Auditor: California budget system overhaul will cost $1B

SACRAMENTO, Calif. (AP) — The cost of California’s vast overhaul of its budget and financial accounting system has ballooned to over $1 billion while next year’s deadline for completing the project is unrealistic, a state auditor’s report said Tuesday.

The Financial Information System for California (FI$Cal) was first envisioned in 2005. It would combine diverse accounting, budgeting, cash management and procurement operations into a single modernized system.

But the project budget has increased by more than $400 million since 2012. The latest plan update this year ignores potentially tens of millions of dollars in additional expenses, such as staffing, related to the transition from older systems to the new one, State Auditor Elaine M. Howle wrote in a letter to Gov. Gavin Newsom and the state Assembly and Senate leaders.

The latest plan lacks transparency about the total project costs and the projected June 30, 2020, end date is based on “a misleading timeline that inaccurately portrays the project as having ended successfully,” the report said.

The update instead removes key features of the project, allowing them to be implemented at some later date — or possibly not at all — leaving a system that lacks “crucial features, such as bond and loan accounting tools,” the report said.

“The project will not have fully achieved one of its central purposes — modernizing the state’s accounting functionality — by the time the governing entities have declared the project complete,” the report said. “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.”

Messages seeking comment from the Department of FI$Cal, which implements, maintains and operates the system, were not immediately returned.

The auditor’s report said more than 20 departments have postponed their transition to the system and instead are using an older one. The agencies include the treasurer’s office, the Franchise Tax Board, the California State Transportation Agency, the state Environmental Protection Agency, the air and water resource boards, the Department of Forestry and Fire Protection and departments that oversee everything from veterans affairs to social services.

The report said challenges during implementation of FI$Cal could hurt California’s credit rating, increase borrowing costs and damage the state’s credibility among investors.

The report recommends that the Legislature order the California Department of Technology, which approves project plan updates, to create an update that includes a budget detailing time and costs for implementing the key features that are being deferred. The report also recommends lawmakers require the Department of FI$Cal to report to the Legislature on all unanticipated costs.

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