The State Worker

Report: State no closer to understanding payroll system failure

More than a year after California Controller John Chiang shut down a quarter-billion-dollar state payroll computer project that failed spectacularly, officials still haven’t looked into how the state contributed to the debacle, according to a report released Wednesday morning.

Legal concerns have trumped an internal review of the MyCalPays project, according to the nonpartisan Legislative Analyst’s Office, because the state is locked in high-stakes litigation with its technology contractor, SAP, over who is to blame.

“The administration seems concerned that any inward–looking assessment of the (project’s) failure could endanger the state’s position in the legal proceedings, apparently leading it to prioritize the state’s legal efforts over such an assessment,” the report reads.

The state could lose up to $50 million if the courts decide Chiang, who is running for state treasurer, terminated the SAP contract because it was convenient and not because of some failing on the company’s part. SAP would have to pay up to $150 million – about $60 million more than the value of the contract – if it loses the court fight.

“In our view, however, an immediate and thorough assessment ... is arguably at least an equal if not a higher long–term priority for the state,” the analyst wrote, because lessons that might be gained from the payroll system’s failure could benefit more than $4 billion in technology projects in the state pipeline.

For more than 15 years, state officials have envisioned unifying the state’s Vietnam-era payroll system with new technology. But Chiang axed the MyCalPays system in February 2013 after test runs fouled up payroll for about 1,500 employees over several months. Errors included overpayments and underpayments to employees, misdirected child support garnishments and non-payment of health insurance premiums.

The state had spent about $250 million on the unfinished overhaul, including $25 million paid to another technology company that Chiang fired in 2009 and replaced with SAP.

MyCalPays / 21st Century Project Update 031914

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