The Sacramento Bee: Threat to California’s credit grows from troubled $1 billion state accounting program 13_cali_transparency




By Wes Venteicher

A growing number of California state agencies are missing budget deadlines because of a $1 billion accounting program that has major problems remaining unaddressed despite its escalating cost, according to a new state audit.

Up to 62 state government departments missed an October 2019 deadline to submit financial statements to the State Controller’s Office, up from 48 for the 2017-2018 fiscal year, according to the audit published Tuesday.

Those delays threaten the state’s ability to produce its annual financial report on time, which could undermine California’s credit, potentially driving up borrowing costs by billions of dollars, according to the audit.

The program known as FI$Cal, launched in 2005, has repeatedly been delayed as costs rose. That trend is likely to continue even though key parts of the project have been abandoned, according to the audit.

“It requires an aggressive schedule that is already proving unrealistic,” the audit states.

A Fi$Cal spokeswoman said the program has been 93 percent functional since July, processing $305 billion in annual spending and handling $2 trillion in banking transactions for the State Treasurer’s Office.

“We greatly value the feedback provided by the state auditor and take the concerns stated in the report seriously,” spokeswoman Lisa Gray said in a statement. “We will continue to work with her and her team to address those concerns.”

Gray said that one project estimate from 2007 projected the project would cost $1.6 billion.

The program is intended to give California state government a single accounting system, replacing a hodgepodge of systems that developed over time in dozens of departments. 

FI$Cal has been blamed for impeding transparency in the state’s spending, after the Controller’s Office didn’t fulfill requests for wide-ranging data from transparency website The Controller’s Office informed the website that it didn’t keep the records in the format the organization requested. The site has been able to get detailed spending records from all 49 other states, but not from California, according to the organization’s founder.

“Even though it’s home to Silicon Valley, the state government isn’t letting tech drive transparency when it comes to its own records,” the founder said in a Forbes op-ed.

Gray said California provides a window into spending through its Open Fi$Cal website.

A project update earlier this year moved the projected end date from July 2019 to June 2020, while updating its cost to $1.06 billion.

“Without action from the Legislature and the project office, as of the 2020 end date, the FI$Cal project will result in reduced functionality, obscured project costs, and a misleading timeline that inaccurately portrays the project as having ended successfully,” the audit states.

And it could be less accountable in the future to taxpayers and the Legislature, since the contract with an oversight firm ends in January 2020, the audit states, adding that a chief deputy at the project office said he wanted oversight to continue into 2021.

Not that the current oversight is entirely effective, the audit adds. The project updates reported on the California Department of Technology’s website have consistently painted a rosier picture than the auditor has found.

The audit found at least $39 million in unreported spending, noting that the true figure is likely higher.

Among the agencies that likely delayed reporting financial figures in October are the Employment Development Department and the California Department of Education, according to the report.

Gray said Fi$Cal is helping departments prepare the reports through increased training and customer support.

The audit notes that while the late reports pose a continuing risk, the delays in reporting in 2017-2018 ultimately “did not cause a material error in the State’s annual financial statements,” even though the state published the statements two months after a spring deadline.

The state budget has been produced with Fi$Cal since 2016 and about 20,000 state workers now use it, Miriam Ingenito, the program’s director, told legislators this summer. About 250,000 people work for California state government.

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