Costly consequences of outdated payroll technology

Put in your time at work, you expect an on-time paycheck, usually by direct deposit for most of us these days.

But Always Investigating found the state’s out-of-date paper system can delay payday for thousands of public workers.

Even if you’re not a state worker it can affect you, because all of that manual processing has cost taxpayers millions in overpayments that are very hard to get back.

In the olden days, the state payroll offices had paper everywhere, tens of thousands of paychecks relying on manual steps. Today, it looks like that still, stuck in the past thanks to old systems.

The man in charge of the Department of Accounting and General Services, comptroller Douglas Murdock, thought this when he first stepped into the time machine upon taking office a few months ago.

“I saw a lot of people working really hard on bad systems that were antiquated, and they were heroically making things happen that were almost impossible given how old the systems were,” he said. “It’s surprising to see so many boxes of paper and that everything has to flow through paper instead of electronic.”

Systems that are 40, sometimes 50, years old crunch along often on parts sought online, including at the state’s biggest single department, education, tucked in the basement of the central Department of Education’s administration building, where stacks and stacks of colored cards are considered the payroll database.

“Each employee has a card for a year,” explained Amy Kunz, the DOE’s chief financial officer and senior assistant superintendent at the Office of Fiscal Services. “Anything that happens, any time off, any adjustments happen on this card.

“We are very paper based in our payroll,” Kunz added. “Any time-off forms, even address changes, everything is done via a piece of paper that gets submitted to human resources. Human resources has to touch that piece of paper and then it gets to payroll.”

That’s just to get the numbers crunched to get handed to someone else to type into an old-fashioned green-screen computer. Trees weep as paper checks churn off the printer all day long.

For those who think they have direct deposit? Not quite.

“Sometimes, we actually have to send a check by first-class mail and then the bank routes the money into the holder’s account,” Murdock said. “It’s not what most people would expect to see when they see direct deposit.”

Say you have a rural post office with shorter hours, or your bank or credit union for some reason doesn’t get the check. You may find yourself, as others did, asking Always Investigating: Why is the state paying me late?

“I had a Texas bank at one time, when I first started working for the state,” Murdock recalled, “and it took a week or two to get my check in my account, so I felt that myself.”

Another side effect of manual payroll notes is overpayment of taxpayer dollars to state workers when it turns out they weren’t at work, didn’t really have that much paid vacation left or they retired a while ago.

“When people retire, they shouldn’t continue to get paid for the next week,” Murdock said, “because that becomes an overpayment we have to track and try and recover.”

But they’ve only got two years under state law to find the overpayment and collect. That tab stands at $1.35 million over the years, with the most overpayments to the DOE.

“We have about $350,000, that is cumulative over many, many years,” Kunz said, “and that’s compared to about $1 billion of annual payroll we pay.”

“The overpayments are substantial and it’s hard to recover back from somebody once you give them the money, so we have to make sure we give them the right amount the first time,” Murdock said. “These (new) systems should make us able to respond to these things more quickly and have the right numbers the first time.”

The new systems Murdock is talking about are still in the works even after Gov. David Ige pulled the plug on his predecessor’s massive across-the-board tech overhaul. That cancelled high-tech project was still five years away from being up and running.

Murdock thinks payroll could be automated faster, in one to two years.

“We’re still investing in technology and actually I think we’ll get these things done more quickly because we can focus in on the things we need the most,” Murdock said. “We’re going to get to a process where it’s done end-to-end electronically, where there are no delays except for the quality checks we do to make sure that we are getting everything right.”

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