Welfare Computer System Too Costly, State Audit Says : Government: Report finds that total expense will exceed projections by $455 million and that the equipment may never do all it was supposed to.

California, already one of the last states to bring its welfare system into the computer age, has jeopardized its chance for dramatic savings by investing in a technology that not only will cost hundreds of millions of dollars more than other systems but may also never work, the state auditor reported Tuesday.

By the time it is fully operational, the new welfare computer system will cost about $1 billion, or $455 million more than originally estimated, and may never be able to “accommodate the high volume of transactions and records” generated by the system, said State Auditor Kurt Sjoberg in an analysis prepared for him by the accounting firm of Ernst & Young.

Summing up his findings, Sjoberg said the $475,000 study of the Department of Social Services’ welfare computer project had shown that the agency’s “approach to welfare automation is too costly and unlikely to succeed.”

“The technology approach” to the project, the report said, “is outdated and the system is not performing as expected.”

The report, ordered by the Legislature after the department failed to provide updated information on the project’s progress, said the state had based its technology decisions on a pilot program in Napa County. But it said that state officials in charge of the project had failed to fully investigate whether a system that worked in a small county would be suitable for the entire state.

The report criticized the department--which has already spent about $100 million on the project known as SAWS (Statewide Automated Welfare System)--for failing to set specific performance goals, establish deadlines for its contractors, and set fixed prices for various aspects of the project.

“The complexity of this project has overwhelmed the department’s ability to manage; we estimate that statewide welfare automation may not be available until the year 2000, 10 years after the department’s original plan for SAWS,” the report said.

The auditors’ conclusions confirm earlier findings by the legislative analyst and chronicle what is only the latest in a string of state computer debacles. Last year, the Department of Motor Vehicles determined that a $50-million program to merge driver’s license data with motor vehicle registration information was so riddled with problems that it had to be abandoned.

The findings are particularly embarrassing for Gov. Pete Wilson and Social Services Director Eloise Anderson, who has often touted the new automation system as one way the state could cut welfare costs. California is one of only two states that does not have its welfare data on a statewide computer system.

“It’s another example of government failure to adapt to new technologies and the Wilson Administration having ignored all the warning signs,” said Assemblyman Richard Katz (D-Sylmar).

As originally designed, the SAWS system would immediately give counties computer access to all welfare data, including information on the Aid to Families With Dependent Children (AFDC) program, Medi-Cal, adoptions, special adult programs and foster care. The project was expected not only to automate tasks that now take thousands of man-hours but also to help reduce fraud. California spends about $18.4 billion annually just on AFDC, food stamps and Medi-Cal and handles more than 2.7 million welfare cases.

In a written response to the findings, Anderson took issue with the auditors’ conclusions, saying that they gave the “incorrect impression that we are wasting money in our administration of welfare.” Noting that the computer program was only a small part of administrative expenses, she said the department had cut administrative costs by 26% over the last five years.

“I believe that . . . the major findings of your report, especially those related to our management of welfare automation, are unwarranted,” she said in an unusually strong response.

For example, she said that working models of the SAWS computerized program are operating in 11 counties and “five additional counties will become operational by September, 1995.” She said the cost overruns outlined by the auditor also failed to take into account the fact that the welfare caseload has grown by 110% since the original cost estimates for the project were made.

But elsewhere in the Administration, some of the auditors’ findings seemed to get the backing of Health and Welfare Secretary Sandra Smoley, who has authority over the Social Services Department.

Smoley announced that after an internal review of the project, she had decided to remove day-to-day management of SAWS from the Department of Social Services and give it to the Health and Welfare Data Center, which is directly under her jurisdiction.

At the same time, she disclosed that two of the officials directly responsible for the project--the social services department’s deputy director and its information technology director--had been reassigned. She refused to give the reasons for their reassignment other than to say that “we feel we needed a new perspective on the project.”

Wilson Administration officials said that, with the management changes, they believe that they can make the system work.

Katz, however, said he believed that the Wilson Administration had failed to make the fundamental changes in the state’s procurement process and computer management needed to make investment in computer technology pay off.

“The Wilson Administration is in denial to a large extent,” he said. “They’re basically trying to make sure that whatever picture they can paint helps the presidential campaign and doesn’t get into the real depths of the problems.”