Colorado’s Aging Financial Reporting System Could Fail, Audit Finds

Colorado’s accounting and financial management system is on its last legs and there isn’t enough money or technical expertise to support it, according to an evaluation conducted by the Colorado Office of the State Auditor.

The audit — released Monday, July 11, titled Evaluation of the Sustainability of the Colorado Financial Reporting System — uncovered that the more than 20-year-old system is at an increasing risk of a partial or complete failure, chiefly because it hasn’t had a maintenance contract for 12 years and is instead being serviced by employees set to retire soon, with no viable replacement personnel available to fill the void.

The information comes as no surprise to technology officials in Colorado. Dara Hessee, chief of staff for the Governor's Office of Information Technology (OIT) in Colorado, said the first study regarding the sustainability of the Colorado Financial Reporting System (COFRS) was done in 1999, and the issue has been bantered about since then without resolution.

“We have been having discussions for many, many years about the stability of our financial management system,” said Hessee. “Unfortunately in prior years, there have been huge competing funding priorities, along with horrible budgetary concerns with the state.”

In addition to the financial difficulties, COFRS — which processed approximately $36 billion in state expenditures in fiscal 2010 — runs on the obsolete COBOL programming language. So while new technology professionals are hired in the state, those employees are likely unfamiliar with COBOL and unable to step into the shoes of those retiring that currently service the system.

“The word the auditor used was this would be a ‘career killer’ for someone coming out of college and wanting to work in IT,” Hessee said, who added that if COFRS crashed, it could take more than a week to get the data up and running on a backup system.

The evaluation also spotlighted some additional areas of concern with the financial reporting system, including:

• COFRS cannot gather and process sufficient data to provide citizens with complete and transparent information, such as providing detailed governmental expenditure data to fully comply with the requirements of the Colorado Taxpayer Transparency Act.

• COFRS doesn’t have the capability to support multiple business functions — such as payroll, human resources, procurement and inventory management — or provide managers with access to real-time information.
• Colorado is among the few states in the nation that have not upgraded their primary financial management system to a more modern, integrated system.

Next Steps

Despite the audit’s negative findings, Hessee believed the evaluation would help kick-start discussions to make the maintenance and eventual replacement of COFRS a higher priority within the Colorado Legislature. She revealed that while this year’s legislative session was finished, agencies are currently compiling their budget requests for the 2012-2013 fiscal year, so it’s the right time to put together the fiscal plan to address COFRS’ shortcomings.

Hessee said once the budget numbers are ready, they go over to Gov. John Hickenlooper’s office, where he and his staff prioritize the requests and submit a budget in the fall to the state’s Legislature. The Legislature will ultimately determine the funding levels for agencies in a finalized budget.

“Because OIT and DPA [Colorado’s Department of Personnel and Administration] have been talking internally for a few years now about the concerns we have, this review provides an objective view into the situation and gives us a vehicle to talk about the issue publically with legislators,” Hessee said. “Getting the support of the Legislature in replacing the system is huge and probably the biggest hurdle.”

When asked what type of system the OIT was eyeing to replace COFRS, Hessee said that a plan has yet to be fully developed. She did say, however, that Colorado CIO Kristin Russell planned to work with the National Association of State Chief Information Officers and other partners to find the “most reliable, low-cost solution.”

For now, the focus is firmly on acquiring the funding to tackle the issues at hand with COFRS, Hessee said. She added that the system is “core and foundation” to state government operations in Colorado and the state can’t afford to wait any longer to do something about it.

“The chair of the Legislative Audit Committee said, ‘Good luck with the Direct Budget Committee.’ So there are multiple steps involved here,” Hessee said, alluding to a potential legislative battle. “But we can always point back to this objective third-party review that shows we’re at a tipping point with this system.”