Arkansas vote calls for end to budgeting scheme

Performance-based model doesn't meet business goals, says state legislature

The Arkansas State Senate last week voted to repeal a law mandating that agencies use performance-based budgeting methods enabled by the state's ERP system. But some officials said the problems with the approach aren't related to the budgeting software that agencies now use.

Performance-based budgeting is a private-sector concept that Arkansas officials hoped would provide state agencies with greater budget flexibility. The new budgeting methodology was meant to be part of the $60 million Arkansas Administrative Statewide Information System (AASIS), an ERP backbone based on SAP AG's R/3 applications that went live in July 2001.

The Senate bill, which lets agencies use the more traditional line-item method of budgeting, offered a number of reasons why the performance-based approach hasn't succeeded.

'Burdensome' Process

The bill criticizes an SAP budgeting application that the state first used, but it adds that the model "does not accurately reflect state agency goals and objectives" and is "burdensome to state agencies."

The sponsor of the measure, Sen. Percy Malone, explained in an e-mail that the state is "several years down this road" of using dual budgeting systems, which is "no way to run state government."

"The proposed Senate bill is faulty because it contains language that is inappropriate and inaccurate," said an SAP spokesman. Arkansas "is ending its performance-based budgeting program because it has decided that the budgeting technique is not appropriate for their operations. SAP delivered the budgeting software, and the state decided not to use the solution. The matter is being litigated in the courts."

After the state abandoned the SAP performance-based budgeting application, it spent $2 million to have Protech Solutions Inc. build custom budgeting software. Little Rock-based Protech delivered its application last June after a six-month development project.

Keith Leathers, AASIS director for the state, said that the software written by Protech has performed well and that the state's move to stop the use of performance-based processes has nothing to do with the quality of the budgeting application. Leathers said the government will continue using Protech's software, which can accommodate both types of budgeting.

He added that the functionality supporting the presentation of budgets in a performance-based format will remain in place in case the state makes future changes in the way that budgeting is done.

Nagaraj Garimalla, Protech's president, said the budgeting system developed by his company "satisfies all the requirements" set by the state. The software is customized around Microsoft Corp.'s .Net technology and provides browser-based views of budget data. It uses Microsoft's SQL Server database and includes Business Objects SA's Crystal Reports software, Garimalla said.

Copyright © 2005 IDG Communications, Inc.

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