If you’ve ever gotten a pay stub processed by the Department of Agriculture but are employed by a different agency, it wasn’t a mistake.

The federal government ensures its 2.2 million federal employees are paid with the help of shared payroll providers that centralize services on behalf of many different agencies. One of them, the National Finance Center, has been serving 650,000 federal employees across 170 customer agencies through hurricanes, government shutdowns and the COVID-19 pandemic, though not without increasingly complex challenges, according to findings by the National Academy of Public Administration’s latest report.

For one, it’s a computer-based service, and like many others in the public sector, is at risk of buckling under demand because of its antiquated IT systems and burdensome manual processes.

“NFC’s devoted staff has a remarkable record of accomplishment and resilience, having never in its history missed a payroll despite significant challenges outside of its control,” according to the report published Aug. 7. However, “NFC’s IT systems, including its mainframe, are in need of modernization.”

Should the the largest civilian payroll service provider not undertake the recommended IT modernizations, the government could find itself unable to pay its employees, which the report indicates “could happen, at least in the short term.”

“No other organization currently exists that can readily absorb NFC’s customers, each with their own specialized and tailored procedures and requirements,” it said. “Transitioning to a different provider would likely be a costly, complex, and time-consuming process for customers, even if there were ready options available. Therefore, stabilizing NFC to safeguard its ability to continue to provide services is an urgent priority.”

IT, hiring challenges stymie customer service

Part of the challenge is that despite unsuccessful attempts to modernize the core mainframe, the program is overlaid with more than 20 sub-systems that complicate upgrades and enhancements. Part of the issue is, like many legacy IT systems, the NFC relies on COBOL, which is not used often in modern systems and has a shrinking pool of expertise as these programmers retire.

That’s not the full extent of NFC’s IT issues either: “even if NFC were able to hire all the COBOL programmers it needs, those programmers would not necessarily have the ability to immediately work with the “spaghetti code” resulting from decades of modifications, many of which were not documented.”

Overall, the agency lacks technical expertise to tackle the “spaghetti code” underlying the payment program, thereby rendering it increasingly susceptible to cyber attacks and general malfunctions.

Further, NFC itself is dealing with high rates of attrition that make continuity of operations hard, the report says. Poor employee morale has the potential to exacerbate that further for the agency of nearly 500 employees.

The center’s headquarters is in New Orleans, which the report says disincentivizes long-term residents due to the propensity for damage done by hurricanes and flooding.

The building that employees work in was destroyed in 2017 by a tornado, according to NAPA, and staff have been working in external trailers that are “below sea level and connected by boardwalks next to a condemned building on NASA’s Michoud campus.”

Additionally, nearly 40% of the existing workforce at NFC is eligible to retire this year, and that figure grows to 70% by 2033.

There are also persistent vacancies in top leadership positions that were only recently filled, though “both employees and customers interviewed ... indicated that turnover in these positions has been relatively high, affecting morale, effectiveness, and customer relationships.”

Users of the program were also interviewed by NAPA, and they pointed to several issues including help tickets being closed without resolution, lengthy responses from the help desk and inconsistent or unavailable training.

The agency meanwhile has spent twice as much on contract support for troubleshooting this year as it did in 2022 — a near $12.5 million.

The White House has urged all agencies to improve their customer service interfaces, and the NAPA report encouraged the center to do this by relying on main USDA to help share resources and lessons learned.

However, to fix many of these issues will require money, and that too is constrained by policy restrictions requiring first a notification to and approval by Congress.

“NFC’s needs are such that it will not be able to rely on a single funding source or strategy— especially with the acute federal budgetary pressures following enactment of the Fiscal Responsibility Act of 2023,” the report said.

The agency’s annual appropriations is its primary source of funding, which is usually set two years in advance and thus requires a strong long-term modernization plan for any outside costs to be accounted for.

Outside of the annual budget cycle, the agency is able to spend money on IT or unplanned expenses via a reserve “account” that collects money from a surcharge of 4% or less on its annual income.

For the 2023 budget, there’s a 1% surcharge and for subsequent years, the plan is to increase it, NAPA reported. Each additional 1% of surcharge yields about $1.5 million per year.

The other caveat is that if increased spending for IT projects is approved in the budget, customer fees could increase to offset it, and thus the agency must show its users that it will give them a real return on this “investment” and improve the useability.

The NAPA report estimates modernization the system would cost between $200 and $300 million based on similar project overhauls at other agencies.

“The new leadership team at NFC, coupled with the agency’s decision to begin implementing some of the Panel’s recommendations before this report was published, represents a positive step in the right direction,” said Gerton.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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