Sunday, June 28, 2020

FY-2021 Budget: A Year of Challanges

On May 14, 2020, the NYCERS Board of Trustees adopted the FY-2021 Admin Budget. The new budget reflects a 3% reduction from the FY-2020 budget due to the economic impact of the Covid-19 virus epidemic. I had previously predicted a much larger reduction.

The amount of the new budget is $78.7M down from the $81.1M in FY-2020. NYCERS chose to take the full 3% reduction in the non-personnel part (OTPS) of the budget and avoid any payroll cuts. This meant that the OTPS amount from FY-2020 was reduced from $45.9M to $42.8M in FY-2021.

While a 3% reduction is significant for any organization, this 3% reduction is a radical cut for NYCERS. Based on planning information in the FY-2020 budget report, NYCERS was planning to increase its OTPS for FY-2021 to $88.0M. This increase was meant to fund the first year the implementation phase of legendary Legacy Replacement Project (LRP).

This “five year” project has been in play since the spring of 2015 and the contract has not yet been awarded. There is a current promise to award the contract in the fall of 2020. As of today, the agency has not been authorized to spend the $46.0M needed to start the actual work on the project. I suspect the agency has delusions that the trustees will approve a budget increase in the fall. In anticipation NYCERS mentions this objective in a note buried in the supporting charts in the budget documents.

A prudent evaluation of the City’s finances would lead to a much more cautious view. This is not a traditional budget crisis for the City. The full impact of the epidemic, on many levels, is unknown. Any attempt to increase the NYCERS budget will run into intense political push back. In fact, it is quite likely that there will be more reductions during the year.

I have been commenting on the LRP project since 2015. The budget that year was $47.3M. Last year it was $81.1M. NYCERS has still not written a line of code for the LRP project. It now looks like it will be another lost year.

In this year’s budget document NYCERS made mindless claims about its Enterprise Risk Management (ERM) program. You can read the verbal garbage below. NYCERS can be forgiven for not having foreseen the Covid-19 disaster but by chasing after a monster five-year IT project, NYCERS set themselves for an epic disaster. Let no one say that they were not warned.

Instead of methodically building small replacement pieces for the old application systems and being in position to adapt to ever changing technology, NYCERS chose to chase after a phantom.

NYCERS did however buy themselves an upgraded website for $40M with annual support cost of $3.0M. NYCERS is the ultimate white whale when it comes to IT contracts.

Verbal Garbage

This is a quote from the executive director's budget letter. I defy anyone to translate this into plain English.


NYCERS continues to experience a significant amount of change. In recognition of this, we will continue to mature our Enterprise Risk Management and Information Security programs in FY 2021. We will also continue our data cleansing efforts to reduce the risk of having inaccurate data in our new pension administration system. Our data validation practices are also being continuously reviewed and enhanced. Enterprise Risk Management (ERM) Program

NYCERS’ ERM Program was established to enhance enterprise-wide risk governance, including identification, mitigation, management, and monitoring, as well as creating a risk-focused culture.

During the past year, the Enterprise Risk Committee (ERC) made significant progress in maturing NYCERS’ ERM Program. A comprehensive suite of governing documents was developed that includes an Enterprise Risk Charter, Risk Appetite Statement, and Risk Escalation Criteria. The ERC also offered educational webinars to Executives on Finding and Fixing Fraud and Creating a Sustainable Vendor Risk Management Program. NYCERS’ first Fraud Risk Assessment is currently in progress.

In FY 2019, an agency risk assessment was conducted. In FY 2020, the risk assessment was expanded to include division risk assessments in addition to the agency risk assessment. In FY 2021, the risk assessment will be expanded to begin at the unit level, so that the assessment process identifies risks at every level of the organization and surfaces material risks for appropriate action.

NYCERS’ ERM program was created and supported by staff who also have full-time operational roles. Now that the program has been implemented, it requires resources not only to continue to grow the program, but also to monitor the risks that have been identified. In FY 2021, we will continue to mature the ERM program to include additional critical risk identification and mitigation initiatives that will require dedicated attention and expertise, including the development of a robust Vendor/Third Party Risk Management process.