INTERNAL AUDIT REPORT

Transcription

1 REPORT PAYROLL SYSTEM ISSUE DATE: DECEMBER 1, 2015 REPORT NO

2 EXECUTIVE SUMMARY AUDIT OBJECTIVES AND SCOPE The purpse f the audit was t determine whether management cntrls ver the Payrll System are adequate t ensure: 1. Accuracy and timeliness f payrll disbursements. 2. Cmpliance with applicable legal requirements. We reviewed infrmatin fr the perid January 1, 2013 August 31, Details f ur audit s scpe and methdlgy are n page 3. BACKGROUND The Prt uses the PepleSft Human Capital Management (HCM) mdule t manage all human resurce and payrll prcessing activities. This mdule is used frm hiring t resignatin. All emplyee and payrll-related infrmatin resides in this mdule. The Prt uses this mdule t administer ver $215 millin annually in pay, benefits and taxes fr Prt emplyees. Fr purpses f this audit, nly the prcesses related t prducing bi-weekly and weekly payrlls are within scpe. The Prt has used the HCM mdule since 1997, and has undergne five upgrades since that time. The mst recent upgrade was in Octber This upgrade ensures cntinued technical supprt and nging sftware updates and security patches frm the sftware vendr. The Prt emplys apprximately 1,800 FTEs. It prcesses the majrity f payrll bi-weekly. It issues a weekly payrll fr abut 50 emplyees. O AUDIT RESULT Management cntrls ver the Payrll System are adequate t ensure (1) accuracy and timeliness f payrll disbursements and (2) cmpliance with applicable legal requirements. i

3 TABLE OF CONTENTS EXECUTIVE SUMMARY...i I. TRANSMITTAL LETTER... 1 II. BACKGROUND... 2 III. FINANCIAL HIGHLIGHTS... 2 IV. HIGHLIGHTS AND ACCOMPLISHMENTS... 3 V. AUDIT SCOPE AND METHODOLOGY... 3 VI. CONCLUSION... 4

4 TRANSMITTAL LETTER Audit Cmmittee Prt f Seattle Seattle, Washingtn We have cmpleted an audit f the management cntrls ver and transactin prcessing in the Payrll System. We reviewed infrmatin relating t the Payrll System frm January 1, 2013 August 31, We cnducted this perfrmance audit in accrdance with Generally Accepted Gvernment Auditing Standards and the Internatinal Standards fr the Prfessinal Practice f Internal Auditing. Thse standards require that we plan and perfrm the audit t btain sufficient, apprpriate evidence t prvide a reasnable basis fr ur findings and cnclusins based n ur audit bjectives. We believe that the evidence btained prvides a reasnable basis fr ur findings and cnclusins based n ur audit bjectives. We extend ur appreciatin t management and staff f the Accunting and Financial Reprting Department fr their assistance and cperatin during the audit. Jyce Kirangi, CPA, CGMA Internal Audit, Directr AUDIT TEAM Ruth Riddle, Senir Auditr Jack Hutchinsn, Audit Manager RESPONSIBLE MANAGEMENT TEAM Duane Hill, Senir Manager, Disbursements, AFR Rudy Caluza, Directr, AFR 1

5 BACKGROUND The Prt uses the PepleSft Human Capital Management (HCM) mdule t manage all human resurce and payrll prcessing activities. This mdule is used frm hiring t resignatin. All emplyee and payrll-related infrmatin resides in this mdule. The Prt uses the system t administer ver $215 millin annually in pay, benefits and taxes fr Prt emplyees. Fr purpses f this audit, nly the prcesses related t prducing bi-weekly and weekly payrlls are within scpe. The Prt has used the HCM mdule since 1997, and has undergne five upgrades since that time. The Prt upgraded t Versin 9.1 in 2013 and Versin 9.2 in Octber The mst recent upgrade ensures cntinued technical supprt and nging sftware updates and security patches frm the sftware vendr. The Payrll Wrk Grup cnsists f five staff. They are respnsible fr prcessing bi-weekly payrll fr apprximately 1800 FTEs, plus a weekly payrll fr abut 50 f ttal FTEs. Pay perids end n Saturday. Time reprts must be submitted t the Payrll Wrk Grup n later than 2 p.m., n the fllwing Mnday. Between Mnday and Wednesday, the Payrll Wrk Grup cnducts a rigrus prcess f verifying the submitted time, addressing all system-flagged exceptins, and prducing a final cnfirmed payrll register. Bank uplads fr direct depsits and hard cpy checks typically ccur by clse-f-business Wednesday. Direct depsits are available in emplyees persnal bank accunts n Friday mrning. FINANCIAL HIGHLIGHTS AVERAGE BI-WEEKLY PAYROLL YEAR Average Payrll Average % f Represented Staff Average % f Nn- Represented Staff Average Number Checks Prcessed Ttal Annual Salaries and Wages Expense 2013 $ 5,854, $151,718, $ 6,082, $ 153,495,732 Data Surce: PepleSft Financials 2

6 HIGHLIGHTS AND ACCOMPLISHMENTS Management cntinues t reduce hard cpy payrll checks. As f August 2015, the majrity (96%) f the Prt s apprximately 1,800 staff receives salary and wage payments by direct depsit t persnal bank accunts r pay cards. This accmplishment prvides multiple benefits: Eliminates printing and mailing f paper checks. Reduces fraud risk f stlen r altered checks. Eliminates emplyees trips t the bank. Facilitates payments t emplyees during emergencies and natural disasters. Management, in cncert with the Prt s Cntinuus Prcess Imprvement team, Human Resurces and Develpment, and Labr Relatins, has revisited varius payrll prcesses, t decrease prcessing steps, increase efficiencies, and reduce risk f errrs. The Payrll Wrk Grup cmpletes its rigrus prcess frm receipt f timesheet submissin t prductin f final payrll register within 2.5 days fr apprximately 1,800 FTEs. In keeping with the Prt f Seattle s G Green Initiative, management implemented electrnic W-2s, in lieu f paper, which has reduced printing and mailing csts. AUDIT SCOPE AND METHODOLOGY We reviewed infrmatin fr the perid January 1, 2013 August 31, We utilized a risk-based apprach frm planning t testing. We gathered infrmatin thrugh research, interviews, bservatins, and analytical review, in rder t btain a cmplete understanding f management cntrls ver and transactin prcessing in the payrll system. We evaluated risk and tested the mitigating cntrls, t determine whether they were perating as intended. The key management cntrls we tested and the detailed tests we perfrmed are as fllws: 1. T determine whether management cntrls are adequate t ensure: a. Payrll is accurate: i. We evaluated the prcess fr assigning and authrizing access t the payrll system. ii. We determined whether there was adequate management versight f user accunts t ensure users are current and valid. 3

7 iii. We tested authrizatins f user accunts fr 1 st quarter 2013, 3 rd quarter 2014, and 2 nd quarter iv. We determined whether cnflictive respnsibilities were segregated: Data entry. Apprval f changes. Recnciliatin f data entry. Transmissin f withhlding. Custdy f hard cpy checks. v. Fr the pay perid ended , we recnciled payrll issued t underlying time submissins. vi. Fr the perid ended , we recnciled payrll withhlding t subsequent payments fr: Federal withhlding. Retirement. Charitable cntributins. vii. Fr the perid t , we traced psitive pay exceptins t supprting dcuments. b. Payrll is timely: i. We reviewed payrll prcessing frm submissin f staff s time t issuance f payrll. ii. We reviewed the timeline fr entering adjustments/crrectins in the system iii. Fr the pay perid ended , we identified the date by which payrll staff: Cmpleted payrll prcessing. Prduced the final payrll register. Upladed psitive pay advice t the payrll bank accunt and prduced hard cpy checks. VII. T determine whether management cntrls are adequate t ensure payrll is in cmpliance with applicable legal requirements, we reviewed the prcesses and cnducted detailed tests as fllws: c. Submissin f federal withhlding. d. Submissin f retirement deductins. e. Remittance f charitable deductins. f. We determined whether the fllwing withhlding and deductins were remitted t the apprpriate recipients i. Federal withhlding (pay perid ended ). ii. Retirement deductins (pay perid ended ). iii. Charitable deductins (2 nd quarter 2015). CONCLUSION Management cntrls ver the Payrll System are adequate t ensure (1) accuracy and timeliness f payrll disbursements and (2) cmpliance with applicable legal requirements. 4