Denise Northrup Interim Director Mary Fallin Governor January 16, 2018 Representative Josh Cockroft Chairman - Special Investigation Committee Oklahoma House of Representatives 2300 N. Lincoln Blvd., Room 408 Oklahoma City, OK 73105 Dear Representative Cockroft: In order to assist the House Special Investigative Committee and streamline your task, I wanted to offer a few points of clarification pertaining to the Office of Management and Enterprise Services (OMES), post the testimony of Oklahoma State Department of Health (OSDH) employees Ms. Deborah Nichols and Mr. Michael Romero. In both hearings there was testimony based on assumption and misperceptions of the operations of OMES. I feel it necessary to clarify three main issues. First, the state’s accounting system, PeopleSoft, is the accounting system of record for state agencies. Agencies may use any number of systems and processes to supplement functionality that is either lacking in PeopleSoft or to provide a level of detail that is possible but not easily achievable in PeopleSoft. These supplemental systems can range from Excel spreadsheets, to third party software, to home grown financial systems. In these instances the supplemental process and the information in PeopleSoft is only as reliable as the agency staff overseeing the internal processes and entering the data in PeopleSoft. Additionally, many agencies utilize PeopleSoft when accounting for federal funds. Most transactions go through the PeopleSoft system. The disbursement goes through a budget-check at the division level and a cash control that ensures there is cash in the fund from which the payment is made. So for most state disbursements, payments cannot be made without both available budget and cash in the account. There are some statutory exceptions for payments that do not process through the state accounting system. [62 O.S. §34.56 – 2401 N. LINCOLN BLVD., ROOM. 118, OKLAHOMA CITY, OK 73105 · OFFICE: 405-521-2141 · FAX: 405-521-3902 STATE OF OKLAHOMA · OFFICE OF MANAGEMENT & ENTERPRISE SERVICES · OMES.OK.GOV Agency Special Accounts] However, the exceptions are not the accounts that are the focus of the OSDH. Second, OMES was notified by OSDH in early October that it anticipated problems making payroll at some future point. A meeting occurred on October 11, 2017, between OMES budget staff and OSDH staff including Julie Cox-Cain, Michael Romero and Deborah Nichols. OSDH testimony indicated this meeting took place in September. The October meeting was the first time the OMES budget office became aware of the problem. OSDH verbalized to OMES that OSDH had been using expenditure corrections to cash flow funds but were trying to get away from that practice. No documentation was provided at this meeting. OMES was trying to understand whether the problem was a cash flow problem or a no cash issue; cash flow meaning OSDH expected cash to arrive just not timely enough to make payroll, no cash meaning that OSDH was going to run out of cash and didn’t expect it to be replenished. In the course of the discussion, the budget staff inquired about the availability of all and any funds to assist with making payroll. This inquiry has been characterized as a recommendation – it was not. It was a discussion addressing any and all possibilities. Finally in regard to OMES charges for Information Technology (IT) services the Committee should be made aware that agencies are in the driver’s seat when it comes to IT investments. IT unification has saved an estimated $351M in reduced IT costs statewide. OMES moved to a consumption-based rate model allowing agencies to easily forecast and control IT use and costs. The essential services state employees need to perform their duties (desktop, network, voice and ERP) are included in the Technology Essentials bundle, based on agency-reported FTE counts and are customized based on the agency’s current technology state and needs. Desktop Essentials is $55/FTE(2120)/mo, Network Essentials is $10/FTE(2120)/mo, Voice Essentials is $17/FTE(2120)/mo, and ERP Essentials is $5.50/FTE(2120)/mo. The FTE model was chosen as many of the licenses are charged to the state based on FTE. This model provides greater transparency and provides an easy-tounderstand and easy-to-budget framework for agency leadership. Prior to IT consolidation, few agencies had visibility of their true cost of ownership or true spend for IT. For your understanding, I have provided a copy of the current OSDH’s contracted fees with OMES for IT services. All other costs for services are a la carte and charged only after agency authorization. OMES has worked with OSDH for several years to identify solutions to replace its legacy system, but previous OSDH leadership placed the project on hold. Today, the 2401 N. LINCOLN BLVD., ROOM. 118, OKLAHOMA CITY, OK 73105 · OFFICE: 405-521-2141 · FAX: 405-521-3902 STATE OF OKLAHOMA · OFFICE OF MANAGEMENT & ENTERPRISE SERVICES · OMES.OK.GOV 2 costs replacing that system would be in addition to the IT services already contracted for by OSDH. Again, OMES does not make management decisions on IT projects beyond essential services required by law. OMES remains committed to assisting this investigation and educating all concerned as to the laws governing the authority of OMES. It is my hope that together we can find ways to overcome limitations while improving processes for the operation of state government. Respectfully, Denise Northrup Interim Director Office of Management and Enterprises Enclosure cc: Rep. Tim Downing, Vice Chair – Tim.Downing@okhouse.gov Speaker Charles McCall – Charles.McCall@okhouse.gov Rep. Chad Caldwell – Chad.Caldwell@okhouse.gov Rep Donnie Condit – Donnie.Condit@okhouse.gov Rep. Chuck Hoskin – Chuck.Hoskin@okhouse.gov Rep. Mark McBride – Mark.McBride@okhouse.gov Rep. Johnny Tadlock – Johnny.Tadlock@okhouse.gov Rep. Kevin Calvey – Kevin.Calvey@okhouse.gov Rep. Tom Gann – Tom.Gann@okhouse.gov Rep. Chris Kannady – Chris.Kannady@okhouse.gov Rep. Cyndi Munson – Cyndi.Munson@okhouse.gov Rep. Bobby Cleveland – Bobby.Cleveland@okhouse.gov Rep. Elise Hall – Elise.Hall@okhouse.gov Rep. Ryan Martinez – Ryan.Marinez@okhouse.gov Rep. Mike Osburn – Mike.Osburn@okhouse.gov 2401 N. LINCOLN BLVD., ROOM. 118, OKLAHOMA CITY, OK 73105 · OFFICE: 405-521-2141 · FAX: 405-521-3902 STATE OF OKLAHOMA · OFFICE OF MANAGEMENT & ENTERPRISE SERVICES · OMES.OK.GOV 3 2401 N. LINCOLN BLVD., ROOM. 118, OKLAHOMA CITY, OK 73105 · OFFICE: 405-521-2141 · FAX: 405-521-3902 STATE OF OKLAHOMA · OFFICE OF MANAGEMENT & ENTERPRISE SERVICES · OMES.OK.GOV 4