An Agency Adrift

During the 12/12/2024 NYCERS Board of Trustees meeting, the executive director, Melannie Whinnery, presented the FY-2024 budget reconciliation report. The key item in the report was that NYCERS had only spent $130.3M, which was $38.1M less than the budgeted amount of $168.4M.

The cause of the shortfall was reported to be mainly due to:

1. $27.2 M delayed payments for the Legacy Replacement Project (LRP, an IT upgrade project) because of the delayed implementation of the project and
2. $9.0 M unspent payroll allocation because of difficulty in hiring new authorized personnel.

The LRP shortfall

In the FY-2024 budget, the LRP project was budgeted at $61.03M for consulting services. I guess we can assume that, in spite of the shortfall and delays, NYCERS did pay $33.83M ($61.03M-$27.20M) for consulting on the LRP project in FY-2024.

Listed below are the official NYCERS budget and ACFR non-payroll costs for the previous eight years:

Non-Payroll Shortfalls

Year	Budgeted	Actual	Underspent
2024	$98.0M	$69.8M	$28.2M
2023	$90.4M	$47.8M	$42.6M
2022	$84.5M	$52.7M	$31.8M
2021	$50.2M	$38.7M	$11.5M
2020	$45.9M	$31.9M	$14.0M
2019	$43.5M	$38.4M	$5.1M
2018	$21.8M	$19.2M	$2.6M
2017	$20.9M	$20.2M	$0.7M

Since FY-2020, as seen in the table above , NYCERS has been significantly underspent the budgeted amounts for its non-payroll expenses with the LRP project being the big-ticket item.

The LRP project was proposed in the spring of 2015 and was originally to start in FY-2016. Miscellaneous components of the project finally did get started in FY-2018. An RFP for the LRP was issued in December 2017. It was, however, withdrawn six months later in June 2018.

The current executive director was hired in the fall of 2017

In FY-2021 the LRP contract was finally awarded to Accenture for $85M with a five-year term ending in June 2026. As reported at the December Board meeting, a stripped-down version of Phase 2 is supposed to be in place by the first quarter of 2025.

Phase 1 appears to have been in place by the spring of 2023. It basically entailed the selection of an off-the-shelf commercial pension administration software package, PENFAX. The annual license charges started in FY-2022 and are currently budgeted at $4.4M in FY-2025. This is just for the licenses and not the customized application. The package will need extensive customization which I suspect will be the core work of Phase 2 through Phase 5.

This project is way behind schedule and will be way over budget, assuming it is ever implemented. I cannot overstate the enormous costs that are being incurred by this project. NYCERS never lets on that this project is its tenth year of dvelopment and that it was origianlly a five year project.

LRP Costs

For the seven years since FY-2018, the costs for

1. software licenses have increased from $2.2M to $10.8M with a total cost for the seven years of $39.9M, and
2. computer consulting has increased from $3.0M to $40.4M with a total cost for the seven years of $104.4M. Yes, over $100 million.

These significant costs are despite the shortfall in spending.

You would think that there must be members of NYCERS, NYC workers belonging to DC-37, who could do this work more effectively and at less cost.

Note: DC-37 is a NYCERS trustee.

There are eleven consulting companies who have been paid over $2.0M in the last seven years:

Consultants Paid over $2M

1	Accenture	$41.0M
2	Gartner	$12.1M
3	InfoPeople	$8.6M
4	Universal Technologies	$7.5M
5	Rangam Consultants	$5.4M
6	Spruce Technology	$4.2M
7	Blue Hill Data Services	$4.2M
8	Experis US Inc. ---	$2.8M
9	Linea Solutions	$2.5M
11	Computer Management Resources	$2.5M
19	ZebraEdge Inc.	$2.2M

There are another twelve companies who have been paid over $1.0M in the last seven years. That is at least $12M plus.

There are another eight companies who have been paid over $500,000 in the last seven years. That is at least $4M plus.

We are not talking about DOD here. This is just a large municipal pension system, one of five in NYC.

The Staffing Shortfall and the Option Letter Delay

In the spring of 2023, as part of the NYCERS FY-2024 budget presentation, the executive director outlined serious production problems at the agency, especially the delays in producing option letters for new retirees (9/3/2923). Because of these problems the executive director asked for thirty two new full-time employees. The trustees approved only an increase of sixteen employees, raising the agency’s total of full-time employees to 501.

In the spring of 2024, the executive director, in a remote video meeting with the Municipal Labor Committee, projected that the option letter delay would be reduced to six months by the end of July 2024. She did, however, gave herself some leeway in that the agency was having trouble hiring new employees. July came and went without hitting the six-month mark.

As of the December 12, 2024, NYCERS Board meeting, NYCERS staff reported that the option letter delay was at nine months ( November 2024) down from 13 months in the fall of 2023. The new six-month target date was now moved to the first quarter of 2025. It was noted that the number of retirement applications had dropped in 2024, which was a help with decreasing the delay with producing the option letters.

At the same Board meeting the staff attributed the delay in solving this problem to the agency’s failure to hire new employees.

In FY-2021 and FY-2022 NYCERS had no problem hiring forty-five new employees.

Listed below are the official NYCERS budget and ACFR payroll costs for the previous eight years:

Payroll and Fringe Shortfalls

Year	Budgeted	Actual	Underspent
2024	$67.9M	$60.2M	$7.7M
2023	$56.0M	$57.7M	-$1.7M
2022	$51.3M	$52.3M	-$1.0M
2021	$48.1M	$48.7M	-$0.6M
2020	$45.9M	$45.7M	$0.2M
2019	$43.9M	$43.7M	$0.2M
2018	$40.9M	$40.4M	$0.5M
2017	$39.7M	$39.5M	$0.2M