L.A. UNIFIED PAYROLL SNAFU'S COSTS SOARING

Widespread problems and delay of final phase will add more than $46 million to tab for district's new computer system.

by Joel Rubin. LA Times Staff Writer

June 9, 2007 = Widespread problems plaguing a new computer payroll system in the Los Angeles school district and a decision to delay the final phase of a massive technology overhaul have boosted its price tag by more than $46 million, officials said.

The Los Angeles Unified School District has some money available to offset the additional costs, but there remains a deficit of at least $37.5 million, district officials told a school board panel Thursday.

The total cost of the controversial Business Tools for Schools project is expected to reach about $132 million, more than 35% higher than its expected price. The full seven-member school board must vote whether to approve the funding.

"There is a Churchill quote about when you're marching through hell, just keep marching," said Charles Burbridge, the district's chief financial officer. "Well, that's basically what we're doing. We need to slow this down and get it right."

About $14 million of the $46.3 million in additional costs have arisen from a series of software and hardware breakdowns and insufficient training that left school-site staff unprepared, problems that have hampered the project's payroll component since it was launched several months ago.

This week, the latest of these technology glitches resulted in more than 32,000 L.A. Unified employees being paid either too much or too little.

When problems arose in February, district officials stumbled as they placed much of the blame on data-entry errors by school clerks. They backtracked quickly, with Supt. David L. Brewer offering a public apology and vowing to correct the problems.

Frustration built, however, as emergency hotlines were overwhelmed. Affected employees were also annoyed that they had to travel downtown, to an office hastily opened in the lobby of the district's headquarters, to get emergency checks. Waiting times often stretched to several hours.

"We have seen no accountability of the people who have made these bad decisions to push ahead," said Ernest Kettenring, a teacher who represents adult school instructors hard hit by the payroll matter.

With no district employees knowledgeable enough in the complex system to make the repairs, much of the additional money is needed to pay outside consultants. The district also has had to pay overtime to employees dealing with the backlog of paycheck problems.

Hoping to avoid a repeat of the payroll debacle, Brewer said he decided to delay rolling out the final phase of the project. That portion was scheduled to launch next month and aims to revamp how purchases are made in the mammoth system.

The delay, Brewer and Burbridge said, is needed to allow enough time to properly train staff, a school-by-school effort that is expected to be completed in February.

That extra time and training will cost the district $32 million. More than a quarter of that money will go to the consulting arm of the international firm Deloitte Consulting, which has already been paid about $55 million to help the district plan and implement the three-phase project that began in 2005.

Brewer declined to discuss whether, or how much, blame rests with Deloitte, saying, "They're still on the team, and we need to keep them on the team to help us fix this."

Representatives from Deloitte did not return calls or e-mails seeking comment.

School board member David Tokofsky indicated that talk of a possible lawsuit had begun. "We have been investigating the shares of blame and the possible legal implications," he said.

"It's an absolute outrage that this still persists," he added. "It has contributed to the worst demoralization and cynicism I've ever seen in this district."

Payroll problems — and now the delay in fixing them — erupted into one of the first major challenges for Brewer, who was hired late last year.

With stories mounting each month of distraught teachers and other employees unable to pay rent or buy groceries, Brewer has had to fend off angry attacks and a lawsuit by the unions that represent the district's more than 90,000 employees.

The snafus have also led, in part, to the district falling behind in its contributions to the state's teacher retirement fund. In a letter sent late last month, state pension officials threatened to seek nearly $700,000 in fines if the district fails to correct itself by next week.

To pay for the increased costs, the district plans to take on so-called certificates of participation, financed debt that would be paid off over time from the district's general fund.

"We just need to get this thing corrected," Brewer said. "Period."

smf notes: It is important to note that the District does not have a dedicated Chief Information Officer in place during this crisis - and that current funding strategies are to not fully fund Information Technology upgrades approved by the voters in recent facilities bonds - using IT monies instead to infill school construction shortfalls caused by cost escalation.