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Thursday, June 27, 2013

Human Resources at SPS: Going Up or Down?

There are sometimes days doing this watchdog work that are defeating, sad and frustrating.  Today is one those.  I'll get to the issue at hand but a few thoughts first.

I've said this before - I do truly believe we have some good and decent people working in SPS.  There are several up the food chain who are almost great but, like many a bureaucracy, have those whose work either drags them down or mires them in place.

I've also said this before - anyone who works in leadership at SPS who does not read and heed the words in the Moss-Adams report of 2002 is doomed to failure.  Or, at least doomed to frustration.

The echo in my head from that brilliant report (and I paraphrase here) -

 It does not matter what structural or systemic change you bring to an institution, if the culture of bureaucracy at an institution does not change, nothing changes.

This has been, and continues to be, the problem with our district.

You really need someone at the top who comes in and, day one, heads this culture of change.   
A fish rots from the head.  

That said, many issues that do come up in our district could be headed off if we had systems in place to catch errors or transgrations.  Director Martin-Morris was very, very on-point when he recently said that compliance is key to getting work done and (presumably) moving forward.  If you don't get bogged down with old problems, that's when you move ahead.

If people feel siloed in their work, you are going to get problems.

If there is some kind of feeling of "circle the wagons" around a department or a "I have to get mine" attitude, you are going to get problems.

Now you could ask, "Melissa, how do you know this?  You don't work there."  Yes and I don't presume to know what it's like but after a long time watching, I have a pretty good idea.  And, after seeing some of the same issues come up time after time, you start to get a pretty good idea of how people are thinking. 

To the issue at hand.  As you recall, last week the State Auditor's office issued an audit about facilities' rental issues, lack of oversight with the JOA between the district and parks, etc.  Turns out there was another document - a letter to management from the State Auditor.

Most of it is about Human Resources and how salary changes are recorded as well as where the money comes from for those salaries.  The letter says, "In the nine of the last ten audits, we reported internal control weaknesses in the District's accounting for payroll expenditures."

There is good, bad and ugly in this letter.

The good is that some of this is about recording practices.  There should be less paper, more machine.  Basic HR practices like sending an official letter to an employee when their salary changes and the letter explaining those changes (step, grade, timing, etc.)  Documentation when the district splits salaries (which is the case in several jobs in Capital which means there may be funds from Capital and some from the General Fund). 

These are all things that with practices and systems in place, the district can easy do.  (Of course, it has to be made clear that they MUST be done each and every time.)

The bad?  The issue with the Capital/General Fund split jobs is not only where the money comes from but is it allowed to be spent for this use.  (I have long wondered about how the Capital dollars get spent.  BTA used to be much more about "B" buildings and less about "T" technology and, when it started, "A" athletics.  Now technology gets a much heavier focus as does the "A" which is now for academics. )

The Auditor's office found that the district charged things like managing the website, tracking student laptops (I believe this would be for Cleveland), assisting with computer programs and processing employee claims for over/under payment.  These appear to be things not covered by Capital.

More bad?  HR has been doing way too many manual salary overrides and that there is no effective tracking of who is doing this.  Additionally, the Nutrition and Facilities Operations Departments are able to do this on their own as they do their own payroll.  There appear to be no issues about salary overrides in this department but no one is tracking their work either.
  • The District has no written policies or procedures for authorizing, documenting, and making manual adjustments in the HR Master Data System. 
  • The District has no formal process for reviewing changes made to employee information in the HR Master Data System.
  • For internal promotions, the District was unable to demonstrate who authorized the promotion to 10 positions we reviewed. In addition, there were no approvals from the Budget Office evidencing they checked to see if there were enough funds to cover the additional payroll expenditures for all 10 positions. 
Sadly, there are two ugly items.  Very ugly and the Auditor's office was unable to get any satisfactory answers as to why they happened.  In the absence of real documentation or evidence, the SAO was unable to call either instance any type of crime.  That doesn't stop me - I say both are wrong.  Very wrong.
  • A Human Resource Manager performed a market analysis of HR positions in February 2010 for all HR managers. This resulted in the managers receiving a pay increase from pay grade 30 to pay grade 32. There is no evidence the market analysis was reviewed or that the increases were authorized. Note: this is about a $9k increase in salary per manager.  I was unable to find the exact number of HR managers but it is at least three people.  The SAO's office asked the manager who performed the market study (done in Feb. 2010) for the study but they never received it.  The name of the HR Manager is Elaine Williams.   To be clear - these raises were not reviewed, approved or authorized by anyone.  I still don't understand this.
  • During our audit we found a Program Manager received a salary override which increased his pay by $20,000. The District could not provide us documentation to demonstrate the pay increase was justified or warranted, and there was no evidence of authorization for the increase. Our inquiry led the District to determine the pay increase was an overpayment, and the employee agreed to repay the District.   Based on our inquiries and work performed, we do not consider the $20K overpayment to Neskahi a loss or fraud.
    This one, to me, looks like a criminal act but the Auditor cannot find a trail and the district will, slowly, get its money back. 
From the ROWD procedure report on this issue dated June 12, 2013:

We learned the Indian Education Program Manager is paid according to the Principals Association of Seattle Schools (PASS) Collective Bargaining Agreements. The identified risk for this observation is the District is paying classified staff according to a union contract for principals. Not only is the District potentially overpaying administrators, but this could result in a legal compliance issue as well. We later learned that the Indian Education Program Manager's increase in pay resulted from an undocumented salary override.

That would be Arlan Neskahi.  This one really burns me up as Mr. Neskahi is the manager who has failed, multiple times, to comply with federal regulations for use of dollars for Native American programs.  I actually thought he had been exited from the district and yet somehow, he ended up with an undocumented $20k raise.

The Auditor's office was quite surprised as:

During the planning of the FY12 Accountability audit, we learned that Arlan received a $20k pay increase in 2012. This was unusual to us because we told management last year that in order to really change the culture at the District (have meaningful, impactful change), the District must begin to hold staff accountable for their actions. We were expecting to see a written reprimand in the employee's personnel file for his continued noncompliance with federal requirements related to the Indian Education federal grant, and for backdating time and effort documentation making it appear as if they were in compliance for the time-period under audit, instead of receiving a significant pay increase.

There's not even a written reprimand for his low performance?  Hard to fathom but clearly, he has friends in the district.

Interestingly, Ms. Williams figures into the story as she was the former Compensation Manager until July 2012.

Elaine defined a salary override as paying someone outside the salary range for the person's job title/position. She indicated that all of the District's principals are in an override situation because the Collective Bargaining Agreement includes a performance bonus, in addition to their base pay.

She said the more common salary override is "Redlining", which is a term used by the HR department. Redlining is when an employee's job title/position is downgraded as a result of reclassification or reorganization (the new position itself is a reduction in salary grade). Instead of reducing the employee's salary, the employee continues to receive their current salary even if their new position's salary range is lower than what the person was making under the old job title; thus making the employee's salary whole (avoiding a paycut). The redline salary continues until salary increases (e.g. step increases) in the employee's appropriate salary range equals or exceeds the redline amount. At that time, the employee reverts to the applicable step in his or her salary range.

Elaine's rationale for redlining an employee's salary is that "you do not want to penalize them because of demotion, decreased work responsibilities, or a reclassification or reorganization"; she stated that it was good for retention purposes.

Okay, I can get that maybe someone's job changes so that they have decreased work responsibilities - through no fault of their own - so you don't lower their salary (but they are also not eligible for a raise).  But keeping their current salary even though they have been demoted?

In asking Ms. Williams about Mr. Neskahi's raise, it was found that the district has no way of knowing who did the manual override to give him a salary raise.

Some history:

We asked Elaine who contacted her asking to change Arlan's rate of pay to off-schedule, and she said that one day in passing, Arlan approached Elaine and expressed his displeasure in his salary placement and said "teachers make more money than I do." Elaine said she passed Arlan's comment to Cathy Thompson and told her that he was disgruntled. Elaine said this conversation took place informally and in a hallway. She said she does not recall a formal request from Cathy to request a salary override for Arlan. She also stated that she did not complete a salary placement worksheet for Arlan. Duggan Harman told us that he contacted Cathy Thompson and asked her if she authorized Arlan's salary override. Per Duggan, Cathy responded "why would I give him a pay increase if I had him on a performance improvement plan." 

Why indeed.


Elaine said that the Classification and Compensation Oversight Committee was responsible for determining raises and handing out raises.
 She said that this committee was established late 2010 and that the committee was originally comprised of the following individuals: Don Kennedy, Duggan Harman, Ann Chan, Noel Treat, and Cathy Thompson. She said that during 2012, the Operations Cabinet assumed responsibility for the function of the Classification and Compensation Oversight Committee. She said that she presented a spreadsheet to the committee listing employees whose rate of pay increased as a result of promotion or salary override etc. We had her pull the September 2011 spreadsheet (the date a change was made to Arlan's rate of pay), and noted that his name was not on the spreadsheet. 

Mr. Neskahi's explanation?  He hadn't noticed for awhile, no one talked to him about a raise and he had no idea what it all meant.

We met with Arlan Neskahi, Indian Education Program Manager, on 2/27/13 to discuss the $20k overpayment. He stated that he learned his salary increased two or three months after the salary override was effective. He stated that he uses direct deposit and did not immediately notice the pay increase. After learning that his pay increased, he reviewed his pay stubs and noticed that his salary grade/step had changed to a 999 number. Not knowing what the 999 number was, Arlan went to the District's website and accessed the salary schedule to determine what the number means, but did not see anything that matched. He said that nobody talked to him (HR representative or Supervisor) regarding his salary increase. He also did not ask questions about why his salary grade/step changed to 999, even though he did not understand what it stood for. He said that he will repay the $20k, and that he elected to make his first of 16 payments beginning March 1, 2013. He also said that his pay was reduced to reflect his correct rate of pay for a person in his position. 

Interestingly, Duggan Harman, head of Budget, did tried to get a handle on things.

Duggan told us that he wanted to freeze all class and comp salary increases. His reasoning for freezing class and comp increases was driven by (1) lack of internal controls over increases in pay and (2) in attempt to control costs. Duggan's recommendation to freeze class and comp increases was rejected by Jose Banda, Bob Boesche, and Paul Apostle. Duggan said their reasoning was there were a number of reorganization moves pending and it was felt that this would be inequitable. 

I certainly understand the reasoning for not doing the freeze but when you have things like employees deciding they deserve raises (and giving them to themselves) AND one employee getting a very suspicious looking raise with no documentation, maybe someone should think about a freeze until you do get a clear idea of what is happening.

The Auditor's office spells out the issue clearly:

There are numerous complex manual adjustments that need to be made for these staff, thus creating potential for human error and creating overpayments/underpayments that end up being detected the next time around. During our inquiry we noted there's risk associated with "one-time adjustments", and we need to determine if someone is reviewing these adjustments. If nobody is reviewing these adjustments then it increases the risk of human error or fraud. 

Anybody out there?

23 comments:

Johnny Calcagno said...

Outrageous.

Anonymous said...

VERY disheartening.

reader

Patrick said...

You'd think this was some tiny country town with just one official, one checking account, handwritten checks, with records kept on post-its, instead of a $600M a year operation.

Incidentally, the Moss Adams report is on the District's web site at

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&ved=0CD4QFjAE&url=http%3A%2F%2Fwww.seattleschools.org%2Fmodules%2Fgroups%2Fhomepagefiles%2Fcms%2F1583136%2FFile%2FDepartmental%2520Content%2Fauditresponse%2Ffinalreport41603.pdf&ei=O7zMUamlMsSQiQKky4DYCQ&usg=AFQjCNHXnkwcQ9G6z2CAaYbVQVncpYsGUw&sig2=BXYtCOehG8-pkJFKl9Z7kw&bvm=bv.48572450,d.cGE

Did the District learn anything at all from that report?

Anonymous said...

At least they are being audited and under scrutiny, with some ability to get their money back. When budget info on charter schools was requested by state officials in both Utah and AZ, many of the AZ charter schools gave the state the big FU, while the UT schools provided only the bare minimum in documentation. The states could do nothing, nor are their GOP-controlled, charter-school-kickback-loving legislators about to do anything about it. Since there is no accountability on the charter schools and public money, it is lost forever. I remember reading similar happenings in OH, and definitely in FL. As dysfunctional as SSD is, I'd rather be dealing with them than the mess that is coming with charter schools.
Not excusing anything SSD is continuing to do wrong, but just adding some additional perspective. Hopefully Banda will get word on this and make some changes.
CT

Anonymous said...

Ms. Williams'salary increased 6.45%from the 08/09 school year to the 09/10 school year. (From $92,398 to $98,364.) A new teacher at the bottom of the salary scale would receive a COLA of 1.5% - from $42,005 to $42,634 in that same period.

Lynn

Anonymous said...

When you actually work in the district you experience first hand the absolute bureaucracy that is the SPS HR department and the absolute incompetency.

There are layer after layer of antiquated ways in which data is obtained and maintained. Its a farce and a joke.

It will never change, never improve and I have seen it for over 20 years. God this is such a one horse town with such two horse ambitions.

Laughs A Lot

Melissa Westbrook said...

But Lynn, we're not talking 2009-2010- we're talking about 2011-2012. Feel free to look at the documents.

Anonymous said...

I am sick to my stomach after reading this.

A year or so ago I saw a report that said SPS uses SAP to produce their in-house payroll.

SAP tracks everything. Who made a data change, who runs a report, who prints a manual check or makes entries to the system.

The only way changes would not be tracked is if everyone is using the same generic, administrative level logon and password. Anyone familiar with standard accounting practices would understand the danger in allowing anonymous operation of the system. If you know the anonymous logon and password that everyone else is using you can write yourself a check or give yourself a raise without a trace.

There is also no need to produce manual checks if someone is being paid a salary not within their designated pay grade.

That would indicate the employee’s actual salary is not being stored in the system and then they are cutting a manual check to compensate for the difference? Normally you can just look on a screen or run a report to see salary information. An employee’s real salary would in effect be kept from view unless you are an employee in payroll who knows which spreadsheet or file cabinet to check. And if the information for the manual checks is not being entered back into the system then the accounts would not balance and all of the end of year reports to produce W2’s and the like would also be invalid and would need to be manually produced.

This would be a bizarrely complex way to produce payroll and concocting such a tangled process would require a lot of effort.

This would be hundreds or thousands of extra hours per year to produce payroll, submit correct sums to the IRS, etc. It would be close to impossible for a manager or anyone not working in payroll to actually know an individual employee’s salary or salary expenses for a department or the entire organization.

This bizarrely cumbersome and opaque process gives the impression of a cover up for criminal activity or someone willingly remaining incompetent. Either should not be tolerated for the loss of funds these actions cause the District.

-StepJ

Charlie Mas said...

So much is wrong here, starting with the culture, then the internal controls, then the processes, then the inability to audit any of it.

Why do they even have software if they are going to do the calculations offline?
Why do we pay so much for it?
Why does anyone think this is okay for even one day, let alone two years?

Disgusted said...

I am so tired of being told the district has "cut to the bone" and needs more of our taxpayer dollars and then reading reports like this. Things will not change with the head of HR we have now. How can the Superintendent not see this?

Anonymous said...

It is not a big reach to see hundreds of thousands of dollars being wasted.

Setting up a login for an individual with appropriate authority for the functions they perform is a less than ten minute process. Doing that for each employee that performs payroll functions would allow all actions and activities to be logged by the software to produce a very easy audit trail.

It is a willful decision to keep transactions anonymous.

-StepJ

Anonymous said...

If the culture is not willing to change it would be cheaper and more accountable to outsource payroll to ADP or similar.

ADP would not allow anything (or allow themselves to be held accountable) for other than good auditable and sound accounting processes. No anonymous entry of raises or bonuses.

It is a shame as SAP could easily track all of the building processes, the District assets, etc., etc. in addition to payroll. And actually be cost efficient. If only...

-StepJ

Catherine said...

SAP can do many many things, if properly installed, configured, maintained, and staff trained. It is a very expensive system to buy and properly maintain. In the days when SPS implemented SAP, I was an SAP training consultant for a different HUGE client/vendor. The admins at our local elementary were given no training, one login for the building, and no training materials/procedures to do their jobs. Nobody had a clue. 12 months later central admin had 'lost' 34 million dollars and Joseph O was gone. I have a bunch of trouble believing that SAP wise things ever got any better.

So yeah - properly done and funded - SAP could handle all this... but it's really expensive to do that and the SAP configuration/maintenance budget line items I've seen, don't cover it being done properly.

Eric M said...

Grrr.
Again.
And how much $ does SPS have for supplies and materials in MY classroom?
Zero.
Not one gd cent.

Get the torches and pitchforks.

Charlie Mas said...

Right now there is a VERY strong intent to keep the senior management team intact - for good or ill.

The District is so convinced that high turnover in the senior management is a sign of dysfunction that they are willing to accept poor performance in those roles to maintain stability.

Melinda said...

Yes Charlie, the fact that Banda thinks everything is fine in HR indicates that his head will remain firmly in the sand and he can't hear anything that isn't spoon fed to him by the same staff who have been riding the gravy train with tax dollars.

This isn't new, its just that those who we expect to be watching such matters have been intimidated by charges of 'micro-managing' that all they can (or will) do is sit by quietly and watch with the rest of us.

Oh, lord!

mirmac1 said...

Money is no object when it comes to feeding the bureaucratic and ed reform machine downtown.

All told, SPS was prepared to spend $19M over three years on the 2008 Strategic Plan.

I see money for consultants and conventions and "leadership training", how much actually went to our classrooms? These expenditures were made during the same period we were cutting librarians, school nurses, and elementary counselors.

n said...

"teachers make more money than I do."

I bet his teachers work more hours than he does. I bet his teachers have more accountability than he does. I bet his teachers do a better job than he does.

It used to be that "management" made a little more than the top wage of the group managed. But, like CEO salaries, "management" now thinks it is owed a much bigger piece of the pie and it gets it one way or another. Wages do matter. They send signals of respect. But what I see in SDS is greed at the administrative level. I'm including principals. Commensurate with their duties, they are way ahead of where they should be.

And don't we have one of the largest bureaucracies which takes an unusually large percentage of expenses - something like 9%? And COLAS for educators are being suspended or eliminated again?

The inequity in wages is part of the rot. Do administrators teach our kids? Are teachers professionals? I have been doubting that recently. I think there is a move to change how we view teachers and teaching. It's all about business now. The administrative side sees itself as "business" and teachers as an expendable ordinary human resource easily replaced.

Well, we're all replaceable. Unfortunately, teachers don't have the login to SAP.

And BTW, where is it dictated that a "program manager" is worth more than his teachers? I remember working for a company that paid its salesmen way more than it paid its managers because the salesman took care of the clients. Well, teachers take care of SPS clients. Instead of putting teachers at the bottom of the food chain, we need to start thinking of teachers as having a symbiotic relationship with administrators. We are the talent.

And if we are not the talent, we should be replaced as well.

Sorry, that little quote really bothered me because it reflects the disrespect teachers are getting from all sides. Far too much money is going to administration to the detriment of teachers and classrooms and kids. No, I haven't forgotten about kids. That's why I'm still teaching.

Patrick said...

N, no need to say "sorry." Neskahi's quote was completely out of line. Managers are easy to replace, especially ones who miss major deadlines several times. Experienced teachers are hard to replace.

Anonymous said...

I missed details on what helped 'Albie' pay it back in installments. Did this happen during or after the audit?

Mr. White

Melissa Westbrook said...

He got caught. The SAO found this, then Kathy T. in Finance reported it to them (so it was officially on the SPS record) and then they confronted him. He played very innocent, "hadn't noticed because of direct deposit", "didn't understand the coding" and no one had told him", and that he would return it.

Someone tried to do him a mighty big favor on his way out the door. That is deeply troubling but the SAO couldn't figure it out. It might be good for the district to clamp down on these controls so it can't happen without a trail.

It might be good for Banda to tell employees this is unacceptable and won't be tolerated.

It might be good for the A&F committee to suggest to staff what they might do to prevent this in the future.

Melissa Westbrook said...

Mr. White, instead of "caught" the word I should have used was
"questioned."

Melinda said...

Mr Banda won't be "telling employees" anything not written by the PR folks responsible for his image, crafted and approved by the Alliance and the Mayor's Office of Education.

Isn't that clear after a year?

He's all sizzle and no steak.

Wonder if Susan would come back if salary went to a half million?th