Police may have to wait longer for a fix to their "error-prone" payroll system.

Another government payroll project appears to be running into trouble, this time the police's.

The Treasury has warned a project to replace police's "error prone" Peoplesoft payroll system may blow its $56.2 million budget with costs already having risen by $10m.

An "assurance review" commissioned from consultants PWC found the new payroll system might not be ready in time for its planned launch in April.

"Current payroll defects are greater than anticipated", it said.

The new payroll system is based on software provided by German giant SAP, but the Treasury report indicated delays designing software from rival United States vendor Oracle had been a factor.

The Treasury put the project on "amber/red" alert in a report published on Monday that set out the status of the major projects it is monitoring.

The colour-code means the successful delivery of the project – on time and in budget and with its expected benefits – is "in doubt".

Additional resources had been brought in to the payroll project, but that had driven up costs, the Treasury said.

Finance Minister Bill English said it was common for projects to move "in and out" of amber/red and red status, and such projects were "usually managed to successful delivery".

The project has previously generated controversy. Auckland payroll specialist AMS complained in 2013 that Kiwi firms had been prevented from competing for the police's payroll tender.

READ MORE:

* Police accused of denying Kiwis a go in tech tender

* Police procurement process criticised

The information technology project is smaller than the Education Ministry's botched Novopay project which left thousands of teachers out of pocket and cost taxpayers an additional $45m to fix.

AMS chief executive Noel Reid said it nevertheless involved "eye-watering amounts of money".

As a New Zealand company, AMS had "nowhere to hide" and had never had an unsuccessful payroll implementation, he said. "The only thing we have to be careful about is we don't know the details of police's requirements."

The Treasury said it was monitoring a total of 38 major projects worth a combined $20.5 billion as of June, plus two secret projects being undertaken by the Government Communications Security Bureau (GCSB) about which it would not reveal details. One of the GCSB's projects is likely to be its Project Cortex cyber-security initiative.

Of that $20.5b spending, $7.3b had been committed to projects that had "amber/red" or "red" warnings against them, the Treasury report showed.