Oklahoma Watch | By Paul Monies

Oklahoma’s superagency that handles information technology, budgeting, employee management and state office buildings has little budget transparency of its own and needs to do a better job of responding to agencies it provides services, a legislative oversight report concluded.

The Legislative Office of Fiscal Transparency said itsexamination of the Office of Management and Enterprise Services found the agency’s annual appropriations have tripled in the past five years, reaching $164 million in fiscal year 2024. During the same time, the agency’s fee revenue, which comes from other state agencies, rose to $52.4 million, an increase of 285%. The office presented its report to lawmakers at a hearing on Wednesday.

Some of the increased spending came in the wake of the COVID-19 pandemic, which exposed an older technology infrastructure that wasn’t built for thousands of state employees working from home. But the LOFT report said a lack of long-term planning on statewide technology needs and an increased reliance on contractors and outside consultants also pushed spending higher.

Lawmakers created the agency more than a decade ago to streamline IT purchases and increase efficiency in state spending on common administrative services. But that promise has only partially been fulfilled, the legislative report found. It explored more than 20 policy recommendations for the Legislature, including splitting out OMES’ statewide finance division into a separate agency to increase accountability.

“OMES is a huge agency with a huge budget,” said Sen. Chuck Hall, R-Perry, who also chairs a specialSenate oversight committee on OMES. “They are handling a lot of services on behalf of the state of Oklahoma and its citizens. We can always be a better service provider, and the LOFT report reflects that there are shortcomings and gaps.”

The report found agencies have little recourse when the Office of Management and Enterprise Services increases its fees for services and have little flexibility to control their own costs for shared services. For example, OMES told more than two dozen state agencies they will have rent increases of up to 20% this year. That was to catch up from years of deferred maintenance, but it applied to agencies regardless of how old their buildings were.

Jerry Moore, OMES’ deputy director and chief transformation officer, said the agency continues to evaluate those anticipated rent increases. But there’s an estimated $280 million in deferred maintenance expenses to buildings owned by the state, he said. Insurance and utility expenses have gone up too.

The report highlighted late payments by OMES to its vendors. Thestate auditor issued a report in 2020 with those same concerns, but OMES hasn’t improved much since then. Authors of the legislative report pulled a random sample of invoices and found 62% went beyond the 45-day legal limit.

Senate Floor Leader Greg McCortney, R-Ada, said he was at a loss to explain to his constituents that a state agency couldn’t perform a basic function like paying its bills on time.

“How in the world can I defend the continuation of what we’re doing here?” McCortney said.

In response, OMES officials said some of those late payments were because it was having problems collecting fees owed by agencies using the services.

“We are stuck paying these technology bills at these agencies, and they may have some disagreement about how it didn’t go to their satisfaction when they signed the statement of work,” said John Suter, OMES’ executive director and the state’s chief operating officer. “That’s frustrating to me.”

The report said OMES spending from federal pandemic relief had left the agency exposed to ongoing operating costs from what were described as one-time purchases at the time. It highlighted $100 million that went for a backup data center in Texas. Much of those costs went to cloud-based systems that now require an extra $18.6 million in annual costs.

The state also paid the same vendor, NTT Data, $8.6 million per year for desktop support services. But service times were so bad OMES canceled the contract this year and took the services back in-house. Lawmakers gave the agency an extra $15.8 million in appropriations to resume those functions.

“Both the new cybersecurity enhancements and the data centers were purchased with CARES money that covered the recurring revenue for the first few years but didn’t account for how those recurring charges would be covered afterwards,” the report said.

Sen. Julia Kirt, D-Oklahoma City, said the LOFT report validates concerns many had for years about consolidation.

“Ultimately, it’s the responsibility of the majority in the Legislature to provide long-term strategic planning so that LOFT’s recommendations are enacted and provide adequate resources to ensure citizens get the services they need,” Kirt said in a news release.

In an interview after the hearing, Suter said his agency was agnostic on how the Legislature wants to provide funding for information technology and he was open to other ideas on agency structure.

“If people need to report to different people, if we need to be funded in different ways, either in all appropriations or in some hybrid model like we exist now, that’s OK,” Suter said. “It gives us a lot of flexibility once the Legislature looks at all the options.”