NSW govt SAP project hit by $5m blow-out

A concerted effort to consolidate three enterprise applications at the NSW department of commerce has hit a snag in the form of a $5 million cost blow-out, according to the NSW Auditor-General.

When the department was created in April 2003 it operated three different information management systems - MIMS for finance, SAP for payroll, and CHRIS for human resources.

Three years ago the department decided to consolidate the three applications into one with SAP R/3 to be used across "most" of the department. The total cost of the project was initially estimated to be $15.1 million.

The department believes it will complete the implementation of SAP across all offices this year at a total forecast cost of $20.5 million, $5.4 million up on the original estimate.

According to a recent NSW Auditor-General's report, the increase of $5.4 million was "mainly" due to management re-scoping phase two of the project to achieve greater benefits by the complete retirement of the MIMS information system.

The department expects to reap benefits of $51.7 million over ten years as a result of the consolidation project.

A cost blow-out is not the only problem dogging the Department of Commerce according to the Auditor-General, which identified a number of "control issues" in its November 2006 report.

"We identified opportunities for the department to improve some internal control procedures and accounting processes and we will report these to management," the report stated.

During 2006 the department's internal audit unit identified and reported to management "significant control weaknesses" in a number of recently-implemented accounting and operational systems, including payroll, accounts receivable and accounts payable, the government licensing system (including Office of Fair Trading Valuers Registrations), and the SAP R/3 phase one post implementation review and project management.

"While management has responded positively in implementing internal audit recommendations, we are concerned with the number of significant system weaknesses that were identified in these new systems," according to the Auditor-General. "We will continue to monitor the work of internal audit in assessing the department's control environment and the resulting level of improvement in system controls."

A Department of Commerce spokesperson told Computerworld the Auditor General's report refers to an internal audit conducted by Commerce in 2005 that identified some issues with the implementation of new payroll and accounting systems.

"Commerce is a new department and these issues were a by-product of bringing together five previously separate ICT platforms," the spokesperson said. "The budget change resulted from re-scoping of the project. A decision was taken to transfer all business units to SAP and retire MIMS. Originally MIMS was to be retained."

The spokesperson said the implementation will be complete in April and will address the control issues raised by the Audit Office.

If that wasn't enough, the Department of Commerce has also been handed the State Records Authority of NSW (State Records), which moved from the Arts portfolio to report to the Minister for Commerce from November 1, 2006.

State Records undertakes a range of functions concerned with records in all formats and all aspects of recordkeeping.

The move followed a review of State Records by the Council on the Cost and Quality of Government. The aim is to help State Records undertake its whole-of-government role.

The department's Government Chief Information Office will work with State Records on plans for digital records and information management as part of the new state information and communication technology direction unveiled by NSW CIO Paul Edgecumbe last year.

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