Something very bad is going on at Montana’s Department of Revenue. And why you should care is you’re spending tens of millions of dollars for it.

It’s my belief the Legislature must direct an independent audit of the DOR for purposes of re-establishing baseline data for individual and corporate tax history and the stillborn computer system POINTS must be completely scrapped.

What began as an honest mistake of signing off prematurely for the new computer system in 1999 (under the pressure of Y2K compliance), then became a runaway software disaster, and has now evolved into departmental cover-up as it fails to be able to conduct its primary mission: accurately collect, account for and audit Montana’s taxes.

Legislative action

The Legislature authorized money for a fully integrated tax system. This past year, against legislative intent, DOR renegotiated with the seller to accept much less than a full system and still spent all the money. So last spring, the Legislative Audit Committee unanimously voted to kill POINTS – we even committed to fund a new system. But instead of working with the legislative branch towards a new solution, amazingly, DOR circled the wagons. Ask yourself – why?

The answer is that it’s too painful to admit what many already know. The computer data back to 1999 is so hopelessly corrupted that a new system by itself will only solve half the problem. Tens of thousands of man-hours must be spent reestablishing tax data into a new system. The embarrassment to DOR and management implications of “opening the books” is too much to bear, so the calculated risk of staying the course and postponing the serious issues onto somebody else’s watch has taken hold.

CPAs, businesses must step up

It is time for the CPAs and business owners of Montana to step up. Tell your stories. Thousands of you and your clients have been adversely affected by our government’s inability to establish what you owe and what you’ve paid. A citizen Legislature needs help on complex and technical debates, especially when confronting one of the full-time branches of government.

The upcoming January legislative session will prove to be a historic one. Will the explosion of governmental spending and programs continue, or will we hold the line and right-size our state government with the recessed and contracted economy? Will we continue to have the highest stated income tax in America and keep away business, or will we work towards economic development via tax reform that many of us ran on.

Montana’s Department of Revenue will play an important role in the upcoming session. Tax reform seems imminent. But DOR has to walk before it runs and not come forward with proposals that are “good for taxpayers” unless they scrap POINTS and agree to an independent audit. The hypocrisy wouldn’t be lost.

Montana Standard

-- Anonymous, November 10, 2002

Answers

Martz kills phase 2 of tax computer system

HELENA - The Martz administration is abandoning the second phase of the state's error-plagued tax-tracking computer system that already has cost the state $12 million, Revenue Director Kurt Alme said Tuesday.

If the state hadn't junked the system, known as POINTS, Alme said it would have to spend an already-budgeted $2.5 million more on the second phase and have to ask the 2003 Legislature, facing a $250 million general-fund deficit, for up to $3.3 million in new funds to complete the work. That is hard to justify, Alme said.

What's more, the second phase of POINTS, which was set to be put in place by Aug. 31, 2003, likely would have been delayed into 2004 and into another tax cycle.

"We do not believe it's in the best interests of the state to go forward with Phase II," Alme said during a press conference. "This is both a budget and a program decision."

He added, "I think it's fair to say this is disappointing."

Martz's office, her budget director, the state's chief information officer and the project's external software engineering consultant were involved in the decision along with Revenue Department officials.

"It is unfortunate that the POINTS project cannot proceed in its entirety, but we will draw what we can from Phase II efforts to date and use it to improve Phase I and the remaining legacy (older) systems," Alme said.

He said the department has spent the past 16 months establishing project controls, performance measurements and a new project plan that calls for stabilization of POINTS Phase I by Dec. 31.

The Legislative Audit Committee had recommended in March that the Revenue Department drop the second phase of POINTS, but Alme chose to continue working on it.

"This has not been an easy or quick decision," Alme said. "However, this is a business and budget decision based on current information after performing due diligence."

Alme, who became revenue director in January 2001, inherited the troubled computer system from the Racicot administration which got legislative permission to issue $16 million in bonds in 1997 and another $16 million in 1999 to pay for the integrated tax system.

Such a system was supposed to allow the Revenue Department to handle a variety of taxes on one computer software system, instead of various systems, so that when someone calls a customer service representative, the Revenue Department employee could look up income, property, corporate and other taxes collected by the department using POINTS instead of having to switch to separate, older systems for each tax.

The system, purchased from Unisys, was plagued by problems from the start when installation began in May 1998. The state agreed to accept the system in December 1999 and believed it could fix the problems.

Although portions of the software worked fine, the department found problems with other aspects that delayed its full implementation. Among the flaws were delayed issuance of income tax refunds to taxpayers, double payment of refunds and mixed up statements of taxpayers' accounts. Teams of consultants were called in to try and fix the problems, but as they fixed one set of problems, they found bugs elsewhere.

By the time the 2001 Legislature convened, legislators from both parties, tipped off by Revenue Department employees, began asking hard questions about POINTS.

The two leading legislative critics of POINTS said Tuesday they weren't surprised by the administration's decision to abandon the second phase, but were disappointed it had continued spending money trying to fix it.

"We've wasted whatever millions we have," said Rep. Dave Wanzenried, D-Missoula, the first to criticize POINTS. "Had it (the department) been more forthcoming about the problems and the magnitude of the problems with POINTS I and the development of POINTS II, the Legislature would have cut it off earlier."

House Majority Whip Cory Stapleton, R-Billings, said he was encouraged that Gov. Judy Martz "at least has made a decision to back down from the stance they've had."

Stapleton charged that Martz and Alme haven't been privy to the some of the real facts about POINTS because the "second- and third-tier managers" covered up some of the problems and kept it from them.

He said the state may have lost $25 million in Revenue Department audits because auditors were dispatched to work on POINTS rather than audit taxpayers. Alme disputed the figure but agreed that some auditors weren't allowed to audit, but he said that problem has been corrected.

Stapleton is sponsoring legislation for the Legislature to scrap POINTS altogether. Then he wants an independent audit of the Revenue Department to re-establish baseline data for individual and corporate tax history.

Alme said the state already has spent $28.5 million of the $32 million in bond issues approved by the Legislature.

The Revenue Department has considered litigation against Unisys, Alme said, but "the advice to us is there has been no legal issue to which we're aware of at this time." However, Alme said, it will withhold $200,000 in payments to Unisys, which already had been paid $11.3 million by the state, as part of an agreement with the software company.

Alme said he is confident the state revenue estimates relied on by the governor and legislators to set appropriations are accurate because they are based on cash reserves, which are "very solid."

There potentially could be an issue with the department's account's receivable or money owed to the state, although Alme said he believes that the totals are correct.

Alme said department officials have reported about POINTS to three legislative committees, a subcommittee and an executive committee consisting of officials from the executive and legislative branches.

Billings Gazette

-- Anonymous, November 14, 2002

From the GICC Archives:

Montana Governor defends new computer system

HELENA - Despite minor glitches and bumps, Gov. Marc Racicot praised his administration for its battle to create a new computer network and tax system. Racicot told the state departments of administration and revenue to feel proud of their accomplishments and to disregard "shallow" criticisms of the new multi-million dollar systems, which put Montana ahead of most other states.

"Both of these projects remind me of what it must have been like to build the first dam," Racicot said during a briefing. "You have to bring these systems up while doing business, but you have to keep business flowing."

Combined, the two computer systems have cost Montana $46.2 million. But Racicot said both the tax system and the network that keeps the state's financial records and human resources were worth the cost and frustration.

He said the old systems hadn't been upgraded since the 1970s and couldn't have performed for the state much longer.

"We could have cobbled them together with bubble gum, Band-Aids and baling twine," Racicot said, adding that wasn't a true solution.

The 1997 Legislature approved funding for both systems.

The financial and human resources integrated network cost $16.5 million. The state decided to buy an off-the-shelf software package from PeopleSoft Corp. instead of building a new bookkeeping and human resources system like it did in the 1970s.

The new tax computer system originally was slated to cost $11.7 million, but the 1999 Legislature agreed to approve another $18 million to fully install the system. It will eventually integrate how the states collects 30 various taxes.

The installation of both systems has caused many frustrations and a few glitches along the way. And it may cost Montana even more money if additional cash isn't found within the departments' existing budgets. But it's too early to draw that conclusion, officials said.

The state financial network had problems such as incorrect paychecks, not paying companies that do business with the state on time and difficulties preparing federal reports.

Most of these glitches have been fixed, but state Administration Director Lois Menzies said other problems will occur during the first, two-year business cycle.

"We expect additional bumps in the road for a while yet," Menzies said.

Racicot agreed that was to be expected and that Menzies and other state workers should be proud.

"For God's sake, that's a problem?" Racicot said about the few batches of incorrect state paychecks. "We can fix that problem by early afternoon."

The tax system has experienced its own problems such as getting tax refunds to Montanans two weeks late.

Revenue Director Mary Bryson said this glitch has also been fixed.

http://www.billingsgazette.com/

-- Martin Thompson (mthom1927@aol.com), February 08, 2000

-- Anonymous, November 19, 2002