An article yesterday about the District's efforts to make its computers Y2K-ready should have said that D.C. Inspector General Charles C. Maddox has recommended that the D.C. Department of Employment Services shift its computer data center operations to the city's Department of Human Services. (Published 12/30/1999)

The District government's catch-up effort to upgrade its computer systems before the year 2000 has cost $24 million more than expected, according to city records, mostly because of troubles within the D.C. labor agency.

The agency's computers--the last in the nation to be certified by federal labor officials as Y2K-ready--were so obsolete and dysfunctional that the District had to spend $12.3 million to move unemployment benefit records to a newer data center in Kentucky, so checks to jobless workers could be cut after Saturday. About 25,000 people receive such benefits each year.

D.C. Mayor Anthony A. Williams (D) said last week that city services would be ready for the new year, largely because the federal government has sent $128 million to the District to make computer repairs. What the mayor did not mention was that because of the city government's late start in preparing its technology systems for 2000, there will be increased pressure on D.C. officials to keep the city's budget balanced.

The $24 million budget shortfall is the latest in a string of financial problems that has plagued the District's Y2K program, largely because of the rushed nature of the effort. Other cities and counties started their year 2000 programs two to three years ago and budgeted money for them. The District didn't start until July 1998, which required the city to give unprecedented authority to Chief Technology Officer Suzanne Peck to award several emergency contracts without going through the usual approval process.

After D.C. officials and the U.S. General Accounting Office told Congress that the District could not account for at least $25 million in federal money spent on repairs, the city hired an outside auditor who is trying to document the project's financial management.

On top of the $12.3 million deficit racked up by the city's Department of Employment Services, Peck has told D.C. budget officials that she may need at least $12 million to cover unfunded costs related to the program to find, repair or replace and test computers so that on Saturday, they will read the year as 2000, instead of 1900. Older computers were built to assume the first two digits of any year as 19.

"We've had many unexpected expenses," Peck said yesterday, adding that computer systems for the D.C. police, the University of the District of Columbia and D.C. General Hospital had to be replaced.

City budget officials have not found a way to plug the $24 million budget gap completely. Peck and D.C. labor officials are proposing to ask for additional funds from the federal Office of Management and Budget, which already has kicked in $128.77 million toward the District's year 2000 program. An additional $2 million could be raised by leaving vacant positions unfilled or drawing from workers' compensation funds.

"I think we need to see what comes to us in OMB funding," Peck said.

A White House budget office spokesman could not be reached for comment yesterday.

The Department of Employment Services' technology woes recently were documented by D.C. Inspector General Charles C. Maddox, who warned in a Nov. 29 audit of "serious service disruptions" in the collection of unemployment taxes and disbursement of unemployment checks because of a loss of agency staff and failure to upgrade software and hardware.

Maddox--as well as U.S. Labor Secretary Alexis M. Herman in a Nov. 12 report to White House Budget Director Jacob Lew--expressed doubt that the District would be prepared for the 2000 rollover.

Herman told Lew: "In view of the high-risk status of the District's unemployment insurance systems, the department has provided more active and extensive assistance to this jurisdiction" than any state.

A spokesman for Herman said yesterday that the federal Labor Department is now convinced that the District's unemployment benefit and tax programs are ready for the date change.

"Our confidence is high at this point," spokesman Howard Waddell said.

Waddell's optimism is based largely on the Dec. 13 move of the D.C. Department of Employment Services' mainframe computer applications to a Y2K-compliant data center in Lexington, Ky., probably until next fall. Some of UDC's records also are being stored in Kentucky.

"There really was no alternative," Peck said. "The only timely alternative to make them Y2K-compliant was to move to an environment that was already up and running."

She said the D.C. labor agency and the university suffered "decades of disinvestment" in computers and workers that had left them unable to meet the Jan. 1 deadline. "It took a drastic action," Peck said.

But Maddox is skeptical that the move to Kentucky will prevent errors from being made in the estimated 180,000 checks totaling $79 million that Employment Services issues each year. Maddox said the agency lacks the management structure, technical resources and trained employees to carry out its programs.

"This situation could result in service interruptions in both the collection of unemployment taxes and disbursement of unemployment checks," said Maddox's audit, which recommends combining the U.S. Labor Department's unemployment records with the D.C. Department of Human Services' computer system, which he said would save the city $3 million.

Gregg Irish, director of D.C. Employment Services for 15 months, defended the new computer unemployment application, which he said has been flawless. Consultants are helping the District with the system until the city decides whether to keep them or hire and train its own workers to operate the computers, Irish said.

Council member Kathy Patterson (D-Ward 3), chairman of the committee overseeing the year 2000 effort and Employment Services, said yesterday that the budget overruns related to Y2K point up the need for D.C. government to sink more money into its information technology, especially personnel.

Employment Services has been one of the District's most troubled agencies for years, Patterson said. "We haven't invested in hardware, software, training or employees," Patterson said.

CAPTION: D.C. Mayor Anthony A. Williams answers questions on the city's Y2K readiness at a news conference.