An agreement between the Los Angeles Unified School District (LAUSD) and a contractor that is in charge of implementing its payroll system was reached on December 3rd, a year after an accounting scandal rippled throughout the school district and placed a number of teachers in financial jeopardy.
Deloitte Consulting has agreed to pay the school district $8.25 million and forego $10 million due from unpaid invoices.
The consulting firm is a subsidiary of Deloitte & Touche USA, an audit, consulting and financial services advisory company.
L.A. Unified paid the company $95 million to install the payroll system two years ago. After a computer glitch was discovered in the system that was responsible for the payroll snafu, the district then paid the consulting firm again to repair the problem.
David Holmquist, chief operating officer for the school district, said that while the district would have hoped to obtain funds for the teachers who were underpaid, recouping money for that particular cause was not possible from a legal standpoint.
“We were limited to what we could recover under a breach of contract, which this was, essentially,” Holmquist explained. “The settlement unfortunately did not allow us to recover (money) for things like pain and suffering of the teachers.”
The settlement with L.A. Unified did not please A.J. Duffy, president of United Teachers Los Angeles (UTLA).
“It’s a terrible settlement,” Duffy said days after the agreement was announced. “Over 50,000 employees were harmed and Deloitte & Touche has taken no responsibility for that.”
Hundreds of teachers went unpaid, and some were overpaid and later had money taken out of their paychecks last year and early this year, and in some cases, educators were not paid at all.
Some teachers fell behind on their mortgages and were forced to borrow money. Many had to seek advice from tax consultants regarding their tax status for last year, as their reported income was not the same that was listed on their filing forms.
“Who’s reaching out to the teachers who were harmed by this payroll debacle?” Duffy asked. “What about the employees whose credit ratings have been harmed and who may be in the process of losing their homes and condos?”
L.A. Unified also ran into trouble on the state level due to its payroll problems. The school district was fined by the California State Teachers Retirement System, the nation’s third-largest pension fund, for sending incorrect payroll information to the state agency.
“As of October 31st, LAUSD has been fined over $328,000,” pension fund spokesman Ricardo Duran told The Argonaut in January.
Politicians joined the public outcry of the system debacle after newspapers reported on the yearlong scandal. Assemblyman Kevin de LeÛn of Los Angeles sponsored a bill that would prevent contractors from bidding on another contract with public agencies if they had been found in breach of contract in a previous instance. The legislation, Assembly Bill 730, was tabled after the consulting firm agreed to settle with the school district.
Holmquist said district officials were confident that they would not see the kinds of software problems that occurred in 2007.
“We now have a world-class payroll system from a systems standpoint,” said the district’s chief operating officer. “It doesn’t mean that we won’t have human errors, but we do not anticipate future problems like we had in the past.”
Representatives of Deloitte & Touche could not be reached for comment.