Independent HR review urges Yukon to modernize payroll systems, strengthen checks and balances

An independent consultant who audited Yukon's human resources and payroll told the City Council that the city's recordkeeping shows no evidence of malfeasance but relies too heavily on manual checks, informal email approvals and an honor-based timekeeping system that creates opportunities for future exploitation.

The findings came Tuesday in a report delivered by a contractor identified in the meeting as Mr. Yenzer, who said his engagement followed last year's forensic audit and covered six workstreams including sick and vacation payouts, timekeeping, payroll adjustments and retirement verification.

Why it matters: Yenzer said the city's current software is several versions behind and recommended a software upgrade, clearer written controls and organizational changes so HR, finance and legal do not all funnel through a single managerial gate. He said those steps would reduce the risk that a single individual, acting in bad faith, could authorize actions that escape prompt scrutiny.

Yenzer told the council the review covered records from July 1, 2021, through Dec. 31, 2024, and that the test work showed adjustments were generally justified. "There was no evidence of unauthorized nor unverified changes having occurred during the course of the entire year," he said. But he added the city's reliance on trust "renders even audits such as these less effective due to a severely deficient model of real time employee tracking and verification." (quote verbatim from presentation)

Key recommendations and details

- Upgrade the HRIS. Yenzer recommended replacing the city's aging HR and payroll software (referred to in the presentation as ENCODE 10, a product of Tyler Technologies) and training staff on the replacement. He said the current system required audits to produce 518 pages of raw output and that modernization would reduce error risk and speed reporting.

- Improve timekeeping. He recommended adding timekeeping that is reliable for hourly employees and better documents overtime and compensatory time for salaried staff; he noted many departments still use written sign-in sheets.

- Clarify leave authority and policy language. The report found a prior city manager had an exemption for leave payouts and recommended that any special allotments be codified in the personnel manual and aligned with signed contracts; he cited the personnel manual (page cited approximately page 46, section b) as needing clearer verbiage.

- Annual retirement verification. Yenzer reviewed retirement data for 40 active and 11 former employees and recommended an annual verification process.

- Organizational changes. The report proposed a flatter top-level structure in which department directors (HR, finance, city attorney) report in a way that allows HR to receive and escalate whistleblower reports without always routing through the city manager.

Council reaction and constraints

City Manager Mike Castro and council members thanked the reviewer for the work but cautioned that some recommendations (notably reorganizing lines of authority) could require a charter change and would need public approval. One council member asked whether the proposed reporting changes would require a charter election; Yenzer said he understood it could, and that implementation of structural changes ultimately depends on the charter and voters.

Castro also warned council to be cautious about an ERP migration timeline. He said prior proposals for ENCODE 10 in 2016 had been problematic in other jurisdictions and that a rushed migration could cause billing, HR and finance problems. "If we're going to do ENCODE 10 as an upgrade, it needs to be something that is well thought out in advance and not rushed through," Castro said during the meeting.

What the report did not say

Yenzer told the council he found no instances of deliberate staff wrongdoing during the review period, and the presentation repeatedly ranked findings as system and process risks rather than proven misconduct. The report identified three current employees with vacation balances that exceed typical limits; Yemenzer said those balances "are going to be completely exhausted by the middle of this year." (paraphrase of presentation)

Next steps and timeline

Yenzer urged swift action on software and policy updates and suggested the city could implement changes within a six-month window if it committed resources and staff for training. Council members asked staff to review the recommendations and return with implementation options; no binding policy changes were adopted at the meeting.

Ending

Council members thanked Yenzer and city staff. Castro said he would provide a written response after reviewing the report in detail.