$1 billion later, financial system still not finished

In 2005, when Arnold Schwarzenegger was in his first term as governor and the iphone had yet to be introduced, state officials came up with an idea to develop an integrated California government computerized budget system.

The following year, the scope was expanded to connect the state’s accounting, budgeting, cash management and procurement into a single modernized and transparent system to track hundreds of billions of dollars of spending.

In 2012, the Financial Information System for California, dubbed FI$CAL, was slated for completion in 2016 at a cost of $620 million. Today, with the cost exceeding the latest $1 billion estimate, the project remains only partially done. Deadlines in 2016, 2017, 2019 and 2020 were missed.

And now the project — currently being overseen by a committee representing Gov. Gavin Newsom, state Controller Betty Yee and state Treasurer Fiona Ma — will blow through the July 2022 target date with no new deadline set, according to the latest scathing report on FI$CAL from the California State Auditor’s Office.

Meanwhile, state agencies are struggling to use the parts of the system that are operational. Once again, the government of the state that’s home to Silicon Valley has demonstrated its technology ineptitude.

Apple is now selling the iphone 13. But California government, from the DMV to high-speed rail to FI$CAL, repeatedly demonstrates its inability to deliver big projects.

FI$CAL was originally meant to improve the state’s financial controls by speeding the timeliness of information. But according to the auditor’s report, released last week, questions about the integrity of the new system have cast doubts on the reliability of the data. And the integration of the old systems with the new one has led to the state’s publishing late financial statements three years in a row.

While that might seem like insider stuff for financial wonks, consider that the delays could end up costing taxpayers big money. Late financial statements could endanger receipt of federal funding and weaken California’s high credit rating, which would increase the state’s borrowing costs.

And then there’s the cost of the system: $1 billion is real money. Taxpayers should get what they’re paying for.

A big reason for the latest delays, according to the auditor’s report, is the need for the state Controller’s Office to verify that FI$CAL data is accurate by comparing it to the numbers in the legacy system. Staffing shortages have led to a backlog in that process.

While the deadlines keep getting pushed back, the scope of the project has been narrowed. Or, put another way, what constitutes completion has been redefined.

Key features, such as statewide loan accounting, have been jettisoned or indefinitely postponed. That means that the state controller must continue using the legacy system as well as FI$CAL. That’s concerning “given that one of the original goals of the project was to replace standalone systems with a single, integrated system,” according to the audit.

So much for efficiency. Then, as anyone who has undergone a computer system change at work knows, there comes a time when the vendor leaves and inhouse staff must take complete control. The problem in this case, according to the audit, is that the state has struggled to hire and retain workers qualified to do those jobs.

Finally, there are deficiencies in Fi$cal’s safeguards, concerns the auditor mentioned in past reports and repeated last week. As a result of those deficiencies, “the state may not be able to rely on the financial reports FI$CAL generates.”

It’s been nearly 17 years since the inception of this project. And, right now, it’s not even good enough for government work.