A damning report has slammed the implementation of Novopay and revealed the troubled system has cost taxpayers double what was expected.
Two Ministry of Education staff will be investigated as a result of the report. The education payroll system went live in August 2012 and was immediately plagued with problems.
Thousands of teachers and school staff were underpaid, overpaid or not paid at all.
The Ministry of Education and Novopay provider, Talent2, have been scrambling to fix the problems since.
Following the bungled introduction Associate Education Minister Craig Foss was stripped of ministerial responsibility for Novopay and then Education Secretary Lesley Longstone quit.
Now a report released today shows a series of mistakes were made prior to the system going live.
It found the ministry had not had good leadership on the project and had an unfounded optimism about Novopay.
"The Go Live decision was confirmed even though it was clear that not all testing had been completed... the sector was not sufficiently ready, the service centre had failed some of its test and was not fully ready and the crucial End of Year/Start of Year process had not been fully developed or tested."
The relationship between the ministry and Talent2 was "not always healthy" but the ministry did not invoke breaches of the contract despite having grounds to do so.
"Talent2 missed agreed milestones and deadlines... Talent2's inability to deliver consistently against milestones led to a loss of trust and confidence in its ability to deliver the solution."
However, in briefings to government ministers, the ministry remained optimistic.
"Ministers were not always well served. Reporting to ministers has been inconsistent, at times unduly optimistic and sometimes misrepresented the situation."
The State Services Commission did not conduct its monitoring role properly and the Government Chief Information Officer was not involved to the level he should have been, the report found.
Novopay had not met expectations, had cost $23.9 million more than estimated, and had severely damaged relations with the sector and wider public, it said.
"There were many factors that contributed to the Novopay failures."
However the report did not say the system should be replaced. Rather it recommended priority action be taken to stabilise the system, remedy the defects and revise Talent2's contract.
Minister Responsible for Novopay Steven Joyce said the Government planned to implement the report's 15 recommendations.
"This report makes for sober reading... it is critical these problems are not repeated again."
Acting Education Secretary Peter Hughes said he accepted all the findings and recommendations.
He said he had apologised to the government ministers involved for the poor advice given to them, and had written to all schools apologising.
"The ministry did not have the capacity - skills, processes and governance - for a project of this scale and complexity. There was not enough oversight from the leadership."
The report was conducted by Sir Maarten Weavers and Deloitte chair Murray Jack.
1. Stabilise the current payroll service, remedy defects, revise Talent2 contract.
2. Ensure ministry has capabilities to execute payroll service.
3. Re-examine service delivery model for school payroll service.
4. Engage with sector representatives.
5. Re-examine the requirements of current schools to remove unnecessary practises.
6. Strengthen ministry leadership team.
7. Improve relationships with schools.
8. Give consideration to all options at inception of major projects.
9. Contracts should have stage gates and 'off ramps'.
10. Risk identification of projects should undertaken robustly.
11. Agencies should draw on others where they don't have the expertise.
12. Engagement with end users should be meaningful.
13. There must be ongoing quality assurance on high risk projects.
14. Office of Government Chief Information Officer (GCIO) be given responsibility for functional leadership of ICT.
15. GCIO and State Services Commission should strengthen capability at leadership levels.