Employees warn of problems with new tax system

The state’s largest union and workers in the state Department of Taxation are warning that the $60 million project to modernize the tax department’s computer systems has gotten seriously off track, and have written to Gov. David Ige to warn that the project could be “severely compromised” unless changes are made.

Hawaii Government Employees Association Executive Director Randy Perreira wrote that control of the project has shifted from state Tax Director Maria Zielinski and Tax System Modernization Program Manager Robert Su to the tax department’s deputy director, Damien Elefante, and state Chief Information Officer Todd Nacapuy.

That management change has “severely impacted” state oversight of the project, and Perreira said there is a “complete lack of confidence” in the leadership of Elefante and Nacapuy.

“If prior leadership is not restored, employees fear the new system will be severely compromised, and will negatively impact the vast majority of Hawaii taxpayers and ultimately the economic well-being of the state,” Perreira wrote. “Employees are compelled to voice their concerns because they are loathe to bear responsibility for the system’s inevitable failure, under current leadership, and the catastrophic effects it will bring.”

Tax department employees who spoke with the Star-Advertiser on condition that they not be identified said vendor Fast Enterprises, which is carrying out the computer project, appears to be controlling the execution of the project.

The tax department’s experts have been excluded from planning for next year’s transition of personal income taxes from the obsolete, old computer system to the new tax system, they said.

If the project continues along its current path, problems with individual income tax returns will surface in the 2019 tax year. “Once we actually see them (the problems), it’s too late,” said one worker.

When asked to comment on the letter, Nacapuy said in a written statement: “We received a copy of the letter and are meeting with the union and state employees to listen to their concerns. All parties are working together to ensure the project is a success.”

Nacapuy has said he was named the project executive sponsor in July, tasked with leading the technical aspects of the project “because the governor has recognized that a lot of these projects do need a lot of technical expertise in order to accomplish them.”

That move is “exactly in line” with the administration’s actions on all of the other major state information technology projects such as new systems for time and attendance records management, payroll, and the Department of Human Services’ KOLEA system to manage Medicaid and other functions of the department, he said.

Elefante has acknowledged some of the unhappiness within the tax department about the changes, but said that “with any type of change that goes on, there are going to be people who will be apprehensive about the change; they’re going to have some concerns.”

Elefante has described the project as a “collaborative effort” between the state’s Office of Enterprise Technology Services and state tax officials.

Some of the concerns raised by HGEA are similar to issues raised by AdvanTech LLC, an outside consultant hired by the state to monitor and report on the tax department modernization project.

The consultant reported in July that shifting overall control of the project from tax officials to the ETS office “created a level of uncertainty and angst” among some who work on the project.

“In some cases, morale appears to have fallen, with an impression that ‘the change in management is because the project is expected to fail,’ leading to attitudes such as ‘I’m not going to try very hard’ or ‘I don’t need to learn this because it is all going to be shut down,’” AdvanTech reported. “We heard statements from more than one staff member such as ‘ETS stole the project away from (the tax department).’”

Perreira said the tax department’s operational staff are not being sufficiently consulted to ensure they eventually can operate and maintain the system themselves, a pattern he said has been seen repeatedly in other state computer projects.

Previous projects often have not worked the way they were supposed to, the vendor was not held accountable, and the contractor then remained on the job long-term, he said. “Hawaii is rife with this.”

“The vendor should not be dictating to the client,” Perreira said.

The tax modernization project is undergoing extra scrutiny in part because an earlier tax department computer upgrade was widely regarded as a failure.

The department launched a system modernization effort in 1999, and eventually paid CGI Group Inc. $87.5 million to install what state officials later described as an already outdated computerized tax collection system.

Perreira and the workers said the new project is on a path similar to the CGI initiative.

“We feel like history is repeating itself,” said one worker.

Perreira said the workers shared their concerns with the Ige administration, and had a four-hour meeting with Chief of Staff Mike McCartney.

“So far this administration has been deaf to the concerns they’ve been expressing,” Perreira said.

The changeover from the old tax system to the new one is being rolled out in phases. So far, excise taxes, hotel room taxes, motor vehicle rental taxes and corporate income taxes have been moved to the new system. Individual income taxes are scheduled to move to the new system next year, and the transition for all other functions should be complete by mid-2019.