FINANCIAL MISMANAGEMENT over the past two years, worsened by the city’s transition to a new accounting system, resulted in more than $1.6 million in retroactive payments to city employees who were underpaid and over $100,000 in late fees to the California Public Employees’ Retirement System.

That was the message to the Stockton City Council from Deputy City Manager Rosemary Rivas, who recently presented a detailed audit update laying out a timeline of errors and other shortcomings in the processing of personnel and other information.

Most of the problems began in 2023, when the city implemented the MUNIS payroll system and tried to integrate it with the city’s existing system, Rivas said. MUNIS, now known as Enterprise ERP, was created by Tyler Technologies as a human resources and payroll management system for public sector entities like city governments.

Since January 2023, Stockton has paid CalPERS $120,000 in late fees due to an average 23-day delay in monthly reporting. 

“We had issues as soon as MUNIS was implemented,” Rivas told the council at its April 14 meeting. “They tried to take an old system into a new system. It didn’t work.”

The reporting delays, according to Rivas’ presentation, stemmed from the volume of payroll errors that had to be corrected before reports could be submitted.

The result was a backlog of underpayments and overpayments. A total of 5,412 retroactive payments were processed for 1,383 underpaid employees, and the city reimbursed a total of $1,670,009.40. The primary causes included late entries for promotions, step increases, and other personnel actions, as well as human error during timesheet and payroll processing.

Stockton’s contributions to the state pension fund are based upon a percentage of the city’s total payroll.

“As problems did arise, they weren’t fixed. They just put a Band-Aid on it.”  — Deputy City Manager Rosemary Rivas

Vice Mayor Jason Lee expressed frustration and concern over the scale of the problem. 

“Anybody that has worked in this department or within this process, as we get deeper into the audits and so forth, should probably try to find attorneys,” Lee said. “Is this normal in an organization like this to have 5,412 errors?”

Rivas responded, “As problems did arise, they weren’t fixed. They just put a Band-Aid on it.”

Lee questioned the lack of internal oversight: “Were there no checks and balances to catch these errors?” At what point did we realize there was a problem?” He also called for those responsible to appear before the council to answer questions.

City working to recover overpayments

In addition to underpayments, the city reported 359 overpayments to employees totaling $452,331.45 between 2023 and this year. Of that total, $347,120.30 has been recovered, with $105,211.15 outstanding. The city is working to recover the funds through voluntary repayment agreements, with some cases still under negotiation.

District 1 Councilmember Michele Padilla acknowledged the efforts of employees who agreed to repayment terms. “Thank you to those who have worked with payroll to resolve this,” she said.

Due to legal limitations, the city cannot unilaterally deduct overpaid wages from employees’ paychecks without their consent. Employees who refuse repayment may be taken to small claims court, though most have reached agreements with city attorneys, Rivas added.

California law allows the city to pursue repayment for up to three years from the date an error was discovered.

The City Attorney’s Office has played a limited role, offering guidance on repayment agreements when requested but not overseeing audit tracking or financial reconciliations.

In March of this year, payroll responsibilities were transferred to the Human Resources Department. Since then, HR contracts with two outside vendors — Robert Half and RGS — to assist with payroll processing, staff training, and diagnosing errors in the MUNIS system. 

Rivas said this partnership has already led to a decline in payroll errors.

“When an error occurs, the employee identifies if it’s a human error,” Rivas said. “If it’s a system error, we contact the vendor to investigate.”

The city is conducting a forensic audit through Ryland Consulting and is covering all city funds, Measure A expenditures, and City Hall finances, as part of a broader initiative to restore financial accountability.

A forensic audit entails examining the flow of money into and out of all city funds, including Measure A cash flows and other City Hall accounts, Rivas explained.

Asked by Lee if the audit would include scrutiny of all employees with access to financial systems. Rivas answered, “Yes.”

This story originally appeared in Stocktonia.