Department of the Treasury Centralized Payroll

Transcription

1 New Jersey State Legislature Office of Legislative Services Office of the State Auditor Department of the Treasury Centralized Payroll July 1, 2000 to June 30, 2001 Richard L. Fair State Auditor

2 LEGISLATIVE SERVICES COMMISSION ASSEMBLYMAN JACK COLLINS Chairman SENATOR DONALD T. DiFRANCESCO Vice-Chairman SENATE BYRON M. BAER JOHN O. BENNETT GERALD CARDINALE RICHARD J. CODEY BERNARD F. KENNY, JR. ROBERT E. LITTELL JOHN A. LYNCH GENERAL ASSEMBLY PETER J. BIONDI JOSEPH CHARLES, JR. PAUL DIGAETANO JOSEPH V. DORIA, JR. NICHOLAS R. FELICE NIA H. GILL LORETTA WEINBERG N e w J e r s e y S t a t e L e g i s l a t u r e OFFICE OF LEGISLATIVE SERVICES OFFICE OF THE STATE AUDITOR 125 SOUTH WARREN STREET PO BOX 067 TRENTON NJ ALBERT PORRONI Executive Director (609) RICHARD L. FAIR State Auditor (609) FAX (609) The Honorable James E. McGreevey Governor of New Jersey The Honorable John O. Bennett President of the Senate The Honorable Richard J. Codey President of the Senate The Honorable Albio Sires Speaker of the General Assembly Mr. Albert Porroni Executive Director Office of Legislative Services Enclosed is our report on the audit of the Department of the Treasury, Centralized Payroll for the period July 1, 2000 to June 30, If you would like a personal briefing, please call me at (609) February 21, 2002

3 Table of Contents Page Scope... 1 Objectives... 1 Methodology... 1 Conclusions... 2 Findings and Recommendations Garnishment Fees... 3 Disaster Recovery Plan... 3 Payroll Certifications... 4

4 Department of the Treasury Centralized Payroll Scope We have performed limited procedures at the Department of the Treasury, Centralized Payroll for the period July 1, 2000 to June 30, 2001, as identified in the methodology section of this report. Centralized Payroll processes approximately 81,000 regular and temporary employees biweekly checks during its regular and supplemental payroll cycles. There are 252 payroll units. Gross salaries are approximately $4 billion annually. Objectives The objectives of the limited procedures were to (1) determine whether Centralized Payroll addressed the significant conditions noted in our prior report and (2) obtain an understanding of the general and application controls for certain elements of the central payroll system. This audit was conducted pursuant to the State Auditor s responsibilities as set forth in Article VII, Section 1, Paragraph 6 of the State Constitution and Title 52 of the New Jersey Statutes. Methodology In preparation for our testing, we studied legislation, circular letters promulgated by the State Comptroller, and policies of Centralized Payroll. We interviewed Centralized Payroll personnel to obtain an understanding of the internal controls. Provisions that we considered significant were documented and compliance with those requirements was verified by interview, observation, and test of financial transactions. To determine the status of findings included in our prior report, we identified corrective action taken by Centralized Payroll and walked through the system to determine if the corrective action was effective. Page 1

5 We compared the Master Payroll File with the Personnel Management Information System(PMIS) and identified employees listed on one but not the other. We further reviewed the employees on the list by contacting agency personnel. We recalculated the gross to net payroll for five employees. We obtained a listing of high level file names and reviewed the Access Control Facility 2 rules to determine if there were adequate controls over the access to these files. The job logs associated with the production of biweekly paychecks, updating of the master payroll file, creating the advice of charge, creating the electronic funds transfer bank file, and the daily PMIS interface were reviewed to ensure that jobs ran to completion without errors and that record counts and dollar amounts passing from file to file were reconciled. One week of job logs were reviewed. Conclusion We found that Centralized Payroll has resolved four of the significant issues noted in our prior report. However, issues involving disaster recovery and payroll certifications have not been resolved and are restated in this report. We further noted that the general and application controls were adequate for the elements of the centralized payroll system which we reviewed. No exceptions were noted in our limited testing of payroll calculations. In making these determinations we identified an additional matter involving garnishments which merits management s attention. Page 2

6 Garnishment Fees A ccumulated garnishment fees should be remitted to the General Fund. Recommendation Auditee s Response The centralized payroll system deducts court ordered garnishments from employees wages and distributes the withheld funds to the appropriate authority within a week of collection. For performing this service, garnishment collection fees of five percent for regular garnishments, one dollar per child support payment, and one percent of the student loans owed to the New Jersey Higher Education Student Assistance Authority are allowed by statute. These fees have accumulated in the Employee Garnishment Account. The account increased by $20,000 during fiscal year 2001, resulting in a balance at July 31, 2001 of $1.8 million. These fees could be remitted to the General Fund and used to support general operations. We recommend the $ 1.8 million be remitted to the General Fund immediately, thereafter the agency should remit these fees on an annual basis. Our analysis of the Employee Garnishment Account indicates that the balance as of January 31, 2002 is $1.6 million. It has been our position that the statutes authorizing the garnishment, child support and student loan collection fees are intended to provide reimbursement relief and resources for the efforts involved. Accordingly this balance is the result of many years accumulation and is net of various usages for necessary modifications. In compliance with the recommendation, we will remit the accumulated excess balance to the General Fund. ¾ Adisaster recovery plan is essential to the continuation of business should a disaster occur. Disaster Recovery Plan Our prior audit report noted that the payroll system was not adequately safeguarded to ensure continuous processing and recovery in the event of processing interruption. Since that report, the Office of Information Technology (OIT) has established a hot Page 3

7 site which allows them to recover and process backed-up data at an alternate location. OIT personnel tested critical portions of the centralized payroll system at the hot site to ensure that it would be operational. However, these tests were not documented and the results were not retained. We further noted that a comprehensive written disaster recovery plan for the payroll system had not been prepared. In the event of a disaster, recovery could be impaired by the lack of a written plan. An adequate level of internal control to ensure the safeguarding of assets would dictate a comprehensive plan be written and testing be documented. Recommendation Auditee s Response We recommend that a disaster recovery plan be written and testing of all critical systems be performed at specific intervals and documented. The Office of Information Technology (OIT) continues to maintain an alternate location hot site to ensure continuous processing and recovery in the event of a processing interruption. While appropriate testing of this site continues to be successfully conducted, we will endeavor to provide documentation of future tests and results. We do not totally concur that recovery would be impaired by the lack of a written disaster recovery plan, particularly give the aforementioned testing and the experience level of the personnel involved. We do, however, appreciate the need to develop such a plan, outlining all critical tasks and identifying personnel roles and responsibilities. It is expected that OIT and Centralized Payroll will develop this jointly. ¾ Payroll Certifications Certification policy should be strictly enforced. A payroll certification accompanies every payroll proof submitted to Centralized Payroll by payroll units statewide. This certification is required to be signed by two agency designated employees whose signatures are on file at Centralized Payroll. The Page 4

8 certification is a control utilized by Centralized Payroll to identify employees at the agency level responsible for the submission and accuracy of that payroll. Our test of 872 payroll certifications found that for 25 percent of the payroll units tested, certifications were accepted without two signatures. In addition, 17 percent of the individuals who signed the certifications were not authorized to sign them per the signature cards on file. Recommendation Auditee s Response We recommend that the centralized payroll unit increase their monitoring efforts to ensure that the certification policy is followed. Beginning at approximately the same time as the audit, new signature cards were mailed to all agencies along with instructions concerning the requirement for two signatures on the certification. All agencies have complied. Tight time frames in the processing of payrolls do not always permit the checking of signatures as part of the audit effort, however signatures are subsequently reviewed and proper certifications obtained where necessary. We will review these authorizations periodically to insure that all signatures remain current. It should be noted that prior to the audit it had been anticipated that an expected new system would provide for electronic signatures, thereby eliminating the need for manually maintaining signature cards. ¾ Page 5