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Published in Print: June 20, 2007, as Glitches in Los Angeles Payroll System Spark Furor

Glitches in Los Angeles Payroll System Spark Furor

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Thousands of Los Angeles teachers have not been paid properly for months because of errors in a corporate-style payroll system that was introduced in January as part of a sweeping, $95 million computer modernization.

The Los Angeles Unified School District acknowledges that the payroll system’s rollout was rushed and tainted by numerous programming glitches and insufficient training of school-based pay officials.

Yet the district teachers’ union has not been satisfied with such explanations. It sued the district this spring Requires Adobe Acrobat Reader, even before a massive failure of the system on June 5—a day the district now calls “Black Tuesday”—when roughly 28,000 employees were overpaid and 4,500 received less than they were due.

“All of a sudden, people who never had problems were being overpaid and underpaid,” said A.J. Duffy, the president of United Teachers Los Angeles. “It’s a fiasco.”

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See other stories on education issues in California. See data on California's public school system.

The union also called on its members this month to boycott after-school faculty meetings Requires Adobe Acrobat Reader until the payroll problems are fixed.

Los Angeles is not alone in running into trouble after converting to a new payroll system. In Chicago, for instance, the teachers’ union has filed multiple grievances with the 415,000-student school district, which began converting to a new system in March. But the problems there have been far less extensive than in Los Angeles.

The payroll system for the 708,000-student Southern California district was created and installed by Deloitte Consulting LLP, based in New York City, as part of a new integrated technology system called Business Tools for Schools, or BTS. The consultant built BTS from software created by SAP AG, a German company, and has been paid $46 million so far by the school district.

Los Angeles Superintendent David L. Brewer III has demanded that the problems be fixed swiftly. He has also postponed the launch of the third phase of the technology project, which will replace the district’s purchasing system, from July 1 to October 1.

Mr. Brewer is not being blamed for the basic project and the selection of the companies, which took place under former Superintendent Roy Romer. Mr. Romer could not be reached for comment.

But Mr. Brewer has recently stirred outrage among teachers by proposing to retain Deloitte to fix the problems. Overall, the district administration is asking the school board to increase the technology project’s budget by $37 million to $132 million, said David Holmquist, the district’s chief risk officer, whom Mr. Brewer assigned to help untangle the mess.

Myriad Errors

The payroll errors since January have included underpayments, overpayments, and incorrect withholdings—and even missed payments to the state’s pension fund for teachers.

Paycheck Headaches

The Los Angeles school district has had many payroll problems since the debut of a new system.

No Base Pay
Check not received; time worked or reported after cutoff date; time not entered or approved; withheld due to earlier overpayment

Partial Pay Received
Paycheck received, but short expected amount; extra assignments not paid or reported

Question Only
Clarification requested; cannot understand pay stub

Deduction error; tax problem; incorrect rate or salary; wrong annualization; incorrect illness or vacation balances, etc.

The district has struggled to straighten them out, but some efforts have stumbled. Its opening of a problem-resolution center at the district headquarters, for example, meant teachers with payroll errors had to travel across the sprawling district on unpaid time, only to wait for hours to get their pay deposits corrected.

At first, the district blamed most problems on data-entry mistakes and delays by school-site payroll clerks and supervisors. Now officials say those workers were inadequately trained, and that the system was not tested enough before the district used it to pay 110,000 full- and part-time employees.

Meanwhile, the district has been racking up unanticipated costs to research and correct the errors, to fix software glitches, and to listen to teachers’ complaints.

Some teachers have gotten monthly paychecks of just a few pennies, while others have received more than $10,000—far more than they should have—or nothing. Those hardest hit are substitutes and “itinerants,” who teach at several schools and are paid hourly.

Tera Straker, who teaches adult English-as-a-second-language classes at a district occupational center, said that she received no direct deposits in her bank account for two months, before receiving a lump sum in March. Her April paycheck was right, but she also was told—inaccurately, she said—that she had been overpaid in one of the earlier deposits.

“They started paying me a different hourly wage—10 dollars less,” Ms. Straker said. “Nobody could explain why. I went to four different floors, and talked to four different persons.”

Short on savings, she got help from her parents, “but at 36, you don’t really want to borrow from your parents,” she said.

Sharon Newman, another adult-education teacher, said she missed debt payments because she was being paid only 60 percent of what she earned this winter and had her interest rates bumped up by two credit card companies.

At the behest of United Teachers Los Angeles, the district sent letters to the three national credit bureaus asking for leniency for teachers who had missed payments Requires Adobe Acrobat Reader because of the payroll problems. A district form letter to creditors is also available for teachers to download.

Dissatisfied with the response and the continuing problems, the teachers’ union, an affiliate of the National Education Association and the American Federation of Teachers, sued the district in April. The suit says the district “failed to issue proper pay to thousands of certificated employees and has issued thousands of paychecks late.”

The union wants a state court in Los Angeles County to appoint a special master to determine the exact amounts unpaid and to coordinate the correction of the paycheck errors, “with interest on all amounts paid late.”

The union also asked for pay centers in each of eight subdistricts, which the district has agreed to. The court is due to hold a hearing on the lawsuit next month.

District officials still do not know the exact nature of the payroll system’s problems. But the district’s inspector general is investigating for the Los Angeles school board, an effort that Mr. Holmquist called a “gargantuan task.”

Outside technology experts said the district had taken on a complex project that has many pitfalls for a large organization.

The Business Tools for Schools system is a type of Enterprise Resources Planning (ERP) system, a kind of integrated computer system that typically replaces what usually are separate software programs for payroll, accounting, human resources, warehouse management, purchasing, and so forth.

Used in many corporations, an ERP system ideally can give a school district new flexibility in the use of data along with standardization that lowers costs and reduces the need to have so many software specialties.

The district has pleaded with credit agencies for leniency toward any employees with financial woes tied to the problems.
The district has pleaded with credit agencies for leniency toward any employees with financial woes tied to the problems.

SAP, the German company, is a pioneer in such software, said Ramon Barquin, an information-systems expert who is the president of Barquin International, a Washington-based company that works with government agencies. Other leaders in ERP systems are Microsoft Corp. and Oracle Corp.

Mr. Barquin said such systems are “fairly complex technology,” and that an organization adopting one must be willing to change.

SAP’s software is especially unforgiving, he added. “It’s created a lot of problems in terms of implementation in other places—not every enterprise has the discipline to make it happen,” he said.

Andy Kendzie, a spokesman for a Washington-based subsidiary of SAP, said: “Our software works exactly as it’s designed and is not unforgiving. These implementations require profound changes in the way the organization conducts business.”

The operational changes associated with ERP systems are intended to be positive and, in fact, are part of the reason why organizations adopt them. In Los Angeles, one change—to give all teachers a paycheck every month, rather than nine months of the year for teachers on a traditional schedule—is something the union has been urging the district to do for 20 years, said Mr. Duffy of the UTLA.

But the district’s timing was bad, he said: “They foolishly rolled that out while doing a completely new payroll system.”

Who Pays?

In the Los Angeles district’s implementation, the SAP-based Business Tools for Schools at first did not accept certain types of pay information, said Mr. Holmquist, the chief risk officer. And the school-based clerks were not trained in what they should do about the problem, he said.

Whether Deloitte Consulting should have foreseen such problems and urged the district to thoroughly test the system before its launch is one of the questions that the district’s inspector general will examine, Mr. Holmquist said.

Asked about the situation, Deloitte Consulting, a subsidiary of Deloitte & Touche USA LLP, based in New York City, offered a statement: “Deloitte Consulting has been working closely with the Los Angeles Unified School District and will continue to support them on this effort.”

Mr. Holmquist said that while the district still has $9 million in the project budget to pay Deloitte Consulting, the amount the company will ultimately be paid “is still to be determined,” and that the company may have to absorb some of the costs.

Mr. Barquin said, however, “Deloitte Consulting is a significant player with a big practice and a lot of SAP experience; I’m not sure that’s the issue.”

The teachers’ union says the problems were just the sort of issues that the district hired the consultant to prevent. “I think they were trying to get it done, and foolishly listened to these companies, SAP and Deloitte,” Mr. Duffy said.

Union officials say they had “begged” the district to test the system first in one or two of the eight regional districts. “The idea that they would roll out a completely new system, . . . and wouldn’t do it area by area, is crazy,” Mr. Duffy said.

Mr. Holmquist said he thinks the system can be fixed.

“I’m a bit of an optimist,” he said. “The experience in other places, from what I’ve been able to gather, is that it takes often about two years to start reaping the benefits [of an ERP]; but then the organization gets through the pain.”

Vol. 26, Issue 42, Pages 1,23

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