The University of Texas ran up a $15 million deficit in its information technology unit by the end of August, and the red ink could grow to $25 million in the current budget year, the American-Statesman has learned.
Separately, a $100 million project to shift the university’s payroll, human resources and finances from a mainframe computer system to cloud-based operations is running behind schedule and over budget.
An internal audit report obtained by the Statesman through an open-records request said “financial mistakes and miscommunication by various parties,” coupled with budgets “well below what’s needed,” caused the Information Technology Services department to spend more than it had been allocated. Officials said the deficit would continue to grow until budget revisions and other reforms are fully in place.
The ITS unit provides internet access, phone service, computer security, email, software support and other essentials of modern university life.
UT has decided to abandon its plan to activate all elements of the cloud-based system in July and instead phase the system in starting sometime later. The university has spent $60 million on the project thus far, and although the delay is intended to assure a smoother rollout it will also raise the cost to an as-yet-undetermined sum above $100 million.
Darrell Bazzell, UT’s senior vice president and chief financial officer, is in charge of addressing these challenges, which he learned of after joining the university’s executive ranks in April. At the same time, he is presiding over a major reorganization that has more than tripled the number of people under his purview to 2,430, including employees in police, construction management and other operational units as well as the staff administering the university’s $2.9 billion budget.
“I look forward to a challenge here,” Bazzell said in a classic understatement. He previously spent 13 years in a similar role at the University of Wisconsin-Madison. “There’s some commonality, but of course there’s some uniqueness. The part that’s unique is going to be the history, the context and the culture here.”
Business office dismantled
The roots of the information technology deficit apparently date back a few years, when a newly created unit known as the Central Business Office took over certain financial responsibilities in an ill-fated effort to consolidate services and save money. The business office made budget decisions without consulting IT leaders, including Brad Englert, UT’s chief information officer and the chief operating officer of Information Technology Services, according to the internal review by Michael Vandervort, UT’s chief audit executive.
Various people oversaw the Central Business Office after it was established in 2010, Bazzell said. Regular reports of IT spending were created by the office but included funds that should not have been available, he said.
“As a result, the reports masked the fact that ITS was overspending their budget, and so managers and administrators were under the impression that they were within budget, when in fact they were overspending and committing to contracts in the future that were unfunded,” Bazzell said. “So, without a dedicated person watching the ITS books who was familiar with the norms for what the department should be spending, conditions were created that made such an oversight possible.”
Fraud was not a cause of the deficit, he noted.
The red ink came to light gradually. “My staff came to me early on in my tenure from the Office of Accounting and said, ‘Darrell, this is something you need to know.’ They’d been investigating,” Bazzell said. “They started noticing some abnormalities and some things that weren’t reconciling. My staff dug into it, and I asked Internal Audit to take a look at this as well.”
The Central Business Office has been dismantled, and a new ITS financial team reports directly to the central accounting office. Officials are working on a comprehensive plan that could include increasing the prices paid by the university’s various colleges, schools and other units to the ITS department for technological services.
“We’ve restored the appropriate checks and balances to prevent something like this in the future. Clearly we can attribute a lot of the problem to human error — not problems with the financial system itself,” Bazzell said.
Asked whether anyone has been dismissed or otherwise disciplined, he replied: “This is a big problem, and people need to be held accountable for problems of this magnitude. I can’t discuss specific personnel actions we may have taken” because of state privacy law. “But responsibility’s been moved and people who were involved — we’ve addressed issues with them.”
Meanwhile, the $34 million allocated to the ITS unit for the current budget year is not enough to keep it from sinking deeper into the red because spending will exceed that sum despite a freeze on non-essential hiring, maintenance and equipment purchases.
The deficit “could grow to as much as $25 million in this fiscal year as we continue to address these issues,” Bazzell said. “The university has sufficient cash flow, given the size of its budget, to cover closely monitored IT spending while we develop a plan to bring the budget back into balance and retire the departmental debt,” Bazzell said.
Cloud costs rising
UT’s move to cloud-based technology supplied by Workday Inc., based in Pleasanton, Calif., for payroll, human resources and finances is a work in progress.
Mainframe computer systems, with customized programs written by university employees, have served those missions since the 1960s. The latest system is an IBM unit purchased in 2010.
“It requires programming skills and capabilities that are kind of dying out,” said Mike Cunningham, director of UT’s data centers.
Workday, not UT, will own and maintain the cloud-based technology.
“And every six months, you get automatic upgrades,” Bazzell said. “They’ve been working on this project for about two years now. The idea was to modernize our technology, which at the same time allows you to modernize your business practices. The feeling was that we could create a more efficient set of business services and to deliver more to the campus community.”
On Bazzell’s recommendation, UT President Gregory L. Fenves authorized the hiring of an independent consultant to assess progress and risks. KPMG LLP, based in New York City, was selected. In a report submitted in November, KPMG concluded that the implementation, or “go-live,” date of July 10 was not feasible. KPMG also recommended activating the technology in phases rather than in what it called a “big bang” approach that had been contemplated.
Among the problems cited by the consulting firm: Workday’s technology for tracking grants and budgets isn’t up to speed yet, and UT’s staffing, training and general campus readiness are insufficient as well.
UT announced this week that it will follow KPMG’s recommendations. “Our next step is to develop a revised project plan and new timelines for implementing Workday,” Bazzell said.
Workday said in a statement that it “is committed to helping our customers best manage their ever-changing needs and continues to deliver the functionality University of Texas at Austin requests to sustain and grow as one of the country’s largest public research institutions.”
Source:- myStatesman
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