Column: IT overhaul crucial to handling state funds

May 11, 2020 | Honolulu Star Advertiser

By Christine Sakuda

Hawaii expects to receive nearly $5 billion in sorely needed federal stimulus funds, thanks to the collective work of our congressional delegation, state leaders and advocates from every corner of the economy. Even with that staggering influx of funding, Hawaii is sure to feel the gaping hole in our economy caused by a pandemic that no one could have anticipated. But what keeps me up at night is the thought that any of those precious federal dollars — our state’s economic stimulus to recovery — could bypass Hawaii not through incompetence, but because the state’s financial management technology is so antiquated.

Transform Hawaii Government, a broad coalition of people and organizations, recently conducted an in-depth exam of the state’s 43-year-old government accounting system. That’s correct; it was built in 1977. A modern financial management system (FMS) should operate like a common language spoken across all of state government, free of misinterpretation and able to account for every cent.

What we have now is similar to an air traffic controller who sees planes coming in but cannot communicate with them because each pilot speaks a different language. In this chaos, all you can do is “guess” and hope you were close. We deserve better. So how do we get rid of “guesstimates” so policy leaders can make good decisions?

A new financial management system would cost far less than the fines, penalties and additional costs caused by the outdated system’s inability to comply with federal funding and bonding requirements.

The state has a difficult time tracking federal deposits to the grants they received and then tracing those funds to departmental disbursements. If states like ours can’t account for all their spending of federal monies, we could lose 4-7% of these funds, according to federal rules. Maybe that doesn’t sound like much, but 5% of the $5 billion recently received to help in the pandemic amounts to $250 million. Even before COVID-19, the state was receiving about $3 billion in annual federal support; 5% of that $3 billion translates to $150 million down the drain.

The price tag to start modernizing the central government’s financial management system is $17 million. That’s not small change, but it pales in comparison to likely losses, and there is a chance that smaller government agencies would be able to use the same system to create more efficiencies across state departments.

Equally as important, the Legislature and the public have also demanded transparency into how taxpayer dollars are being spent. A new financial management system would allow better visibility into where money is being spent, what financial resources the state currently has, and provide a way of tracking the success of projects by evaluating outcomes against allocated budgets.

People’s trust in government is the fundamental basis of our democracy, and this can only come about through transparency and accountability.

The pandemic illustrates the importance of preparing for unforeseen events. We cannot continue to budget in the 21st century with 20th-century tools. Through the plan laid out by the Hawaii Department of Accounting and General Services and the Office of Enterprise Technology Services to create a modern financial management system, we can get to where we need to be. Modern financial management technology is “shovel ready.” All it needs is funding.