Anchorage Daily News

The city has overpaid employees as much as $2 million over the past 10 years because of a payroll programming flaw that erroneously boosted overtime pay, city officials said Friday.

A payroll audit caught the problem, said municipal employee relations director Nancy Usera, who sent a memo describing the error to city directors and union leaders.

The overpayments date back to the installation of city payroll software roughly a decade ago, she said. The software, called PeopleSoft, was incorrectly programmed at the time, Usera said.

"By having the formula wrong, all the numbers spit out wrong," she said.

About three-quarters of the city work force -- or roughly 2,200 employees -- could have had paychecks increased by the error, according to employee relations.

"To my knowledge, we (the city) found out about it in '08," said the Usera, who joined the city staff this year.

She said city officials knew about it but hadn't done anything.

It wasn't immediately clear why the problem hadn't been corrected before.

Mike Abbott, who was city manager in 2008, said he'd never heard a word about it. Same with Assemblyman Matt Claman, who served as acting mayor from Jan. 1 through July 1, when Dan Sullivan took office.

Sharon Weddleton worked as the city's chief financial officer under Claman and former mayor Mark Begich. She first heard the city might be overpaying for overtime maybe two months before leaving the job in late June, she said.

City payroll supervisor Toni Prockish, around that time, "brought this to the attention of the senior executives as one way to reduce spending," Weddleton said.

"It was something that many of us were working on, so it was no secret. We were looking for a solution and we knew that there might be some push back ... most likely from the employees that were affected," she said.

Weddleton met three or four times about it with other city officials, such as attorneys and the payroll manager up until she left the job, she said. The plan was to go to the unions and tell them they planned to fix the error.

Asked why the city didn't correct the accounting practice to lower overtime pay earlier, Weddleton said maybe it "fell through the cracks" as the city executives changed jobs.

"What might have happened is with the change of administration, the issue got lost," she said.

The root of the problem is that the city's payroll software uses a formula for calculating overtime that is slightly different than what's legally required. The result is that the city was paying minutely more per hour of overtime than it should have, according to documents attached to Usera's memo.

But that small bonus, spread across thousands of employees working thousands of hours of overtime, grew into a couple hundred thousand dollars each year.

The city plans to meet with union officials Thursday and correct the overpayments by Oct. 26.

"We need to give the unions 30 days' notice," Usera said.

Workers won't be asked to repay the extra money, she said.

Derek Hsieh is president of the Anchorage Police Department Employees Association. In the 15 years he's worked for the city, there have been payroll errors that benefited employees and others that short-changed them, he said.

"Ultimately $200,000 a year certainly is a substantial sum," he said of the annual overpayments. "But I think in proportion to the overall municipal payroll -- rep and non-rep, meaning union and non-union -- I think it probably works out to some fraction of 1 percent."

Usera's memo said the overtime bonuses did not occur with "Kelly Schedule" employees, such as firefighters, who work 56-hour weeks.

Read The Village, the ADN's blog about rural Alaska, at adn.com/thevillage. Twitter updates: twitter.com/adnvillage. Call Kyle Hopkins at 257-4334.

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