Revenue Dept. in over its head, audit concludes By Mike Soraghan Denver Post Capitol Bureau

April 12 - The Colorado Department of Revenue got in over its head when it decided to revamp its incometax computer system, auditors said Tuesday.

As a result, state taxpayers lost $10 million and still have a 35year-old computer system.

Republican state senators who requested the audit placed the blame at the feet of Renny Fagan, the Democratic former revenue director.

"It was stupidity on the part of the director," said Senate President Ray Powers, R-Colorado Springs. "Anybody should know better than to try that." "Sandlot politics" Fagan, who was appointed by Democratic Gov. Roy Romer and now works for Attorney General Ken Salazar, called Powers' statement "sandlot politics" and said it is more productive to figure out how to do projects better in the future.

"I hope that the lessons learned from this project will make the other state computer projects more successful," Fagan said.

Fagan started the project in 1994, deciding to replace the antiquated computer system the state used in collecting income taxes. A major goal was to have the new system in place in time for the 2000 date change.

But by late 1998, it became clear the system would not be ready for the date change. Fagan shelved the project and set the department to work on preparing the old system for Y2K.

The department had spent $12 million on the project. Only about $2 million is considered salvageable, so about $10 million was lost.

In between, Department of Revenue officials made some serious mistakes, auditors found.

When they hired contractors, they didn't demand results, the auditors said. Instead, they hired contractors to work a set number of hours. The audit found that the department spent $6.4 million on con tractors without demanding results.

"We're critical of allowing contractors to run amok," state Auditor Dave Barba said.

They also found inadequate cost controls.

For example, the department paid $3,200 to a contractor for sick time and holiday pay and $4,500 to a hotel for a kickoff meeting, and spent $325,000 on a new database program five months before the project was supposed to be done, according to state auditors. Auditors said the revenue department can't handle such large projects by itself and that Gov. Bill Owens' new Office of Innovation and Technology should coordinate any future large projects. But the audit left some of the department's harsher critics unsatisfied, including one of the senators who requested it, and a former employee demoted because of his criticism of the project.

"I'm really disappointed that this is all," said Sen. Jim Congrove, R-Arvada. "We've lost over $10 million, and this is all the attention we're going to pay it," he said, pointing to the audit, a slim, plastic-bound volume.

No experience

Gar Olmsted, who settled with the state for $165,000 after winning a "whistle-blower" action against the department, said auditors didn't look far enough back to find what really went wrong.

"We tried to introduce five new technologies which no one in the department had any experience with," Olmsted said.

Olmsted also said he resented a section of the report that questioned the ethics of a project manager who went on a vacation with two contractors.

He said the manager was one of the people whose recommendations on the project were brushed aside.

In preparing their report, auditors talked extensively with Fagan but not with Olmsted.

http://www.denverpost.com/news/leg/leg0412d.htm

-- Martin Thompson (mthom1927@aol.com), April 12, 2000