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California Government Struggles with Technology, State Auditor Identifies High-Risk Programs

California Government’s Chronic Inability to Utilize Technology: State Auditor Identifies High Risk Programs

California’s government is facing significant challenges in effectively utilizing technology, according to the annual update from State Auditor Grant Parks. The report, released recently, highlights several programs and agencies that are categorized as “high risk” due to their deficiencies. While some government functions previously deemed high risk, such as transportation infrastructure, prison inmate health care, and the teachers’ pension system, have shown improvement, the implementation of technology continues to be a persistent issue.

The state’s struggle with technology is closely tied to the Employment Development Department’s difficulty in managing unemployment insurance benefits, another high-risk endeavor, and contributes to the government’s constant delays in producing timely financial reports. These tardiness and incomplete reports are considered high risk issues themselves and are directly linked to technological shortcomings. Although the California Department of Technology (CDT) was established and new procedures implemented to address previous criticisms concerning the state’s ability to develop cost-effective information technology systems, Parks’ latest report questions the management of these projects.

Parks explains, “CDT’s oversight of IT projects has not shown significant improvement and will, therefore, remain on the state’s high-risk list.” He further emphasizes that their audit revealed CDT’s ineffective management of risks associated with complex projects. Despite identifying deficiencies in three out of the four IT projects reviewed, requiring immediate corrective action, CDT failed to ensure that these issues were resolved. The Financial Information System for California (FI$Cal) serves as a prime example of IT failures, with the project experiencing numerous revisions since its inception in 2005. Despite nearly two decades of effort, state entities have struggled to use the system effectively for timely data submission for the Annual Comprehensive Financial Report (ACFR).

The ACFR is a crucial resource that provides stakeholders, including creditors and entities doing business with the state, with reliable information on the state’s annual finances, which involve collecting, spending, and investing hundreds of billions of dollars. Timely filing of the ACFR is also essential for the state to receive federal grants. However, Parks highlights that the 2020-21 report was 12 months late and the 2021-22 reporting is already overdue. Late financial reporting could negatively impact the state’s credit rating, increasing borrowing costs. In fiscal years 2021-22, the state borrowed $5.6 billion in general obligation bonds, and even a slight interest rate increase resulting from a downgraded bond rating could amount to millions of dollars in additional borrowing costs annually.

Despite not receiving significant attention compared to other headline-grabbing issues, such as cultural conflicts, the chronic deficiencies in expensive IT programs have tangible real-world implications. Fortunately, the state auditor is determined to prevent these issues from fading into obscurity.

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