Board of Regents addresses UW System overpayments

A University of Wisconsin System Board of Regents committee had difficult questions for administrators of its human resources system, which overpaid more than $33 million in benefits and retirement payments.

The board’s Business, Finance and Audit committee questioned Michael Morgan, the UW System’s senior vice president for administration and fiscal affairs, and Larry Henderson, the director of the UW HR service center, about the overpayments.

In early January, an audit showed the UW System overpaid $17.5 million in retirement funds and $15.4 million in health benefits. The UW System recovered the $17.5 million within a month, but only recovered $2.4 million of the health benefits overpayments.

The overpayments happened because the UW System failed to reconcile their employment data with data from a state benefits agency.

Elizabeth Dionne, director of the UW System’s audit department, said her department also found about $1.1 million lost due to other issues. Other issues may come up as the UW System and outside auditors and consultants continue their investigations, she said.

“We’re doing everything in our power to identify and fix these complex issues and problems that caused the overpayments,” Henderson said.

Henderson reminded committee members of the complexity of the human resources system that came online April 2011, replacing a nearly 40-year-old system that system officials said could have broken down any day and led to paychecks not being sent out. Morgan said the new system went through more than 50,000 hours of testing before going online.

Since the new system went online, the UW System has sent out nearly $4 billion in payments, Henderson said. He pushed for a “redesign” of the system to reduce its complexity, giving some examples of how complicated it is, such as some employees having four different jobs or the UW System offering five different life insurance plans.

“Is it catastrophic? No,” Regent Jerry Whitburn, the committee’s chair, said. “Should we be going through this? Absolutely not. People are going to have to get their act together going forward.”

Regent Gary Roberts said he was “bothered” to learn about the overpayments in the newspaper, especially since UW System officials knew about the problem in October 2012. Morgan said that was a “valid” criticism.

Roberts also said he was frustrated by officials failing to catch the overpayments earlier, and the investigations can still lead to more problems being identified.

“It seems like some point along the way, it isn’t too complicated to realize your budget is out of whack,” Roberts said.

UW System President Kevin Reilly, who recently testified at the Capitol about the overpayments, said the regents have a “really important role” in addressing the issue.

Reilly said UW System is handling the problem with the internal audit that already found $1.1 million in issues as well as the Legislative Audit Bureau, which released its report on the overpayments and a separate security issue in December. The UW System is also hiring an external risk assessor they expect to have next week. At the Capitol hearing last month, Reilly said that would cost under $50,000.

LAB had also found “material weaknesses” in the system’s security, where a number of employees could have access to more than they were supposed to. With that access, one of those employees could potentially fabricate an employee and have payments sent to them.

Dionne said the problem has been solved with changing 51 employees’ access and an audit of what the people with the wrong access could have done should be completed by Labor Day.

UW System spokesperson David Giroux also gave an update on the UW System’s new Knowledge Powers Wisconsin marketing strategy that shares stories from campuses on how they help communities and business grow.

Among the highlights of the strategy is a Twitter handle, @uwpowersme, where students and alumni will soon be sharing stories of what they’ve learned and how it has helped them.

“They do so in a way that we can’t,” Giroux said.

The first guest Twitter user will share his or her story Monday and others are “lined up” to tweet, he added.