legislative report subject: overpayments...

LEGISLATIVE REPORT

SUBJECT: Overpayments

REFERENCE: Act 106, SLH 2012 (HB 2012, HD1, SD1, CD1, Section 15, adding a new Section 133.3 to Part VII, Act 164, SLH 2011)

ACTION REQUESTED: Report on overpayments, in a format prescribed by the State Department of Budget and Finance, per Finance Memorandum No. 12-17, dated November 1, 2012.

DOE REPORT: Finance Memorandum No. 12-17 specifies that the compliance with Act 106, SLH 2012, shall include:

• Copies of monthly salary overpayment reports for May 2012 through October 2012, pursuant to Comptroller's Memorandum No. 2012-10, Monthly Reporting of Salary and Wage Overpayments, dated April 19, 2012.

• Discussion of overpayment preventative measures.

The attachments provide the required information.

FINDINGS: See attached.

RECOMMENDATIONS: None.

Department of Education

Section 133.3 of Act 164, SLH 2012, as amended by Act 106, SLH 2011 Subsection (2) - Overpayment Preventative Measures

Discuss the following:

1. Procedures implemented to prevent overpayments.

Due to the State's policy of exception pay, in which paychecks are paid unless exceptions are changed, overpayments may occur every pay period.

The Department of Education (DOE) has over 24,000 full time employee positions, with approximately 12,000 teachers, and 3,000 10-month educational assistants. Most of the overpayments occur with teachers primarily due to leave without pay, and the fact that they earn the entire year's sick leave up front at the beginning of the fiscal year.

The DOE's total payroll costs for fiscal year 2011-12 were over $1 billion, i.e. $1,135,792,475. Accumulated overpayments to be collected as of October 31, 2012, were $507,348, representing approximately 0.04% of total payroll costs.

The DOE has initiated several procedures to minimize overpayments:

a. We have established a procedure whereby all our 254 schools and 35 offices are required to call the Payroll Unit to stop payroll for any employee for specific reasons, such as leave without pay, or termination/retirement. This is followedup with authorized documents processed by DOE's Office of Human Resources.

b. On April 12, 2012, the Superintendent issued a directive on payroll overpayments, reminding all schools, complex areas and offices that they are required to:

• Maintain updated leave records for all employees; • Notify Payroll of any known resignations, terminations, or retirements; and • Submit required documentation to the DOE Office of Human Resources

within one week after notification to Payroll.

c. On June 6, 2012, the Superintendent issued another directive to a/l schools, complex areas and offices, to submit required employee retirement forms to the DOE Operations Section, Office of Fiscal Services, within two weeks of the dates of retirement.

d. The DOE established bi-weekly meetings with representatives from the Office of Human Resources; Office of Fiscal Services; Office of the Superintendent; and the Department of the Attorney General Collections Division, to review salary

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overpayment cases, and to resolve policy or other related issues, in order to accelerate col/ection of salary overpayments.

e. The DOE Office of Human Resources is finalizing an "employee separation checklist, " which will provide step-by-step instructions as to required documentation for employee resignations, terminations or retirements. This checklist will include the requirements for the appropriate forms for processing of employee separations, including leave balance finalization.

f. The DOE Office of Fiscal Services has launched a SASA Academy for all school administrative services assistants, who are the secretaries for school principals. This comprehensive curriculum, developed with on-line courses, will provide the basis for strengthened staff knowledge of required procedures for payroll and employee leave balances. There are plans also to launch another Academy for office staff as well.

g. Reports of salary overpayments are being sorted by complex area and office, and will be distributed to senior management quarterly. Complex area superintendents and assistant superintendents will review the data with line managers, to identify root causes and minimize occurrences of overpayments.

h. The DOE successfully converted its manual records of employee leave balances, to the Kronos Time and Attendance System, in 2009. This system now provides real-time information on employee leave accruals, transactions, and leave balances. In addition, "clean-up" of manual record balances was completed in April 2011.

i. The DOE is developing an automated payroll interface to the Department of Accounting and General Services (DAGS), which will significantly improve the efficiency of the DOE payroll process. This initiative will tie-in to the DA GS project to automate the antiquated payroll change schedule (PCS) process, called ePCS.

The DOE is also participating in the state's Enterprise Resource Planning (ERP) system project, which will include a new Time and Attendance module. This module will require a change to "positive pay," i.e. if an employee does not register his/her work time, he/she will not get paid.

2. The challenges in adhering to the above procedures.

Challenges are as follows:

a. Due to the complexity of multiple collective bargaining agreements (Hawaii State Teachers Association [HSTAj, Hawaii Government Employees Association [HGEAj, and United Public Workers [UPW]), "positive pay" will require specific calculations of pay based on bargaining unit and time worked each pay period.

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For example, the duration of lunch periods vary across bargaining unit agreements.

b. As mentioned in item 1 above, the DOE is the only state agency with 10-month employees (over 12,000 teachers, and 3,000 educational assistants). They are granted the entire year's sick leave up front during the fiscal year. This causes additional complexity when calculating instances of leave without pay, etc.

c. We have employees who often transfer between 10-month versus 12-month positions, and vice versa. This causes further complexity in conversion of leave accruals, transactions, and balances, which often affects pay calculations.

d. The lateness of signing bargaining unit contracts results in decreased time, or lack of time, for proper implementation.

e. Charter school governance has been challenging. Each charter schOdl has their own local school board. The 2012 legislation created a new Charter School Commission, which replaces the Charter School Administrative Office. The charter schools have a separate state budget appropriation code, and they are able to negotiate separate collective bargaining agreements. The DOE has no authority to determine whether each charter school is incurring or minimizing salary overpayments.

f. For several years, negotiated furloughs and Supplemental Time Off (STO) employee benefits have wreaked havoc on our substantially manual payroll process. The granting of STO hours concurrent with a 5% reduction in pay, is not currently implementable in our Kronos Time and Attendance system without massive custom programming. All 254 schools and 35 offices are required to track STO hours for HGEA employees manually on Excel spreadsheets, since the State did not provide guidance on implementation to the DOE.

g. The DOE's implementation of the Kronos Time and Attendance System involved automation of the old employee manual records. However, capture of employee overtime and other additional pay remains dependent on timekeeper input at each school or office. Maintenance and audit of data in the Kronos Time and Attendance system will require support resources, which we are planning to provide internally, as an interim measure, before the new Enterprise Resource Planning (ERP) system is implemented.

h. DAGs payroll deadlines for "change schedule" input are BEFORE each pay period ends. By definition, this causes "assumed pay" for half of each pay period, contributing to potential incidences of overpayment.

i. We have multiple school calendars, which has increased the complexity of tracking and calculating payroll, employee leaves, and leave without pay. The multiple school calendars have been a result of:

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• Multi-track schools, having several school calendars per campus, designed to handle enrollments exceeding the schools' capacities.

• The Race To The Top competitive grant from the U. S. Department of Education. As part of the grant, the Hawaii DOE has initiated Extended Learning Time (EL T), increasing student instructional time by one hour per day on only Mondays through Thursdays, except for the last two weeks of school. This resulted in massive changes to payroll and leave calculations for the Nanakuli-Waianae, Ka 'u-Kea 'au-Pahoa complex area schools, and the Hawaii School for the Deaf and the Blind.

• Charter schools with different schedules, but DOE is responsible for payroll for special education-funded positions.

3. Assessment of whether the procedures are appropriate and sufficient.

As a percentage of the overall payroll, the error rates for salary overpayment at the DOE appear with acceptable ranges, particularly when the mix of types of employees at the DOE is considered. However, the size of the DOE payroll results in significant dollar amounts being overpaid even with an acceptable error rate. The DOE is working on replacing the current process of manually verifying that the paycheck reflects available leave balance with a more automated Enterprise Resource Planning system. In addition, the ERP will make it possible to require that each employee registers his/her work time in order to get paid (i.e., the "positive pay" system). This positive pay requirement will further reduce erroneous overpayments. Finally, the DOE has renewed its efforts to resolve its backlog of cases by working closely with the Department of the Attorney General and is exploring ways to bring more contested cases to quick and expeditious administrative hearings.

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/" ~jEIL ABERCROMBIE

GOVERNOR

OFFICE OF FISCAL SERVICES

June 14, 2012

STATE OF HAWAri

DEPARTMENT OF EDUCATION

POBOX 2360

HONOLULU, HAWArl 96804

TO: Mr. Wayne M. Horie, Division Head Department of Accounting and General Services

FROM: ~~~ lLz, Assistant Superintendent & Chief Financial Officer 8lce o~~cal Services

SUBJECT: Monthly Salary Overpayment Report

The following is our monthly salary overpayment report for May 2012.

April 2012 Increase/Decrease No. of Employees

Collectible 297 <14> Uncollectible 78 <3>

Amount ($) Collectible $534,483.99 <$2,384.13> Uncollectible $126,706.68 $895.71

KATHRYN S. MATAYOSHI SUP I: RINIENDI-Nr

May 2012

283 75

$532,099.86 $127,602.39

If there are any questions, please contact Susan Keliikuloa, Accounting Operations Specialist, at 586-3130.

ASK:AC:dk

Attachments

c: Ms. Kathryn S. Matayoshi, Superintendent of Education Mr. Edwin Koyama, Accounting Director Ms. Sheila Walters, Branch Chief, DAGS

AN AFFIRMATIVE ACTION AND EQUAL OPPORTUNITY EMPLOYER

/ NEIL ABERCROMBIE

GoveRNOR


July 9,2012

STATE OF HAWAn


P.O. BOX 2360

HONOLULU. HAWAI'I 96804


FROM: S;~;? k)"z, Assistant Superintendent & Chief Financial Officer ,) v


The following is our monthly salary overpayment report for June 2012.

May 2012 Increase/Decrease No. of Employees

Collectible 283 7 Uncollectible 75 -

Amount ($) Collectible $532,099.86 $42,270.85 Uncollectible $127,602.39 <$22,354.61>

KATHRYN S. MATAYOSHI SUPERINTENDENT

June 2012

290 75

$574,370.71 $105,247.78

Since the Attorney General (AG) recently issued instructions on referrals, we are preparing numerous cases for referral to the AG for collection.

If there are any questions, please contact Alan Chang, TA Accounting Operations SpeCialist, at 586-3130.

ASK:AC:dk

Attachments



/ /

NEIL ABERCROMBIE :; i;·v£:.RNOR


August 9. 2012

STATE OF HAWAri


P a BOX 2360

HONOLULU. HAWAII 96804

TO: Mr. Wayne M. Horie, Division Head Deyartrnent of Accounting and General Services

FROM: ~y~. &'nz, Assistant Superintendent & Chief Financial Officer ~ce ot'iscal Services


KATHRYN S MATAYOSHI S') PERINffNOENf

In accordance with Comptroller's Memorandum No. 2012-10, the following is our monthly salary overpayment report for July 2012.

June 2012 IncreaselDecrease July 2012 No. of Employees

Collectible 290 7 297 Uncollectible 75 - 75

Amount ($) Collectible $574,370.71 $36,162.04 . $610,532.75 Uncollectible $105,247.78 0 $105,247.78

In accordance with Comptroller's Memorandum No. 2012-09, we are processing immediate recovery of all overpayments, pursuant to Section 78-12, Hawaii Revise Statutes. Of the total "Collectible" balance of $610.532.75, approximately $410,000 pertains to former employees. We are gathering the required documentation to refer these cases to the State Department of the Attorney General based on the Attorney General Memorandum No. 2012-02 dated April 4, 2012.

If there are any questions, please contact Alan Chang, T A Accounting Operations SpeCialist, at 586-3130.

ASK.AC:dk

Attachments

c: Ms. Kathryn S. Matayoshi, Superintendent of Education Mr. Edwin Koyama, Accounting Director Ms. Sheila Walters. Branch Chief. DAGS


NEIL ABERCROMBIE GOVERNOR


September 7,2012

STATE OF HAWArt


P.O. BOX 2360

HONOLULU. HAWArl 96804


FROM: Am~unz, Assistant Superintendent & Chief Financial Officer Office of Fiscal Services


KATHRYN S. MATAYOSHI SUPERINTENDENT

In accordance with Comptroller's Memorandum No. 2012-10, the following is our monthly salary overpayment report for August 2012. .

Net July 2012 Increase/Decrease August 2012

No. of Employees Collectible 297 2 299 Uncollectible 75 - 75

Amount ($) Collectible $610,532.75 $24,500.53 $635,033.28 Uncollectible $105,247.78 < $245.00 > $105,002.78

In accordance with Comptroller's Memorandum No. 2012-09, we are processing immediate recovery of all overpayments, pursuant to Section 78-12, Hawaii Revised Statutes. We have met with the State Department of Attorney General (AG) on September 6, 2012 to discuss referrals of cases for collection, and were briefed on the Attorney General's new training for the administrative hearing process.

If there are any questions, please contact Alan Chang, TA Accounting Operations Specialist, at 586-3130.

ASK:AC:dk

Attachments



NEIL ABERCROMBIE GOVEANOR

STATE OF HAWAn


P.O. BOX 2360

HONOLULU. HAWAJ'I 96804

OFFICE OF'FISCAL SERVICES

October 9, 2012

TO:

FROM:

SUBJECT:

Mr. Wayne M. Horie, Division Head Department of Accounting and General Services ~~ .

tG-Amy S. K't.rA'z, Assistant Superintendent & Chief Financial Officer Office of Fiscal Services

Monthly Salary Overpayment Report

KATHRYN S. MATAYOSH SUPERINTENDENT

In accordance with Comptroller's Memorandum No. 2012-10, the following is our monthly salary overpayment report 'for September 2012. .

Net August 2012 Increase/Decrease September 2012

No. of Employees Collectible 299 10 309 Uncollectible 75 4 79

Amount ($) Collectible $635,033.28 <$100,504.98> $534,528.30 Uncollectible $105,002.78 . $103,758.06 $208,760.84

In accordance with Comptroller's Memorandum No. 2012-09, we are processing immediate recovery of all overpayments, pursuant to Section 78-12, Hawaii Revise Statutes. We are meeting regularly to review the status of collections. We are also meeting with the State Department of Attorney General (AG) to discuss referrals of cases for collection. In the month of September 2012, we referred a total of $114,910'.46 to the AG for further collection on overpayments for former employees who have now separated from state employment.

If there are any questions, please contact Bryan Ota, Accounting Operations Specialist, at 586-3130.

ASK:BO:dk

Attachments

c: Ms. Kathry'n S. Matayoshi, Superintendent of Education Mr. Edwin Koyama, Accounting Director Ms. Sheila Walters, Branch Chief, DAGS

AN AFFIRMATIVF Ar.TION ANn I=()IIAI ()DDr"IOTII,,/lTV t:HDI r'IVt:o

NEIL ABERCROMBIE GOVERNOR

STATE OF HAWArI


P.O. BOX 2360

HONOLULU. HAWAri 96804


November 16, 2012

TO: Mr. Wayne M. Horie, Division Head

FROM: ~~rtment of Accounting and General Services

y 4,unz, Assistant Superintendent & Chief Financial Officer Ice of Fiscal Services .


KATHRYN S. IIATAYOSHI SUPERINTENDENT

In accordance with Comptroller's Memorandum No. 2012-10, the following is our monthly salary overpayment report for October 2012.

Net September 2012 Increase/Decrease October 2012

No. of Employees Collectible 309 < 5 > 304 Uncollectible 79 5 84

Amount (i) Collectible $534,528.30 <$27,180.42 > $507,347.88 Uncollectible $208,760.84 $31,620.21 $240,381.05

In accordance with Comptroller's Memorandum No. 2012-09, we are processing immediate recovery of all -overpayments, pursuant to Section 78-12, Hawaii Revised Statutes. We are meeting regularly to review the status of collections. We are also meeting with the State Department of Attorney General (AG) to discuss referrals of cases for collection. In the month of October 2012, we referred a total of $32,665.21 to the AG for further collection on overpayments for former employees who have now separated from state employment.

If there are any questions, please contact Bryan Ota, Accounting Operations Specialist, at 586-3130.

ASK:dk

Attachments

c: Ms. Kathryn S. Matayoshi, Superintendent of Education Ms. Sheila Walters, Branch Chief, DAGS Mr. Edwin Koyama, Accounting Director


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