Consolidation of
Administrative Functions
and the ACE Initiative
Department of Administration
September 2009
Report Highlights
The Department of Administration (DOA) facilitates various administrative
functions for state agencies, including managing human resources,
purchasing goods and services, supporting computers and networks, and
selling surplus state property. Beginning in March 2005, the Accountability,
Consolidation, and Efficiency (ACE) Initiative attempted to improve
these administrative functions.
The goals were ambitious, including saving up to $200.0 million over
a four-year period that ended in June 2009; reallocating agency staff
positions and eliminating 76.85 full-time equivalent (FTE) positions
statewide; lapsing $35.5 million to the General Fund; and consolidating
certain administrative functions within DOA. Given the magnitude of
the proposed changes and uncertainty about whether anticipated savings
were being achieved, the Legislature twice attempted to require DOA
to report on the ACE Initiative’s success. Both attempts were vetoed.
The ACE Initiative ended in June 2007, but many of its components
continue. At the request of the Joint Legislative Audit Committee, we
evaluated DOA’s implementation of the ACE Initiative and its management
of the ongoing components that are intended to save money and
promote efficiencies, including efforts to:
consolidate human resources functions for 7 small agencies;
consolidate purchasing functions for 11 state agencies and execute
new and improved purchasing contracts;
identify and sell surplus state property; and
consolidate computer server and network support functions.
Human Resources
Under the ACE Initiative, DOA
was authorized an additional
8.0 FTE positions to provide certain
human resources services to seven
small state agencies. These agencies
are generally satisfied with
DOA’s human resources staff and
the services they provide. Charges
for the services provided by DOA
totaled $1.9 million from fiscal year
(FY) 2006-07 through FY 2008-09.
It was always anticipated that the
seven agencies would continue to
incur additional costs for human
resources tasks not completed
by DOA, and these costs totaled
$1.3 million during a recent
two-year period.
2009 Wisconsin Act 28, the 2009-11
Biennial Budget Act, proposes
further consolidation of human
resources functions. Careful,
ongoing legislative scrutiny of these
consolidation efforts is warranted.
Purchasing
Under the ACE Initiative, DOA
was authorized an additional
15.5 FTE positions to provide
purchasing services for 11 state
agencies. DOA’s charges for those
services totaled $2.7 million from
FY 2006-07 through FY 2008-09, and
the affected agencies are generally
satisfied with the services provided.
However, consolidation has not
eliminated purchasing-related work
in the 11 agencies, which reported
spending a total of $1.6 million
during a recent two-year period to
perform purchasing tasks that
DOA does not complete for them.
As of June 2008, more than 125 vendors
were eligible to provide goods
and services such as office supplies,
printers, and information technology
(IT) services to state agencies
and the University of Wisconsin
(UW) System under 14 purchasing
contracts negotiated by DOA. By
negotiating lower prices, reducing
the variety of products available
for purchase, and requiring state
agencies and UW System to use the
contracts in most circumstances,
DOA expected significant savings.
Expenditures totaled $106.8 million
in FY 2007-08, the first full year all
contracts were in effect. Available
data indicate the State saved
$18.9 million over a three-year
period for goods and services we
were able to analyze.
More than 80.0 percent of the
savings occurred under the IT
services contract, but the available
information indicates that the State
paid $396,100 more than allowed
under three contracts. Moreover,
purchases under the contracts
represented only 2.7 percent of the
total value of supplies purchased
by executive branch agencies and
UW System in FY 2007-08.
Management of purchasing contracts
could be improved. DOA
relies on vendors to report on the
goods and services purchased,
but this information is not always
accurate and complete, and DOA
does not consistently review it to
ensure that vendors charge the
prices allowed under the contracts.
Further, some goods are available
for purchase at different prices
under multiple contracts.
Property Sales
The Legislature authorized DOA to
sell $36.0 million in surplus property
during the 2005-07 biennium
and $40.0 million during the 2007-09
biennium, but only $9.6 million was
sold during that four-year period.
2009 Wisconsin Act 28 extended
DOA’s authority to identify and
sell surplus property through the
2009-11 biennium.
DOA’s contract with Equis, a
Chicago real estate consulting
firm that helped identify potential
saleable properties, had a troubled
history. In March 2009, a former
Equis vice president was convicted
in federal court of bribery and other
offenses related to the potential sale
of DOA’s Administration Building.
In addition, concerns have been
raised about the commissions that
Equis was eligible to receive for
property sales. DOA ended its
contract with Equis in May 2007.
Information Technology
Under the ACE Initiative, DOA was
authorized an additional 68.0 FTE
positions to provide IT support
services to 20 state agencies and
to consolidate and maintain the
servers that manage software.
Through June 2009, consolidation
had been completed in only 7 of
the agencies, although all 20 lost IT
staff positions and continue to incur
server and network support costs,
which totaled $31.6 million during a
recent two-year period.
DOA also managed two other large
ACE Initiative–related IT projects:
converting all executive branch
agencies’ e-mail systems to a
common system; and
creating the Integrated Business
Information System (IBIS),
which is designed to replace
approximately 100 types of
software used by state agencies
for accounting, budgeting,
human resources, payroll,
and purchasing functions.
Through June 2009, DOA spent
$113.5 million on server consolidation
and the other two IT projects.
The costs of all three projects
significantly exceed the original
estimates for implementation, and
only e-mail consolidation has been
completed.
In April 2008, DOA suspended
IBIS. Continued legislative scrutiny
of IBIS is warranted because the
project’s appropriation had a
negative balance of $8.4 million
as of June 2009. In addition,
the State is obligated to repay,
through FY 2012-13, an additional
$4.2 million incurred under the
master lease program, which
finances IT project costs.
For Future Consideration
The ACE Initiative has had mixed
results. Some consolidation
components have been effectively
implemented and have resulted
in significant cost savings. Others
have been less successful, and
calculations of savings and
efficiencies have not always taken
into account the $15.2 million
paid to four contractors that
assisted DOA in their creation
and implementation.
Consideration of the successes
and challenges presented by the
ACE Initiative and its ongoing
components may be useful as the
Legislature assesses other efforts
to consolidate state operations.
Continued legislative attention
to these issues is warranted, and
additional oversight could increase
the likelihood of success.
Recommendations
Our report includes recommendations
for DOA to report to the Joint
Legislative Audit Committee by
June 30, 2010, on:
the amounts it is charging seven
state agencies in FY 2009-10
for human resources services
and its preliminary plans
for consolidating the human
resources functions of
additional agencies
(p. 20);
surplus state property sold
during FY 2009-10
(p. 40);
the status of efforts to consolidate
server and network
support functions
(p. 44); and
the status of IBIS and the current
deficit in the project’s program
revenue appropriation
(p. 51).
We also include recommendations
for DOA to:
execute division-of-labor
agreements with each state
agency for which it provides
purchasing services
(p. 22);
review payments to vendors
under the services contracts and
recover any overcharges
(p. 30);
improve its management of
purchasing contracts by implementing
processes for verifying
the accuracy of information in
vendors’ reports and assessing
financial penalities when
amounts charged exceed those
stipulated in contracts
(p. 33); and
establish policies for approving
or denying requests for
waivers from provisions of the
purchasing contracts
(p. 36).