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How and why? Health payroll inquiry begins

The human cost of Queensland Health's flawed payroll system is immeasurable.

But that is not what the Commission of Inquiry into the payroll debacle will focus on

The $5 million inquiry will use the “very real” human cost and suffering – the missed payments, the under payments, the stress of falsely being accused of fraud after an over payment – as the impetus of its investigation, but this review is very much about the hows and whys.

How did it happen? Why did it happen? And what can be done to stop it ever happening again?

To that end, former Court of Appeal Justice Richard Chesterman, QC, opened the inquiry in the Brisbane Magistrates Court on Friday morning to accept submissions from anyone who may have information on what went wrong.

There have been previous reviews of the debacle; two have been deemed to be of “direct relevance” to the inquiry – the Auditor-General's Report (no 7) handed to parliament in June 2010 and the KPMG audit report from May 2012.


“The factual background to the inquiry is notorious,” Mr Chesterman said.

“The contract price negotiated for the design and implementation of the new payroll system was agreed at $6.19 million, but by the time the system was put into operation the amount paid to IBM had exceeded $37 million.

"The government's own costs, incurred on its side of the implementation, were a further $64 million.

Queensland Health had envisioned a system which was “efficient, economical and largely automated”.

Instead it received one which took more than 1000 payroll employees to perform about 200,000 manual operations and process 92,000 forms every two weeks.

The KPMG review noted that the cost of operating the system from its implementation in March 2010 to May 2012 came in at more than $400 million.

To run the system for another five years would cost the state another $836 million.

Since March 2010, $130.8m in salary overpayments and interim cash payments have been paid to staff members, affecting approximately 83,000 current or former staff over the past three years.

Half of the current workforce has an outstanding over payment. Another 75 per cent of current employees had been overpaid at some point since the roll out.

Mr Chesterman said the payroll system also ignored many employees who were unpaid or underpaid.

"A number were made temporarily destitute, unable to afford the basic necessities of life," he said.

"Some who were overpaid were falsely accused of fraud. It was, for all affected, a time of great anxiety and hardship.”

Which is why, Mr Chesterman said, this inquiry would search out “why such large amounts of money have been lost to the public, whether anything might be recovered and why such distress was inflicted on the Queensland Health workforce”.

The answers to those questions and others within the inquiry's terms of reference will largely depend on the cooperation and evidence of key players in the implementation of the system, including the former Labor state government and system creators, IBM.

The commission can compel witnesses to give testimony if it is deemed necessary.

Shane Doyle, SC, representing IBM, said his client intended to fully cooperate.

Alan MacSporran, SC, will represent the state of Queensland.

Peter Flanagan, SC, will act as counsel assisting the commissioner.

The commission was adjourned on Friday to give time for relevant people to submit their information or evidence to the inquiry and for those submissions to be feted. 

Public hearings will be set for a date yet to be determined.

The Newman government has estimated it will cost $1.253 billion to fix the system.

It will be up to the government to decide whether it is more cost effective to keep the current system or scratch it in favour of a new one.


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