Monday, January 21, 2008

Los Angeles schools’ payroll problems “stabilized”

<span class=Posted by Michael Krigsman to the ZDNet blog
under "IT Project Failures/Rearranging the Deck Chairs"

January 20th, 2008
The Los Angeles Unified School District (LAUSD) seems to have ended it’s year-long payroll system failure. For most of the last year, many teachers have faced incorrect paychecks resulting from problems during the implementation of an SAP system.

According to the Daily News in Los Angeles:

Errors due to defects in the system were below 1 percent based on Thursday’s payroll numbers, meaning 99.2 percent of the district’s employees were paid accurately, said Dave Holmquist, LAUSD’s interim chief operating officer.

That’s down from a 1.27 percent error rate in December and 2.97 percent in November.

Also, the number of people coming in to the payroll center with paycheck problems has dropped substantially - to 119 so far this month compared with 759 in November and 237 in December.

“We’re under 1 percent … which was one of the goals we had … and we’re hoping to improve upon this,” Holmquist said. “The goal was three consecutive, improving, reliable payrolls, and we believe we've reached a place of stability in our payroll.

“We’re nearing an end to our crisis.”

The human toll on teachers has been extreme, so I’m glad system errors have finally come down to a manageable level. I believe the problem was rooted in a combination of arcane union work rules together with poor project management by Deloitte & Touche, the implementation firm:

“We’re hoping to get this resolved through a negotiated settlement,” Holmquist said. “We don’t want to have to sue. We’re not sure it’s the best way to spend tax dollars.”

But Assemblyman Kevin de Leon, D-Los Angeles, who introduced legislation Monday prompted by the LAUSD payroll fiasco, has said he will push the district to recover lost money from Deloitte through a lawsuit or negotiated settlement.

Both sides were most likely at fault here. Still, the project is estimated to be almost $40 million over-budget (original plan: $95 million). That’s far too much and Deloitte should demonstrate it’s own skin in the game, by giving up some of its “ill-gotten” profit.

Note to LAUSD: I suggest you push Deloitte hard on this. Dig deep into actual costs they incurred, but watch out for “Hollywood accounting,” where they bring overhead into real costs, reducing apparent profitability. However, remember your folks also played a role creating the problems, so be fair and reasonable with Deloitte while you dig into their finances. Deloitte is hardly blameless, but LAUSD’s program management also fell short of the mark.

smf chimes in: Krigsman is right-on with his cheap-shot reference to Hollywood accounting. As a show-biz veteran I resent resemble the reference - and know first hand the evils thereof.

When I went to business school in the nineties much was made of the entrepreneurial spirit and paradigm shift in business practice as practiced by the film community - leveraging tax shelters, syndicating projects and packaging investors, etc. This model of investment - plus the Hollywood penchant for "off the books" and/or multiple-books bookkeeping ("It's like double entry bookkeeping, only better!") set the stage for all kinds of abuse that followed in other industries. See: Enron, Global Crossing, etc.

Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures. See his full profile and disclosure of his industry affiliations.

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