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A bloody mess

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* A new Auditor General’s report found that the state uses 263 different financial reporting systems

Thursday’s audit says many of the systems are “archaic.”

More than half aren’t compatible with each, which requires data to be entered manually when information from one system is going to be used in another. That increases the chance of mistakes.

It takes Illinois more than a year to compile a final spending report after each budget ends. Auditor William Holland says that could cost the state money lowering Illinois’ bond rating.

* You can read the audit by clicking here. There’s much more

• Negative Factor Affecting Bond Ratings. The audited financial statements contained in the CAFR [Comprehensive Annual Financial Report] are one of the primary documents used by the bond rating agencies when assessing the State’s financial condition. The bond rating agencies view negatively the late release of the audited financial statements. Illinois’ untimely financial reports have been highlighted as negative factors in two recent reports issued by Moody’s. […]

• Negative Impact on Federal Funding. Each year, the State of Illinois depends heavily on funding received from the federal government. In fiscal year 2009, Illinois expended $23.7 billion in federal awards. Officials from the federal Department of Health and Human Services, which is the federal oversight agency for Illinois, noted that, although it was unlikely that a State would lose its federal funding, untimely financial reporting could have an effect on the amount of discretionary funding received. In May 2010, the Illinois Student Assistance Commission received a letter from the U.S. Department of Education regarding the single audit. The letter stated that if the audit was not submitted within 15 days, it would be classified as missing. The letter further stated that the Secretary of Education may “…suspend the payment of account maintenance fees, default fees, and claims to an entity that does not submit its audit within the required time period.”

In other words, this is really hurting us.

* Another reason why these reports are so important…

• State Financial Management/Oversight Adversely Affected. Legislative and oversight bodies are one of the primary users of financial reports. When financial reports are not available, legislative and oversight officials are forced to use outdated information or unaudited numbers.

* More details…

In addition to the lack of a centralized GAAP compliant financial reporting system, other factors have an adverse impact on the timeliness and accuracy of financial reporting:

• The Comptroller’s Office is responsible for financial reporting but does not have authority over the agencies from which it collects information. Furthermore, there is no penalty if the agencies do not cooperate with the Comptroller. The Comptroller’s Office and the Governor’s Office should work together to establish financial reporting target completion dates and ensure that such dates are met.

• The State of Illinois has a complex fund structure that utilized an estimated 900 funds in fiscal year 2009. A complex fund structure increases the level of effort necessary to account for and report transactions and increases the risk of errors and omissions.

• Many State agencies have a lack of competent trained staff in the area of financial reporting and reported that the personnel system impedes their ability to hire qualified staff.

* And…

• Agencies reported that only 16 percent of the systems are compliant with Generally Accepted Accounting Principles (GAAP).

• Half of the financial reporting systems in use at State agencies are more than 10 years old.

• Fifty-three percent of the financial reporting systems are not interrelated which consequently requires manual intervention to convert data from one system so it can be used in another.

• The total estimated cost of maintaining the systems in fiscal year 2010 was not determinable. Agencies provided cost estimates totaling $24 million which covered only 56 percent of the systems.

I’ve been reading Auditor General reports like this since I started doing this job, back in 1990. It’s simply amazing to me that Illinois can’t get its act together. Or, maybe I shouldn’t be so amazed. How about disgusted? Yeah, that’s better.

What a mess.

…Adding… And speaking of screwed up numbers, Gov. Pat Quinn’s office recently released a list of past-due bills it owes to vendors, universities, schools, etc. Turns out, the list has lots of mistakes. Here are a few in the Southland

According to the list, the state owes Trinity Services $17.70. But [Rep. Renee Kosel] said the nonprofit agency, which helps the disabled, may be owed more than $1 million.

Dr. Susan Rife, an Orland Park physician on the list for $55, believes that figure is much too low. Her office bills the state for Medicaid patients, and the state is at least six months behind in paying, she said.

“It’s why doctors are refusing patients on public aid,” Rife said. “My office does not take any new patients who are on public aid. Now, if circumstances change with my current patients, we make accommodations.”

Rife said she would be in favor of the state borrowing to pay its vendors but only if it wasn’t from the federal government.

Some 640 Southland creditors were owed $500 or less from the state. About 290 of those are owed $100 or less, but 25 towns and school districts each still await $1 million or more in state payments, according to the SouthtownStar’s analysis.


posted by Rich Miller
Friday, Feb 25, 11 @ 10:26 am


  1. How can anyone trust the accuracy of any state-wide comprehensive fiscal reports? What a mess indeed!

    Comment by Fed-Up Friday, Feb 25, 11 @ 10:31 am

  2. You should update the first link. The one you put up is already dead. Here’s the live one:

    Comment by jerry 101 Friday, Feb 25, 11 @ 10:31 am

  3. Thanks, Jerry. Fixed.

    Comment by Rich Miller Friday, Feb 25, 11 @ 10:33 am

  4. Hmm I wonder how many non essential jobs could be eliminated if this mes was consolidated into 1 financial reporting system. Maybe their are reasons for more than one system but consolidating from 263 to say 10 or so would surely save time money and rescources. Next year I predict at least 300 differnt systems as part of Gov Quinn’s theme of reducing spending buy having a larger budget.

    Comment by fed up Friday, Feb 25, 11 @ 10:39 am

  5. So, when do we get to hear some good news?

    Comment by dupage dan Friday, Feb 25, 11 @ 10:40 am

  6. The first rreaction to this type of audit is to usually move more agency functions to or under the control of Central Management Services. This in turn makes the agency less efficient and less responsive to their constituency. CMS then actually bills the agency for the increased inefficiency. OH, the poor taxpayer if they only knew.

    Mandate a singular accounting method but keep the data gathering/input at the agency level. Keep CMS out of it as much as possible!

    Comment by Leave a light on George Friday, Feb 25, 11 @ 10:41 am

  7. It is interesting that Jack Franks is complaining about the lack of technological capacity.

    Does that mean he (and the other Republicans complaining) are willing to increase spending in order to upgrade the state’s technology infrastructure?

    Comment by dave Friday, Feb 25, 11 @ 10:42 am

  8. I had no idea that there even were 263 different financial reporting systems.

    In concept, at least, don’t you have Central Management Services to avoid this kind of mess?

    Comment by wordslinger Friday, Feb 25, 11 @ 10:42 am

  9. This is the case with all data systems in the state, not just financial. The IT infrastructure used for public benefits is beyond archaic. If a client transfers from one DHS office to another, the physical file - read a paper folder - has to be sent to that new office.

    Part of the problem -I assume this is the problem with financial as well as other systems - is that there is no overall vision/coordination/investment in internal infrastructure. Programs/Departments/Agencies decide to upgrade in their silo or get a grant to get a new system, with no thought or planning as to how it will interact with other systems. This problem is not going to go away any time soon.

    Comment by Montrose Friday, Feb 25, 11 @ 10:43 am

  10. Unfortunately, it takes money to upgrade accounting systems, and the state’s been cutting for the past 10 years. I audit local governments, and a lot of them have really archaic systems as well, but the governing Board’s rarely approve funding for a new system. It always seems like something that might be nice, but isn’t needed (to them). But, these old systems get overwhelmed and cause governments to operate inefficiently.

    Quality information systems are valuable, especially to a big organization. But the State uses some really crummy old systems.

    However, the price tag of implementing an Oracle or SAP system for a single major state agency is tremendous, let alone for the entire state. And, to a lawmaker, spending a ten or twenty million (I have no idea what it would actually cost to implement Oracle for the entire state, but there are the costs for the software licenses, upgrading older computers and servers, linking up networks, hiring consultants and software engineers to customize the software, testing, troubleshooting, and all sorts of other costs, so ten or twenty million may be a reasonable estimate - or I could be way off base - whatever it is, its more than most people would think) on accounting software probably seems like an unnecessary luxury, especially when the Governor wants to cut DHS’ budget by $100 million.

    That said, once such a system was up and running, Illinois government would gain a lot of efficiencies. New headaches as well, but systems like Oracle are exceptionally powerful pieces of software - they don’t just maintain general ledgers and a/p and a/r listings and the like. They can be used in grant management, for HR purposes, inventory management, they can be linked up to allow people from different agencies to access certain information from other agencies (that’s one of the headaches, though - you have to pay people to manage user access) and all sorts of other stuff. I’ve seen some Oracle systems in action - they can do impressive things.

    And the data mining potential, should you want to perform some benchmarking analyses or “forensic” audits is also astounding.

    Comment by jerry 101 Friday, Feb 25, 11 @ 10:45 am

  11. There was an RFP in process to rectify this situation and create a single system but it was cancelled in the first months of Quinn’s administration. They had reached the point of selecting a vendor.

    It was to be called ISSIS.

    Comment by Smiling Friday, Feb 25, 11 @ 10:47 am

  12. Oh, Word. You’re so witty.
    “Don’t you have Central Management Services to avoid this kind of mess?”
    The Oak Park audience is the greatest audience in the world. Don’t forget to tip your server. You don’t have to go home, but you can’t stay here…

    Comment by soccermom Friday, Feb 25, 11 @ 10:51 am

  13. You’re right Rich, these reports are starting to look the same after a while. The systems issues figured in last year’s too. For all of the bloat we think there is in state government, some departments run on legacy systems stretching back to the 70’s, while some reporting is actually done on paper because the systems don’t talk to each other. Paper! A relatively few million invested in new systems for the state would not only pay for itself, but could find millions more in savings just because you could finally see all of the details. How could you ever balance your checkbook if you can’t even find it in the first place?

    Comment by Jeeves Friday, Feb 25, 11 @ 10:54 am

  14. “A relatively few million invested in new systems for the state”

    Try hundreds of millions.

    Comment by Jo Friday, Feb 25, 11 @ 11:00 am

  15. The political fiefdoms do not want to increase efficiency because it reduces the election ‘assistance’ they get during each election cycle.

    I bet there is a ROI of less than 5 years lurking in an upgrade, but whose army will be riffed?

    Comment by Pluotocat03 Friday, Feb 25, 11 @ 11:01 am

  16. I wonder what it would take to square the problem.

    Remember after 9/11 and we learned that the computer systems in the FBI’s various offices weren’t integrated.

    They’re still working on building a unified system. Now the worry is that once it’s done, it will be obsolete.

    Comment by wordslinger Friday, Feb 25, 11 @ 11:03 am

  17. Five years ago Illinois started a very reasonable and cost effective HR and fiscal IT systems upgrade under the “Shared Services Program.” The total payback after implementation was 3.5 years. However, because of Blago’s problems and Quinn’s ineptitude, Illinois taxpayers spent over $4 million on consultants and another $2 million for timekeeping software that was never implemented. It’s a scandal waiting for an enterprising reporter.

    Comment by Louis Howe Friday, Feb 25, 11 @ 11:03 am

  18. - It’s a scandal waiting for an enterprising reporter. -

    Yeah, sounds like a real page turner. Can’t wait to see the movie…

    Comment by Small Town Liberal Friday, Feb 25, 11 @ 11:07 am

  19. So here is how a bill tries to be paid in my agency. I receive the invoice at my location. I voucher it - by hand because there is no computer system - MAIL it to my office in Springfield. My office inputs the voucher into THEIR computer system which prints out a paper voucher. The voucher then goes to CMS and finally gets put into the Comptroller and Treasury systems and then goes through the regular process for payment. How redundantly archaic is THAT?? Why am I messing with it if its a utility bill? (which is a whole different thing - we should be getting a giant discount for all the gas and electricity the state uses) Why isn’t that going straight to CMS? Why am I wasting time vouchering anything? Or my agency, for that matter? Why can’t we just scan in the invoice to CMS and let them do the rest or the work? Why don’t I just keep a running ledger of expenses? Why I am even trying?

    Comment by lincolnlover Friday, Feb 25, 11 @ 11:16 am

  20. Agree with Jerry 101 that upgrade to more powerful large systems is the way to go and can reap many benefits.

    be wary of Oracle. NYC just got out of that and whether you are an Oracle client sometimes determines how difficult it is to implement things.

    brings to mind, though, just what was done or not done by the technology chief who has departed Illinois for Cook County, where he has the same position?

    Comment by amalia Friday, Feb 25, 11 @ 12:09 pm

  21. The PIMCO Total Return Fund is probably the largest bond fund in the world. When its manager, Larry Gross, says he is optimistic about municipal debt in general, but is staying away frm Illinois bonds, we have a very, very large problem.

    Comment by Cook County Commoner Friday, Feb 25, 11 @ 12:16 pm

  22. 263? I bet over half of thoses “systems” are one person and a spreadsheet.

    Comment by Nick Name Friday, Feb 25, 11 @ 1:28 pm

  23. =However, because of Blago’s problems and Quinn’s ineptitude=

    There’s a phrase that should be copied and pasted into every audit.

    Comment by Leave a light on George Friday, Feb 25, 11 @ 1:42 pm

  24. I was involved with implementing the FMIS financial system in Cook County. As has been noted, it takes a lot of money, implementation time, consultants, dedicated staff time from each department, training, etc… over several years until the system is fully in use. Then it is beautiful. Are the legislators and others who complain about the cost and waste in the present State system going to complain about the cost and waste in implementing a central system? If they want magic from day one, it doesn’t happen.

    (Note: I am not talking about the politics of how a central system is actually used. That is another consideration for another time).

    Comment by oakparker Friday, Feb 25, 11 @ 1:43 pm

  25. I have worked for a couple of different agencies, but this comes as no surprise. I would guess that there are even more than 263 but that would include all of the manual processes that people do.

    About 5 years ago, I worked for an agency that affects all state employees. One of there major systems was balanced by employees keeping a huge paper worksheet.

    While at another agency, every time we (IT) wanted to do something to upgrade the accounting systems, the management would not approve it. What we did do is develop systems on the cheap. Although this systems did work, you ultimately get what you pay for. And now that they are over 20 years old, the potential for failure or even finding people to maintain them, continues to grow.

    The other problem is that with the continued exodus of experienced people, the probability of designing an integrated system is incredibly low and would cost some serious cash.

    Comment by RetiredStateEmployee Friday, Feb 25, 11 @ 1:52 pm

  26. AP report by Christopher Wills:
    “State legislators were stunned by the audit’s findings.

    “I think it’s disastrous. What private company with revenues of $33 billion wouldn’t have a unified accounting system?” said Sen. Chris Lauzen, R-Aurora, an accountant.”

    “What private company with revenues of $33 billion” have a major administration change about every 4 years?

    “Rep. Jack Franks, head of the House State Government Administration Committee, ….”It sounds almost Soviet-style, where nothing works,”

    Franks has been around a while, why didn’t he know this was happening?

    Comment by sal-says Friday, Feb 25, 11 @ 3:01 pm

  27. Several agencies I have worked for we had the same problem. Lots of paper balance sheets and when it came to knowledge of GAAP or other financial reporting they denied employees classes or other agency training. They do not want to streamline auditing and by doing it with paper it is easier to hide theft or unethical situations.

    Comment by Ain't No Justice Friday, Feb 25, 11 @ 3:35 pm

  28. The last estimate I saw to upgrade to one financial system was $100 million. The public, in its infinite wisdom, would throw a fit if the state spent that kind of money on “itself.” Never mind that it is absolutely necessary.

    Comment by Demoralized Friday, Feb 25, 11 @ 3:39 pm

  29. This is, in large part, an all 1990s GOP caused problem. As part of the upgrade for Y2K, then Comptroller Loleta Didrickson had a solution to this issue:

    The GOP (and, remember boys and girls, in 1996 Lee Daniels was Speaker and Mike Madigan was Minority Leader, reduced to complaining about House GOP staff “forging” Fiscal Notes) killed her plan deader than a doornail. And although it is unremarked in the article, then Secretary of State George Ryan’s fingerprints were all over the “murder” weapon.

    Louis Howe - Shared Services (or, as the employees call it, “Scared Services”) will never work in Illinois, as the entire funding was premised on the idea that each agency had many people doing the same task (and Shared Services Centers could reduce headcount), when in actuality most agencies have most people doing multiple tasks, most agency specific - the 2007 Shared Services presentation to the Group Insurance Representatives was quite “raucous” … . Filan and Co. actually thought each state office location outside Springfield (prisons, mental health centers, etc) had a full time Group Insurance Representative, when actually those persons spent 90%+ of their time on other matters.

    Comment by Smitty Irving Friday, Feb 25, 11 @ 4:14 pm

  30. Small Town Liberal…While prudently managing the State’s $4 billion plus payroll isn’t sexy stuff, the cost of payroll errors amounts to tens of millions in wasted taxpayer dollars. The public is convinced that government is hopelessly inept and the “Shared Services Program” was another excellent example of good intentions squandered by executive failure to execute.

    Comment by Louis Howe Friday, Feb 25, 11 @ 4:14 pm

  31. Demoralized - not sure if the report noted how much it costs the state in duplicate jobs and especially to consultants since a lot of the agencies have to pay accounting firms big $ to do their financial reporting at year end.

    Comment by Patty R. Friday, Feb 25, 11 @ 4:22 pm

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