Where did the money go?

The Oklahoman (Sunday) - - NEWS - BY MEG WINGERTER Dig Team mwingerter@oklahoman.com

The Ok­la­homa State Depart­ment of Health spent $382,000 to in­stall “free” soft­ware — only to find out it would cost $53,000 each year to main­tain.

The soft­ware from the Cen­ters for Dis­ease Con­trol and Preven­tion was in­tended to com­ply with fed­eral rules and bet­ter track cases of child­hood lead poi­son­ing. But Deb­o­rah Ni­chols, the Health Depart­ment’s chief op­er­at­ing of­fi­cer, said she wouldn’t agree to con­tinue the project in a Nov. 20 email to state Of­fice of Man­age­ment and En­ter­prise Ser­vices Chief In­for­ma­tion Of­fi­cer Bo Reese and oth­ers. It was never clear how the depart­ment was go­ing to pay for the soft­ware, or why it couldn’t find a cheaper op­tion, she wrote.

“It is too late for the $382k but I need some trans­parency around why we would ever spend $53k on main­te­nance,” she wrote in the email.

A project the size of the CDC soft­ware would ac­count for only about 1 per­cent of the depart­ment’s roughly $30 mil­lion in over­spend­ing, but it does of­fer a win­dow into how the fi­nan­cial sit­u­a­tion could have gone awry.

Ni­chols, who was chief op­er­at­ing of­fi­cer at the depart­ment from Au­gust 2015 to Novem­ber 2017, told a House in­ves­tiga­tive com­mit­tee in De­cem­ber that top of­fi­cials wanted to do as much good for the pub­lic as pos­si­ble, and they didn’t grasp that they were out of money. The depart­ment over­spent on pay­roll and in­for­ma­tion tech­nol­ogy, and of­fi­cials didn’t al­ways un­der­stand the fi­nan­cial obli­ga­tions they were tak­ing on, she said.

The Health Depart­ment’s lead­ers were ea­ger to draw down fed­eral funds for their pro­grams, Ni­chols said, but didn’t think through how much they were com­mit­ting them­selves to spend. Fed­eral grants usu­ally re­quire states to con­trib­ute match­ing funds, though the size of the match varies.

“It’s re­ally great that you can spend $200,000 and get $2 mil­lion, but if you don’t have the money to spend for that state match, then from a pure busi­ness point, you shouldn’t be spend­ing it,” she said.

No one has al­leged that any Health Depart­ment of­fi­cials em­bez­zled or used funds to give them­selves perks like new of­fice fur­ni­ture or lux­u­ri­ous travel.

The Health Depart­ment’s pay­roll in­creased by about $25 mil­lion, or 19 per­cent, from bud­get year 2011 to 2016. Rev­enues didn’t keep pace, and de­clined in some cases, but the depart­ment didn’t use lay­offs or other cuts to bal­ance the bud­get.

Ni­chols at­trib­uted most of the in­crease to hir­ing more people, rather than giv­ing pay raises.

“When pro­grams would have their fund­ing cut and there was per­son­nel in­volved, there was a re­luc­tance to let those people go,” she said.

It wasn’t al­ways clear what the depart­ment was get­ting for its tech­nol­ogy spend­ing, Ni­chols told law­mak­ers. The Of­fice of Man­age­ment and En­ter­prise Ser­vices, which pro­vides in­for­ma­tion tech­nol­ogy ser­vices for state agen­cies, didn’t have a “vested in­ter­est” in re­duc­ing costs for IT projects, she said, and Health Depart­ment of­fi­cials also tended to fo­cus more on what they thought an up­dated sys­tem could do for them than on its price.

“It’s like deal­ing with a sales force, al­most. They have to have this sys­tem,” she told law­mak­ers. “It was noth­ing for a project to cost $200,000,

$300,000.”

Bo Reese, chief in­for­ma­tion of­fi­cer at state Of­fice of Man­age­ment and En­ter­prise Ser­vices, said con­trol­ling costs is im­por­tant to the agency. He es­ti­mated it had re­duced the Health Depart­ment’s costs for core tech­nol­ogy ser­vices, like in­ter­net and phone con­nec­tions, from about $10 mil­lion to about $6.5 mil­lion.

The Health Depart­ment made its own de­ci­sions about which tech­nol­ogy projects to pur­sue, Reese said, though he tried to of­fer some guid­ance.

“I do not con­trol the busi­ness de­ci­sions that they make,” he said. “I can’t go twist their arm.”

Waste also ap­pears to have been a prob­lem. An Oct. 16 memo said the depart­ment had spent

about $8 mil­lion pre­par­ing for three in­for­ma­tion tech­nol­ogy projects and build­ing ren­o­va­tions since 2009, but aban­doned all four projects — mean­ing the up­front in­vest­ment had pro­duced noth­ing.

By the time the bud­get prob­lem came to light in 2017, it was too large to fix without sig­nif­i­cant lay­offs, Mike Romero, who was chief fi­nan­cial of­fi­cer from April 2017 to Jan­uary 2018, said in an in­ter­view. If the depart­ment had laid off small num­bers of people or made other ad­just­ments when rev­enues went down, it might have been able to bal­ance its bud­get while spar­ing the most im­por­tant ser­vices from cuts, he said.

“I think it had been far gone for a long time,” he said.

It’s re­ally great that you can spend $200,000 and get $2 mil­lion, but if you don’t have the money to spend for that state match, then from a pure busi­ness point, you shouldn’t be spend­ing it.” Health Depart­ment’s chief op­er­at­ing of­fi­cer

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