It was a logical, exquisitely simple idea: Build one single computer system to track and manage California’s bounteous spending of public money.
When work began to modernize the state’s creaky mishmash of financial computer systems, the new super system was supposed to cost $617 million, be complete in four years, take care of all of California’s financial reporting needs — and be so transparent that even regular folks could easily scour state spending.
That’s not quite how things are working out.
Eight years later, the aspirational Fi$Cal system remains unfinished. It has shed or delayed what analysts consider vital functions. Officials have ignored criticisms, and the project’s price tag has officially exploded to more than $1 billion — a figure the state auditor says is woefully misleading, and surely much higher.
Californians are essentially getting less for more, according to a blistering report last month by State Auditor Elaine Howle.
‘Urgent concern’
Howle has been chronicling the mess with Fi$Cal for years, but her latest examination voices “urgent concern” over plans to declare “mission accomplished.” The project’s official end date is June 30, “even though the FI$Cal project will not have implemented promised functionality,” she said in a report to the Legislature.
One columnist has likened it to America declaring victory in Vietnam, then packing up and leaving.
“(T)he updated project plan continues the project’s trend of removing key features from the project’s scope, increasing the budget, and developing unrealistic schedules, resulting in a product that will lack crucial features, such as bond and loan accounting tools, and will not include the transition of the State’s annual financial reporting to FI$Cal,” Howle said.
It might sound esoteric, but failure packs a real-world punch to taxpayer pocketbooks — even beyond the skyrocketing cost of the under-performing project itself.
Fi$Cal is supposed to churn out statewide annual financial statements, an exceedingly complex endeavor involving thousands of individual agencies and legally required for many reasons, not the least of which is to enlighten those who have loaned California billions of dollars for infrastructure projects about the state’s financial health.
But Fi$Cal has been unable to do so.
Credit rating at risk
“(C)hallenges during FI$Cal’s implementation may affect the state’s credit rating and increase borrowing costs,” Howle said.
It turns out that dozens of departments submitted late financial information to the state controller, who puts together those statewide annual financial reports. Many of those late-comers submitted only estimated numbers, not actual figures. And, as of October, even more departments were submitting late financial information, “which may ultimately damage the State’s credibility among investors,” Howle said.
It can hurt its credibility with citizens, too.
Adam Andrzejewski, founder of transparency website OpenTheBooks.com, has been asking states to hand over their checkbooks each year, revealing every line-by-line payment they have made. California is the only one that has not complied.
“Even though it’s home to Silicon Valley, the state government isn’t letting tech drive transparency when it comes to its own records,” he wrote in Forbes. “In 2013, then-California State Controller John Chang rejected our public records request for the state checkbook, telling us: stop asking because the records can’t be located. Today, six-years later — (Controller Betty) Yee is still parroting the same answer.
“It shouldn’t take subpoenas and litigation to force open the books.”
Good intentions
There’s little question that California — high-tech’s home — has a dire need to modernize its systems.
The Legislative Analyst’s Office — which also has chronicled delays with the project — said FI$Cal was supposed to eliminate the need for more than 2,500 department-specific applications, automate time-sucking processes that are now “highly manual,” improve tracking of statewide expenditures, standardize financial practices and make information more readily available to California’s citizenry and business partners.”
A noble, but as yet unrealized, goal.
“The Legislature intended FI$Cal to replace the State’s aging financial systems, implement standardization across all departments, and maintain a central source for financial data. Instead, the state — with the fifth largest economy in the world — will continue to rely on aging technology to ensure accountability and develop key financial statements.”
The Controller’s Office plans to run the “legacy system” in parallel with FI$Cal for the next several years to validate data before turning the old computers off. “Given the complexity of this arrangement, we would have expected the project to develop robust procedures to run both systems simultaneously. However, it did not do so,” Howle said.
The Legislature must step up oversight of FI$Cal to ensure the delivery of key features, as well as greater transparency of project costs, Howle said.
Many state agencies share responsibility for developing FI$Cal, including finance, technology, general services, the state controller and treasurer offices and the Department of FI$Cal itself.
“We greatly value the feedback provided by the State Auditor and take the concerns stated in the report seriously,” said a statement from Shanda Thorntona, a spokeswoman for FI$Cal.
“We will continue to work with her and her team to address those concerns.”
In defense of FI$Cal
Computational bungles are certainly not uncommon in government, or elsewhere, and Gov. Gavin Newsom has vowed to tackle the state’s technology woes.
“The focus of the Department of FI$Cal has always been delivering a quality information technology product for the state of California and assisting our users in managing the changes they are experiencing to their day to day business processes as they learn to use the FI$Cal system,” Thorntona said in an emailed statement.
“As of July 2019, we have delivered 93 percent of the system functionality. There are 152 departments and more than 18,000 end users processing $305 billion in expenditures each year using the FI$Cal system. As a result of having the budget data centralized for the last four years for the first time, the enacted budget has the same level of detail as the Governor’s proposed budget.”
The cost of the system has fluctuated through the years, she said, including a $1.6 billion estimate in 2007, years before contracts were awarded.
The key features referenced in Howle’s report are deferred and not omitted, she said. They will be implemented as part of operations and maintenance during fiscal year 2021, and FI$Cal has extended oversight an additional year as a result.
“We are focusing on delivering the critical functions that will allow us to produce the book of record by June,” she said.
FI$Cal also quadrupled the number of User Support Labs it ran for departments from 172 to 719, cutting the wait time to less than two days, she said.
“The FI$Cal system in its success enforces policies and true accounting practices, promotes government efficiencies and facilitates transparency. The platform and technical services are flexible and can expand to provide additional business functionality and build related systems to meet the state’s business needs,” Thorntona said.
For a sense of scale, the state Treasurer’s Office handles some $2 trillion in government banking transactions each year, she said. And its transparency website, Open FI$Cal, allows the public to look at expenditure data for each department in the system.
“We produce a line-by-line accounting of the expenditures that flow through FI$Cal on our Open FI$Cal site. As more departments transition to FI$Cal for their accounting their data will be added to the site,” she said.
That’s not enough for transparency advocates like Andrzejewski from OpenTheBooks.com.
“Every state across America can produce a complete checkbook of public expenditures,” he wrote. “And taxpayers aren’t just dreamin’ to believe that California can produce a full record too.”