Administration unveils payroll consolidation project
The Bush administration Wednesday announced the consolidation of the federal payroll system, which will reduce the number of agencies processing employee paychecks from 22 to four.
Office of Personnel Management Director Kay Coles James said the new e-payroll system, which will be in place by the fall of 2004, will replace a "duplicative and archaic system in dire need of costly modernization." She said the new system will save taxpayers $1 billion over the next 10 years.
The payroll project, which will cost about $40 million in fiscal 2003 and $50 million in fiscal 2004, is one of 24 e-government initiatives identified by the Office of Management and Budget. The consolidated payroll system will help meet the five goals of the President's Management Agenda, specifically the expansion of e-government, designed to make the federal government more efficient and citizen-friendly.
Of the eight agencies that competed for the right to process federal paychecks, the Agriculture, Interior, and Defense departments, along with the General Services Administration, were chosen to develop two online systems. Agriculture's National Finance Center in New Orleans and Interior's National Business Center will work on one system, while the Defense Department's Defense Finance and Accounting Service will collaborate with GSA on developing the second system.
The two teams will face the daunting task of standardizing payroll systems that have operated under different managers and diverse rules for years, said OMB Deputy Director for Management Mark Everson, who was recently tapped by Bush to serve as IRS commissioner. For instance, James said, agencies currently have different methods for accounting for vacation time on pay stubs.
Most of the technology needed for the two new systems already exists, said Mark Forman, associate director for information technology and e-government at OMB. But the team will still need to sort through a hodge-podge of antiquated software to figure out which will provide the best service at the lowest cost, and move the federal government to the forefront of IT innovations. "We will no longer be the laggard, we'll be the benchmark," he added.
Payroll transitions are often fraught with difficulties. Payroll systems have various formats that are often incompatible with one another, or with other systems, such as financial management or human resources information systems, with which payroll systems must share data.
For example, a law passed in November allows federal workers to make larger payroll contributions each year to the 401k-style Thrift Savings Plan, a retirement investment plan for federal workers. But it will take agencies until mid-2003 to update their payroll systems to handle the change.
When the Transportation Security Administration hired its new workforce this year, a time and attendance system could not be installed quickly enough, so time sheets were filled out manually and shipped to the Transportation Department's payroll center in Oklahoma City, Okla. The manual time sheets required data entry into the payroll system. Some workers' records had the wrong information, so they weren't paid properly.
But James said she expects this payroll consolidation effort to run smoothly.
"I want to assure federal employees that the providers will work diligently to avoid disruption in service as agencies transition to new payroll systems," she said. "Employees will receive their paychecks on time and in the right amount."
The Veterans Affairs, State, Transportation and Health and Human Services departments all lost bids to help run the sleeker, consolidated payroll systems. But OPM officials said that at this point they do not expect any workers at these, or the other 14 agencies currently involved in payroll transactions, to lose jobs in the consolidation. However, this will depend on the number of other, nonpayroll related positions that will open within the agencies, they added.
Brian Friel contributed to this report.