Payroll system conversion horror story

Converting their payroll system has resulted in some serious errors to the tune of greater than $1.5 million for the Fort Worth (Texas) school district.

The school district overpaid employees and former employees at least $1.54 million, according to the [internal] audit. It also found that the district’s payroll system lacked proper controls, was cumbersome and inconsistent, and included manual paper entries that led to human error.

Aside from the poor conversion, it doesn’t sound like the new system is all that great if it requires manual entries. I’m assuming the entries are needed because the payroll system doesn’t interface with their general ledger system. Additional review controls over the process between systems is required in that case.

Some trustees are seeking an independent audit of the problems to get more assurance that fraud wasn’t a factor and that all the issues have been resolved.

[Trustee Christene] Moss said she wasn’t comfortable with parts of the report in which the [internal] auditors could not determine why various issues happened.

Yeah, I’d be concerned about that too! As well, the auditors aren’t certain that all the overpayments have been identified and fixed. I think these are the main reasons why an independent audit is needed. The situation calls for a specific engagement looking at the system conversion process and subsequent issues.

Board President Ray Dickerson reiterated that he didn’t think there was a need for a costly external audit. He said controls will be put in place.

[…]

Dickerson said the problems that were found are typical in such a transition.

“No matter how well you plan and train, once you flip that switch, you’re going to find things you didn’t know,” he said.

Uh, not really dude! And certainly not $1.5 million worth of “things you didn’t know” (on a monthly average payroll of $41 million)!

As a not inconsequential footnote, the conversion to a new system was required because the old system’s vendor was no longer going to be supporting it. A quick search for “open source payroll software” turns up many options which will prevent vendor lock-in in the future.

Update: Another story, this one in the Fort Worth Weekly, has more details about the internal audit’s findings and the attempts by the district to have some former employees repay the erroneous amounts.