Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT TECHNOLOGY COMMITTEE

Date:02/06/2015
ATTENDANCE
Time:01:35 PM to 03:50 PM
Martinez Humenik
X
Newell
X
Place:HCR 0107
Singer
X
Tate
X
This Meeting was called to order by
Tyler
X
Senator Neville T.
Neville T.
X
This Report was prepared by
Matt Kiszka
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
Presentation by the Office of the State Auditor
Presentation of the Joint Budget Committee’s Proposed Policy for Annualization
Discuss Operating Impacts of FY 2015-16 IT Budget Requests
FY 2015-16 Project Prioritization		Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only

01:35 PM

Senator Neville, Chair, called the committee to order. A quorum was present.

01:37 PM -- Presentation by the Office of the State Auditor

 Matt Devlin, Deputy State Auditor, Reed Larsen, Legislative Auditor, and Bryan Becker, IT Audit Supervisor, came to the table to present to the committee on the Office of the State Auditor's (OSA) Annual Report of Audit Recommendations Not Fully Implemented (Attachment A). Mr. Devlin provided a background on the OSA, and explained that the report covers a period of five years through June 30, 2014. He noted that the OSA only tracks the implementation status of recommendations that agencies agree to implement or partially implement, and that there are two types of audit: financial audits and performance and information technology (IT) audits. Mr. Becker explained that financial audit recommendations are classified by their severity, and provided an overview of the number of financial audit recommendations outstanding for departments by severity level. Mr. Becker highlighted the recommendations OSA made specifically for the Governor's Office. He explained the purpose of performance and IT audits performed by OSA, and summarized the outstanding numbers of these audits for state agencies. OSA responded to committee questions on the metrics used to perform an audit.

150206 AttachA.pdf150206 AttachA.pdf


01:51 PM

Mr. Larsen walked the committee through audit recommendations for the Governor's Office, which received 530 recommendations during the five-year period. He explained how these recommendations were broken down by type of audit and the specific office of the Governor. He spoke specifically to financial audit recommendations made for the Colorado State Titling and Registration System, Columbia Ultimate Business Solution system, and Kronos IT system. Mr. Larsen said the Governor's Office received 342 performance and IT audit recommendations, with the majority of these being made to the Office of Information Technology (OIT). He described OSA's high-priority recommendation items for the Governor's Office, which are the Colorado Department of Transportation's (CDOT) financial system and information systems security items for the Office of Cyber Security (OCS). OSA responded to committee questions on what CDOT had done to address the IT audit recommendation, what CDOT's disaster recovery policy is, the cost of compliance for CDOT to meet the state's IT security policy, and the asset inventory and management procedures of OCS. Mr. Larsen discussed OSA's recommendations made to the Statewide Internet Portal Authority, and noted that it had implemented all recommendations. OSA responded to committee questions on what the Joint Technology Committee (JTC) should be concerned about in regards to outstanding financial, performance, and IT audit recommendations that had not been fully implemented by state agencies. Discussion ensued.

02:13 PM -- Presentation of the Joint Budget Committee’s Proposed Policy for Annualizing Operating Efficiencies for IT Capital Projects

Alfredo Kemm, Budget Analyst, Joint Budget Committee (JBC) Staff, came to the table to present to the committee on a proposed policy change of the JBC. A copy of his proposal was distributed to the committee (Attachment B). Mr. Kemm stated that he is concerned with the fact that IT budget requests ofter do not include a cost-benefit analysis or life-cycle cost analysis of the proposed project. He stated that he is looking for a standard way of quantifying cost savings of IT projects and that the JBC has a proposed policy change to annualize minimum expected baseline operating efficiencies for IT capital projects. Under the proposed rule, in the second fiscal year of implementation of a project, personal services would be offset by a base reduction equal to 10 percent of the IT project cost. Additionally, in the second fiscal year of implementation, operating expenses would be offset by an equivalent, ongoing base reduction for annual operating or maintenance costs associated with the IT system. Under the plan, poorly planned or executed projects would be subjected to penalties. Mr. Kemm provided an example of how this would work for a project, referencing the FY 2014-15 supplemental request submitted by Department of Personnel and Administration for its Human Resources Information System.

150206 AttachB.pdf150206 AttachB.pdf

Mr. Kemm explained that the JBC had asked him to explore ways to ensure that departments do their due diligence and planning and achieve on-target execution of projects, which will help reduce the number of projects that require supplemental appropriations down the road. This approach would encourage departments to ensure that a project is worth implementing because it would require future cost savings for a project.

02:26 PM

Discussion ensued on the topics of state agency project planning and management, cost overruns, and appropriations. Mr. Kemm responded to committee questions on the major concerns he has surrounding department project submittals and alternatives to the proposed 10 percent base reduction. Committee discussion ensued on key performance indicators (KPI) that could be applied to projects, how to measure the benefits of new IT systems, quantification of the cost-benefit of a project, the expectations of departments in performing adequate analysis of a proposed project, and departmental accountability for the success of IT projects.




02:43 PM

Mr. Kemm discussed the evolution of the IT budgeting and appropriations process, the need to hold agencies accountable to project success, and how the JBC would like the JTC to take the lead on developing the requirements for departments to quantify savings and benefits of IT projects when submitting a request for funding. The committee discussed coordinating with Mr. Kemm and the JBC to develop these requirements, the criteria it could consider to measure the potential success and benefit of a project, and quantifiable metrics that departments could provide to help the JTC in its consideration of IT budget requests.

02:50 PM

Mr. Kemm discussed a bill the JBC is currently having drafted and the JTC's meeting with the JBC on February 12, 2015. He explained that he anticipated the meeting's focus to surround: how to quantify and identify project funding considerations; IT capital funding being split away from the capital construction fund (CCF) in the 2014 session and whether to revert this change or create a special fund within the CCF for IT capital projects; statutory definitions of IT capital versus building capital; and amending statutes to add IT capital projects to the interim supplemental appropriations process. At the request of the committee, Mr. Kemm explained the interim supplemental appropriations process. He also discussed the Colorado Operations Resource Engine (CORE) supplemental request that the JTC and JBC considered in December 2014. He responded to committee questions on funding of IT capital budget requests, the emergency supplemental process versus the regular supplemental process, agency IT project planning and the funding request process, and expectations the JBC has of the JTC in its review of IT capital budget requests.

03:03 PM -- Discuss Operating Impacts of FY 2015-16 IT Budget Requests

Matt Becker, Legislative Council Staff, came to the table to discuss the inclusion of operating budget requests within some FY 2015-16 IT capital requests submitted by state agencies to the Office of State Planning and Budgeting. He distributed a table detailing which projects incorrectly included operating funds requests (Attachment C), which should have gone directly to the JBC and not been included in the IT capital funding requests. He explained that staff is suggesting that the JTC not take any action on the operating request portions of the Department of Human Services' (DHS) IT Systems Interoperability request and the Department of Personnel and Administration's (DPA) Collections System Replacement request, but that it should refer these operating request portions to the JBC. Mr. Becker noted how these project requests call for full-time equivalent employees (FTE) for the departments, which should not be considered by the JTC. He responded to questions on the two projects and the inclusion of operating funding requests by the departments within their IT capital budget requests.

150206 AttachC.pdf150206 AttachC.pdf

03:08 PM -- Discussion of FY 2015-16 Project Prioritization

Gary Lucas, Legislative Council Staff, came to the table and discussed his concerns with state IT systems currently in use and funding requests that the committee must review. He spoke to options the committee has in the future in its consideration of projects and the additional information that it should request from departments that submit an IT capital budget request. The committee discussed its role in considering state IT projects and the quarterly project reporting requirements it could implement for state agencies.


03:18 PM

The committee discussed how it can get information on KPIs from departments for their requested projects and metrics that the committee can use to rate and rank project budget requests. Mr. Lucas walked the committee through an initial project ranking list that staff prepared (Attachment D). He noted that there were two initial criteria for ranking considered: whether there was anything in a project contract or Request for Proposal (RFP) to hold a vendor accountable to the project's performance; and if the funding request quantified cost savings. Discussion of how projects were ordered and ranked in the table ensued. Mr. Becker explained how the Colorado Commission on Higher Education ranked, in terms of priority, the two projects for which it submitted a FY 2015-16 IT capital budget request.

150206 AttachD.pdf150206 AttachD.pdf

03:26 PM

The committee discussed ranking criteria for the consideration of FY 2015-16 IT budget requests, such as: whether the scope for the project is appropriate; if project performance requirements and accountability for contractors are included; and if the department is engaging end users to make sure they are planning the project based on user needs. The committee also discussed the importance of focusing on the causes of failures in past projects, successful project management of state IT projects, the need for specifications and terms for commercial off-the-shelf products to be included in project contracts, the risk for projects to see overruns coming from the system customization side, and what happens when a project is mismanaged by an agency and not executed successfully.

03:39 PM

Michael Shea, OIT legislative liaison, and Jack Wylie, DPA legislative liaison, came to the table and stated that the departments were working on responses to staff questions and would return them to the committee as soon as possible. Discussion ensued.

03:43 PM

The committee discussed the prioritization of FY 2015-16 IT budget requests and whether it could use a decision matrix when considering projects. Kori Donaldson, LCS, came to the table and discussed how the Capital Development Committee has considered using a decision matrix in the past but never ultimately implemented one. She said that there had been hesitation to lock criteria for scoring down to specific aspects of a project. She responded to questions on how the Governor's Office ranks projects for funding. Mr. Lucas discussed how he would analyze projects and rank them for the committee's consideration.

03:50 PM

The committee was adjourned.