Auditor: State's HR software system has series of 'material weaknesses'

An SAP-based human resources software system implemented last year by Kentucky's government suffered from a series of "material weaknesses" that could result in significant financial misstatements, according to a report released this week by the state's auditor.

The Kentucky Human Resource Information System went live in April 2011. State Auditor Adam Edelen's report concerns Kentucky's fiscal year ended June 30, 2011.

His office found eight material weaknesses related to KHRIS along with another seven "significant deficiencies," which are considered less worrisome "yet important enough to merit attention," it said in a statement.

"The findings in the audit related to KHRIS demonstrate the need for continued scrutiny and oversight by the Personnel Cabinet, which failed to perform necessary testing prior to the system's launch," Edelen said in a statement.

In one case, a worker was erroneously paid more than US$10,000 for work he didn't do, according to the audit report.

"The Department of Corrections (DOC) performs dual entry for personnel actions in both KHRIS and KRONOS [sic], their third-party timekeeping system," it states. "When the employee at DOC was imputing the data into KRONOS, they made a typo and used the employee ID assigned to an individual located in another agency. When the files in KRONOS were uploaded into KHRIS, the incorrect data was not rejected."

KHRIS hadn't been tweaked properly to disallow such a thing from happening, the report adds.

The audit's findings also stated that KHRIS had gone into production despite the fact that project staff "had not developed numerous reports within KHRIS that were comparable to what was previously available within the legacy system," it states. The system was also found to be calculating employee pay rates in an inconsistent manner.

In statements included with the audit, the Personnel Council said the issues raised by Edelen's office were being addressed.

One expert with no first-hand knowledge of the KHRIS issues said there are some reasons SAP human resources projects can have problems, and it's not usually the software.

"Typically they have more to do with the low bid procurement process, inexperienced consultants, and internal customer issues," said Jarret Pazahanick managing partner of the consulting firm EIC Experts, via email. "SAP payroll works for the public sector, as there are a number of success stories in the marketplace."

In addition, human resource software projects are particularly prone to garnering negative attention, according to Pazahanick, who has worked on many large SAP human resource implementations.

"When you are dealing with employee's paychecks there is no room for error, as they will notice if their check changes even the slightest," he said. "In many public sector projects there can be a large population of union employees (and rules) or hourly employees which can complicate things. That said with adequate parallel testing (run payroll in both legacy and SAP during testing phase) all these problems should be easily identified and fixed."

"When SAP Payroll projects are successful you never hear about them, but when employees started getting paid incorrectly it can quickly become news and be the highest profile area of an SAP implementation," he added.

A number of companies, including IBM, have provided systems integration work on the KHRIS project, according to past reports.

The Personnel Cabinet has managed the project since July 2009, according to spokeswoman Crystal Pryor.

KHRIS "is one of the largest enterprise-wide technology transformations in the history of Kentucky state government," replacing an "antiquated and unreliable payroll system" along with more than two dozen other HR systems, Person said in a statement.

On the whole, KHRIS is "a more reliable and responsive program that has successfully managed payroll and benefits for nearly 250,000 benefit participants and county and state employees since its launch," Pryor added.

"SAP and the people from KHRIS have been working very closely in partnership," said SAP spokesman Andy Kendzie. "It's a mutually supportive relationship and we want to keep that mutual support going forward."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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