CHARLESTON, W.Va. — State legislative auditors say $18.3 million in contracts to support implementation of the wvOasis computer system may have been invalid because they were signed by a state employee without the proper authority.
The auditors are suggesting state leaders look into reimbursement of all that money. They also suggest the state should withhold $1.26 million in outstanding invoices and send almost $600,000 collected from Department of Transportation to pay the contractor back to DOT.
Representatives from the Legislative Auditor’s office made the recommendations Sunday during interim legislative meetings. The Legislative Auditor for the past few months has been looking into the state’s relationship with the consultants hired to set up wvOasis, the enormous and interconnected computer system.
After the presentation, Speaker Tim Armstead asked about what members of the board that oversees the wvOasis project might intend to do.
“Have they indicated their willingness to follow their recommendations?”
A representative from the state Auditor’s office said the recommendations are being taken under advisement, including the aspects of legal evaluation.
House Finance Chairman Eric Nelson wanted to know what should happen next. “What is the followup process? Does it just get reported here?”
Legislative auditor Aaron Allred said it would be up to leaders in the executive branch to determine whether to involve the Attorney General.
Nelson responded that having the facts within the report is important, but he said there’s more. “It’s the followup, and having that followup fully reported to this body and others.”
The wvOasis project has been meant to update and inter-connect the state’s various, aging computer systems into something called an “Enterprise Resource Planning System.” It’s supposed to help the state’s computer systems talk to each other, to help state employees better track data and to manage those with whom the state does business, such as vendors and retirees.
Project planners at first thought wvOasis might be mostly ready by fall of 2014 and at one point thought might be completed by June 2017. It’s still going, although state leaders say the end is in sight.
Its initial cost estimate was $98 million, but the state Auditor’s office has said complications and delays have meant blowing past that amount and about $50 million more.
Oasis is so big and crosses so many different areas of government that a three state leaders — the governor, the Auditor and the state Treasurer — share responsibility on a board that oversees the project. Together, they’re in charge of the Enterprise Resource Planning Board.
The state contracted with a company called CGI to be the vendor deploying the work but also contracted with another consultant called ISG to help the state understand the process.
In this case, the legislative auditors were looking into whether the state’s contract with Information Services Group constituted a properly executed and legally binding agreement.
The question came up because, starting in 2012, the contracts with ISG were signed by the former project manager, Todd Childers, or the controller of the ERP board — rather than the actual board members.
Information Services Group came aboard when the project first got underway in 2010 to include planning, selection of the software vendor, implementation and support.
Initially, the legislative auditors wrote, ISG’s role specifically prohibited implementation services. But as the contract with the company continued through 2017, implementation became a major part of its work.
Legislative auditors wrote that when the oversight board had its first meeting on June 23, 2011, the board gave the state Auditor day-to-day administrative authority of the project. But at a later meeting, Nov. 17, 2011, they brought up the issue of whether the Project Management Office should execute the initial contract.
They decided the three board members would sign the contract and “any subsequent change orders would be signed by the board members as well.”
The Auditor’s duties were considered to be responsibilities such as contracting for office space or drawing down funds for payments that would come back before the full board for approval — not sole approval of multi-year, multi-million dollar contracts.
ISG’s contract was canceled by the Department of Administration and then reassigned to the ERP board in 2012. But the Enterprise Resource Planning Board didn’t execute or even discuss the change during at any of its meetings, wrote the legislative auditors.
“Indeed, the board did not unanimously sign, execute or ratify any of the multi-million dollar contracts reported to be made between ISG and the board from 2012 to 2016,” the legislative auditors wrote.
“To date, the state has paid Information Services Group about $18.3 million for contracts signed by the controller of the ERP board who did not have the authority to enter into these contracts on behalf of the ERP board.”
The legislative auditors wrote that on at least two occasions, Enterprise Resource Planning Board members expressed concern over staff entering or changing contracts without approval.
Despite that, legislative auditors wrote, staff signed and executed seven ISG contracts and change orders over the years.
“Because the contracts were unauthorized and formed outside the ERP board’s statutory framework, based on the advice of his attorneys the Legislative Auditor believes that they are void, unenforceable against the ERP board and not subject to the doctrines of estoppel, apparent authority or ratification,” legislative auditors wrote.
“Therefore, the state has no obligation to abide by the terms of the contracts, not to make any payments under those terms.”
Since taking office in January, 2017, current state Auditor J.B. McCuskey has not paid any invoices from ISG, legislative auditors wrote. The unpaid invoices amount to $1.26 million.
About $600,000 of that was collected from the Department of Transportation for projects associated with that agency. The money has been held back from payment.
The Legislative Auditor is recommending that those invoices are invalid and should not be paid. The money collected by the Department of Transportation should be returned to the agency, legislative auditors conclude.
The Legislative Auditor also recommends the Enterprise Resource Planning Board seek advice from the Attorney General’s office about seeking reimbursement for the $18.3 million in prior payments to Information Services Group.