It’s no secret that the Burlington Telecom fiasco has been the primary cause of the Queen City’s financial woes. But Wall Street monitors have also laid some blame on the city’s antiquated, spreadsheet-based accounting system for the three-year-long slide toward the bond-market junkyard.
In response, then-mayor Bob Kiss and the city council in 2011 approved the purchase of an accounting software package from Michigan-based New World Systems that promised to make its municipal budget data more reliable, up-to-date and easier to access. Twenty-one months and $700,000 later, the new system still isn’t fully functional.
In fact, it’s lagging in crucial respects, charges Progressive City Councilor Jane Knodell, an economist and former University of Vermont provost.
After being assigned a seat on the city council’s board of finance in April, “one of the first things I asked about was the state of the unassigned cash deficits,” Knodell recounts. She wanted to know the total of all departmental and enterprise fund borrowings from the cash pool — the same cash pool from which the Kiss administration “borrowed” $16.9 million to prop up Burlington Telecom.
That’s “a key metric,” Knodell points out. In downgrading Burlington’s credit rating a little over a year ago, Moody’s Investors Service cited “strains on the city’s pooled cash” as the chief cause of the negative appraisal.
To satisfy credit-rating agencies such as Moody’s, Knodell observes, “You have to be able to show you know your own financial condition.” But in the continued absence of detailed, timely data on pooled cash, she says, “we’re flying blind.”
Mayor Miro Weinberger and Paul Sisson, who then held the post of interim chief administrative officer, “couldn’t answer the question” about the status of the pooled cash, Knodell says. The board of finance is “still waiting for the information” that the new accounting software is supposed to provide, she adds.
On Monday, Weinberger promised that the data Knodell is seeking will be available within the next few days. For the first time in recent memory, he said, councilors will be getting the comprehensive monthly financial reports mandated by the city charter. Among other upgrades, those reports are supposed to ensure timely tracking of revenues and expenses.
A number of improvements have already been implemented. Knodell says she appreciates the advantage of receiving “real-time data, which was not possible under the old system.” And because it’s an “enterprise-wide system,” as Sisson puts it, Burlington is better able to keep track of data related to the pay-to-play operations of Burlington Telecom, water and wastewater — but not Burlington Electric, which has its own software. This monitoring capability is “something the city never had before,” Sisson adds.
After overcoming difficulties in switching to the more complex New World system, some municipal department heads have come to acknowledge its virtues.
“It’s working for us now,” reports Doreen Kraft, head of Burlington City Arts. “We’re small, so that helps.”
In contrast, Burlington International Airport director Gene Richards presides over one of the city’s largest entities. He says that despite having endured “a little pain” during the implementation process, New World’s software is proving “a whole lot better than what we had.” The biggest plus, in Richards’ estimation, is that the airport and city government are now working from one set of books.
However, not all department chiefs are sold on the new system, including Steve Goodkind, the soon-to-be former director of the Department of Public Works. In a July 12 report to the city council, Goodkind wrote that while New World “in the long run will offer some benefits that our former system lacked, its implementation over the past year has been painful. The challenges ranged from establishing the appropriate accounts based on the budget document adopted by the city council, to getting timely and accurate monthly reports.”
The longtime public works director cautioned councilors that because of “the problems New World still has with budget reporting, I am keeping my budget discussions in this report to general descriptions, as I lack the specifics that I normally have in the year-end report to the council.”
But Sisson claims that Goodkind’s headaches are largely self-inflicted. He says the outgoing DPW director, unlike some other department heads, did not seek assistance from city hall in implementing New World. “We helped the departments any time they asked,” Sisson adds.
Airport director Richards brought in reinforcements — two temporary workers — to assist with engineering a cutover that was beyond BTV’s in-house capabilities. Other city managers did the same, Sisson says.
“Glitches and bugs” always arise as part of a transition from one accounting system to another, adds Sisson, a certified public accountant who now works as general manager at South Burlington-based Northern New England Energy Corp. Ward 6 independent City Councilor Karen Paul, who runs a financial consulting firm, agrees.
“I’ve never encountered a software program where you don’t have glitches during a switchover,” Paul says.
In Burlington’s case, New World’s system replaced the old software on July 1, 2012 — the start of the city’s 2013 fiscal year. And that was “a fundamental mistake,” contends one city official, who asked not to be identified as a critic of the Weinberger administration. The old and the new system should have operated side by side for several more months, the source says, suggesting that many problems could have been avoided if it were possible to compare data from previous fiscal years with the numbers New World is providing.
Councilor Paul agrees. “The two programs should have been kept in tandem,” says the former board of finance member. “It’s hard to make year-to-year comparisons because of the switchover.”
But letting the old system run parallel with the new one was “simply not possible,” counters Sisson, who served as interim CAO from the start of the Weinberger administration in April 2012 until June of this year. “That would have meant doubling the workload of the clerk/treasurer’s office,” he says. “There’s no way we could have handled that.”
Sisson does acknowledge that the decision to go cold turkey with New World presented “a risk.” But it was a reasonable risk, he emphasizes, and most departments are now operating smoothly with the New World system, which is providing “huge advantages” over the old one.
For example, the city used to have three different payroll systems, one of which relied on an outside firm. “Now we have one system. It’s a clear and major improvement,” Sisson says.
But the city and New World did not adequately train municipal workers to operate the new software, says the city official who would not speak for attribution. In an interview last week, current CAO Bob Rusten conceded “there were some issues with training.” Those shortcomings have been addressed in recent weeks, Rusten added, saying, “We’re now in the final stages of making this work better for all of us.”
Assistant CAO Rich Goodwin, interviewed in conjunction with Rusten, said, “We’ve put together a system to ensure that it is fully operative by September 30.” That deadline will arrive almost two years after the start of the transition to New World.
Weinberger likewise acknowledged, “There is additional work to do to get the system to the point where all our departments are operating it fully.” The mayor noted that when he chose Rusten in May to succeed Sisson in the CAO job, “the highest priority I gave Bob was to complete installation” of New World. Rusten pointed out he’s been on the job only a few weeks.
Some of the blame for the delays and confusion in the implementation process lie with New World itself, Rusten said. The software has inherent problems beyond the “normal glitches,” he maintained, noting that he plans to meet this week with New World executives to request a partial rebate of the $700,000 Burlington paid for the software. Asked how much he expects to recoup, Rusten just smiled. Last year the state of Vermont convinced Hewlett-Packard to refund $8.37 million for a computer system that never worked properly for the Department of Motor Vehicles.
New World officials did not respond to email and telephone messages requesting comment on the Burlington situation.
Karen Paul suggests it will all turn out OK in the end, saying, “I’m confident Bob [Rusten] will be able to work through the remaining issues.”
Sisson doesn’t question the wisdom of buying the product from New World, which was one of only two companies that responded to the city’s request for proposals. “It was definitely the right choice,” he says.