After four years and $130 million, a software system aimed at improving the state’s outdated financial reporting functions has yet to fulfill its promise, according to a recently released state auditors’ report.
Since the new system — called Core-CT — went live October 2003, Comptroller Nancy Wyman has missed every deadline required by the state and federal governments, and the Securities Exchange Commission in the submission of Connecticut’s year-end audited financial reports, states a critical 48-page report released by the State Auditors of Public Accounts last month.
The auditors also criticized Wyman’s failure to produce a monthly balance sheet for the general fund because of system problems with Core-CT.
“If you can’t do monthly statements, by the time you have to do the year-end statements it becomes more difficult,” state Auditor Robert G. Jaekle said. “We have been issuing comptroller’s audits every year on its financial operations. It is fair to say the critical tone of our reports have been getting edgier. … There are a lot of repeat findings, and that in itself results in a little more of an edgier report.”
The report repeated nine of 14 problems previously identified by the auditors.
“I asked somebody high up … when will we know this system is working right? The answer was, ‘When it is able to produce what the old system was producing.’”
Responded Jaekle, “I don’t consider success when you are $130 million into a new system to have it just do what the old system could do. It has the potential to do much better, but at the moment, it is not even doing what the old system had been doing.”
Treasury Problems
The system has been problematic not only for the comptroller, but also for the state treasurer.
The auditors pointed out that a component of the new software system necessary for the treasurer’s office to reconcile cash transactions and bank accounts was not purchased because of its additional cost, estimated to be about $1 million.
Absent that piece of software, the auditors found that “the inability of the treasurer to perform timely cash reconciliations made it impossible [for the comptroller] to prepare a monthly balance sheet.”
Howard G. Rifkin, deputy state treasurer, disputes the auditors’ — and comptroller’s — contentions that blame the treasurer for the comptroller’s failure to file monthly audited financial reports in a timely manner.
“It is a little odd to us,” he said. “We don’t understand how our reconciliation process impacts the comptroller. In the best of circumstances, there is no relationship.”
He does agree that there are problems with the Core-CT software.
“To make the Core-CT system truly functional, how much more than what is already budgeted will it cost? … There were expectations about what this software could do and there are obviously glitches that need to be fixed. This bank reconciliation area has not been completely fixed. We are waiting for that.”
Deputy Comptroller Mark Ojakian asserted that the treasurer and comptroller’s offices are working cooperatively together to resolve “this issue,” and that there is “no finger pointing from our perspective.”
There hasn’t been much in the way of finger pointing at the software vendor, either. Despite problems with the system, the auditors reported that Wyman and the state Department of Administrative Services reached a settlement agreement last May with the software vendor, Oracle, which acquired the original vendor, PeopleSoft.
In exchange for $1.6 million in technical support credited against future costs, the state released Oracle/PeopleSoft from any claims for damages arising from the disputes over the quality, performance and functional features of the financial reporting system, Core-CT.
Ojakian said the deal recognized that the new system satisfied the state’s expectations, up to that point.
Although Core-CT received poor marks two years ago from the state’s rank and file in a 2005 auditors’ survey, Ojakian maintains the software is now generally performing as expected, even though the audited financial reports have never been filed on time.
He emphasizes that unaudited reports are filed on time, and that those have produced less than a 1 percent discrepancy between the final audited and early unaudited versions.
Problems Expected
“Even though we have been behind, with a new system, this is bound to happen,” Ojakian explained. “This is a huge technological process. It is probably unparalleled in the history of our state.”
Core-CT replaced 20 separate financial reporting systems throughout the state, he said.
“Clearly, there have been bumps in the road. But [Core-CT] is stable,” he added.
So far, the comptroller’s failure to file state financial year-end reports on time has not jeopardized Connecticut’s credit rating or an estimated $5.5 billion in federal funding.
“We are fortunate,” said Jaekle, who co-issued the report with State Auditor Kevin P. Johnston.
With $1 billion stashed away in the state’s rainy day fund, rating agencies and the federal government haven’t expressed concerns about Connecticut’s finances, despite numerous requests by Wyman for deadline extensions in filing state financial reports, he said.
Initially, Wyman asked for a 15-month extension. Last year she requested a nine-month extension. Ojakian expects the delay to be just two months this year.
The auditors initially attributed the comptroller’s failure to file financial reports on time to a learning curve that comes with the implementation of a new software system.
More than three years later, that excuse “no longer applies,” Jaekle said.
But Okajian maintains that the state has made great strides in addressing a lot of the auditors’ concerns and recommendations. Since the auditors’ September 2006 review of the comptroller’s office, monthly balance sheets for the general fund are now being done on time, he said.
“We are very pleased with the way the system is operating,” he added. “We are able to achieve a greater degree of reporting capability at the user level.”
Ojakian pointed out that consultants from Stamford-based Gartner reviewed Core-CT this year and found that the state received value for its investment in the system, “but is not currently receiving full value.”
The Gartner report also noted that it is difficult to quantify the value of the system because no cost baseline or targeted improvement metrics were developed. An early retirement program in 2003, as the new system was launched, and a “consistent, closed loop communication of decisions, and their impacts, did not occur between the Core-CT team and the agencies,” which were among the reasons Gartner gave to explain why the state has not been able to fully leverage Core-CT’s potential benefits.
