OLCC Executive Director Steven Marks and Chief Information Officer Boba Subasic presented the current situation to legislators during the most recent session: the agency lacks the technology to support licensing and compliance for the 17,500 businesses that hold a liquor license; the use of paper forms indicating payment in cash, check or money order; and business records maintained on paper cards updated with correction tape and typewriters.
What's more, the exponential growth of the marijuana industry in the state has outgrown the initial online licensing system, which cannot meet demand, is devoid of a renewal feature and misses key functions like auditing and case management.
The Legislature approved about $6.5 million toward IT modernization across the agency.
During testimony before the Committee on Information Management and Technology in April, Marks said replacement systems are needed for OLCC to achieve the agency’s goal for performance, service delivery and stabilizing, and protecting $1.5 billion in revenue from the sale of spirits and $251 million from taxes on marijuana.
“Liquor licensing has been manual forever,” Marks told the committee. “We’ve had a manual process in place that’s antiquated. … It’s at continued risk of failure. Every month, we have problems with it that put us out of balance, that make our payments that we put out at the end of the month in jeopardy. It seems like that’s a regular occurrence now, so we’re forward to advancing the system.”
OLCC would like a system that marries the Prohibition-era paper licensing system with the new marijuana industry, Subasic told Government Technology. Of the modernization allocation, about $756,000 is earmarked for new licensing systems.
“I think the budget gets us going,” Subasic said. “It’s not just the average kind of agency needing modernization. We have typewriters still being used for the licensing and we have systems that are having a lot of issues, very outdated systems. I think by the end of our presentation, they got a better idea ... where we are, what the challenges are and what the needs are.”
The urgent need for new hardware and software was punctuated by a follow-up report to a 2018 audit by the Oregon Secretary of State’s office.
Audit Manager Teresa Furnish said the goal of the audit was to determine if OLCC had an appropriate security management program and sufficient application controls for the marijuana licensing system and cannabis tracking system.
“Overall, we found the systems functioned as intended, but some process improvements were needed to improve data reliability and ensure that compliance violations would be noticed and addressed,” Furnish said. “We observed many manual processes through the course of the audit. However, our objectives did not include an analysis to determine whether the marijuana systems would be sufficient for the agency’s ongoing needs.”
She said that of the 17 recommendations made in the 2018 report, OLCC has fully or partially implemented 15. She also noted that at the time of the original audit, the agency did not have funding for a CIO, but following the 2018 legislative session, lawmakers allocated money for the hire of Subasic.
“In some ways, the Secretary of State audit buttressed [Subasic’s] presentation,” OLCC spokesman Mark Pettinger said, “because, just as with other audits for other agencies, it calls to light issues that often are the result of underfunded or unfunded support that’s required. We certainly didn’t deny any of the findings. We set out to address them, but we also used that audit to underscore the need for modernization of the IT enterprise in the agency, which is the third-largest revenue generator for the state of Oregon.”
Subasic said he agreed with the findings of the audit and believes all recommendations will be fully implemented once new licensing systems come online.
OLCC Financial Services Director Bill Schuette said the agency has an idea about the cost of new licensing systems, but the real price tag won’t be apparent until vendors bid on an RFP.
“We’re going to initiate these projects, the warehouse management system and the licensing systems, hopefully by the end of the year and then come back [to the Legislature] in February for when the real cost — or better cost — is known for those systems, if they are more than the money that has been allocated so far,” Schuette said.
The warehouse management system, which will modernize the supply chain of distilled spirits, finished its RFI in January, according to the solicitation. About $1.5 million of OLCC 2019-21 budget is currently set aside for the upgrade.
“I think the agency, and certainly people, are looking forward to having an electronic system as opposed to the paper method,” Pettinger said, “but just like our adaptation of the cannabis tracking system, it’s taken a while for people to learn, to adapt and to become fluent in it, and I think that the same thing will happen with all these other systems. So staggering their adaption will probably help with the learning and adaption.”
New systems will be deployed in phases, Subasic said, an approach that is easier to manage and allows employees to adjust.
“We want to make these two different sides of our agency as consistent as possible on both the licensing and enforcement side, but at the same time we are very well aware that we can’t just copy and paste from one to the other because they are very different industries,” he said.
A timeline for the modernization is speculative at this point, Subasic said. But, with the 2019 legislative session over and the approval of the OLCC’s biennium budget, the agency can put in motion months of preparation work.
“We are going to go back to the Legislature next year,” Subasic said. “They wanted us to come back with a better idea of how long this is going to take so really we need to find out who our vendor partners will be and what the solutions look like to get a better idea of the timeline.”
The remainder of the $6.5 million Information Services Enhancement package features a $2.5 million allocation for the implementation of an electronic privilege tax system, modernizing monthly tax reports and payments currently done by paper forms and checks. OLCC is reviewing vendor bids from a recently completed privilege tax system RFP. Lastly, about $1 million is slated for the addition of four full-time IT positions to the agency.
