The Arkansas Department of Information Systems presented a revised rate schedule Tuesday that it hopes will bring its billing into federal compliance in the next 18 months.
The revised schedule was made after a Department of Finance and Administration audit of the agency released late last month showed that the Department of Information Systems had multiple problems with billing rates, contracts and travel reimbursements.
Officials estimate that Department of Information Systems revenues would increase by about $1 million; the department currently has a $70 million annual budget.
Department of Information Systems interim Director Herschel Cleveland said the rate changes would be adjusted at least quarterly.
"The effort between DIS and DFA was an attempt to set some rates that would be logical for customers and at the same time put us on the track where we would give back to the agencies through rate reductions our excess fund balances and recoup some of those that are negative balances," Cleveland said.
The Joint Committee on Advanced Communications and Information Technology approved the rate changes Tuesday after a short discussion. The rates will go before the Arkansas Legislative Council for final approval Friday and would go into effect for customers Jan. 1.
Department of Information Systems Chief Operating Officer Jeff Dean said the rates would refund about $2.9 million in charges for some services where the agency is overbilling and recoup an additional $3.9 million in other services that are being underbilled.
Gov. Mike Beebe requested the audit after a national nonprofit organization conducted an analysis of broadband availability to school districts and found that the Department of Information Systems was still paying to use antiquated, costly copper wire and was charging school districts rates that varied greatly across the state.
Subsequent studies have found that those rates are substantially higher than the rates private service providers charge school districts for Internet service.
In 2013, the most recent year analyzed in the audit, the agency overbilled for some services by about $7.6 million and underbilled for other services by about $17.7 million -- which could open the state up to federal scrutiny.
The state requires the agency to set rates that come as close to breaking even as possible because state law prohibits the agency from making a profit from billing.
The federal government requires that bills sent to agencies funded by federal dollars only include the actual cost of providing the service.
Previous billing problems cost Arkansas $44 million in 2006, after the state settled a lawsuit with the federal government. Federal officials had originally identified about $9.2 million in improperly billed services from the Department of Information Systems between 1997 and 2000, but the state resisted the refund request and defended its billing methods.
Those methods stayed in place until the settlement, adding more refundable charges and interest, thereby increasing the total refund cost to $44 million.
"Because it's so hard to forecast in advance and if there's any deviation from forecast instead of waiting for those trends to continue for the next normal cycle... one of the recommendations that we wholeheartedly concur with is changing more frequently, even as much as quarterly or immediately if we see a material deviation from the forecasted cost or what revenues are forecasted to be," Dean told the committee Tuesday.
The department addressed other issues in the audit including requiring employees who had not followed travel policies to pay back the state for about $5,000 in reimbursements.
Metro on 12/17/2014