Best Practices and Cost Benefit Analysis of Payroll Reporting

Abstract

EXECUTIVE SUMMARY: The project was designed to provide an assessment of the best practices used in payroll management by a variety of Navy commands. The project aimed to benchmark the average cost of payroll execution processing at the various Navy commands to determine if Navy Installation Command (NIC) is expending resources effectively. A secondary analysis determined institutional cost-effectiveness and cost-benefits of payroll tracking, reporting, and reconciliation practices with a goal of improving the accuracy of financial reporting. This report provides an assessment of data collected on the best practices and related costs of similar functions performed at a selection of Navy commands. A variety of cost ratios are provided to determine if other Navy commands are providing similar services more effectively and efficiently. The scope of the project was limited to assessment and comparison of US direct hire civilians and related hours consumed by each command to produce a variety of monthly and annual reports that are required from each command, regardless of the echelon or reporting hierarchy of the command. Effectiveness ratings are based on command opinions of the systems used in the production of the monthly and annual reports. The team recognizes the ratings are subjective and is unable to validate the responses. Results of the analysis indicate internally-developed systems are preferred over Navy-provided systems by commands. Internally-developed systems provide better management flexibility and easier report generation than Navy-provided systems. Internally-developed systems are least cost efficient although more effective in areas of reporting and tracking costs. The number of unit identification codes (UICs) managed by a command is a main cost driver in the cost of providing the service. Fewer UICs require less tracking and reporting regardless of the number of full-time equivalent (FTE) reported in each UIC. The team recommends the client coordinate with Military Sealift Command (MSC) to review their processes and reporting. MSC is the most cost efficient of the participants and reports the highest effectiveness through a combined use of Work Years Personnel Costs (WYPC) and Financial Management System (FMS), an internally developed system.