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Audit: WV state payroll system wastes millions

By JAKE ZUCKERMAN

Charleston Gazette-Mail

CHARLESTON, W.Va. — An audit released Tuesday details more problems with the state’s beleaguered payroll system, alleging it wasted millions of taxpayer dollars.

In the report, the Legislative Auditor’s office details several issues with wvOASIS, a $123 million supercomputer system the state uses to handle its back office functions such as payroll, accounting, asset management and others.

The system has cost the state million of dollars paid to consultants to manage it instead of training government workers to handle the software at a much lower cost.

Along with the state’s dependency on consultants, the audit questions the legitimacy of a state board’s contract with the consultants due to a breach of protocol, and it claims the state has overpaid workers due to a switch to paying workers biweekly instead of semimonthly, potentially breaking state law along the way.

Consultant-dependency

In May 2010, the state’s Enterprise Resource Planning board hired Salvaggio, Teal and Associates — which has since been acquired by Information Services Group — to assist in planning a new IT system.

In the contract with the firm, the audit states the board was supposed to work toward training state employees to be able to handle wvOASIS systems. So far, the state cannot run the system without consultants’ help – a pricey affair.

The audit states the contract failed to include any hard dates for employee training on handling the system or dates employees could take over the system.

“In our estimation, there was not sufficient planning with regard to training state personnel to take over the functionality being performed by Consultants,” the report states. “We have seen no evidence of such plan in any written document.”

Outsourced consultant labor runs a much higher price than anything in-house. According to data provided in the audit, the state paid the consultants between $90 and $225 per hour. State employees’ wages on the wvOASIS team range from $15.38 to $51.03 per hour.

Likewise, after seven years with the new system, the state has paid ISG employees $24 million between May 2010 and January 2017, averaging out at just less than $300,000 per month.

Despite the high payouts, the ERP did not document any sort of oversight in the billing process. The audit states ISG’s invoices only show the number of hours worked, but no specific detail about what times they clocked in or out, or what they accomplished in the given time frame.

“Due to the size, scope and cost of this project, the inability to verify the accuracy of over $24 million invoiced for 134,867 consultant hours worked is a concerning hindrance to ensuring the state is being invoiced correctly,” the audit states.

Legislative Auditor staffers presented the initial draft of the audit to the ERP board in March, prior to the contract’s May expiration and potential renewal date of the contract. The board has opted not to renew the contract, and instead executed a new one with Dataview, an ISG subcontractor.

The board signed off on a one-year, $1.12 million contract with the option to renew for a second year at $700,000. However, this new contract does not quell some of the audit’s main concerns.

“It is not apparent that the new contract with Dataview contains increased oversight or incentives for completion as recommended,” it states. “While not specified in the contract, target dates have been established by ERP board staff. The ERP project director provided the Legislative Auditor with knowledge transition plans to be completed by Oct. 8, 2018, which appears that it may require the contract to be renewed at least one more year.”

 Breach of protocol

According to state code and ERP board decisions, only the board can sign the state into contracts with its contractors. However, the audit found that the board did not discuss or vote on its vendor contracts, and did not send a member to sign them, using a staffer instead.

At a Nov. 17, 2011 ERP board meeting, the body agreed it would sign contracts with a board member, not a staffer.

However, on March 18, 2013, then-State Auditor Glen Gainer filed to give the board’s comptroller, Mike Withrow, signature authority. The board’s minutes make no note of any discussion or vote regarding the filing.

Withrow used that signature authority on a change order Dec. 16, 2014, making modifications that furthered the state’s dependency on the contractors, according to the audit.

On April 14, 2015, Withrow extended the contract for one year. On March 14, 2016, he did so again.

These alleged overreaches bring the contracts’ legal standing into question.

“Thus, after review and counsel of his attorneys, the Legislative Auditor questions the validity of this contract,” the audit states.

Overpaying state workers

The wvOASIS program came under scrutiny in 2015 when it shifted how it paid employees from bimonthly (paying on the 1st and 15th) to biweekly (every other week). This led to state employees filing grievances, claiming they were underpaid. Meanwhile, legislative leadership raised concerns claiming the new system would lead to, once every 11 years, a lump sum over payment costing the state $55 million by issuing an extra paycheck.

Employees changed over to the new system in “waves.” Tuesday’s audit does not focus on the bimonthly/biweekly debate, but points out that the second wave of employees to transfer were overpaid by at least one half-day, and up to two full days’ pay, due to overlapping pay periods during the transition.

The report found that upon noticing the error, the acting payroll director ignored the possibility of overpayment of employees and instead pushed to get through the transition without worrying about balancing the books.

“By allowing employees to receive extra compensation as the result of the conversion to biweekly pay, the ERP Board is in violation of WV Code 6-7-1 and 6-7-7,” it states.

Though the ERP board corrected this issue for the third wave of employees in May by notifying them of what looks like a pay decrease during the transition, the audit notes the disparity in treatment between the waves.

“These conflicting treatments for pay adjustments between Wave 2 and Wave 3 are indicative of the many issues of the conversion to biweekly pay that were not fully thought out prior to implementation,” it states.

The audit concludes with a recommendation that the ERP board seek a legal opinion from the Attorney General’s office regarding the differing treatments between the waves of employees.

Seemore from the Charleston Gazette-Mail

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