August 23, 2001 Cost of state's phone billing plan spirals to $1.6 million

SALEM, ORE. (AP) - The State of Oregon unnecessarily spent more than $1.6 million overhauling its phone billing system because of a lack of oversight, state auditors say.

The Department of Administrative Services overpaid contractors and paid consultants for work that wasn't needed, the secretary of state's Audits Division reported. The project, expanded from a Y2K phone system upgrade to a new billing system covering other services, ultimately was scaled back.

The project has cost more than $4.8 million and still isn't finished because, auditors say, no one in the department, which oversees the operation of more than 200 state agencies, had control over it.

"Each phase should be controlled and approved. That did not occur," said Neal Weatherspoon, who conducted the audit.

With the state trying to prevent Y2K computer glitches expected Jan. 1, 2000, state agencies got approval to relax competitive bidding requirements. Auditors said Administrative Services took advantage of that flexibility to expand the scope of the phone billing project with minimal oversight.

Mike Greenfield became department director in March 2000 and requested the audit shortly thereafter. In September 2000, Greenfield halted the expansion into other billing services because he said he couldn't get questions answered about the project's scope. That meant $1 million worth of work on the expansion was abandoned.

The replacement of the state's phone billing system will be completed next month and will cost about $6.2 million.

"Someone wasn't paying attention to details, and it's difficult for me to sort out where that occurred," Greenfield said.

Jon Yunker, who retired as department director in the spring of 2000, said Y2K compliance "was a huge project. . . . I don't think there was anyone who generally didn't know what was going on. Maybe there were some details people didn't know."

Auditors uncovered the problems in the phone billing project during an audit of Administrative Services' information resources management division, which oversees computer services for most state agencies.

Auditors recommended the agency set up a method to determine who's responsible for large computer-related projects and their responsibilities. Auditors also suggested the agency ask the attorney general to review project contracts.

Plans to upgrade the state's phone system began in 1997, when Administrative Services officials hired a national consulting firm to suggest how to prevent Y2K glitches from interfering with the department's ability to bill other state agencies for phone calls. The department paid the company $439,000 but rejected the upgrade it recommended.

Administrative Services then decided to build a new system to replace the old one. It hired a contractor in January 2000, at a cost of $3.5 million, to do the work - and add a function that would have consolidated all billing in every agency.

It was equivalent, Weatherspoon said, to a homeowner hiring a plumber to fix a leak, then deciding the kitchen needs remodeling, too. Auditors couldn't determine whether the extra function was included in the original cost.

http://www.katu.com/news/story.asp?ID=29242

-- Martin Thompson (mthom1927@aol.com), August 24, 2001