QLD Health payroll bungle to cost $1.25 billion

Queensland Health's bungled payroll system upgrade is set to cost the state some $1.25 billion between now and 2017, according to an audit by KPMG.

The audit, commissioned by the new Liberal National state government, was tabled in State Parliament on Wednesday by health minister Lawrence Springborg.

Springborg expressed his anger at the Labor government’s management of the SAP-Workbrain rollout, which resulted in more than 35,000 payroll anomalies after going live in March 2010.

The Labor government initially considered seeking damages from integrator IBM, which was contracted for $6.19 million in December 2007 to replace Health’s payroll system by August 2008.

Queensland’s auditor-general revealed IBM had made 47 changes to the original specifications and had been paid $21 million by the time the system went live.

“This was a rogue contractual arrangement, untended by Labor, that engulfed the valued workforce of Queensland Health,” Springborg said on Wednesday.

“Even today, 27 months after the Labor payroll went live, unavoidable costs continue to escalate. This is a damning report. It is a shocking citation of failure and bad faith by the former government.”

KPMG’s audit noted that Queensland Health’s payroll system was “uniquely complex”, requiring 2500 customisations to the SAP software and more than 130 manual workarounds.

The department’s 85,000 staff were employed under two different Acts, covered by 12 different industrial awards and impacted by six different industrial agreements, creating more than 24,000 different combinations of pay, auditors found.

Each fortnight, 1010 payroll staff were required to perform more than 200,000 manual process on about 92,000 forms due to the complex environment.

“Regardless of the design of the [Queensland Health] payroll system, the current complexity of the industrial environment … will continue to have the potential to impact on payroll performance into the future,” KPMG reported.

“Simplification of the current awards structure would require a Whole of Government approach. An assessment of the feasibility of this is beyond the scope of the current review.”

KPMG expected Queensland Health to spend a total of $1.25 billion on the payroll system between 2010 and 2017, of which $839.9 million would be spent from the next financial year onwards.

Of the total $1.25 billion, almost $1.01 billion would be spent on business as usual, $220.5 million on fixing problems associated with the existing system and $25.0 million on deciding on a future system.

The KPMG cost forecast did not account for any upgrade or reimplementation costs, or up to $110.4 million in tax costs associated with waiving non-recoverable overpayment debts from staff.

Although 79 percent of the upcoming costs were considered necessary to maintain business as usual, the State Government had yet to approve 64 percent of that funding.

The auditors called for Queensland Health to recover overpayments, reduce some degree of complexity, and commence work on upgrading its SAP and Workbrain systems.

“QH need to implement the projects that deliver payroll outcome improvements, while concurrently using a targeted approach to engage the external market to determine the best solution that accounts for the future environment,” the auditors recommended.