Blog note: one test of a grand jury report's significance may be when a regional newspaper prints a local story.
SALINAS — In the wake of millions in cost overruns due to poor management, inadequate oversight and myriad pay practices, Monterey County officials must immediately start getting a handle on a star-crossed financial and human resources management system in preparation for another upgrade.
That’s according to a 104-page report from the 2018-19 Monterey County Civil Grand Jury released earlier this week. It includes a lengthy chronicling of the county’s spending of more than $40 million over the past dozen years on new and upgraded fiscal management software systems. It made 18 findings and 23 recommendations for how the county mishandled the issue and how it should correct its mistakes going forward with another upgrade expected to be needed within the next four years.
The report dubbed “Enterprise Resource Planning, Costly Lessons from a Decade-Long Systems Enhancement Effort” found the county “made decisions or took actions that needlessly added to the cost of implementation” of the system “critical for effective fiscal management.” The county’s approach must be addressed to prepare for the next pending upgrade implementation according to the report.
It criticized the county for not being “adequately prepared or skilled for a technology project of this complexity,” allowing changes to the fiscal management system involving employee without approval or proper documentation, and acting in “crisis mode” without strategic planning.
Tops among a series of recommendations from the civil grand jury was a call for the Board of Supervisors to take a more active oversight role. It called for the county to begin saving money now and doing other major planning for the next upgrade.
The report also recommended the board hold senior county management more accountable for keeping them updated on the system upgrade process. It also recommended the county assign the next upgrade to the County Administrative Office instead of the elected Auditor-Controller in an effort to enhance accountability.
In 2007 the county officially acknowledged it had to upgrade its already far-outdated fiscal management system. Two versions have been implemented of the ERP software systems. Those systems are designed to create an integrated system of applications to help manage the county’s business and automate many essential functions related to human resources and payroll for a workforce that now numbers more than 5,800, as well as budgeting, financial reporting and technology.
The first was implemented in 2009-10 and the second in 2018, and together they cost about $37 million in development charges and about $3.6 million in related costs such as legal fees, consulting fees, and additional county staff time allocated but not budgeted for the upgrade effort, the report found. Both were completed well above original cost estimates and exceeded their budgets.
According to the report, questions raised early last year by Supervisor Luis Alejo about the ballooning costs of the latest upgrade prompted the civil grand jury to begin investigating.
The report found that the county was told by a consultant nearly 20 years ago that it needed a fiscal management systems upgrade since it had relied on “disparate and disconnected” systems with “inadequate” controls and technology. But the county wouldn’t commit to an upgrade by budgeting money until 2008, well after the payroll system was no longer supported by provider CGI, according to the report.
By the time the upgrade was implemented in 2009-10, the software was already outdated by several years, which would also be true of the subsequent upgrade, according to the report.
When the first upgrade was launched, senior county management decided not to include the hundreds of overtime and special pay calculations matching contractual county employee union bargaining agreements, according to the report, which resulted in employees being paid incorrectly and prompted costly lawsuits, grievances, fines and penalties, and took up to three years to resolve including back pay.
Meanwhile, county officials were attempting to correct the payroll errors by making changes outside the system, and failed to document them or let system provider CGI know about the changes, actions that would end up costing the county more money and time to implement the subsequent upgrade, the report found.
When the county realized it needed another upgrade just a few years later in 2014, so many undocumented changes had been made that it couldn’t even properly describe what an upgrade should include, as part of a request for proposals. The county had to hire a consultant for $570,000 to do that, according to the report.
During the implementation of the subsequent upgrade, the county went through five project managers in three years, causing additional delays, inefficiencies and added costs as each new manager got up to speed, the report said.
The management void prompted the Auditor-Controller’s hiring of consultant eCare in 2015 without the usual bidding process, a move that ended up costing the county about $800,000 – less than half the $2 million the firm sought – before the county board ordered a formal consultant search. Subsequent project manager Plante Moran then took over with no transition from eCare’s management and struggled to get up to speed, spending the full $1.8 million, 20-month project budget within a year.
The report also noted a lack of good working relationships and communication between various senior county officials including the supervisors, helping prompt confusion and disagreement over who should be in charge of the systems upgrades.
As a result of a lack of pre-planning and competent management, as well as the undocumented changes made to the system, the project cost rose from an initial estimate of $4.5 million to nearly $15 million, not including other costs.
Since the upgrades were put into place, the report also acknowledges the “significant improvement” in payroll, finance, overall administrative processes record-keeping and controls, and improvement in the county’s Information Technology department which oversees the fiscal system under director Eric Chatham, who is well-versed in such systems.
But the report reiterates that “proactive planning is critical to identify and implement the optimal solution to meet future Monterey County human resources and administrative needs.”
June 15, 2019
The Mercury News
By Jim Johnson, Monterey Herald
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