The 2014-15 Budget: Evaluating FI$Cal Project Plan

The 2014-15 Budget: Evaluating FI$Cal Project Plan MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • MARCH 26, 2014 Summary Over the last several years, the administration has been engaged in the design, development, and implementation of the Financial Information System for California (FI$Cal) Project, which will replace the state’s aging and decentralized information technology (IT) financial systems. The project intends to implement FI$Cal in five waves, with more departments and budgetary/ financial functions added with each wave. The project deployed Pre-Wave—the first of the five implementation waves—on July 1, 2013 successfully and without incident. The next stage of the project—Wave 1—is scheduled to begin in July 2014. Over the last two years since the vendor was selected and the development of the system began, project staff reports coming to a better understanding of the magnitude and complexity of FI$Cal. Drawing on lessons learned over this period, the project determined a different approach would be necessary moving forward in order to mitigate the risk of a significant disruption to the project in future years. In January 2014, the Department of Technology approved special project report (SPR) 5, which updates the project plans. The SPR 5 results in a 12-month schedule extension (to 2017-18) and increases the project cost by $56 million—to a total cost of $673 million. We believe that the time and effort that project staff has spent in updating the project plan has reduced overall risk and strengthened FI$Cal’s likelihood of success. Nevertheless, significant risk remains. To enhance legislative oversight, we recommend changes to the timing and content of the project’s statutorily mandated annual report. In addition, we recommend that the Legislature direct the administration to consider establishing a recruitment and retention benefit for project staff to help the project maintain appropriate staffing levels through the completion of the project. Finally, we recommend approval of the Governor’s budget proposal that reflects a reasonable funding plan to implement the updated project plan. 2014-15 BUDGET Background the project’s steering committee. After continued planning and a lengthy procurement that used an The FI$Cal Project. Over the last several years, innovative procurement approach, a vendor was the administration has been engaged in the design, selected in 2012 to configure existing financial development, and implementation of the FI$Cal management software applications to address the Project, which will replace the state’s aging and state’s needs. (Refer to our April 30, 2012 report, decentralized IT financial systems. The FI$Cal The 2012-13 Budget: Evaluating FI$Cal, for a more Project will transform state government processes comprehensive description of the project’s history.) in the areas of budgeting, accounting, procurement, and cash management by (1) eliminating the need FI$Cal Project Status for over 2,500 department-specific applications and (2) enabling the state systems and workforce Pre-Wave Deployment Successful to function in an integrated financial management The project deployed Pre-Wave—the first of system environment. The project is managed by the five implementation waves—on July 1, 2013. a partnership of control agencies: Department of Pre-Wave deployed procurement functionality— Finance (DOF), Department of General Services including requisitions, purchase orders, and (DGS), State Controller’s Office (SCO), and State receiving—in seven state entities. The project also Treasurer’s Office (STO). The project intends to implemented a vendor master file for Pre-Wave deploy FI$Cal in five waves, with more departments entities, the first step in developing a single list of and functionality added with each wave. all vendors that do business with the state. Evolution of the Project. The planning for the The Pre-Wave deployment also triggered the FI$Cal Project began in 2005 when DOF proposed establishment of the FI$Cal Services Center (FSC). an IT project that would implement an internal The center serves as the project’s point of contact financial system for the department. The Budget with departments using the system. Ultimately, Information System, as this system would have the FSC will be responsible for maintaining and been called, was envisioned to better meet DOF’s operating the entire FI$Cal system, including budget development and administrative needs. In offering supportive services to departments. The 2006, project staff proposed an updated project FSC will be deployed incrementally through each plan that significantly changed the scope and of the project deployment waves. All components of governance of the project. Rather than building Pre-Wave were deployed successfully and without a new system exclusively for DOF, project staff incident. recommended that because a majority of state The activities necessary for deploying FI$Cal departments were reliant on aged and inadequate to departments are largely consistent over the technology, there was a need to modernize and various waves, such as engaging departments, replace the state’s entire financial management converting data from current technology systems infrastructure. The updated project plan to FI$Cal, training end users, and testing the proposed increasing the scope of the project to system. Pre-Wave was designed as a pilot to test include developing a single integrated financial these procedures. Although the scope of Pre-Wave information system for the state. The project was was narrow and only a few departments were renamed FI$Cal and would be managed by a impacted, Pre-Wave allowed the project to become partnership of control agencies that would sit on familiar with (1) the opportunities and challenges 2 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET associated with the technology; (2) control agency The state’s Department of Technology and a and departmental technical and organizational third-party technical consultant recently identified landscape; and (3) the project methodology that performance- and capacity-related concerns will be used through the entire project lifecycle regarding FI$Cal’s long-term ability to meet the to analyze, design, build, test, and deploy FI$Cal. state’s budget functionality needs. These oversight As we discuss further below, this pilot allowed the entities are concerned that some of the budget project to gain valuable expertise and draw lessons functions may not be ready for implementation that can inform decisions moving forward. in July 2014, but they agree that the project has made significant strides in the last several weeks to Issues in Upcoming Wave 1 address the challenges associated with the budget Merit Close Attention functions. The oversight entities have not identified Challenges With Wave 1 Budget Functions. significant concerns with the financial functions The next stage of FI$Cal’s deployment—Wave 1—is included in Wave 1. scheduled to begin in July 2014 and will deploy Project Prioritizing Workload for Wave 1. financial and budgeting functions to the FI$Cal The project indicates that despite the concerns partner agencies and a limited number of other of the oversight entities, it continues to make departments. Specifically, Wave 1 is designed to progress towards accomplishing the objectives of deploy (1) DOF’s budget control agency functions, Wave 1 and remains on schedule for deployment establishing FI$Cal as the budget system of record in July 2014. Nevertheless, the project has also (meaning that FI$Cal will maintain the official indicated that some of the budget functionality record of the state’s budget); and (2) department- may not be ready (or necessary) for deployment on level financial functions, including accounting, July 1. As a result, certain budget functionalities cash management, and procurement. The project may be rolled out incrementally after July 1. The is currently experiencing challenges developing project indicates that the delay would have little the budget functions associated with Wave 1. impact on the budget process since certain budget Challenges exist in (1) developing the interface functionality is not operationally required on between the budget and financial functions, July 1 (such as certain functions associated with which will be required to share information; the preparation of the Governor’s budget, which and (2) configuring the budget IT solution to is released annually in January). The project accurately reflect the state’s budget operations. is determining what activities for core budget These challenges have caused delays in building the functions are priorities for Wave 1. This analysis budget functions and are subsequently shortening will inform the development of a contingency plan, the time available for the testing activities in if issues with Wave 1 cannot be addressed in time Wave 1. Although IT projects typically identify for a July 1 deployment. some defects upon initial deployment, testing High Vacancy Rate and Staff Retention Issues prior to deployment is intended to minimize the scope and severity of system disruptions. The Project Has Had Difficulties Filling Vacant FI$Cal Project could be negatively affected if these Positions and Retaining Staff. Staffing difficulties challenges are addressed too close to deployment create risk that an IT project will not meet key and the project hastens testing in order to meet the milestones that affect the project’s schedule and scheduled July 2014 deployment. budget and can ultimately lead to a project failing. www.lao.ca.gov Legislative Analyst’s Office 3 2014-15 BUDGET For example, an independent assessment of the Resources manages the process to establish pay terminated IT Modernization Project at the differentials. Department of Motor Vehicles concluded that Vacancies Cited as Project Risk. Over the staff turnover was a significant contributor to that past couple years, the State Auditor has flagged project’s failure. For much of the FI$Cal Project’s the project’s vacancy rate as a risk that the project history, FI$Cal management has contended with should mitigate. In its February 2014 report, the recruitment and retention difficulties. State Auditor noted that the project has made Many State Departments Have Vacant substantial progress in reducing its vacancy rate Positions. The process of filling vacant positions from 22 percent in November 2012 to about is a normal part of human resources management 14 percent in December 2013. More recently, for employers of any size in both the public and however, the project reported its February 2014 private sectors. In California state government, vacancy rate to be about 17 percent. The project’s departments generally have the responsibility to fill historically high and volatile vacancy rate can vacant positions that have been authorized by the be attributed to (1) a relatively limited pool of Legislature. The percentage of authorized positions applicants with necessary skill sets, (2) obstacles that are vacant is known as the “vacancy rate.” At inherent in the existing civil service process to any one time, a substantial number of authorized hiring qualified staff quickly after positions are positions are vacant in state government. authorized by the Legislature, and (3) high turnover According to data maintained by SCO, the vacancy rates among project staff (including at executive rate for state positions in February 2014 was about levels). Even if the project’s overall vacancy rate 14 percent. Although vacancy rates vary widely were low, sustained vacancies or high turnover of across departments—and can vary throughout key project positions can significantly compromise the year for a single department—the statewide the project. The project has seen critical positions vacancy rate has consistently been around this level remain vacant for sustained periods of time as for at least the past decade. (Refer to our write-ups well as turnover in its leadership positions. A entitled “Vacant Positions” in our Analysis of the pay differential has not previously been provided 2008-09 Budget Bill and Analysis of the 2003-04 to FI$Cal Project staff; however, the project has Budget Bill for a more comprehensive discussion of suggested in the past that providing a retention pay the state’s historical vacancy rate and past efforts to differential could increase the project’s ability to address high vacancy levels.) attract and retain qualified staff. Some positions are especially difficult to recruit Major Components of the or retain qualified employees. These difficulties may Updated FI$Cal Project Plan be due to the location of the job, the type of work performed, low salaries relative to those offered by In California state government, a feasibility other employers, or other factors. In some cases, study report documents the initial justification for the state provides employees with these difficult- an IT project and lays out the project plan, while to-fill positions additional pay on top of what is any significant subsequent changes to the project established for the position’s classification in an plan—including project scope, schedule, and/ effort to improve a department’s recruitment and or budget—are documented in SPRs. In January retention efforts. This additional pay is referred to 2014, the FI$Cal Project submitted, and the as a “pay differential.” The Department of Human Department of Technology approved, an SPR that 4 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET updates the project plans. This was the fifth update departments included in each wave according to (SPR 5) to the project plans since FI$Cal began its SPR 5. planning phase in 2005. The project indicates the Expands Project Scope to Completely Include proposed changes reflect lessons learned since the DGS. The project determined during its planning previous project update (SPR 4) was approved in phase that if a department had an operational March 2012. The last two years have been marked financial management system—or was in the with significant accomplishments, most notably process of implementing such a system—it would the selection of the primary vendor and the be designated as a “deferred department.” In order successful deployment of Pre-Wave. Drawing on that the state’s financial information is centrally lessons learned over this period, the project reports housed, deferred departments will interface their coming to a better understanding of the magnitude current financial management systems with FI$Cal and complexity of FI$Cal, particularly Wave 2 without being direct users of the new system. as planned under SPR 4. Specifically, the project Over time, a deferred department will transition determined the risk associated with the project to FI$Cal as its current system exceeds its useful was too large and decided a different approach life. Other departments are statutorily exempt would be necessary moving forward in order to from ever becoming users of FI$Cal. Figure 2 (see mitigate the risk of a significant disruption to the next page) lists departments that are deferred or project in future years. The project indicates that entirely exempt from FI$Cal under SPR 5. Under the revised plan, outlined below, reduces the overall SPR 4, DGS’s internal financial management risk associated with the implementation of FI$Cal. system was deferred, but the department’s control See Figure 1 for a summary of functionality and agency procurement functions were included in the Figure 1 Departments and Functionality of FI$Cal Waves Under Special Project Report 5a Number of Additional Departments Additional Functionality Pre-Wave 7 Chart of accountsb Master vendor filec Requisition to purchase order Wave 1 23 Department of Finance control agency functions Department-level accounting, budget, cash management, and procurement Wave 2 3 Department of General Services (DGS) control agency functions 50 contracted fiscal services departmentsd Wave 3 2 State Controller’s Office control agency functions State Treasurer’s Office control agency functions Wave 4 68 Public transparency website a Functionality implemented in earlier waves is deployed to new departments as they join the Financial Information System for California (FI$Cal). Functionality implemented after a department originally joined FI$Cal will be deployed to that department as part of the subsequent wave deployments. b Establishes a unique identification number for each business unit, project/grant, and account. c A statewide central source of vendor information that will be used by all departments for procurement, receiving, and payment functions. d DGS offers accounting, budgeting, and financial services to state entities on a fee-for-service basis. These departments are known as contracted fiscal service departments. www.lao.ca.gov Legislative Analyst’s Office 5 2014-15 BUDGET FI$Cal Project scope. The DGS’s internal financial internal financial management system and management system has reportedly reached its 50 contract fiscal services departments that end of life sooner than expected. Consequently, rely heavily on procurement functionality. per SPR 5, the project proposes to accommodate Wave 2 will begin three months earlier a request by DGS to replace its existing internal than previously planned to allow for financial management system with FI$Cal. The 15 months of design and development new updated project plan expands FI$Cal’s scope to of the procurement functions, however, accommodate this. its deployment date is still planned for Revises Deployment Schedule for Final Three July 2015. Waves. The project proposes to change the system • Wave 3. With the updated plan shifting deployment by shifting the bulk of departments SCO and STO control agency functions to the final wave (Wave 4) so that control agency from Wave 2 to Wave 3, Wave 3 is functionality is deployed before departments come expected to (1) begin six months earlier on line. Specifically, the revised project plan makes than previously anticipated and (2) end the following changes to Waves 2, 3, and 4. six months later. These changes allow for • Wave 2. The updated plan decreases the a 24-month design period and align the scope of Wave 2 by shifting the SCO deployment with the start of 2016-17. and STO control functions previously in Wave 2 to Wave 3. The focus of Wave 2 • Wave 4. Under the new plan, all other becomes DGS’s control agency functions, departments previously in Wave 2 and but also includes the replacement of DGS’s Wave 3 are shifted to Wave 4. The final wave of the project will Figure 2 also implement a public Departments Deferred or Exempt From FI$Cal transparency website. Under Special Project Report 5 The plan delays Wave 4’s Deferred deployment from Board of State and Community Corrections July 2016 to July 2017 to California State Lottery Commission allow a full 24 months for Department of Corrections and Rehabilitation Department of Motor Vehicles design and development. Department of Transportation Schedules Expected Department of Water Resources State Teachers’ Retirement System FI$Cal Software Upgrade. Exempt The previous project plan Legislature (SPR 4) indicated a need Legislative Counsel Bureau/Legislative Data Center to upgrade the FI$Cal Judicial Branch software but assumed State Auditor’s Office University of California the upgrade would take California State University place after all waves were Hastings College of the Law implemented. (Oracle— California Housing Finance Agency Public Employees’ Retirement System the developer of the IT State Compensation Insurance Fund system that FI$Cal will 6 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET implement—has released a newer version of the this level for the duration of the project seems software since the project began.) The new plan reasonable given the more complex nature of proposes to schedule the necessary upgrade to the control agency functions that will be deployed in FI$Cal software as part of Wave 3. Wave 2 and Wave 3. Does Not Change Wave 1. The new plan Affects Project Cost and Schedule Relative proposes no changes for Wave 1—scheduled to to SPR 4. The proposed changes to the project deploy in July 2014. reflected in SPR 5 result in a 12-month schedule Requires Longer Period of Heightened extension, as shown in Figure 3, and increase the Staffing Levels. The SPR 4 provided for a project cost by $56 million—to a total project ramp-down of project staff—from the peak level— cost of $673 million. (The increase in project due to a decrease in workload in later waves. As cost is mostly attributed to the proposed levels of a result of Wave 4 expanding in scope, SPR 5 project staff over the additional 12 months.) These requires sustaining the peak level of staff through additional costs also include an increase in project Graphic Sign Off the duration of the project (through 2017-18). vendor cost of $14 million—to a total vendor Under the new plan, total staffing will peak in contract cost of $226 million. The actual project Secretary 2014-15 at 294 positions and is sustained at that costs over the last seven years—from 2005-06 Analyst level through the deployment of Wave 4. Staffing through 2012-13—were $160 million. In 2013-14, MPA then decreases in 2018-19 when FI$Cal enters budgeted expenditures are $85 million. See Figure 4 Deputy its first full year of maintenance and operation (next page) for project costs (including planning (M&O). Although the bulk of departments are and other predevelopment expenditures incurred to shifted to the last wave under SPR 5, reaching date) by fiscal year through 2018-19. a peak level of staff in 2014-15 and sustaining Figure 3 Comparison of FI$Cal Implementation Timeline Under Special Project Report (SPR) 4 and 5 Calendar Years 2012 2013 2014 2015 2016 2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Pre-Wave — 12 Months M&O Wave 1 — 20 Months M&O Wave 2 — 12 Months M&O Wave 3 — 12 Months M&O SPR 4 Wave 4 — 12 Months M&O Pre-Wave —12 Months M&O Wave 1 — 20 Months M&O Wave 2 — 15 Months M&O Wave 3 — 24 Months M&O SPR 5 Wave 4 — 24 Months M&O M&O = maintenance and operation. = go live date. www.lao.ca.gov Legislative Analyst’s Office 7 ARTWORK #140158 Template_LAOReport_large.ait 2014-15 BUDGET LAO Findings Figure 4 Costs for FI$Cal Plan Attempts to Mitigate Project Risk for Under Special Project Report 5 Wave 2 Through Wave 4. Typically, project staff (In Millions) update plans in response to negative project Fiscal Year General Fund Total Funds indicators, such as a project consistently missing 2005-06 $0.5 $0.9 established milestones or tracking expenditures 2006-07 2.2 5.0 above its budget. This is not the case for FI$Cal, as 2007-08 6.2 6.2 the project is on schedule and within budget, per 2008-09 2.1 5.6 2009-10 2.1 12.3 SPR 4. Instead, the update (SPR 5) is an attempt 2010-11 1.8 25.8 by project staff to reduce the risk associated with 2011-12 1.9 21.8 the project and improve the likelihood of FI$Cal’s 2012-13 — 82.0 2013-14 estimated 3.4 85.1 success. The proposed changes reportedly reflect 2014-15 proposed 94.4 106.5 lessons learned in the nearly two years since the 2015-16 proposed 108.6 134.0 vendor was selected and the development of the 2016-17 proposed 79.0 90.0 system began. For example, the modifications to 2017-18 proposed 40.9 59.8 2018-19 proposed 25.6 37.6 the project are described as reflecting the following Totals $368.7 $672.6 lessons. • Align Deployments With Start of Fiscal Governor’s Budget Proposal Year. The project reports that it has come The Governor’s budget proposes an increase to understand that the deployment of of $4.3 million in 2014-15 to expand the project’s waves in July, at the start of the fiscal year, scope to include DGS’s internal financial minimizes the disruption to departments management system as part of FI$Cal. This brings associated with a mid-fiscal year the total 2014-15 request for the FI$Cal Project deployment. to $107 million ($94 million General Fund). • Establish Stabilizing Control Agency Beyond the 2014-15 budget proposal, the Governor Functions as a Priority. Minimizing identifies funding for the project through 2018-19, the number of departments in Wave 2 which includes the design, development, and and Wave 3 is intended to focus project implementation of the project as well as the first resources on control agency functions. year of M&O as outlined in SPR 5. Approval of the These changes may reduce the overall Governor’s proposal allows the project to effectuate project risk because these functions the proposed changes in the new project plan. The are more complex than departmental total cost of the project for 2015-16 through 2018-19 implementations. is $321 million ($254 million General Fund). As shown in Figure 4, this brings the total cost of the • Reduce Repeated Deployments to project (including the first full year of M&O) to Departments. Because control agencies $673 million. affect every other agency and department, there is substantial risk of rework to 8 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET departments by not having control agency wave, we question whether FI$Cal Project staffing functions implemented and stabilized prior will be at adequate levels at that time to actively to bringing on the bulk of departments. engage departments as needed for Wave 4 to The updated plan dramatically expands succeed within the proposed time frame. the scope of Wave 4 by shifting to Wave 4 Under New Schedule, Staff Turnover a Bigger most departments previously planned Risk at Final Wave of Project. Under the revised for implementation in Wave 2 and project schedule, the final wave is more critical Wave 3. This transition and the Wave 3 because of the number of departments included in system upgrade may further reduce risk the wave. In order to stay on schedule while rolling and eliminate the need for retraining out the system to the increased number of users departments’ staff and the adverse impacts in the final wave, the project plans to maintain its of repeated deployments. peak staffing levels through the end of the project. After the final wave, many of these positions will While the updated project plan is associated be eliminated. We expect it will be increasingly with an extension of the project’s schedule and difficult for the project to maintain a constant level an increase in the project cost relative to SPR 4, of staff—let alone at peak levels—as the end of the these changes could potentially be less costly project approaches because (1) employees will look than moving forward with the prior plan. This is for other employment opportunities in anticipation because the previous plan, especially the significant of their project job ending and (2) fewer qualified workload in Wave 2, could have resulted in costly candidates will apply for vacant positions that rework that likely would have disrupted the state’s will soon be eliminated. The likelihood of greater financial systems. turnover and increasing vacancy rates towards Plan Potentially Shifts Some Project Risk the end of the project creates greater risk that the to Wave 4. While we think the modifications to project will not successfully maintain the proposed FI$Cal in SPR 5 reduce overall project risk and schedule and budget in the final wave. Improving strengthen FI$Cal’s likelihood of success, SPR 5 the project’s ability to retain qualified employees— potentially shifts some of the implementation especially towards the end of the project—would risk from earlier waves to Wave 4. Because SPR 5 mitigate this risk. deferred the deployment of FI$Cal for the bulk of Providing Retention Benefit Might Improve departments until after control agency functions Retention Efforts. In an effort to mitigate risk are stabilized, the number of departments included resulting from staff turnover, the state has provided in Wave 4 has increased substantially under the pay differentials for state workers employed by new schedule. The large size of the final wave one IT project in the past. In an effort to address creates greater risk during this wave. The FI$Cal recruitment and retention issues at SCO’s 21st Project staff support departments throughout Century Project (MyCalPays System), the state implementation as the departments participate in provided a pay differential to state workers readiness activities related to changes in business employed by the project. The state has no data to processes and the technical aspects of using the inform decision makers whether or not these pay FI$Cal systems. This time-intensive engagement differentials improved the 21st Century Project’s is necessary to ensure departments are ready for recruitment and retention efforts. We note that staff system deployment. Given the breadth of the final www.lao.ca.gov Legislative Analyst’s Office 9 2014-15 BUDGET turnover is not considered a primary cause of that its completion. While the state may be limited in project’s suspension. (Refer to our March 19, 2014 what types of retention benefits it could extend to report, The 2014-15 Budget: 21st Century Project FI$Cal staff due to civil service rules (for example, Update, for more information regarding that the state likely could not provide outgoing staff project’s history.) hiring preferences upon the completion of the project), we think the administration could explore LAO Recommendations various retention benefits. We recommend that Monitor and Reassess Approach for Wave 4 any retention benefit for FI$Cal staff include an Through Modified Annual Reporting. Currently, assessment of the benefit program’s impact on the the project is required to provide the Legislature project’s ability to recruit and retain qualified staff. an update in February of each year. As part of Measuring the outcomes of a retention benefit this update, the project is required to provide a would help ensure that the benefit is set at an discussion of lessons learned and best practices appropriate level and could be used to establish a that will be incorporated into future changes best practice for future critical IT projects. in project management activities. We think it is Approve 2014-15 Budget Proposal, While important for the Legislature to remain apprised Understanding Inherent Project Risk. The of project developments through the annual Governor’s budget proposal reflects a reasonable report. However, we think the timing of the annual funding plan to implement the updated project report to the Legislature should more closely plan (SPR 5). We believe that the time and effort align with the deployment of FI$Cal waves. As that project staff has spent in updating the project the February annual report is not available to the plan has reduced overall risk and strengthened Legislature until seven months after the project’s FI$Cal’s likelihood of success. Nevertheless, FI$Cal July deployments, too much time may have elapsed involves the development of the most ambitious for the Legislature to address problems arising and complex IT system in the history of the state from the deployment of a wave. We therefore and significant risk remains. In its review of the recommend the Legislature revise the due date for Governor’s proposal and its ongoing oversight the annual report from February 15 to October 15, of the FI$Cal Project, the Legislature should be in better time for the administration and aware of and monitor not only the general risk Legislature to make necessary budgetary changes. inherent in all IT projects but also the shifting of We also recommend the Legislature direct the some risk to the latter end of the project due to project after the completion of Waves 1, 2, and 3 to the substantial increase in Wave 4 departments. identify—as part of the annual report—foreseeable We recommend the Legislature ask the project to challenges with the implementation of future identify the steps it is taking to address the risks waves, particularly Wave 4. inherent in the substantial broadening of the scope Consider Retention Pay Program. Although of Wave 4. Ultimately, we believe that the benefits it has not been conclusively proven that pay of proceeding with FI$Cal development outweigh differentials improve staff recruitment and the risk and therefore recommend approval of the retention on IT projects, we think the Legislature Governor’s budget proposal. Should the project should consider directing the administration make significant changes going forward, a new to develop a retention benefit that rewards state budget proposal would be submitted for legislative workers for staying at the FI$Cal project through review. 10 Legislative Analyst’s Office www.lao.ca.gov 2014-15 BUDGET www.lao.ca.gov Legislative Analyst’s Office 11 2014-15 BUDGET LAO Publications This brief was prepared by Lourdes Morales and Nick Schroeder, and reviewed by Mark C. Newton. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This brief and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 12 Legislative Analyst’s Office www.lao.ca.gov