An audit of the Department of Administration Financial Services Division finds that the agency failed to meet deadlines for implementing an upgraded human resources system for state employees and that most of the $42.5 million allocated for the project has been spent.

The Auditor General’s Office says ADOA needs a comprehensive plan to ensure completion of the Human Resources Information Solution (HRIS), which is replacing several existing out-dated programs with an integrated system to administer payroll, personnel, employee benefits and other related functions.

Phase 1 of the system, implemented in December 2003, processes state employee payroll and tracks and processes various employee actions, including hires, transfers and promotions. However, the audit says Phase 2 was in various stages of implementation as of April 2005.

Functions of the second phase include assisting in the hiring approval and screening process, and an employee/manager self-service component that would allow a state employee to input his or her own information, such as an address change, into the system.

ADOA estimates that the new HRIS system should save the state more than $100 million over the next 10 years by automating functions previously performed by administrative staff and reducing turnover due to increased employee dissatisfaction.

Agency Response

In its response, ADOA agrees with the auditor’s overall recommendations and says a comprehensive plan will be in place as the agency consolidates current plans. The HRIS executive committee has been meeting on a regular basis to direct planning and implementation of remaining functions of the system, the agency says.

Regarding the budget analysis, ADOA says that nearly $6 million of the $7.5 million appropriated by the Legislature for the project was for debt service. The additional $35 million was generated through certificates of participation, which are securities that function similar to a lease-purchase agreement.

“ADOA believes that the financing costs of the project are separate costs from the actual project development,” the agency says. “The approved ADOA budget during the fiscal years of the project implementation mirrors that belief.”

Regarding oversight of procurement procedures, the audit says the agency’s planned changes provide a good foundation, but adds: “Although department officials estimate that the state spends billions annually in state, federal and other monies on the purchase of goods and services, the department performs little oversight of state agency procurement activities.”

The audit applauds ADOA for taking steps to centralize procurement for specific items on a statewide basis, rather than having each agency do its own procurement. For example, the Arizona Department of Transportation will serve as the contracting center for automotive parts, and agencies needing those parts will use the contract developed by ADOT.

“The state should then benefit from the discounts that result from higher-volume purchases,” the audit says.

The audit also recommends improvements in the workers’ compensation claims process, primarily to speed the process and to make sure injured employees understand their rights and responsibilities.