Now is time to lay fiscal groundwork

January 8, 2013 

Before he leaves office next week, State Auditor Brian Sonntag has issued a final plea for state financial management reforms that Gov.-Elect Jay Inslee and state lawmakers should adopt this year.

After 34 years in public service, including the last 20 years as the state’s top government watchdog, Sonntag has identified a key weakness in how the state manages its finances. In a letter to Inslee, Sonntag urges Inslee to reform the Office of Financial Management for broader responsibility over individual state agency’s budgeting and long-term financial planning.

In a research paper attached to his letter, Sonntag points out that the OFM “sees itself as an agency supporting individual agencies, programs and activities.” As a result, Sonntag says, the state is left without “strong centralized financial management.”

Sonntag wrote, “The opportunity lies in moving financial management to a more mature level that effectively engages citizens in developing a state strategic plan and long-term financial plan to support budget decisions and sustainable delivery of programs and services.”

But, there’s a catch. In order to move toward enterprise-wide financial management, the state must first upgrade to a modern financial system that is technologically capable of supporting the state’s budgeting process and providing data from individual agencies from which the OFM can measure performance.

The Office of Financial Management has recognized the need to replace legacy financial management information systems, but the demand on diminishing state operating funds in recent years has stalled any progress.

One solution is for the state to consider replacement of the finance system as a capital expenditure, taking it out of the competition for operating dollars. The Washington Policy Center is urging this sensible approach.

Given the state’s recent fiscal challenges, which aren’t likely to go away soon, and the new governor’s campaign promise to implement new LEAN management initiatives, Sonntag’s proposal for financial management reform seem urgent.

The outgoing state auditor notes that the state’s “core financial system was put in place in 1984 and its enabling legislation was passed in 1959.” No private business or organization could operate successfully with such outdated approaches to financial management, let alone an enterprise as complex as state government.

The state auditor’s office will issue a performance audit early this year that identifies the risks of failing to upgrade systems and reform the OFM. The new governor and the Legislature should not hesitate to lay the necessary groundwork now, during the upcoming session.

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