State’s Financial Reporting System Is “High-Risk,” Auditor Says

The state government’s financial reporting and accountability “is now a high-risk issue because of urgent concerns regarding the State’s effort to update its financial information infrastructure,” the state auditor reported January 30.

The auditor explained:

“The State has focused significant efforts on a project known as the Financial Information System for California (FI$Cal), a $1.06 billion information technology (IT) project that is currently under the eighth revision to its scope, schedule, and budget. Since numerous state entities began implementing FI$Cal, they have struggled to submit timely data for the State’s annual financial statements, an issue that could ultimately limit the State’s ability to sell bonds without increased borrowing costs. Additionally, state agencies have incurred tens of millions of dollars in costs to implement FI$Cal. Finally, the FI$Cal project will lack key functionality when the project ends because of reductions in the project’s scope over the last few years, and the current project plan update may eliminate key oversight before the FI$Cal system is complete. For these reasons, the efficiency and effectiveness of the State’s ability to report on its finances is an issue of significant risk to the State.”

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