Detroit’s payroll system is poor, Orr tells creditors

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                                                                                                    By Bankole Thompson
    CHRONICLE SENIOR EDITOR
    Kevyn Orr, Detroit Emergency Financial Manager today gave a blistering account of Detroit’s state of affairs to 150 stakeholders including creditors meeting at the Detroit Metro Airport Westin Hotel about the future of the city.
    The Detroit Restructuring Plan, as the report is called, is a massive inventory of the entire apparatus of the government of Detroit that has long been operating at the Coleman A. Young Municipal Center without giving much to hard pressed taxpayers, residents and those invested in the city. 
    The plan for example cited the city’s payroll system as one that “currently uses multiple, non-integrated payroll systems,” noting that “a majority of employees are on an archaic payroll system that limited reporting capability and no way to clearly track, monitor or report expenditures by category.”
    According to the plan, the cost of payroll administration for the city is significantly higher when compared to other cities. The current cost to process a payroll is $62 per check, which amounts to $19.2 million annually, and “four times more costly than the overall average of $15 per paycheck and almost 3.5 times more costly than other public sector organizations, which average $18 per paycheck.”
    Orr said in the plan that the primary driver of this cost is labor, which is more than the 70 percent of the total cost for the city.
    “149 full-time employees are involved in the payroll, 51 of which are uniformed officers (high cost personnel performing clerical duties,” according to the plan which also indicated how the current payroll process is “highly manual (some done by hand) and prone to human error, including erroneous payments to individuals.”
    Orr’s proposal also takes a look at the city’s income tax noting that tax collection and data management are highly manual.
    “The city’s income tax system is outdated (purchased in the mid-1990s), has little to no automation capability and is catastrophic per an IRS audit completed in July 2012,” the plan stated. “Updating the current income tax system could increase revenues for the city through improved revenue tax processing, tax compliance and collection and improve reporting, efficiency and accuracy.”
    On property tax, Orr’s also showed how the city’s billing, processing and collection of property taxes is inefficient, something that has been the subject of discussions long before the arrival of an emergency financial manager.
    The plan stated that recommendations made in 2011 to restructure how the city collects property taxes are not followed even though the implementation promises to increase efficiency of the collection process.
    On budgeting, accounting and financial reporting systems, the plan revealed that the city installed the Oracle-based financial reporting system in 1999, but it was not used to full capacity. Now the manufacturer of the system no longer supports it.
    Orr detailed a plan to creditors today in a bid to get them on board to map out a plan that puts Detroit back on financial solvency while granting creditors 10 cents on each dollar. .
    The plan also would reinvest $1.25 billion over the next decade to upgrade services in police and fire as well as other crucial needs including blight removal while restructuring the entire government.

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