We withhold recommendation on $47.6 million ($23.9 million General Fund) proposed for the Statewide Automated Welfare System (SAWS) and the Interim SAWS (ISAWS) project in 1995-96 because (1) the proposal is incomplete and inconsistent with other assumptions in the budget, (2) the department has not provided supporting documentation for part of the proposed expenditures, (3) the department has encountered difficulty in maintaining the existing system, and (4) the Bureau of State Audits will be reporting to the Legislature in April on the findings of an independent evaluation of SAWS. We recommend that the Department of Social Services (DSS), at budget hearings, address the issues raised in this Analysis and address the findings of the independent evaluation.
Background. The SAWS is a major project of the DSS to establish a statewide computer-based system for administering various health and welfare programs. The project is estimated to eventually cost over $800 million over a 12-year period. It is the largest and most costly computer-based system ever undertaken by the state. The DSS has proposed to base the SAWS on an automated welfare system developed in Napa County, called NAPAS. Los Angeles County, however, is authorized to implement its own automated welfare system, called LEADER.
Interim SAWS. In early 1994, the department began implementation of an interim system (ISAWS) in 14 small to medium-sized counties that have approximately 10 percent of the state's welfare caseload. The 14 counties are Butte, Colusa, Glenn, Kern, Kings, Lassen, Madera, Marin, Mendocino, Plumas, San Joaquin, Shasta, Tehama and Yuba. The ISAWS project is an effort to verify the costs, benefits, and technical feasibility of adopting NAPAS for statewide implementation. As of November 1994, seven counties were in various stages of installation, case conversion and operation. The remaining seven counties will begin implementation in 1995.
The Health and Welfare Agency Data Center (HWDC) is providing computer support for ISAWS through contracts with the consulting services, hardware, and software vendors that developed NAPAS. The ISAWS project was originally estimated to cost $78 million over 58 months and generate $68 million in benefits resulting from reduced error rates and maintenance and administrative savings, thus resulting in a net cost of $10 million.
Costs Increase by $31 Million. In January 1995, the Department of Finance approved the latest set of changes to ISAWS proposed by DSS in a Special Project Report (SPR). According to the SPR, the costs will increase by $31 million (40 percent) resulting in a revised cost of $109 million, and the net project costs will grow by $21 million, from $10 million to $31 million. Some increase in the ISAWS project cost is attributable to a net reallocation of certain components from "SAWS" costs to "ISAWS" costs. However, our analysis indicates that the primary reason for the increase in the projected ISAWS costs are various errors in planning for the 14-county implementation of the project. Based on the increased costs to ISAWS, we estimate that the 12-year costs of SAWS, as currently proposed, will exceed $1 billion. Based on our review, we have identified the following problems with the projected ISAWS costs.
Problems With Initial SPR. We've identified two major issues with the department's initial SPR.
Problems With the Most Recent SPR and Budget Proposal. We have several concerns with the department's budget proposal, as well as the latest SPR.
Problems With System Maintenance. At the time this analysis was prepared, the department had accumulated a backlog of over 100 high-priority Major Change Requests (MCRs) from the ISAWS counties. Some were technical in nature; however, a large part of the backlog consisted of law and regulation changes that could affect a client's program eligibility or grant level. Furthermore, some of these MCRs had been on the list for two years or more. The department acknowledges that it has had problems in this area and indicates that it has modified the process to address MCRs by providing for more county involvement. At the time this analysis was prepared, however, it was unclear whether the department's response to the backlog would enable the MCRs to be addressed in a timely fashion and ensure that the changes are made by the vendor. We also note that it is unclear if the department has sufficient staff, or staff in appropriate classifications, to address this issue.
Independent Evaluation Due in April. During its deliberations on the 1994 Budget Bill, the Legislature expressed concerns with the increases in estimated costs of the SAWS, the technical solution adopted by the department, and the statewide procurement strategy. As a result, the Budget Act appropriated $475,000 for the Bureau of State Audits to contract for an independent evaluation of the state's approach for SAWS. The evaluator is required to determine whether one computer hardware or software system for all the counties is the most cost-effective choice for welfare automation. In addition, the evaluation will include a review of the NAPAS, MAGIC (the Merced County automated welfare system) and LEADER systems, and a review of a centralized state-operated system versus a decentralized county-operated system. The evaluator is also required to review a pilot project which would test an alternative method to implement SAWS. The bureau indicates that the findings will be available in April 1995.
Conclusion. Because of the issues noted above, and the need to consider the evaluation findings, we withhold recommendation at this time.
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