The auditor’s update to the governor and the Legislature repeats previous themes: FI$Cal has, in effect, moved the goal posts on what constitutes completion of the transition to the $1 billion system, which is ultimately intended to merge state government’s accounting, budgeting, cash management, procurement and other operations into a single, modernized system. And, Howle reasserts, that shifting goal and related financial implications could cause future trouble for the state's already troubled finances.
FI$Cal is a project that comprises the State Controller’s Office, the State Treasurer’s Office, the Department of General Services and the Department of Finance. Representatives of those departments serve as the project’s steering committee.
The auditor’s update, in the form of a letter, cites familiar concerns with the project — but also notes progress. Howle lays out three main points:
- The FI$Cal project office “missed its completion deadline, and its updated plan extends the project schedule, uses a new budget methodology and reflects some scope reductions.” Howle notes: “The project office was unable to complete the project by its June 2020 deadline, further delaying a project that has extended years beyond previous estimates. The governing entities set this deadline in an August 2019 project plan update after the project office missed its July 2019 completion target.”
This section also cites progress in testing of the system’s capabilities, as reported by an oversight contractor. Howle writes: “The contractor observed improvements in test procedures and related error resolution that allowed staff to more efficiently perform testing tasks. Yet, at the same time, the contractor identified areas where the project office should continue working to improve these processes.”
- “The transition to FI$Cal has caused delays to critical state financial reporting for the second consecutive year.” Howle’s letter notes that this has been an ongoing problem that could still cause financial harm to state government: “Agencies transitioning to FI$Cal continue to struggle to produce financial reports on time, a problem that may impact the State’s ability to secure low-cost financing for important projects.”
“The State’s ability to publish accurate and timely financial statements is critical for the State to sustain the trust of financial markets and maintain a high credit rating. A high credit rating helps ensure access to low-interest debt. If the State suffers a downgraded credit rating, it could substantially increase borrowing costs, affecting the State’s ability to pay for debt-financed projects such as schools and levees. The State maintaining low borrowing costs may be particularly important in upcoming years, as the Legislative Analyst’s Office has projected multiple years of reduced state revenue growth from a potential recession related to COVID-19.”
Howle adds: “… Reliable tracking of expenditures is an issue of increasing importance during the COVID-19 pandemic as it helps allow state agencies to take full advantage of federal relief funding. However, as we discussed in our August 2020 update to the State High Risk List … agencies’ struggles with FI$Cal may impede the State’s ability to produce information it needs to satisfy federal funding requirements.”
Separately on Thursday, FI$Cal Director Miriam Barcellona Ingenito published an update in the department’s newsletter noting the release of her department’s 2021-2025 Strategic Plan. It cites the progress made in certain projects and notes gains in technology.
“Staying true to our vision,” Barcellona Ingenito writes, “we are increasing our use of technology as a means to deliver high-quality service and a much-improved customer experience. We boosted the capabilities of FI$Bot with features like artificial intelligence, to help our customers achieve their goals. We are introducing a new cloud-based business intelligence tool to bolster departments’ ability to explore, analyze and report their own data. Additionally, we are deploying robotic process automation, or RPA, in a number of important areas, which can automate many repetitive tasks that workers perform.”
And on Thursday afternoon, in response to a Techwire request for comment on Howle’s letter, a FI$Cal spokesperson issued the following statement from Barcellona Ingenito:
“The focus of the Department of FI$Cal has always been delivering a quality information technology product for the state of California and assisting our end users in managing the changes they experience to their day-to-day business processes as they learn to use the FI$Cal system. Today, FI$Cal serves as the departmental accounting system for 152 departments and more than 15,000 users processing $350 billion in spending each year. The State Treasurer’s Office functionality handles about $2 trillion in state government banking transactions annually. In addition, our Open FI$Cal website allows the public to view expenditure data for each department in the FI$Cal system, increasing state transparency. We will continue to focus on our end users and on delivering the final pieces of functionality that will enable FI$Cal to produce the cash book of record when the State Controller’s Office retires its legacy system. We appreciate the work of the State Auditor and take her recommendations seriously. We look forward to continuing to work with her office as we complete the final phase of this extraordinary project.”
