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With accounting system ‘on the ropes,’ Arizona moving forward with upgrade

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PHOENIX – The state’s accounting system is on life support, but thanks to funding allocated last year by the governor and the Legislature it’s getting an overhaul that officials say is long overdue.

Gov. Jan Brewer and the Legislature last year designated $80 million, to be disbursed over four years through fiscal 2016, to upgrade the Arizona Financial Information System.

State Comptroller D. Clark Partridge said the current, 20-year-old system has become increasingly bogged down in recent years to the point that it’s difficult to maintain.

“This one’s lasted a lot longer than the last one had, but on the other hand, Arizona has grown so much,” he said. “We’ve just flat-out outgrown the system.”

Although the system was implemented in 1992, its core is four decades old and was programmed using COBOL, or Common Business-Oriented Language, which dates back to 1959. The Department of Administration’s General Accounting Office has only two programmers on staff who know how to work with it.

The upgrade, a complete overhaul, is in the final planning stages as the state is in negotiations with two vendors. Partridge expects work to begin in July, when the state and its partner company will begin the two-year process of configuring the new system. The system is slated to go live July 1, 2015.

The new accounting system will aggregate information from every state agency except for the three state universities.

“All of those systems are aging, and this will allow the state the opportunity to get one statewide system to meet those needs, lower the total cost rather than replacing every one of those systems individually,” Partridge said.

Brewer last month recommended that the Legislature allocate $30.6 million from the general fund to IT infrastructure upgrades in 2014.

Rep. John Kavanagh, R-Fountain Hills, who chairs the House Appropriations Committee, said the proposal includes an additional $20 million toward the accounting system update.

Legislators, he said, are awaiting details about why the extra funds would be necessary.

“We’re certainly open to that, but we would like to see the reason for the additional $20 million expense,” he said.

Brewer’s recommendation comes at a time when other sectors are vying for project funding that would come out of the state budget. Arizona Superintendent of Public Instruction John Huppenthal is seeking $35 million to replace the state’s outdated Student Accountability Information System, which tracks student data.

“Everyone comes to us with a budget request that is absolutely, positively, undoubtedly necessary, and we don’t have the funding to cover it all,” Kavanagh said.

The accounting system, however, tops the priority list when it comes to information-technology funding, he said.

“The system is extremely old; they have to go to nursing homes to get COBOL programmers,” he said. “The question is, ‘Can it be stretched out a couple more years?’”

Serena Unrein, public interest advocate with the Arizona Public Interest Research Group, said the urgency of the upgrade merits a significant investment.

“It was definitely time to update the system, and I think it had been incredibly hard to justify that kind of expense when the state was facing such a tough budget situation year after year,” she said. “But when you think about how devastating it would be to the state being able to function, I think having an accounting system is worth it.”

In fiscal 2012, the state’s accounting system processed 9.4 million transactions that included $31.7 billion in revenue and $30.3 billion in expenditures.

Mike Mucha, a senior manager with the Chicago-based Government Finance Officers Association, said in an email that in the past five to seven years many states have begun large IT-system improvement projects.

“Many states are seeing return on investment resulting from efficiencies or features made possible by the new system,” Mucha said, including transparency initiatives, automation of business processes and faster financial reporting.

Partridge said the General Accounting Office doesn’t yet have a price tag for Arizona’s new system because negotiations are ongoing.

“As we come to the conclusion of some of our contract awards, we’ll have a better estimate of how much this project really will cost, and then we’ll have to adapt and adjust accordingly, have some conversations about how do we fund the project and make sure we have all the things we need to deliver the value to the state,” he said.

Partridge said although the GAO had sought the upgrade for years, it became apparent two years ago that it was “on the ropes.” When the GAO tried to close the system for the fiscal year, the programs failed to run. Programmers and staff worked over the weekend to find a solution, but the threat of a shutdown forced the issue of replacing the antiquated software.

“We’ve known the system is getting weaker, but we’d never really had a scare like we had that one year,” Partridge said. “So when that started, we knew that we were putting fingers in the dikes.”

In the end, he said, policy makers and the public will benefit from an upgraded, integrated system.

“Having that information available to help make good, informed decisions is so valuable,” Patridge said.