope to see some of that 10 functionality perhaps in the 2017 time frame as a 11 general ballpark time frame, but probably nothing in 12 this calendar year. 13 MS. MA: Okay. So in the meantime, we will 14 gather some data in terms of how much revenues we 15 generate from -- from who, and maybe start trying to 16 figure out some trends in terms of who should 17 perhaps pay or have the ability to pay more, you 18 know, on a more timely basis versus quarterly. 19 MS. FLEMING: One of the things we'll do 20 for you, also, is we'll schedule the staff to come 21 back and really walk you through our -- the -- the 22 revenue streams process. 23 There's some significant intelligence and 24 algorithms that have established that, and we'd 25 really like to walk you through that so you could 26 see there are ten revenue streams identified. So we 27 want to walk you through those so you can see how 28 the revenue streams are going to work, how the 10 1 vendor gets compensated for it, any revenue and 2 benefits that they produce out of that. And then a 3 lot of the other data that's available to us, that's 4 really the intelligence that -- you know, that's the 5 foundation of that. So we'd like to walk you 6 through that. 7 That way you can -- and then also share, to 8 the extent that we can, kind of the two approaches 9 that are being offered. And then you can get a 10 greater peek into, okay, so this is how this might 11 work. And then we could look a little bit more at 12 the time frame. 13 I will share, however, that the -- the 14 compensation model is -- is set up in such a way 15 that the vendors are carrying the costs of the 16 projects for quite a while. So -- so -- so the 17 vendors will be very motivated to try to get to some 18 revenue as quickly as possible. But we have a lot 19 of rules and criteria that's -- that's established 20 that -- that ensures that the State gets what they 21 want, but it's also going to be fair to the vendor 22 community. 23 But that strategy has a lot to do with when 24 the functionality comes on board, what approach they 25 will stand -- you know, implement the functionality 26 and where those payments and the revenue starts to 27 be realized. 28 MS. MA: So at what point would you like to 11 1 share with us this -- 2 MS. FLEMING: I'll get on your calendars 3 this month. The information's ready. I'll get on 4 your calendar and we'll walk you through that. 5 MS. MA: Okay. 6 MS. FLEMING: And we'll do that probably -- 7 probably at this point, I'm not sure. I'd like to 8 talk with you guys individually first. I'm not sure 9 if we're ready to -- to put that on a public agenda 10 at this point. 11 MS. MA: Okay. 12 MS. FLEMING: But we can sit down -- 13 because it's something -- it's pretty complicated. 14 I mean it's easy to see in diagrammatically, but 15 it's something that we actually need to walk you 16 through and then you can give us direction on. You 17 know, we could even make it available perhaps on our 18 website. 19 MS. MA: But at some point once we choose 20 the vendor, perhaps you can come back and do a 21 public presentation just for the public. 22 MS. FLEMING: Absolutely. Absolutely. 23 MS. MA: Okay. 24 MS. FLEMING: Our goal absolutely, 25 consistent with your direction, is transparency. 26 MS. MA: Okay. Good. 27 MS. FLEMING: Absolutely. 28 MS. MA: All right. Thank you -- 12 1 MS. FLEMING: Thank you. 2 MS. MA: -- Ms. Fleming, for your 3 presentation. 4 MS. FLEMING: Thank you. 5 ---oOo--- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Kathleen Skidgel, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on July 14, 2016 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 13 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: August 23, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 14