Interviews were conducted with 14 agencies. Interviews included representatives of the Accounting Office, the Budget Office and the Information Technology Office for financial systems. Agencies selected for the sample included departments using CALSTARS, enterprise systems, and other types of systems. The interviews focused on internal controls, risks, reliability, stability, economy and efficiency of the financial systems of the agencies sampled. Our findings were summarized into the major categories listed below.

• 93 percent of the departments’ business needs are not met by the existing systems;
• 93 percent have significant concerns with maintaining the existing systems;
• 93 percent have staff recruitment and retention concerns and related risks;
• 93 percent rely on staff manual processing activities to ensure the integrity of financial data;
• 93 percent manually prepare two financial statements each year: one for legal/ budgetary basis and one for Generally Accepted Accounting Principles (GAAP) basis;
• 81 percent did not have an audit of their financial management systems;
• 79 percent receive federal funding and almost half of them cannot meet the federal criteria;
• 79 percent must gather data from multiple sources and manually compile reports;
• 78 percent do not have a system to capture the costs of providing a service or product (activity based costing or product costing);
• 71 percent of state agencies do not have an enterprise or strategic plan that addresses financial management systems;
• 71 percent of state agencies do not have integrated financial data (common database); data is generally handled multiple times in multiple systems;
• 57 percent of the core financial management systems are over 20 years old;
• 50 percent did not complete a department IT risk analysis; an additional 25 percent did not know if a risk analysis was performed for the systems they manage;
• 46 percent do not have a consolidated fixed (capital) asset system; and
• 29 percent were concerned with system security, the state has not established statewide security standards.

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