$1.3 million software can't handle York City's finances

Logan Hullinger
York Dispatch
York City Hall in York City, Friday, March 23, 2018. Dawn J. Sagert photo

York City has poured $1.3 million into inadequate financial software that has at times left its finances in disarray and delayed annual audits for up to 17 months, according to city officials.

Since 2017, the city has spent about $900,000 maintaining and upgrading the system that failed to meet a plethora of criteria expected by city officials upon its initial purchase. The system, designed by Microsoft, was purchased because the former software was no longer supported by the company.

The software initially cost $550,000, but the city received a $150,000 grant to offset the costs.

"It's a really, really bad situation," said York City Council President Henry Nixon, adding that the system exemplifies bad business practice and is "untenable."

The city purchased the new system, Microsoft Dynamics AX, after officials attended a demonstration in Washington state, said Tom Ray, the city's business administrator. 

There was one problem, however: City officials didn't realize the base model they purchased didn't come with all the upgrades presented with the display model. 

Without the upgrades, the software can't handle many key functions required for compiling city finances, Ray said. 

Even after years' worth of investments, electronic bank reconciliations, a grant management tracking module and real-time financial logs remain an issue, Ray said. But the city doesn't intend to scrap it and go a different route because of its hundreds of thousands of dollars in investments in upgrades and fixes.

York City Mayor Michael Helfrich speaks during Light Up York in York City, Saturday, Dec. 7, 2019. Dawn J. Sagert photo

The system's weaknesses have made such tasks as keeping track of sewer and refuse payments "a disaster," Ray said. It also requires the city to hire a third party compiler to gather financial information to send to an accounting firm.

"Trust me, we are trying to fix this system we’re working in. It takes too long," said York City Mayor Michael Helfrich said. "The way it should work is that we do our own compilations in house and then send those to the auditor. And that’s what we’re working on.”

Helfrich and other officials have also said the system has delayed annual audits, which are required by the state's third-class city code.

The city's audits have taken as long as 17 months after the end of each fiscal year to publish, according to an analysis of audits over the last decade. And the city is on a trajectory to meet that mark for the third time with the delay of its 2018 audit.

More:'To the bone': York City's 2020 draft budget calls for plenty of cuts

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By comparison, York is well behind other third-class cities in the region when it comes to publishing audits. Lancaster, for example, averages six and a half months to complete its independent audit.

And none of the cities has taken as long York's 17-month delay in publishing an audit; the closest to that mark is Harrisburg, which took 13 months in 2017.

And, while the city has pointed fingers at the flawed software for its delayed financial reviews, an analysis of audits dating back to 2007 shows that the city has never taken fewer than nine months to publish them.

Ray said he was unable to say why the city struggled with timely audits prior to acquiring the  software, but he floated that it may have been due to a lack of staffing.

Under the state's third-class city code, audits must be completed within 90 days of the beginning of the year. Helfrich has called that an unrealistic deadline, as the city's books don't close until February.

Under this criteria, the 2019 audit would be due in March. But the city doesn't even plan to complete its 2018 audit until July of this year, officials have said.

York City, however, doesn't have to sweat that deadline, as it adopted what's known as "the 1957 charter law" in the 1960s. Charter laws, which provides for "home rule," allow municipalities such as York to have more freedom to self-govern.

The 1957 charter law does not identify a timeline for audits, and such laws supersede state code, city solicitor Jason Sabol confirmed. 

Regardless of the charter provision, state code does not provide any mechanism to enforce the 90-day deadline.

The audit delays also come as the city continues to pass strained budgets, limited by skyrocketing pension and health care costs. Last month, City Council approved a $110.5 million budget.

The 2020 budget pulls $6 million from reserves to cover pension and health care costs without raising taxes. The city also cut roughly $3.8 million in spending across 14 of its 29 departments.

— Logan Hullinger can be reached at lhullinger@yorkdispatch.com or via Twitter at @LoganHullYD.