L.A. Unified payroll system still troubled, grand jury says

In the wake of a costly, much-publicized fiasco, the payroll system of the nation’s second-largest school district remains dangerously incomplete and inadequately monitored, a grand jury has concluded.

The L.A. County Grand Jury annual report, released Wednesday, took aim at the malfunctioning payment system launched in January 2007 in the Los Angeles Unified School District. For months, thousands were overpaid, underpaid or not paid at all.

The grand jury investigation, which will not result in criminal charges, traveled well-worn ground in examining what went wrong, noting inadequate employee training and an insufficient trial run to work out glitches.

But there’s also a future hazard.

The report cited the district’s own technical staff as indicating that another debacle could be imminent because the new system, which handles more than payroll functions, was never fully installed.

On “a scale of one to 10 with … 10 being a disaster, LAUSD is currently at eight on the scale of exposure,” the report said.

A system collapse could derail food services and halt the flow of supplies to schools, according to the report. In addition, the district could lose crucial financial data or forfeit funding because of poor recordkeeping.

A spokesperson for the school district said officials would have no comment Wednesday because key senior staff were either on vacation or on furlough as part of ongoing budget cuts.

Completing the payroll system could take up to 36 months and cost up to $30 million, the report said.

That expense would strain a school system that’s dismissed thousands of employees because of declining enrollment and the state funding cuts.

To make matters worse, seniority rules resulted in the layoffs of younger tech-savvy employees who were among the most skilled in resolving computer problems, the report said.

“Those folks who were sleeping on cots to fix this system are the ones who were shown the door,” said one former employee.

The district has also severed ties both with payroll consultants and with staff from Deloitte Consulting, which oversaw the $95-million system’s faulty installation.

Eventually, a settlement with Deloitte allowed L.A. Unified to recover nearly half of an estimated $37 million in added expense.

The grand jury also said three internal district audits listed 47 recommendations, most of which officials accepted as valid. Yet no formal follow-up has occurred to make sure that employees acted successfully on these recommendations, the report stated.

The district’s inspector general oversaw the audits, and the grand jury said he would be best positioned to follow up.

But that approach is complicated by sharp budget reductions in the inspector general’s office over the last two years. The casualties now include Inspector General Jerry Thornton, who worked his last day Wednesday. It’s not clear if or when Thornton will be permanently replaced; his departure involved internal disputes over the role of his office within the school system.

The district has tried to recoup nearly $60 million in overpayments from about 35,000 employees. Early this year, the district was still pursuing more than $9 million. Collection agencies and lawyers are on the trail of former employees. Officials are making payroll deductions from others, many of whom still contest the amounts they were allegedly overpaid.

howard.blume@latimes.com