We withhold recommendation on proposed funding for the Child Welfare Services Case Management System ($2.5 million General Fund) and recommend that the department report, during budget hearings, on the concerns raised in this analysis.
Background. Chapter 1294, Statutes of 1989 (SB 370, Presley), requires the implementation of a single statewide child welfare services case management system (CMS). The primary goal of the CMS is to provide a statewide data base, case management tool, and reporting system for the program.
The budget proposes $9.9 million ($2.5 million General Fund and $7.4 million federal funds) for state operations to develop the CMS in 1995-96. The budget also proposes $2.7 million ($0.8 million General Fund and $1.9 million federal funds) for local assistance for the ongoing costs of pilot implementation in 1995-96.
New Special Project Report (SPR) Approved. In June 1994, the Department of Finance approved a new SPR for the CMS project. The latest approved SPR makes several changes to the previous SPR, including:
Needs Not Considered in Original Plan. While some of the changes were due to new federal and state requirements, many were included to address needs that had not been accounted for in the previous SPR. These changes were related to case management, county support, integration of state and county systems, implementation, and other areas.
Costs Higher Than Reflected in the SPR. The previously approved SPR estimated total project costs to be approximately $90 million for a nine-year period. Statewide implementation was scheduled to be completed in January 1994. The new SPR estimates total project costs to be approximately $119 million (an increase of 32 percent), with statewide implementation to be delayed 30 months, to July 1996.
We believe that the $119 million estimate contained in the most recent SPR understates the costs of the project. This is because the SPR fails to include the increased state costs which will occur due to the vendor's contract obligations being reduced by 17 months. Adjusting for this factor, the project will cost $140 million, or $21 million higher than reflected in the latest SPR.
Ongoing Vendor Dispute. The vendor is asking for $147 million (75 percent over the amount included in the new SPR for the vendor's component of the project) to complete the CMS as proposed in the SPR. The department indicates that the vendor's position is without justification. Additionally, the department states that it is pursuing this issue through negotiations.
Delays Could Jeopardize "Enhanced" Federal Funding. Federal law allows states to claim 75 percent federal funding for the planning, design, development, and installation of a statewide automated child welfare system, effective for federal fiscal years 1994, 1995, and 1996. In subsequent years, the federal match decreases to 50 percent.
The new SPR schedule assumes statewide implementation of the CMS by July 1996, which would allow the state to receive enhanced federal funding at 75 percent for these costs. The General Fund costs proposed for the CMS in 1995-96 are based on this assumption. To the extent that the project is delayed beyond this schedule, the state could lose anticipated federal funds which could result in further increases in General Fund costs for the project. The department has indicated that it is considering seeking a federal waiver to extend the time limit on enhanced funding.
Difficulties in Contract Management. The department has experienced difficulties in managing the vendor contract. In addition to the dispute over the contract price, the department has indicated that the vendor has failed to meet certain obligations. The department has acknowledged the need for assistance in managing the contract by including in the new SPR funding for a Quality Assurance Advisor who will help ensure that the vendor complies with all the terms and requirements of the contract. We believe that this assistance would be beneficial.
Recommendation. Depending on the outcome of the vendor dispute, the costs for the CMS in the budget year may differ significantly from the amount proposed. Consequently, we withhold recommendation on the proposed funding for the project and recommend that the department report during budget hearings on the concerns raised in this analysis, including (1) the status of the vendor dispute, (2) the impact of the vendor dispute on the budget, (3) the likelihood of securing federal approval to extend the time period to claim enhanced federal funding, and (4) steps that will be taken to improve contract
Return to Analysis and Perspectives and Issues Page