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Audit: State fails to track cost savings for big IT projects

Posted February 3, 2015

State Auditor Beth Wood

— An audit released Tuesday says state officials can't back up a projected $1.2 billion in cost savings used to help justify several major technology upgrades.

After examining IT projects across five different agencies, state auditors found limited or no effort to track expected cost savings used for nine different projects. The state spends about $3 billion on technology products and services during every two-year budget cycle.

The audit also notes the State Board of Elections got nothing for the $1 million it paid a vendor to replace its campaign finance system and that agencies need stronger oversight of technology management and purchases.

In their review, auditors examined projects initiated by the departments of Public Safety and Public Instruction and the State Treasurer's Office, as well as the elections board and Wildlife Resources Commission. The elections board and WRC were the only agencies to track the money new technology saved, but they had only limited data and documentation.

Although the agencies include these expected cost savings when they propose new projects, tracking stops once the project gets the green light.

Auditors found the State Budget Office and the Enterprise Project Management Office, housed within the office of state Chief Information Officer Chris Estes, provide neither the guidance nor the tools to track the money new technology might save.

Even the estimates of what the projects might save are problematic, auditors wrote, noting that flawed calculations left one project with projected benefits "based on a complex and unrealistic formula."

To fix those issues, auditors recommended more consistent oversight, new rules that require agencies to tally how much new technology saves and better tools to track benefits and share lessons with other agencies. Also among the recommendations is new legislation "to enhance the transparency and oversight" of state technology projects and clarify the responsibility of the state's chief information officer.

In letters responding to the audit, state agency leaders wrote that they largely agreed with the findings and recommendations. That included DPS Secretary Frank Perry, who noted that better guidance and tools would help agencies like his justify technology initiatives.

"Hard-dollar benefits of our projects that protect public safety are often difficult to count. The value of our statewide VIPER radio system, used by thousands of law enforcement officers, is a good example," Perry wrote. "We believe deciding how to deal with these concerns is a precursor to more rigorous benefits accounting."

After $1 million spent, no new campaign finance system

The audit also notes that an almost $1 million in advance payments to SOE Software Corp., the vendor contracted to replace the state campaign finance system, needs more scrutiny. Since the end of the contract in October 2013, the elections board has so far received nothing in return for the money.

In a letter responding to the audit, State Board of Elections Executive Director Kim Westbrook Strach agreed that her predecessors should not have paid for the project upfront. She said she expressed those concerns to the previous director and the board in 2011.

"In the summer and fall of 2013, we attempted to remedy many of those weaknesses by renegotiating with the vendor but were, unfortunately, unable to reach an agreement," Strach wrote.

She added that her staff reviewed all of its contracts in the summer of 2013 and attended state training to better manage them in the future.

It's not the first time the state has shelled out big money for failed technology. In 2007, officials paid more than $16 million after terminating a contract with Affiliated Computer Services to replace the state's Medicaid billing system.

The state's new system, NCTracks, finally launched in July 2013. Its estimated cost is almost $500 million, close to triple the price of the original ACS contract.

While the botched rollout of the federal HealthCare.gov dominated headlines in late 2013, WRAL News reported that, nationwide, state government IT projects fail nearly 30 percent of the time.

5 Comments

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  • Ginger Lynn Feb 3, 2015
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    And the companies paying the contractors do not care. They just take their slice off the top and bring in more H1Visa contractors in at rock bottom dollar.

  • itsnotmeiswear Feb 3, 2015

    The frequency of lax controls being placed on outside IT consultants and contractors in the private and public sector is staggering. The vast majority of them can't code or plan their way out of a wet paper bag.

  • Ginger Lynn Feb 3, 2015
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    There are still many defects but CSC says everything is "fine" while running all the way to the bank.

  • Eq Videri Feb 3, 2015
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    The state had multiple early warnings about NC Tracks, but launched it anyway. Go figure.

  • hollylama Feb 3, 2015

    "Although the agencies include these expected cost savings when they propose new projects, tracking stops once the project gets the green light."

    The projected cost savings were included to justify getting the money in the first place. If funding is granted without a requirement to track savings...then it doesn't happen.