Report 2014-105 Recommendation 3 Responses

Report 2014-105: Los Angeles Department of Water and Power - Consequences Linked to Its Premature Launch of Its Customer Information System May Push Total Costs Beyond $200 Million (Release Date: March 2015)

Recommendation #3 To: Los Angeles Department of Water and Power

To ensure that the board can more effectively exercise oversight for the department's significant information technology projects, the board should develop a process for the board to designate certain information technology projects as having a potentially significant effect on business operations or customer relations, and require that department managers first obtain the board's approval before launching such critical new systems.

Annual Follow-Up Agency Response From October 2020

As indicated in prior responses to the State Auditor, LADWP was sued in multiple lawsuits from customers alleging damages resulting from the implementation of the customer billing system. Following final approval of the settlement of several of those cases in 2017, LADWP has implemented the settlement, including refunding and crediting customer overpayments and changing LADWP'S information systems and operations to meet billing system and customer service performance metrics established by the settlement. To assure proper oversight, LADWP's board has been regularly briefed, in closed session, on these issues. The first follow-up audit of the billing system, as called for by the settlement, has been completed and submitted to the court, as has a consultant report commissioned by plaintiffs' class counsel on the adequacy of the refunds and credits. The second follow-up audit is scheduled to begin in the next quarter.

LADWP's focus on remediation of the customer billing system has meant that it continues to prioritize other pending major information technology (IT) projects by recognizing the importance of maintaining the day-to-day operations of the enterprise as it implements new systems. In that regard, this year's COVID-19 pandemic did require the reallocation of information technology resources to implement projects to adapt to the large remote workforce resulting from the pandemic.

LADWP staff continues to work with the board to review proposed IT projects, with a focus on assuring ongoing executive management review and board oversight. This has included update briefings on the LADWP's response to the pandemic, as well as the briefing the board received in open session earlier this year on the status of major IT projects. The board continues to provide oversight of these projects given that they are critical to LADWP's operations.

LADWP is pleased to provide this update to the State Auditor.

Estimated Completion Date: Ongoing

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Annual Follow-Up Agency Response From November 2019

As indicated in prior responses to the State Auditor, LADWP was sued in multiple lawsuits from customers alleging damages resulting from the implementation of the customer billing system. Following final approval of the settlement of several of those cases in 2017, LADWP has been implementing the settlement, including refunding and crediting customer overpayments and changing LADWP'S information systems and operations to meet billing system and customer service performance metrics established by the settlement. To assure proper oversight of the litigation and remediation efforts, LADWP's entire board of commissioners has been regularly briefed, in closed session, on these issues. With the settlement now final, LADWP is now in the midst of the several year process - through 2020 - of implementing the settlement agreement. The entire board of commissioners has been provided with regular updates as the implementation proceeds.

LADWP's focus on remediation of the customer billing system has meant that it continues to place other pending major technology systems projects on a slower track though 2019.

A new LADWP general manager was appointed July 2019. He has made an initial reorganization of the information technology services division, and has reconvened an IT executive steering committee and will adopt a holistic approach to technology project budgeting, staffing and prioritization.

LADWP staff continues to work with the entire board of commissioners to review these projects as they move forward, with a particular focus on assuring appropriate and ongoing executive management review and board oversight of these projects. The entire board of commissioners continues to provide oversight of these projects given their critical nature to LADWP's operations.

LADWP is pleased to provide this update to the State Auditor.

Estimated Completion Date: 2020.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Annual Follow-Up Agency Response From October 2018

As indicated in prior responses to the State Auditor, LADWP was sued in multiple lawsuits from customers alleging damages resulting from the implementation of the customer billing system. Following final approval of the settlement of several of those cases in 2017, LADWP has been implementing the settlement, including refunding and crediting customer overpayments and changing LADWP'S information systems and operations to meet billing system and customer service performance metrics established by the settlement. To assure proper oversight of the litigation and remediation efforts, LADWP's entire board of commissioners has been regularly briefed, in closed session, on these issues. With the settlement now final, LADWP is now in the midst of the several year process - through 2020 - of implementing the settlement agreement. The entire board of commissioners has been provided with regular updates as the implementation proceeds.

LADWP's focus on remediation of the customer billing system has meant that it continues to place other pending major technology systems projects on a slower track. LADWP staff continues to work with the entire board of commissioners to review these projects as they move forward, with a particular focus on assuring appropriate and ongoing executive management review and board oversight of these projects. The entire board of commissioners continues to provide oversight of these projects given their critical nature to LADWP's operations.

LADWP is pleased to provide this update to the State Auditor.

Estimated Completion Date: 2020.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

The board and the department working together to review technology projects is a positive step. However, the recommendation is for the board to develop a process to allow it to designate which of the projects are of such significance that its approval is needed before launching the system. The department's response does not reflect that the board has developed a process to make the recommended designation.

Annual Follow-Up Agency Response From November 2017

As previously indicated in responses to the State Auditor, LADWP has been involved in multiple lawsuits from customers alleging damages resulting from the implementation of the customer billing system. In July of 2017, the Los Angeles Superior Court issued its order giving final approval to the settlement of several of those cases. The settlement calls for refunds and credits for all customer overpayments and for LADWP to meet a set of billing system and customer service performance metrics. To assure proper oversight of the litigation and remediation efforts, LADWP's entire board of commissioners has been regularly briefed, in closed session, on these issues. With the settlement now final, LADWP has begun the several year process - through 2020 - of implementing the settlement agreement, with regular updates of the board of commissioners planned as the implementation proceeds.

LADWP's focus on remediation of the customer billing system has meant that it continues to place other pending major technology systems projects on a slower track. LADWP staff is working with the entire board of commissioners to review these projects as they begin to move forward, with a particular focus on assuring appropriate and ongoing executive management review and board oversight of these projects. It is expected that the entire board of commissioners will continue to provide oversight of these projects given their critical nature.

LADWP is pleased to provide this update to the State Auditor.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

The board and the department working together to review technology projects is a positive step. However, the recommendation is for the board to develop a process to allow it to designate which of the projects are of such significance that its approval is needed before launching the system. The department's response does not reflect that the board has developed a process to make the recommended designation.

Annual Follow-Up Agency Response From November 2016

See Response to Recommendation 1.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

The Board has to approve all expenditures over $150,000, so they are aware of all information technology projects that could have a potentially significant effect on business operations or customer relations. There are no information technology projects below this expenditure level that would have a significant effect on our business or our customers. Combined with the monthly reports described in Item #2 above, this expenditure approval process provides the Board with the ability to approve launching any such critical new systems.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Although the department has outlined ways in which the board may be aware of significant information technology projects, our recommendation is to the board to develop a process for the department to follow and to obtain the board's explicit approval before launching critical new systems.

6-Month Agency Response

As per this recommendation in a letter dated July 23, 2015 LADWP's Chief Administrative Officer instructed LADWP's Chief Information Officer as to "All information technology projects which may have potentially significant effect on business operations or customer relations will require Board of Water and Power Commissioners approval before launching such critical new systems into production. This item will be covered under the Management Report of the Board agenda."

California State Auditor's Assessment of 6-Month Status: Partially Implemented

The department did not address all aspects of the recommendation. The department has not supported that the board developed a process to designate certain information technology projects as having a potentially significant effect on business operations or customer relations.

60-Day Agency Response

-As part of its current procurement and administrative process, the LADWP submits to its Board proposed contracts where expenditures exceed $150,000 per year.

-All jobs that include business operations or customer relations are approved by the Department management and the Board of Water and Power Commissioners before initiation.

-Additionally prior to implementation of any system, related to business operations or customer relations into production a briefing to the Board of Water and Power Commissioners will be made to obtain their approval.

The first two paragraphs are already in place the third paragraph will be in place before the next reporting date.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2014-105

Agency responses received are posted verbatim.