The 2017-18 Budget

Department of Consumer Affairs

The Department of Consumer Affairs (DCA) includes 40 boards, bureaus, commissions, and programs. Through these entities, DCA licenses approximately 3 million individuals in roughly 250 professional categories, such as doctors, acupuncturists, and cosmetologists. In addition, DCA licenses certain businesses, such as auto repair facilities. As part of its regulatory responsibilities, DCA also investigates complaints and disciplines violators of licensing requirements. Additionally, DCA provides certain services to its boards and bureaus, including staff training, consumer education and outreach, and legal and audit services.

The Governor’s budget proposes $655 million from various funds for support of DCA in 2017‑18, which is an increase of $18 million (3 percent) from the current-year estimated expenditures. DCA is supported by fees and other regulatory assessments.

In this analysis, we discuss our findings and recommendations regarding three proposals for DCA included in the Governor’s 2017‑18 budget: (1) BreEZe Information Technology (IT) System, (2) DCA Organizational Change Management, and (3) Registered Nursing Military Education and Experience. We discuss our findings and recommendations regarding DCA’s two cannabis-related proposals in our recent report, The 2017‑18 Budget: The Governor's Cannabis Proposals.

BreEZe IT System

LAO Bottom Line. The Governor proposes $19.8 million in 2017‑18 (growing to $22.5 million in 2018‑19, then decreasing to $7.7 million annually thereafter) from various DCA special funds for the BreEZe IT system. This funding would support a total of 43 permanent positions as well as various contract and other costs. We recommend that the Legislature approve the Governor’s proposal for 2017‑18, but reduce the 2018‑19 amount by $1 million because the proposed increase in state staff should allow DCA to gradually reduce its reliance on its external maintenance contract. Additionally, since DCA has not yet provided a plan for addressing the IT needs of Release 3 boards and bureaus, we also recommend that the Legislature direct DCA to report at budget hearings on its plan.

Background

Project History. When first initiated, the BreEZe project was proposed to be an integrated, web-enabled enforcement and licensing system that would replace various systems that have been in place at all of the boards and bureaus within DCA. It was proposed to be completed in three phases (or “releases”), with roughly half of the boards and bureaus in the third release. In November 2009, the BreEZe project was approved with a budget of $28 million and an expected completion date of June 2014. DCA selected Accenture as the vendor for the project in September 2011. The first release was launched in October 2013, but experienced various implementation challenges. Notably, according to a report by the State Auditor, most Release 1 Executive Officers reported that BreEZe decreased their regulatory entity’s operational efficiency. In January 2015, the administration informed the Legislature of its intent to cancel the contract with Accenture after Release 2 due in large part to rising project costs, which had grown to $96 million for Releases 1 and 2 alone. The Legislature concurred with the administration’s proposed approach in March 2015, but expressed a desire for closer oversight over the project and for a plan for Release 3 boards and bureaus. In January 2016, DCA launched Release 2 and has since reported that the second release is proceeding successfully.

Funding Provided in 2015‑16 Budget. The Legislature has approved various funding proposals for BreEZe. Most recently, the 2015‑16 budget provided roughly $23 million on a limited-term basis. The proposals included 34 permanent positions, though funding for them was only provided through 2017‑18. During the 2015‑16 budget process, DCA indicated it planned to conduct cost-benefit analyses for Release 3 boards and bureaus in 2016 (after Release 2 completion) and then make a decision about whether entities previously slated for Release 3 would come onto BreEZe or another system.

Governor’s Proposal

The Governor’s budget proposes $19.8 million in 2017‑18 (which would grow to $22.5 million in 2018‑19 and decrease to $7.7 million annually thereafter) to support maintenance of the BreEZe system. The project would be funded primarily from various DCA special funds that come from license fees collected by all of the individual boards and bureaus. The Governor’s proposal funds 43 positions, an increase of 9 positions from the current staffing levels. Of these nine additional positions, five are related to maintenance of the system and four are related to cashiering and the call center for licensees that use the system. The Governor’s proposal for 2017‑18 and 2018‑19 includes funding for various contract amounts, including a continuation of about $4.5 million per year for a maintenance contract with Accenture. According to DCA, this maintenance contract funds about 21 Accenture positions.

LAO Assessment

Minimizing Accenture Contract Worthwhile Goal, but Not Reflected in Proposal. The proposal requests an increase of five additional positions for maintenance of the BreEZe system. DCA indicates that BreEZe maintenance requests have stabilized, and that the additional maintenance staff requested would allow the department to begin transitioning maintenance responsibility from Accenture to state staff.

We concur that reducing the state’s reliance on the Accenture maintenance contract is a worthwhile goal since it is more costly than state staff. However, the proposal does not reflect a commensurate reduction in maintenance contract amounts. DCA indicates that this is because it expects to initiate specific system modification projects in the current and future years, and thus does not want to reduce the Accenture contract at this time. However, we anticipate based on information provided by DCA that the specific system modification projects that the department has identified—for the Board of Optometry and the Board of Vocational Nursing and Psychiatric Technicians—will likely be largely completed by the end of 2017‑18. Accordingly, we expect that the department should be able to begin to reduce its reliance on Accenture starting in 2018‑19 even if it undertakes these additional system modification projects.

Plan for Release 3 Entities Remains Uncertain. While it has been about two years since the decision was made to terminate Release 3 from the BreEZe contract, DCA still lacks a plan for Release 3 boards and bureaus. Furthermore, it indicates that there is currently no defined timeline for the completion of the cost-benefit analyses that DCA expects to undertake before making decisions about whether entities previously slated for Release 3 would come onto BreEZe or another system. The lack of a plan for Release 3 is problematic because Release 3 boards and bureaus are using outdated IT systems that do not fully meet their business needs. We also note that these Release 3 entities have already waited eight years and contributed financially to a new system, and thus should reasonably expect to see a plan for addressing their needs.

LAO Recommendation

Approve Governor’s Proposal, but Reduce Funding for Accenture Maintenance Contract in 2018‑19. We recommend approving the Governor’s proposal for 2017‑18. However, since the department is adding five additional maintenance positions, we recommend that the Legislature reduce DCA’s Accenture contract by $1 million in 2018‑19—the equivalent of roughly five Accenture positions. This funding level would provide DCA with an opportunity to finish the modification projects that are currently planned. If DCA determines that this Accenture contract amount is insufficient to meet its maintenance needs after 2017‑18, it can return in a future year to request additional funding. At that time, the department should have additional information on its maintenance workload and plan to transition from the Accenture maintenance contract.

Require Report on Plan for Release 3 Boards and Bureaus. We recommend that the Legislature direct DCA to report at budget hearings on its plan for moving forward with addressing the IT needs of the Release 3 boards and bureaus, including the timeline for conducting cost-benefit analyses evaluating potential IT solutions. This information is important for the Legislature to have in order to ensure that the department is taking adequate steps to address the IT needs of these entities.

DCA Organizational Change Management

LAO Bottom Line. We recommend that the Legislature reject the Governor’s proposal to provide $1.3 million to conduct organizational change management (OCM) activities at DCA’s 40 boards and bureaus. We find insufficient evidence that specific deficiencies exist at all of DCA’s 40 entities or that OCM will effectively address these deficiencies and result in measureable improvements in outcomes.

Background

The Strategic Organization, Leadership, and Individual Development (SOLID) unit within DCA handles training and strategic planning for boards and bureaus. Since 2015, SOLID has also provided OCM services to DCA entities. OCM involves mapping and reviewing business processes and developing recommendations for ways to improve efficiency and effectiveness. DCA reports that SOLID currently has three assigned staff and two redirected staff working on OCM.

Governor’s Proposal

The Governor’s 2017‑18 budget proposes $1.3 million and ten permanent positions to conduct OCM activities at all DCA’s 40 boards and bureaus. According to the department, this will fund OCM for roughly five to seven boards and bureaus annually. The OCM process for each entity is expected to take the equivalent of about two DCA staff for a full year. The Governor proposes to fund this proposal with the special funds that support these 40 entities. The costs are proposed to be distributed across all of these special funds in proportion to each entity’s share of authorized positions.

LAO Assessment

While we find that the goal of improving the efficiency and effectiveness of the board and bureau operations is worthwhile, DCA has not adequately justified that OCM (1) is needed at all boards and bureaus, (2) has a proven track record at DCA or other state departments, or (3) will produce specific measurable outcomes.

Insufficient Justification of Need. DCA has not provided a compelling argument for the need for OCM. DCA indicates that OCM is needed to improve the quality of work conducted by the department and its boards and bureaus. However, it has not provided evidence of specific deficiencies in the work at the department’s 40 entities in order to justify conducting a staff-intensive effort to improve their performance.

DCA further indicates that there is unmet demand for OCM from boards and bureaus. However, the specific examples provided by DCA generally focus on business process mapping in advance of IT solutions or providing trainings on BreEZe and project management rather than on broader OCM efforts. Thus, it is not clear whether the boards and bureaus have unmet demand for comprehensive OCM services or for more limited support for specific activities.

Insufficient Justification of Value of Organizational Change Management. DCA has not shown that OCM has been an effective tool for improving the performance of state entities. Specifically, while DCA has provided OCM services since 2015, it has not been able to provide evidence that these activities have led to efficiencies or other measurable outcomes at its boards and bureaus. Furthermore, DCA could not provide examples of other departments that have ongoing staffing for OCM and the results they have achieved. Thus, even if deficiencies exist at all 40 boards and bureaus, it is not clear if OCM efforts that DCA proposes would be an effective method for addressing those deficiencies.

Inadequate Identification of Expected Outcomes. DCA has not identified any specific measurable outcomes that would be achieved with these new resources. Accordingly, it is not clear how the Legislature would evaluate whether these resources have been effective at meeting their intended goals.

LAO Recommendation

Reject Governor’s Proposal. We recommend that the Legislature reject the Governor’s proposal because there is insufficient justification that deficiencies exist at DCA’s 40 entities or that OCM will effectively address these deficiencies and lead to measurable improvements in outcomes. To the extent there are needs for other activities conducted by the SOLID unit, such as trainings or business process mapping for future IT projects, DCA can return with a proposal in a future year to fund those activities. Furthermore, to the extent that DCA is able to substantiate the value of OCM in the future, it could return with a proposal that provides that evidence, along with a plan for ensuring that the Legislature has the information it needs to evaluate the effectiveness of the OCM activities on an ongoing basis.

Registered Nursing Military Education and Experience

LAO Bottom Line. The Governor’s 2017‑18 budget proposes $389,000 and three permanent positions to implement Chapter 489 of 2015 (SB 466, Hill). We recommend that the Legislature reduce the Governor’s proposal to provide $130,000 and one permanent position because this lower level of resources better reflects the expected workload associated with implementing Chapter 489.

Background

The Board of Nursing (BRN) licenses nurses and oversees the roughly 140 nursing school programs in the state to ensure that registered nurses are competent and safe to practice. Chapter 489 required BRN to adopt regulations by January 1, 2017 that requires nursing schools seeking approval to operate in the state to have a process to evaluate and grant credit for applicants’ military education and experience. Chapter 489 also required the board to review these policies and the school’s practices at least once every five years. Chapter 489 further requires the board to deny or revoke approval of a nursing school that does not give student applicants credit for military education and experience.

Governor’s Proposal

The Governor’s 2017‑18 budget proposes $389,000 in 2017‑18 (decreasing to $365,000 annually thereafter) and three permanent positions from the Board of Registered Nursing Fund (funded primarily through license fees) to implement Chapter 489. The positions would allow BRN to review school policies and practices regarding granting credit for military education and experience to applicants who have served in the military. Under the proposal, each nursing school would be reviewed every four years.

LAO Assessment

Insufficient Workload Justification. We find that BRN’s estimate of workload associated with reviewing schools pursuant to Chapter 489 appears inflated. BRN indicates that it will take 152 hours—close to four weeks—to conduct each school review. For each school, this includes (1) 120 hours for reading policies and procedures and writing a report summarizing findings, (2) 16 hours for presenting at committee and board meetings, and (3) 16 hours for a site visit. However, BRN has not provided adequate justification that the required review of school policies and practices specifically related to granting credit for military education and experience will take this amount of time. Specifically, we anticipate that these reviews could be conducted largely as desk reviews of school policies, rather than through school site visits. Furthermore, we expect that BRN should be able to conduct these reviews in a relatively standardized manner—for example, potentially using a checklist to verify compliance with BRN’s regulations—that should take significantly less time than BRN assumes.

LAO Recommendation

Reduce the Governor’s Proposal. We recommend that the Legislature reduce the Governor’s proposal from $389,000 to $130,000 and one permanent position in 2017‑18 ($122,000 ongoing). We find that this funding level better reflects the expected workload associated with implementing Chapter 489.