October 2016
The Health and Human Services Commission (Commission) has outsourced the majority of its human resources functions. However, the Commission did not adequately monitor and enforce the human resource requirements in its $56.9 million human resources and payroll services agreement (contract) with NorthgateArinso.1 As a result, there were weaknesses in classification of employees and compliance with human resources and information technology contract requirements.
Auditors determined that a significant number of employees at and job postings for the State’s health and human services agencies2 (HHS agencies) were not properly classified according to the State’s Position Classification Plan. Specifically:
• Based on a list of 5,484 HHS agency managers and supervisors on January 15, 2016, 760 (13.9 percent) were misclassified with entry-level titles and other nonsupervisory titles.
• An audit conducted by the State Auditor’s Office’s State Classification Team determined that 356 (57.7 percent) of 617 program specialist employees at the Department of Aging and Disability Services were not classified correctly (see A Classification Compliance Audit Report on Program Specialist and Program Supervisor Positions at the Department of Aging and Disability Services, State Auditor’s Office Report No. 16-705, August 2016).
• Of the 149 job postings tested, 40 (26.8 percent) appeared to be incorrectly classified based on the duties described in the job description compared to information in the State’s Position Classification Plan.
Correct job classifications are essential in preventing underpaying or overpaying employees. Improper job classification can also lead to unqualified managers and supervisors. In addition, it may contribute to employee turnover.
The Commission did not have a comprehensive monitoring plan and a supporting risk assessment in place to help focus its monitoring of the contractor to determine whether the contractor provided the required services. A monitoring plan and risk assessment should identify the contract requirements to be monitored, how the requirements will be monitored, and who will perform the monitoring.
The Commission did not adequately document its interactions with the contractor. The lack of documentation associated with the Commission’s monitoring makes it difficult for the Commission to hold the contractor accountable for providing the services required in the contract.
The Commission should improve its monitoring of the information technology-related requirements in the contract. Neither the Commission nor the contractor had an adequate process to periodically review user access to the Commission’s human resources system or to ERS Online, which contains confidential employee data, and ensure that user accounts are disabled when users leave employment. In addition, the Commission did not adequately ensure that the contractor complied with information security best practices and the Commission’s security protocols and standards as required by the contract.
The Payroll, Time, Labor, and Leave Department developed processes to adequately monitor contractor performance. That monitoring was designed to monitor contractor compliance with applicable service level agreements and significant requirements outlined in the contract.
The Commission reviewed all 35 of the contractor invoices and made payments from May 1, 2013, through February 2016 totaling $30.5 million. All of those payments were properly supported by the documentation, complied with the contract requirements, and were approved by authorized parties.
However, four payments totaling $3.5 million were charged to the prior contract for human resources and payroll services.
The Commission generally complied with applicable statutes and State of Texas Contract Management Guide requirements for contract planning, procurement, and formation for the contract.
However, the Commission did not specify in the request for proposals the weight that would be applied to each evaluation criteria as required by the State of Texas Contract Management Guide.