NewsOK: Oklahoma City News, Sports, Weather & Entertainment

OSDH overspent by $30 million. Where did the money go?

Oklahoma City — The Oklahoma State Department of Health spent $382,000 to install “free” software — only to find out it would cost $53,000 each year to maintain.

The software from the Centers for Disease Control and Prevention was intended to comply with federal rules and better track cases of childhood lead poisoning. But Deborah Nichols, the Health Department's chief operating officer, said she wouldn't agree to continue the project in a Nov. 20 email to state Office of Management and Enterprise Services Chief Information Officer Bo Reese and others. It was never clear how the department was going to pay for the software, or why it couldn't find a cheaper option, she wrote.

“It is too late for the $382k but I need some transparency around why we would ever spend $53k on maintenance,” she wrote in the email.

A project the size of the CDC software would account for only about 1 percent of the department's roughly $30 million in overspending, but it does offer a window into how the financial situation could have gone awry.

Nichols, who was chief operating officer at the department from August 2015 to November 2017, told a House investigative committee in December that top officials wanted to do as much good for the public as possible, and they didn't grasp that they were out of money. The department overspent on payroll and information technology, and officials didn't always understand the financial obligations they were taking on, she said.

The Health Department's leaders were eager to draw down federal funds for their programs, Nichols said, but didn't think through how much they were committing themselves to spend. Federal grants usually require states to contribute matching funds, though the size of the match varies.

“It's really great that you can spend $200,000 and get $2 million, but if you don't have the money to spend for that state match, then from a pure business point, you shouldn't be spending it,” she said.

No one has alleged that any Health Department officials embezzled or used funds to give themselves perks like new office furniture or luxurious travel.

The Health Department's payroll increased by about $25 million, or 19 percent, from budget year 2011 to 2016. Revenues didn't keep pace, and declined in some cases, but the department didn't use layoffs or other cuts to balance the budget. Nichols attributed most of the increase to hiring more people, rather than giving pay raises.

“When programs would have their funding cut and there was personnel involved, there was a reluctance to let those people go,” she said.

It wasn't always clear what the department was getting for its technology spending, Nichols told lawmakers. The Office of Management and Enterprise Services, which provides information technology services for state agencies, didn't have a “vested interest” in reducing costs for IT projects, she said, and Health Department officials also tended to focus more on what they thought an updated system could do for them than on its price.

“It's like dealing with a sales force, almost. They have to have this system,” she told lawmakers. “It was nothing for a project to cost $200,000, $300,000.”

Bo Reese, chief information officer at state Office of Management and Enterprise Services, said controlling costs is important to the agency. He estimated it had reduced the Health Department's costs for core technology services, like internet and phone connections, from about $10 million to about $6.5 million.

The Health Department made its own decisions about which technology projects to pursue, Reese said, though he tried to offer some guidance.

“I do not control the business decisions that they make,” he said. “I can't go twist their arm.”

Waste also appears to have been a problem. An Oct. 16 memo said the department had spent about $8 million preparing for three information technology projects and building renovations since 2009, but abandoned all four projects — meaning the upfront investment had produced nothing.

By the time the budget problem came to light in 2017, it was too large to fix without significant layoffs, Mike Romero, who was chief financial officer from April 2017 to January 2018, said in an interview. If the department had laid off small numbers of people or made other adjustments when revenues went down, it might have been able to balance its budget while sparing the most important services from cuts, he said.

“I think it had been far gone for a long time,” he said.

Related Photos
<p>The Oklahoma Health Department is pictured in Oklahoma City. [Photo by Sarah Phipps, The Oklahoman Archives]</p>

The Oklahoma Health Department is pictured in Oklahoma City. [Photo by Sarah Phipps, The Oklahoman Archives]

<figure><img src="//" alt="Photo - The Oklahoma Health Department is pictured in Oklahoma City. [Photo by Sarah Phipps, The Oklahoman Archives] " title=" The Oklahoma Health Department is pictured in Oklahoma City. [Photo by Sarah Phipps, The Oklahoman Archives] "><figcaption> The Oklahoma Health Department is pictured in Oklahoma City. [Photo by Sarah Phipps, The Oklahoman Archives] </figcaption></figure>
Meg Wingerter

Meg Wingerter has covered health at The Oklahoman since July 2017. Previously, she lived in Topeka, Kansas, and worked at Kansas News Service and The Topeka Capital-Journal, where she earned awards for business coverage. She graduated from... Read more ›