Wilfrid Laurier University BOARD OF GOVERNORS

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1 Wilfrid Laurier University BOARD OF GOVERNORS Meeting Date: January 25, 2011 Agenda Item #: A7 BRIEFING NOTE X Public In-Camera Agenda Item: Report on the Internal Audit of Payroll and Related Human Resources Processes Action Required: Approval Discussion X Information Motion: Summary: Alignment: N/A A review of payroll and related human resource processes was included as part of the internal audit schedule for the year. This internal audit was completed, and the attached document reports the results of the review. This report includes: the major areas of focus and associated audit objectives of the review; an executive summary of key findings, recommendations, and management responses; and detailed information of all audit findings, recommendations and management responses and action plans The Terms of Reference of the Audit and Compliance Committee state that the Committee is to ensure there are processes and controls in place to efficiently and effectively use, manage and safeguard the University s resources. In addition, the Committee is to review internal reports, significant findings, and recommendations concerning the adequacy of internal controls in the University and satisfy itself that the administration is addressing the issues raised where appropriate. Proposed by: Wally Pirker, Institutional Research Officer Consultation: Christine Barry, Manager: Payroll Services Gregory Brown, Manager: HRIS Pamela Cant, Director: Total Compensation Kate Konopka, Manager: Employee Relations Rationale: The attached document informs the Audit and Compliance Committee of findings, recommendations and associated management action plans of an internal audit of payroll and related human resource processes. Risk Assessment: The attached report recommends internal control and process improvements to prevent potential errors, and associated losses, from occurring. Attachments: Internal Audit Report on Payroll and Related Human Resources Processes At Wilfrid Laurier University For University Secretariat Use Only (Official only if initialled by University Secretary): Final Approval by: BOG E&G Date: Initials: MOTION: Moved: Seconded: Carried same wording as recommendation differs from recommendation for information only

2 Internal Audit Report on Payroll and Related Human Resources Processes at Wilfrid Laurier University - Prepared for the Audit and Compliance Committee - Prepared by: Helena Keirstead, Internal Auditor Date: January 25, 2011 Agenda Item #: A7 0

3 Table of Contents Introduction 3 Audit Coverage 3 Areas of Focus 4 Areas Excluded from the Audit 5 Other Comments 5 Executive Summary 6 Audit Report Findings, Recommendations, and Management Action Plans 9 A. Payroll General 9 A.1 Streamlining Payroll Processing 9 A.2 Bi-weekly Payroll Processing 10 A.3 Consistency in Processing Hourly Payroll 11 A.4 Processing Manual Retro Payment Adjustments 11 A.5 Centralized vs. Decentralized Payroll Processing 12 A.6 Timesheet Approvals 13 A.7 Faxed Timesheets 13 A.8 ed Payroll Requests 14 A.9 Payroll Processes Documentation Manual 14 A.10 Training and Development at the Departmental Level 15 A.11 Payroll General 15 B. Human Resources General 17 B.1 Employee Manuals 17 B.2 HR Action Notices Authorizations 17 C. Payroll / Human Resources General 18 C.1 Confidential Information 18 C.2 Misfiled Information in Employee Files 18 C.3 Logging Off Workstation 18 D. Employee Groups 20 D.1 WLUSA 20 D.1.1 Filing of Timesheets WLUSA 20 D.1.2 Overtime Calculations WLUSA 20 D.1.3 Overtime Hours Reported by WLUSA 21 D.1.4 WLUSA Supplemental Pay Form vs. WLU Record of Overtime 21 1

4 D.2 WLUFA / CAS 22 D.2.1 Faculty Relations Documentation 22 D.2.2 Contract Academic Staff (CAS) Contracts 23 D.3 Management Group 24 D.3.1 Management Group Salaries / Merit Approval Process 24 D.4 Students 25 D.4.1 Student Payroll General Comment 25 D.4.2 Processing Fictitious Employees Students 25 D.4.3 Student Authorization for Employment 26 D.4.4 Student Payroll Timesheet Listing by Department 26 D.5 UFCW 27 D.5.1 Food Services Payroll Processing 27 E. Forms 28 E.1 Variety of Forms General Comment 28 E.2 Variety of Forms Specific 28 E.2.1 Instructional Assistants (IA) Contracts 28 E.2.2 WLUSA Supplemental Pay Form 29 E.2.3 Payroll Payment Authorization Form (PAF) 29 E.2.4 General Temporary Timesheet 30 F. Processing Errors 31 F.1 Fellowship 31 F.2 Overload Faculty Contracts 32 F.3 Merit Reconciliation 32 G. Exception Reports 34 G.1 Dollar Amount Processed 34 G.2 Hours Processed 34 G.3 Dock Report 35 2

5 INTRODUCTION As part of the internal audit plan, I completed an audit of the centralized Payroll and related Human Resource processes at Wilfrid Laurier University (WLU). The audit report describes the audit objectives and areas of focus, procedures performed, the key observations and issues noted, and the associated recommendations. At the end of each section, management comments and action plans have been included which address the issues and recommendations noted. Follow up procedures will occur in the future to ensure that recommendations have been adequately addressed and implemented. The controls are generally in place to adequately mitigate significant risks and are operating effectively in most cases. In those cases where control deficiencies were identified, management generally had alternative solutions and / or mitigating strategies with which to address the deficiencies. As a result, majority of the findings and recommendations focus on process improvements to further enhance the efficiencies of current processes and controls within Payroll Services. Other findings have been classified either as low, medium or high risk, depending on the potential impact these could have on the operations of the University. AUDIT COVERAGE The audit focused on the period from May 1, 2009 to April 30, 2010, corresponding to WLU s fiscal Preliminary audit procedures focused on documenting the Payroll processes by obtaining copies of pertinent policies, procedures and manuals related to the payroll process. This also included walkthroughs, observations and discussions of payroll processes with the Payroll Administrators. The audit included detailed testing of 244 random selections distributed proportionally by dollar value and risk assessment amongst all employee groups, including: - Management and Senior Administration, - Wilfrid Laurier University Faculty Association (WLUFA), - Contract Academic Staff (CAS), - Wilfrid Laurier University Staff Association (WLUSA), - Canadian Union of Public Employees (CUPE), - United Food & Commercial Workers (UFCW), - Special Constable Services (SCS), - International Alliance of Theatrical Stage Employees (IATSE), - Students, - Non-permanent Academic Staff, - Brantford Campus staff, and - One-time / casual and short term payments. 3

6 AREAS OF FOCUS Areas of focus and related audit objectives covered the following: Area of Focus: Hiring Personnel Audit Objectives: - Additions to payroll master files represent valid employees. - All new employees are added to the payroll master files. - Confidential employee information is appropriately safeguarded, limiting the liability exposure and reputational decline. Area of Focus: Terminating Personnel Audit Objectives: - Terminated employees are removed from payroll master files. - Employees are only terminated within statutory and union requirements. - Deletions from the payroll master files represent valid terminations. Area of Focus: Recording Time Audit Objectives: - Time and attendance data recorded reflect actual time worked and is authorized. - All time worked is input. - Time worked is accurately input and processed. - Time worked is processed timely. Area of Focus: Calculating Payroll Audit Objectives: - Payroll is accurately calculated and recorded. - Payroll is recorded in the appropriate period. Area of Focus: Disbursing Payroll Audit Objectives: - Payroll disbursements and recorded payroll expenses relate to actual time worked. - Payroll is disbursed to appropriate employees. Area of Focus: Maintaining Payroll Master Files Audit Objectives: - Only valid changes are made to the payroll master files. - All valid changes to the payroll master files are input and processed. - Changes to the payroll master files are accurate and processed timely. - Payroll master files data remains pertinent. 4

7 Area of Focus: Withholding Table Data Audit Objectives: - Only valid changes are made to the payroll withholding tables. - All valid changes to the payroll withholding tables are input and processed. - Changes to the payroll withholding tables are accurate and processed timely. - Payroll withholding data remains pertinent. - Statutory withholding tables are consistent with statutory requirements. Other Areas Covered: - Change authorization concerns - Segregation of duties concerns within payroll department - Public salary disclosures are accurate and in accordance with regulations AREAS EXCLUDED FROM THE AUDIT The audit of Payroll Services did not cover the following areas: - Review and testing of decentralized payroll processes to ensure appropriate controls are in place - Ensuring employee attendance compilation procedures are adequate to ensure accuracy of vacation, sick leave, and other attendance data - Employee vs. contractor concerns - Process for hiring and terminations at the Faculty Relations office, covering WLUFA and CAS employees These areas can be audited in the future if requested by the Audit and Compliance Committee of the Board of Governors. OTHER COMMENTS All individuals from Payroll Services involved in assisting me with completion of the audit were extremely helpful and I received full cooperation in all respects. Information was provided in a timely manner and completion of the audit took priority over all other daily responsibilities whenever feasible. This was very much appreciated. 5

8 EXECUTIVE SUMMARY Based on the findings and recommendations included in the detailed audit report, the following provides a summary of key findings, recommendations, and management responses. General Payroll Processes One of the critical findings and recommendations for the payroll audit process relates to streamlining payroll processes between three different bi-weekly payrolls and one monthly payroll. Management has already identified this as an area where processing efficiencies can be gained and has worked on putting plans in place on how to streamline these processes more effectively. Another area where efficiencies can be achieved relates to decentralizing payroll processes at the departmental level and implementing web-based time entry system for specific groups. Management has already considered decentralization for certain groups and testing for decentralized time entry has been under way since October In addition, a pilot deployment of web time entry functionality is expected to be completed by April It is important to note that costs vs. benefits as well as effective implementation of decentralized processes need to be carefully considered by management. In addition to the above, the audit has suggested Payroll develop targeted training sessions at the departmental levels to address some of the current process inefficiencies and issues encountered. Employee Groups Some specific concerns were identified for a number of employee groups, in particular: - Current process in regards to overtime calculations for WLUSA employees creates potential for errors. In addition, overtime hours are submitted in bulk to payroll which raises concerns over accuracy of overtime reported and matching of payroll expenses with overtime worked. Payroll Management will be working with the Manager Employee Relations to develop feasible recommendations for this employee group with regards to concerns identified. - In regards to processing documentation from the Faculty Relations office, inefficiencies have been identified that create concerns over processing of faculty related paperwork. The HRIS Manager has been working with the relevant parties since August 2009 to review the business processes related to the administration of faculty data and to implement solutions to streamline these business processes. - With respect to Management Group, the main concern identified during the audit was the lack of formal approvals and documentation of Management Group salaries. Though the merit process approval is formalized, the salaries appear to be reviewed more informally only during the budget setting process. Management will include individual employee salaries in the merit approval process in the future. - Student payroll process is quite time consuming and convoluted due to the large number of students who hold a variety of student positions within number of departments throughout the University. The 6

9 main concern of the current process is the ability to verify the authenticity of authorizations of student timesheets. A recommendation has been made to consider implementing a web-based time entry system for the student payroll to eliminate some of the concerns with processes that are currently in place. As noted above, Management has already considered decentralization and implementation of a pilot deployment of web time entry functionality, specifically for this employee group. Results of the pilot will guide further action. Forms A general comment has been made with respect to the variety of different forms currently used by the University for various employee groups, resulting in inefficiencies when processing payroll. The forms should be streamlined whenever possible and appropriate communication and / or training provided at the departmental level to advise of the format changes. Specific comments have been made in the audit report regarding some of the individual forms where redesign would provide additional benefits in processing payroll. Processing Errors During testing, a few errors were identified in processing payroll. Though the number of these was not considered significant when compared to total population tested, the findings resulted in specific recommendations that should prevent these processing errors from occurring in the future. It should be noted that all processing errors identified were simply a result of unintentional human errors due to specific circumstances encountered. Exception Reports Suggestions for running specific exception reports to prevent some of the processing errors identified during the audit have been noted for management s consideration. Management will review the suggested recommendations and determine the most appropriate and feasible responses regarding these recommendations. Union Considerations Given the Unionized environment of the majority of the employee workforce at the University, the feasibility of some of the recommendations will depend on Management s ability to negotiate the suggested revisions as part of the collective bargaining process. Hence, some recommendations may not be implemented due to Union constraints. Management will weigh the benefits vs. drawbacks of proposing the recommendations to Union groups as they see fit. Other Comments The audit did not come across any issues when testing the process of hiring and terminating personnel as it related to audit objectives identified above. In addition, other than the few processing errors identified in the audit report, the remainder of selections tested regarding recording, calculating and disbursing payroll were processed correctly by the Payroll department. Finally, no issues were noted in 7

10 calculating withholding table data, maintaining payroll master files, and public salary disclosures. Overall, payroll process appears to be reliable and as noted, majority of the findings and recommendations focus on process improvements to further enhance the efficiencies of current processes and controls within Payroll Services. 8

11 AUDIT REPORT FINDINGS, RECOMMENDATIONS, AND MANAGEMENT ACTION PLANS A. PAYROLL - GENERAL A.1 Streamlining Payroll Processing (Classification: Process Improvements) Observation: Currently, bi-weekly payroll is processed in three different pay periods for three different employee pay groups, namely: staff, food services, and students. There are three staff in total responsible for processing bi-weekly payroll: - Two staff responsible for processing regular bi-weekly payroll, - One of these two staff is also responsible for processing food services payroll, and - Third staff responsible for processing student related payroll. In addition, payroll for Management, Senior Administration, WLUFA, and CAS is processed on a monthly basis. The fourth staff is dedicated to processing monthly payroll for these employee groups. There are a number of issues resulting from this current structure: 1) Inefficiencies created by having three different bi-weekly payroll reporting dates plus a fourth monthly payroll reporting date, resulting in approximately seven different payroll deadlines within a month, reconciling seven different payroll registers, and banking payroll for seven different pay dates. 2) Limited opportunity for cross-training of staff in processing all forms of payroll. 3) Due to strict processing timelines and the volume of information that needs to be processed, there is little flexibility in staff s time during each pay cycle to complete additional responsibilities. 4) A potential for employee s pay or optional deductions to be processed by two different individuals, under two different pay schedules, resulting in the employee being paid twice. Recommendation: All bi-weekly payroll should be processed with the same pay period end and pay dates by the three payroll staff to address potential issues as identified above. Consideration should also be given to moving the monthly payroll to bi-weekly to align it with other groups and to create better efficiencies and effectiveness when processing payroll. In order to fully implement this alignment between payrolls, various Union considerations must be taken into account. Subsequent to streamlining payroll, Management should consider re-evaluating current staffing complement to determine the most effective and efficient way of utilizing current staffing resources. Management Response and Action Plan: Prior to the audit, management had identified this process improvement and plans have already been put in place to combine the student payroll with the Biweekly or Food Services payroll by the end of summer This will reduce the number of bi-weekly 9

12 pays from three to two. Bi-weekly pay will be divided by alpha equitably, allowing for cross-training and ensuring the payroll administrator does not process their own pay. Changing the monthly payroll (faculty and management) to bi-weekly will require union and management acceptance. The benefits of streamlining will have to be weighed against the additional costs associated with providing bi-weekly instead of monthly pay deposits (i.e. administrative costs, salary costs for years with an additional pay). Implementation: Student payroll will be combined with the Bi-weekly or Food Services payroll by the end of summer Changing monthly pay to bi-weekly will be considered in terms of cost/benefit. A.2 Bi-Weekly Payroll Processing (Classification: Low-Medium Risk / Process Improvements) Observation: Currently, bi-weekly timesheets for employee groups (other than UFCW) are submitted by each Wednesday prior to the end of pay period Saturday. This may result in adjustments on subsequent pay for hours worked up to end of the current pay period, due to vacation, sickness, personal time, or overtime that would not have been reflected on the current pay due to Wednesday cutoff. Whenever there are adjustments, there is a risk that these adjustments may be inaccurately documented by respective Managers and / or processed by Payroll. Recommendation: It is recommended that bi-weekly Payroll processing for groups (other than UFCW) be revisited and revised so that hours for each pay period are recorded before payment is processed (i.e. similarly to process for UFCW). This would eliminate the need for adjustments and would prevent any potential errors from occurring as a result. However, given the majority of the employee groups that are processed bi-weekly are unionized, Union considerations will have to be taken into account when addressing this issue. In the interim (or if the recommendation cannot be successfully implemented due to Union constraints), system edit checks should be set up to warn the payroll staff if they are processing payroll hours that exceed total regularly worked hours due to prior pay period adjustments (refer to G.2 below). This will ensure that payments to employees are accurate and include all relevant adjustments. Management Response and Action Plan: The change to pay cycles and dates would have to be collectively bargained. Creating a further lag between the time hours are worked and paid could be perceived as a takeaway by the unions. Reference to reporting Leave time is not applicable to WLUSA as most employees are now reporting leave time on web. The system does provide an error message during entry of regular hours that exceed union associated maximums (i.e. 70 hours per pay). Timesheets are checked against the payroll register to ensure accuracy of total hours and to prevent overpayment. Automated system edit checks to warn that total hours (including vacation, sick, personal, overtime) exceed the allowable per pay are not currently 10

13 available and would require customization to a core Banner program. Management is currently determining the most appropriate and feasible response regarding the above recommendation. Implementation: To be determined Accountability: Manager, Payroll Services A.3 Consistency in Processing Hourly Payroll (Classification: Process Improvements) Observation: Currently, there does not appear to be a formal policy on processing hourly payroll when it comes to rounding of minutes or converting minutes worked to an hourly basis. Recommendation: A formal policy should be established by the University and directed by Payroll to ensure hours worked by all employee groups are processed consistently. The policy should include guidelines with respect to rounding of minutes (i.e. to the nearest quarter of an hour) as well as consistently applying conversion of minutes to an hourly basis. Payroll should communicate the policy formally to various groups by means of a memo and / or training. Management Response and Action Plan: Management will develop a minutes to hours policy for posting and education throughout university. Implementation: Commence Spring 2011 ; Pamela Cant, Director: Total Compensation. A.4 Processing Manual Retro Payment Adjustments (Classification: Process Improvements) Observation: In completing detail testing for monthly payroll, it was noted in two instances that manual retro payments were calculated incorrectly. A similar issue was also encountered when completing testing for an employee who was on maternity / parental leave and also for an employee who worked on a reduced workload basis. Recommendation: A consistent calculation of manual pay should be implemented for purposes of calculating manual retro pay, maternity / parental leave salary calculations, reduced workload assignments, and / or any other instance where this could be applicable. Specifically, pay should be calculated using the standard hrs worked per month, taking into account total number of retro days to be paid prorated over total number of business days. Management Response and Action Plan: Management agrees with the recommendation. A consistent calculation of manual pay has been implemented as per the auditor s recommendation. Implementation: Immediate 11

14 A.5 Centralized vs. Decentralized Payroll Processing (Classification: Process Improvements) Observation: Currently, only UFCW payroll process is decentralized (refer to D.5.1). Management has expressed intention to potentially decentralize processing of other payroll groups. Decentralizing payroll results in more efficient processing of payroll centrally since data inputs and any payroll inquiries can be dealt with at the departmental level. Therefore, Payroll Administrators can focus their efforts on completing other tasks more effectively. However, there are drawbacks to decentralizing payroll as well amongst others, there are concerns over whether appropriate controls and segregation of duties have been implemented at the departmental level to ensure accurate processing. Recommendation: Given some of the inefficiencies and some complexities with processing payroll centrally as noted throughout the report it would be reasonable for the University to consider payroll decentralization for various groups (i.e. CUPE, WLUSA, SCS, etc). However, Management should consider the following to ensure successful implementation: - Implementation needs to be well planned, executed and timely - Training at the department level should be provided to ensure: - Appropriate controls are in place for recording and processing hours worked, specifically as it relates to adequate segregation of duties, and - The most efficient ways of processing inputs have been implemented. - Implementation challenges at the departmental level relating to acceptance of additional responsibilities. - Bi-weekly payroll registers (or equivalent), for purposes of reconciling to inputs, should be provided from central payroll processing to each department and reconciled on a timely basis to ensure payroll processing is accurate. Management should thoroughly evaluate the pros and cons of each alternative to ensure the decision to decentralize more processes is the most suitable in the circumstances. If decentralization is decided upon, Payroll needs to drive the implementation process for each of the decentralized processes to ensure each is executed effectively. Management Response and Action Plan: Management agrees with the recommendation and the idea that efficiencies can be achieved through decentralized payroll for certain groups. Decentralized entry of payroll data has already been considered by the Payroll and HRIS Managers. In fact, testing of the Banner functionality for decentralized time entry via Employee Self-Service has been under way since October A pilot deployment of Web Time Entry functionality for selected employees is planned for January This pilot is expected to give Payroll a realistic view of the system behavior and implications for the various employee groups. The pilot is expected to be complete by April In addition, a comprehensive payroll/time entry needs analysis for the various employee groups will be completed by April The results of the pilot and needs analysis will inform our next steps. 12

15 Implementation: Testing October 2010 Implementation determined by testing results Accountability: Gregory Brown, Manager HRIS; Christine Barry, Manager: Payroll Services A.6 Timesheet Approvals (Classification: Low Risk) Observation: It was noted on a few occasions during testing that timesheets processed are not always authorized by a Supervisor / Manager. Though the risk of processing illegitimate time worked is minimal, because all timesheets are received directly from the Manager, there is a possibility that an unauthorized timesheet could be illegitimate or inaccurately reflect an employee s time worked. Recommendation: It is recommended that only authorized timesheets are processed. This approval component needs to be reinforced with the Supervisors / Managers of the various departments through intra-office memos. In addition, it is recommended that Payroll look into: 1) Implementing electronic / on-line authorization of timesheets for all departments to prevent unauthorized processing of payroll, and / or 2) Move towards a more decentralized processing of departmental payroll. Implementation of appropriate controls at the departmental level would be imperative to ensure the process is working as intended (refer to A.5 above). Management Response and Action Plan: Management agrees with this recommendation. In instances where approval signatures are not provided on timesheets, Payroll staff endeavor to obtain authorizations through s and / or phone calls whenever feasible due to restrictive timelines. Paperwork received without an authorizing signature will not be processed. Refer to A.5 above for additional comments regarding decentralized payroll. Implementation: Refer to A.5 above. Accountability: Gregory Brown, Manager HRIS; Christine Barry, Manager: Payroll Services A.7 Faxed Timesheets (Classification: Low Risk) Observation: In reviewing payroll supporting documentation, it was noted in some cases, that employee timesheets are faxed in to payroll. This is not a recommended practice, since it could result in inability to confirm authenticity of authorization and thus process pay for fictitious timesheets. This is especially of concern in processing student pay. Recommendation: Faxed-in timesheets should not be accepted for processing payroll due to concern over authenticity of information submitted. Payroll should clearly communicate this to various departments and employee groups through a memo and / or training sessions. In extenuating circumstances where information needs to be submitted by fax, a phone call or communication from the supervisory / management level should precede the fax or a follow up call or e- mail to supervisor / management should be done by Payroll. 13

16 Management Response and Action Plan: Management agrees that it is ideal to receive timesheet originals in payroll, however in a multi site organization it is expedient to accept faxed timesheets in order to ensure timely payments to employees. Student employees are the primary users of timesheets submission. The pay period for student payroll ends on a Saturday and timesheets are due on the following Monday by 4:30 to allow for timely processing. Accepting timesheets by mail only will result in delayed receipt and may compromise the timely processing of Student payroll. Management has considered the risk of timesheet forgery via fax vs. the risk of delayed timesheet receipt and feels the latter is a greater risk to the overall integrity of the payroll process. Management will take steps to educate employees and encourage submission of paper timesheets whenever possible. As outlined in A.5, if the Web Time Entry functionality proves feasible, the requirement to submit time sheets, either on paper, via , or facsimile, will be unnecessary as student time will be submitted approved and processed on-line. Implementation: Education process to start January 2011 A.8 ed Payroll Requests (Classification: Low Risk / Process Improvements) Observation: In some instances, it was noted that requests to process payroll have come in by means of an . This is not a recommended practice, since it s not the most efficient way of requesting pay processing, as in many cases it will require follow up due to missing information. In addition, ed payroll requests are not considered to be as reliable as manual documentation due to the potential for ed information to be illegitimate. Recommendation: requests to process payroll should not be accepted as supporting documentation. A preferred method would be to use standard forms that are currently available to process pay, as it allows for better efficiency and ability to authenticate approvals. This should be clearly communicated to various groups by means of a memo and / or training sessions. Management Response and Action Plan: Management agrees that authorizations should not be received as the only form of pay authorization. However, management feels is acceptable when received to support or clarify the original submission. Management will identify areas where pay authorizations have been submitted via and work with identified individuals/areas to educate and enforce proper completion of the supporting documentation. Implementation: Identification of areas that submit data in this manner will begin summer 2011 A.9 Payroll Processes Documentation Manual (Classification: Process Improvements) Observation: In reviewing the current Payroll Processes documentation binder, it was noted that information is somewhat outdated and not very well organized. Information is fairly system specific and 14

17 lacks other more useful information related to general payroll processes. A new employee would likely not find the binder very useful for purposes of training and education about the payroll process without some additional guidance. Recommendation: It is recommended that the Payroll department revisit the information currently included in the payroll binder to determine whether it s relevant, current and accurate, and to decide what other information should be included to assist in process documentation for various payroll groups. This improved payroll manual should be used for purposes of training new payroll staff. Management Response and Action Plan: Management agrees with the recommendation. The updated Payroll Manual is currently in development with a goal for completion by end of Fiscal year Implementation: Currently under development goal to complete by end of Fiscal year A.10 Training and Development at the Departmental Level (Classification: Process Improvements) Observation: On a number of occasions, Payroll Administrators have to spend time following up with the supervisors, managers, faculty or others at the departmental level to ensure accurate processing of information. Some of the reasons for this result from poor form completion or absence thereof, late submission of information, inaccurate / incomplete information being provided, frequent changes in administrative staffing, etc. There appears to be complacency on the part of those submitting the information to the payroll department, primarily because most of the processes have been in place for a long time. Recommendation: It is recommended that the Payroll department develop targeted training sessions and provide this training to relevant individuals at the departmental level to address some of these inefficiencies. In addition, a payroll procedures manual could be assembled and provided to individuals / departments as a means to ensure efficiency of processes, especially in cases where new staff complete the process. Management Response and Action Plan: Management agrees with the recommendation. Management will identify areas where this can be used effectively and will implement a training program in assistance with Training and Development. Payroll training manual can be developed as a tool for new managers. Implementation: By the end of 2011/2012 Fiscal Year (will depend on resources of Training and Development) A.11 Payroll General (Classification: Process Improvements) Observation: For the organization of this size, where salaries and benefits are approximately 80% of University operating expenses, it appears the processes are quite manually intensive and as a result inefficient in certain areas, as discussed throughout the report. 15

18 Recommendation: It is recommended Management works towards more efficient processing of payroll by systematically implementing web-based time entry system for the various groups, decentralizing payroll process (where feasible), and streamlining bi-weekly payroll in making the payroll process more efficient. In order to effectively implement the systems changes and conversion from manual to electronic processing, a consideration needs to be given to current staffing complement of the Payroll / HR Systems. Management Response and Action Plan: Management agrees with this recommendation and has already taken initial steps in the testing and implementation of web based decentralized time entry (see A.5). The timelines associated with the implementation are dependent upon the type and number of additional resources required and the priority and timelines of the HRIS projects to be completed. These are yet to be finalized. Implementation: Testing currently underway. Implementation timelines to be determined. Accountability: Gregory Brown, Manager HRIS 16

19 B. HUMAN RESOURCES - GENERAL B.1 Employee Manuals (Classification: Process Improvements) Observation: During the audit, it was noted that the current SCS Employee Manual that is available for review electronically on WLU HR website is outdated in that the latest date of the wage grid provided in the manual is as of period July 1, 2007 to June 30, This information is not current. Recommendation: Information for all employee groups as contained in Employee Manuals or Collective Bargaining Agreements needs to be up to date. It is HR s responsibility to ensure this information is updated on a timely basis and is current. Management Response and Action Plan: All employee manuals will be reviewed to ensure accurate and up-to-date information. Collective Bargaining agreements are all up to date. Implementation: December 2010 Accountability: Pamela Cant, Director: Total Compensation; Kate Konopka, Manager: Employee Relations B.2 HR Action Notices Authorizations (Classification: Low Risk / Process Improvements) Observation: During testing, it was noted on a couple of occasions that HR Action Notices were not properly authorized or authorized copies were missing from the employee file. This was mainly noticed in completing testing of terminated employees. Recommendation: HR staff should ensure HR Action Notices are properly authorized at all times, to ensure legitimacy of information. HR action notices should be issued and retained in employee files in all cases. Management Response and Action Plan: Our current process is all action notices are completed by the Human Resources staff, authorized by the Manager or Director prior to processing, and retained in the employee files in all cases. We will ensure this process is followed in future. Implementation: December 2010 Accountability: Pamela Cant, Director: Total Compensation; Kate Konopka, Manager: Employee Relations 17

20 C. PAYROLL / HUMAN RESOURCES - GENERAL C.1 Confidential Information (Classification: Low Risk / Process Improvements) Observation: In completing the testing of employees that are currently employed in Human Resources and Payroll departments, as well as members of Senior Administration, it was noted that all of the files were kept confidential in AVP: Human Resources office. However, in a few instances, it was noted that some of these employees also had a second file created that was kept in the general Payroll filing area in addition to the confidential files in the AVP HR office. In addition, some of these Payroll files contained both payroll and HR related information that was considered confidential. Recommendation: For employees of Human Resources and Payroll, as well as for the members of Senior Administration, it is recommended only one file be maintained and kept in AVP HR office to ensure confidentiality is maintained at all times. A designated person should be responsible for allowing access to these files in cases where the AVP HR is not available. Management Response and Action Plan: Management agrees with the recommendation. Duplicate files were created for ease of filing only. These have now been removed and future changes will be given to HR/Pension Administrator for filing in AVP HR office. Implementation: October 2010 C.2 Misfiled Information in Employee Files (Classification: Process Improvements) Observation: While completing the payroll audit and reviewing various employee files for testing purposes, it was noted on several occasions that employee information has been misfiled, thus resulting in inaccurate recordkeeping. Recommendation: On a go forward basis, measures should be put in place by Human Resources and Payroll to ensure only employee relevant information is filed in the proper employee file, to ensure accuracy and ease of obtaining employee related information. The importance of this should be addressed with all Payroll and HR staff. Management Response and Action Plan: Management agrees with the recommendation and will ensure staff are more diligent in filing employee information. Implementation: November 2010 C.3 Logging off Workstation (Classification: Process Improvements) Observation: On a number of occasions, it was observed that when payroll / HR employees leave their workstation, their computers are not locked / logged off. Given the confidentiality of information 18

21 processed by payroll / HR at any given time, it is critical that workstations be logged off / locked when payroll / HR staff leave their desk, to ensure no unauthorized access to confidential information and to prevent manipulation of data entered. This is considered best practice. Recommendation: Computers should be logged off / locked when payroll / HR staff leave their workstations. Management Response and Action Plan: Payroll workstations have now been set up with auto log off after 10 minutes. Implementation: November

22 D. EMPLOYEE GROUPS D.1 WLUSA D.1.1 Filing of Timesheets WLUSA (Classification: Process Improvements) Observation: Pay periods are currently not documented on the timesheets before they are filed in the file room. This could create inefficiencies with refilling timesheets and could result in misfiling of documentation. Recommendation: Pay period numbers should be clearly marked on all timesheets filed in the payroll file room to ease tracking and refilling of documentation. Management Response and Action Plan: Management agrees with the recommendation. Payroll stamp will be purchased for staff to stamp and identify the applicable pay periods paid. This will be applicable to all payrolls. Implementation: In progress D.1.2 Overtime Calculations WLUSA (Classification: Low-Medium Risk / Process Improvements) Observation: While completing testing of WLUSA employees who submitted overtime timesheets, it was noted that employees are paid time and a half at their regular rate, rather than rate and a half at regular time. This is inconsistent with all other payroll groups tested. In addition, this method creates potential inefficiencies and errors as was noted on one occasion during testing. Recommendation: Similarly to other employee groups, a system code should be set up in Banner for WLUSA employees so that payroll is able to process regular hours at overtime rate of 1.5 or 2 (as applicable) rather than processing hours worked at 1.5 or 2 times the regular rate. This would simplify the reporting process and would minimize potential errors. Management Response and Action Plan: Management agrees with this recommendation, and will work to adjust the applicable forms and procedures to ensure consistency in the way overtime pay is calculated across all employee groups. Implementation: Implementation to be completed by May

23 D.1.3 Overtime Hours Reported by WLUSA (Classification: Medium Risk / Process Improvements) Observation: WLUSA employees accumulate a number of hours of overtime and then submit in bulk to Payroll for processing. This sometimes spans a number of months as noticed during the audit process and can accumulate to be quite significant, especially given the current overtime calculation method (refer to D.1.2 above). Paying out overtime hours as a lump sum results in a problem of matching hours worked with appropriate time period for payroll tracking and accounting purposes. In addition, processing large payments impacts the withholding of employee deductions. As well, it is questionable whether supervisors can recall the hours worked by an employee a number of months ago to ensure accuracy of overtime hours processed. Recommendation: Overtime hours should be submitted on a timely basis and processed in the relevant pay period. Payroll should re-enforce this with the various departmental Managers / Supervisors through written communication and / or direct training. Management Response and Action Plan: Manager will identify areas where this is continuing and communicate recommendation to department Managers / Supervisors. Implementation: Commencing January 2011 D.1.4 WLUSA Supplemental Pay Form vs. WLU Record of Overtime (Classification: Process Improvements) Observation: Currently, it appears both the WLUSA Supplemental Pay Form and the WLU Record of Overtime are used to process overtime hours worked by WLUSA employees. These two forms are intended to report the same information, however due to format differences create some inconsistencies in reporting overtime. In addition, it is unclear why there are two forms when they are used interchangeably. Recommendation: It is recommended to use only one form for all employee groups across WLU to record overtime to simplify the process. Alternatively, if due to Union considerations a separate overtime form for WLUSA is required, a decision needs to be made as to which form is most applicable for this group. This will ensure process efficiency and consistency in form completion. Management Response and Action Plan: Management agrees with this recommendation. Old forms are no longer available in payroll; however, it appears departments may still have stock of old overtime forms. All areas have been advised of the new form when it was implemented. Payroll staff will identify areas / individuals who are using old stock and recommend the need to use the new form instead. Refer also to A.10 above. Implementation: January

24 D.2 WLUFA / CAS D.2.1 Faculty Relations Documentation (Classification: Process Improvements) Observation: Currently, information from the Faculty Relations office is received in a variety of formats. In addition, in some instances the Senior Payroll Administrator has to complete a two step process to ensure all data is input and processed accurately, which is not efficient. There have been instances where documentation from the Faculty Relations office has been received either late or Payroll was not informed of a subsequent change to original documentation in a timely manner. This has resulted in processing errors and / or required additional work to revise the original data entry. Additionally, the authorization of the various documents from the Faculty Relations coming to Payroll is not always evident. Recommendation: It is recommended that Payroll works in collaboration with the Faculty Relations office to develop a more standardized format in which the variety of information from the Faculty Relations office can be provided to Payroll to make the process more efficient. All information provided to Payroll should be properly authorized. A consideration should be given to the impact decentralization of Faculty Relations payroll would have on the need to obtain this information. Decentralization would eliminate the need to maintain duplicate sets of paper records and would limit the potential of inaccurate information being processed by Payroll, limiting errors and increasing efficiencies (refer to D.2.2 below). Management Response and Action Plan: In recent years management has worked with Faculty Relations and there have been a number of improvements made to the way pay information is received and processed for faculty. Management agrees there is still opportunity to improve and streamline this information. 1. The Manager Payroll Services will work with Faculty Relations to analyze and assess the formats used to provide information to payroll. The assessment will seek to identify ways to provide this information in a more standardized format, incorporating clearly identifiable sections for proper authorizations. 2. The Manager, HRIS has been working with ITS, Faculty Relations, The Office of the Registrar, Payroll, the VPA, and all Schools / Faculties since August 2009 to review the business processes related to the administration of faculty data and to implement solutions to streamline these business processes. This review is part of the Faculty HRIS Project which is currently in the analysis phase. The forms used for the submission of faculty information to HR/Payroll are included in this project. The recommendation above appears to address 3 issues: - Lack of authorization or evidence thereof for some faculty related paperwork - Inefficient processing of faculty paperwork - Duplicate storage of paperwork 22

25 Payroll will require paperwork for faculty to have appropriate authorization. Form redesign and processing efficiencies are being addressed as part of the Faculty HRIS Project. Duplicate storage of paperwork cannot be avoided due to the terms of the current faculty collective agreements. Implementation: 1) Winter Spring ) In progress, Spring 2012 Accountability: 1) Christine Barry, Manager: Payroll Services 2) Gregory Brown, Manager: HRIS D.2.2 Contract Academic Staff (CAS) Contracts (Classification: Process Improvements) Observation: Currently, CAS contracts are manually entered every term by Payroll into the Payroll module in Banner. However, this information is already available in the Faculty Banner module. As a result, there are two copies of contracts being maintained; one at the Faculty Relations office and one in Payroll. The Senior Payroll Administrator currently performs a two step check to ensure information entered in payroll for CAS is accurate. This process is not efficient, but appears to be necessary in order to ensure the accuracy of data entered. Recommendation: It is recommended that the Payroll department work on developing a solution that would result in system information from the Faculty Banner module to feed directly into the Payroll module. In effect, the payroll process would be decentralized at the point of data entry at the Faculty Relations office and processed centrally in Payroll for purposes of payment. This would create significant efficiencies in the Payroll department, would limit potential for error on either end, would only require one set of records to be maintained, and would ensure information is only entered once. After the payroll register is run, a copy should be sent to the Faculty Relations office to reconcile against the supporting documentation to ensure it has been processed accurately. The process of decentralizing faculty payroll should also be considered for full time faculty s salary contracts and related annual salary increases. This would also allow any payroll related inquiries to be addressed directly by the Faculty Relations office rather than the Payroll Administrators, which would be more appropriate. Management Response and Action Plan: Processing efficiencies for the generation and processing of CAS contracts are currently being addressed as part of the Faculty HRIS Project. Refer to D.2.1 above. Implementation: Refer to D.2.1 above. Accountability: Gregory Brown, Manager: HRIS 23

26 D.3 MANAGEMENT GROUP D.3.1 Management Group Salaries / Merit Approval Process (Classification: Low-Medium Risk / Process Deficiency) Observation: Though currently salaries for the Management Group are reviewed informally during the budget setting process, there does not appear to be a formal approval process in place to ensure accuracy of salaries for the Management group. Only the merit component is approved formally on an annual basis. In addition, only the merit component has been included in a letter that was prepared by HR and provided to the employees for information purposes. It is a good practice on behalf of an organization to inform the employees formally of their annual salaries and any related increases. It allows the employees to be informed and address any discrepancies. During the audit, it was difficult to find any recent information in employee files that would confirm current employee salary. As a result, Banner system information was used to calculate the accuracy of current salaries. Given the lack of a paper trail, this approach was the only reasonable approach to use in order to complete the required testing of Management and Senior Administration salaries. Recommendation: The salary should be formally approved annually during the merit setting process. Specifically, HR should prepare a listing of employees within each of the VP s responsibility by departments and show their prior year s salary, merit component and other increases for the year ahead, and the resulting new salary. Each VP s direct reports should then review the salaries and related merit for the upcoming year and formally approve the document. Each area s VPs should then have a final signoff on the documentation and forward to HR for processing. This will ensure all employees are receiving accurate salaries. In addition, it is recommended annual salary letters that incorporate all relevant salary increases be prepared by HR / Payroll and distributed to each area s VPs, Deans, etc and then provided to employees. This process needs to be consistent for all campuses. Management Response and Action Plan: Management agrees with the majority of this recommendation, and the 2010 merit letters for Management and Exempt Staff included the employee s salary information and were sent to both the employee and their direct manager. In 2011 management will include individual employee salaries in the merit approval process at the Vice- President level, and will require the direct manager s signature on the merit/salary letter. It does not seem feasible for the Vice-President to sign each individual merit letter, but they will be required to sign / approve the list of merit increases and associated salaries for their unit. Implementation: September 2011 Accountability: Pamela Cant, Director: Total Compensation 24

27 D.4 STUDENTS D.4.1 Student Payroll General Comment (Classification: Low-Medium Risk / Process Improvements) Observation: Currently, the student payroll process is quite time consuming and convoluted, due to intricacies and complexities of processing a variety of student payments. At a high level, each student can hold a number of positions at the University, there are number of departments involved, and there are a number of supervisors who are able to authorize student payroll, all resulting in added risks in processing student payroll. Recommendation: It is recommended that Payroll consider implementing web-based student time entry system for payroll processing purposes. At a high level, it would allow student payroll to be processed more efficiently, would ensure authenticity of authorizations, and would reduce the amount of paperwork that is currently used to process payroll. To implement web-based student time entry system is a significant undertaking, one which will require significant amount of planning and consideration of various issues. A suggestion would be for Management to obtain information on implementation of web-based student time entry systems at other Universities to fully understand the potential pitfalls and benefits of such a system. As part of the implementation, management also needs to ensure adequate training is provided at the departmental level. Consideration should be given to appropriate segregation of duties as well as oversight responsibilities when process is decentralized. Management Response and Action Plan: Refer to A.5 and A.11 above. Implementation: Test beginning December 2010 Accountability: Gregory Brown, Manager: HRIS; Christine Barry, Manager: Payroll Services D.4.2 Processing Fictitious Employees Students (Classification: Medium Risk) Observation: Currently, there does not appear to be an effective process in place to ensure fictitious student employees are not processed by Payroll. This is especially of concern with processing student payroll, because large numbers of timesheets are submitted manually from various individuals / departments, creating difficulties in assessing authenticity and verification of approval signatures. Hence, it is possible for a student to prepare a timesheet, falsify authorization on the timesheet and submit it to payroll for processing. Recommendation: To ensure fictitious student payrolls are not processed, the University should implement web-based processing of payroll for students (refer to D.4.1 above). Management Response and Action Plan: Refer to A.5 and A.11 above. Implementation: Test beginning December 2010 Accountability: Gregory Brown, Manager: HRIS; Christine Barry, Manager: Payroll Services 25

28 D.4.3 Student Authorization for Employment (Classification: Process Improvements) Observation: The Authorization for Student Employment form is required in order to set up students who have not previously been employed by the University, prior to processing timesheets. It was noted during the audit that this form is not always completed for each new student position; rather, as long as the form has been completed previously, Payroll will use the biographical and other relevant student information to process timesheets. This creates inefficiencies in processing student payroll as the information in the system may be inaccurate and / or outdated. Hence, the use of the form itself loses relevance given the above. Recommendation: It is recommended that the Payroll department revisit the need for, and administration of, the Authorization for Student Employment form to determine the relevance and effectiveness of using this form. It should be pointed out that this process will also have to be considered when implementing web-based student time entry (refer to D.4.1 above). Management Response and Action Plan: As part of Web-time entry (refer to A.5 and A.11 above), Management will review the form and usage to determine validity and currency. Implementation: In conjunction with testing beginning December 2010 D.4.4 Student Payroll Timesheet Listing by Department Observation: Currently, there are five departments that submit student pay information in a listing, rather than individual timesheets. This is efficient for purposes of processing payroll; however, the inefficiencies are created because different forms are used by each of the departments. Recommendation: Payroll should develop a standard form that should be used by various departments for consistency purposes. This would result in more efficient processing of payroll. The submitted lists should be approved by a designated individual in each department before submitting to Payroll. In addition, it is recommended Payroll review other areas where this approach could be implemented to create additional efficiencies in processing student payroll. Management Response and Action Plan: Management will work with the identified areas to standardize the format and information provided to ensure consistency and to include appropriate approvals. Additionally, an analysis will be initiated to identify other areas where a standardized format could be used to provide efficiencies. Implementation: Summer 2011 Accountability: Gregory Brown, Manager: HRIS; Christine Barry, Manager: Payroll Services 26

29 D.5 UFCW D.5.1 Food Services Payroll Processing (Classification: Low Risk / Process Improvements) Observation: Currently, Food Services payroll process is decentralized all time is input at the department level and the payment is processed centrally by Payroll. Currently, Payroll outputs do not appear to be reconciled to Food Services inputs. Without this reconciling step, there is a risk that inputs that are entered inaccurately by Food Services will not be detected. Recommendation: Payroll department should provide Food Services with a bi-weekly payroll register (or equivalent) for purposes of reconciling to supporting documentation to ensure accuracy. One thing to keep in mind is that the person in Food Services who is entering the payroll information inputs into the Banner system should not be the same person completing the reconciliation, as these two duties are incompatible with respect to appropriate segregation of duties. Hence, either the Assistant Food Director or a person with a similar role should be the one completing the reconciliation of inputs to the payroll register on a bi-weekly basis. Management Response and Action Plan: Payroll Manager will work with Manager, HRIS to investigate the development of an on-line reporting tool for Food Services for purposes of review / audit. Manager, Payroll Services and Manager, Employee Relations will meet with Food Services to determine what their reporting needs are and how Payroll/HRIS can best address their needs. Implementation: Fiscal year 2011/2012 Accountability: Gregory Brown, Manager: HRIS; Christine Barry, Manager: Payroll Services; Kate Konopka, Manager: Employee Relations 27

30 E. FORMS E.1 Variety of Forms General Comment (Classification: Process Improvements) Observation: Currently, the University uses a variety of different forms for various employee groups, the format of which in most cases appears to be driven by individual departments rather than by the Payroll Department. The result is a variety of paperwork that creates inefficiencies in processing payroll, as each of the forms is different. Some of the forms are not very well designed as the required information is not clearly indicated. In addition, not all forms are consistently completed by individuals, and thus inefficiencies are created when Payroll has to follow up with various individuals to obtain relevant information. Recommendation: Payroll should revisit the number of different forms that are received from various employee groups and University departments. The forms should be streamlined and revised to ensure information requests are clearly stated. If possible, several of the forms should be combined into one to help streamline the process. Communication in a form of a memo and / or training should be provided to each department by Payroll to advise of the format changes. Management Response and Action Plan: Some forms have been created at the specific request of the Union. Management will review forms, usage and currency to determine if streamlining is a viable option. Implementation: Over Fiscal year 2011 / 2012 E.2 Variety of Forms - Specific E.2.1 Instructional Assistants (IA) Contracts (Classification: Process Improvements) Observation: Currently, IA contracts are completed by applicable departments and though each form contains similar information, it is in fact different for each of the departments. In addition, IA contract dates don t always correspond to the payroll start and end dates for the period of the contract, which requires manual adjustments by the Payroll Administrators when processing. Recommendation: IA contracts should be standardized amongst all departments for consistency, to ensure all required information is captured in the most effective way. Specifically, pay dates should be more clearly specified to correspond to pay dates. The form design and implementation should be driven by Payroll, rather than each department and communicated with each department once revised. Management Response and Action Plan: Management needs to identify who has ownership of this form. Payroll will work with various areas to ensure consistency. Implementation: Over Fiscal year 2011 /

31 E.2.2 WLUSA Supplemental Pay Form (Classification: Process Improvements) Observation: WLUSA Supplemental Pay Form is not consistently completed for purposes of recording overtime worked. The form appears to be confusing as the column titles are not clear and may be interpreted differently by various individuals. This may create issues in processing payroll accurately and may also require follow up on behalf of the Payroll Administrators to ensure hours as reported are accurately documented. Recommendation: WLUSA Supplemental Pay Form should be revised to ensure clarity of information being reported. This will ensure accurate processing and will eliminate the need to follow up, creating efficiencies in processing payroll. Management Response and Action Plan: This form was created in accordance with a WLUSA request. A guide to complete the form is attached to the on-line form and training was provided on implementation. Payroll will identify areas/individuals that are failing to complete the form correctly and will work with Human Resources to provide training and education, in conjunction with WLUSA/OSSTF to identified staff. Implementation: Over Fiscal 2011/2012 Accountability: Manager Payroll Services and Manager, Employee Relations E.2.3 Payroll Payment Authorization Form (PAF) (Classification: Process Improvements) Observation: PAF is intended to process casual or one-time payments; however, PAF has been used in a number of instances for documenting information other than its intended use - the result of which are inefficiencies for purposes of processing payroll. Recommendation: PAF should be used for its intended purposes only. Payroll should clarify this requirement with various departments. Formatting of the PAF should be revised if applicable, to accommodate completion for its intended use. Management Response and Action Plan: This form is used for a wide variety of purposes instead of creating many different forms. Payroll will review the form to determine type of use, source and information that is not provided as required. The form is no longer used for Research Assistantships as Graduate Studies office is now issuing these contracts on custom forms. Management will adjust PAF to reflect total pay, vacation %, mandatory costs = total commitment, remove bottom left corner and replace with directions for use, for example. Implementation: Over Fiscal 2011/

32 E.2.4 General Temporary Time Sheet Observation: It is unclear as to the exact reasons for using of this timesheet. It appears to be just another form that is available for use (for non-wlusa temporary positions), without necessarily clear guidelines as to when it should be used. Recommendation: The use of this form should be revisited to determine whether there is a need to use it at all. The form may be combined with other forms or removed altogether. It is recommended the Payroll department determines the nature of uses of this form and then decide whether to retain it or not. Management Response and Action Plan: Similar response applies as noted above in E.2.3. Management will review the form to determine type of uses and determine if it is necessary as a standalone form. Implementation: Over Fiscal 2011/

33 F. PROCESSING ERRORS F.1 Fellowship (Classification: Medium Risk / Process Improvements) Observation: A fellowship payment was processed in error as $990 per pay rather than for the term of the fellowship. This resulted in a total error of $7,920. Error would not have been discovered had it not been for the audit testing. Error was subsequently reversed as the employee has provided 18 postdated cheques in the amount of $440 each to cover the $7,920 overpayment. Upon further discussion with the Payroll Administrator, the reason for the mistake was human error. The documentation was received and processed late and as a result did not get reviewed as part of the payroll register reconciliation. It appears the Change Report was also either not prepared or not reviewed. Though in this case the University appears it will be able to recover the overpayment of funds, there is always a risk to the University that the employee may be unable to pay back the amounts owing or may refuse to do so, given the error was made by the University. Recommendation: In order to avoid a similar issue from occurring in the future, the following are recommendations: 1) Secondary payroll register should be run that would include any entries processed after the initial payroll register has been run. Banner system restrictions should be taken into consideration. 2) An exception report should be run that would identify all payments processed above a certain dollar threshold amount (refer to G.1 below). Banner system restrictions should be taken into consideration. 3) Change Reports should be run in all cases to ensure information has been accurately input. 4) Payroll Manager should review and approve all exception reports to ensure all payments are accurate and legitimate. The exception reports should be maintained as supporting documentation for a predetermined amount of time. Management Response and Action Plan: Management agrees it is important to perform audit checks on payroll transactions to ensure they are processed accurately. The following are management s responses to the four (4) recommendations above. 1) The payroll register is a large report and can only be produced in its entirety. The Banner system restrictions do not allow for reporting on only those transactions entered after the initial processing. Management will work with Manager HRIS to investigate and assess the development of a customized tracking report to capture post initial payroll entries. 2) Payroll currently runs regular threshold reports for hours as well as net bi-weekly pay in excess of $2500, but there are not threshold reports run by employee group as suggested in G.1. Management 31

34 will investigate and determine appropriate threshold reporting to better reflect typical pay levels by employee group. 3) Payroll runs a Job Audit Report listing all job data changes (including rate of pay, start and end dates, leave dates etc) each pay. This report is reviewed by the Payroll Administrators in pairs as part of the payroll verification process. Other payroll changes including deductions and retro payments are not captured by the Job Audit Report, and therefore are reviewed against the Payroll Register. A single comprehensive change report identifying all payroll changes is not currently available through Banner and would require custom development. Management feels the current audit process provides a more reliable and accurate audit then the development of a custom report that would not be supported by Banner and therefore risks the integrity of the data. 4) Exception reports and audits are provided with reconciliation to Manager for review. Applicable audits are performed and filed by staff as part of the reconciliation process. The Manager will ensure that all audits required are run and saved each pay period. Implementation: Spring 2011 F.2) Overload Faculty Contracts (Classification: Low-Medium Risk / Process Improvements) Observation: In completing the testing of WLUFA / CAS overload payments, two errors were noted an overpayment of $3,291 in one instance, and an underpayment of $485 in another. Both of these errors appear to have been a human error, processed by the former Senior Payroll Administrator. There are number of processes currently in place and utilized by the current Senior Payroll Administrator that should minimize the instances of similar errors from occurring. Recommendation: The recommendation is to emphasize the importance of running the Payroll Change reports to ensure beginning and end overload contract dates agree to the supporting documentation. In addition, contracts should be filed by month of expiry and before the payroll is processed for the particular month, these should be double checked against the system data, to ensure contracts are set up to expire as intended. Management Response and Action Plan: Payroll has resolved the overpayment in consultation with the School of Business and will be recovering the money in Winter For the underpayment, Payroll has investigated and paid as retro. Current Senior Payroll Administrator checks each new contract for start and end dates and amount per pay and uses bring forward files to double check end/start/future changes to ensure accuracy. Implementation: December

35 F.3 Merit Reconciliation (Classification: Process Improvements) Observation: In completing testing during the audit, it was noted that an employee in Brantford did not receive appropriate merit component increase. This was due to the employee moving between groups, from staff (at which point the employee was eligible for merit) to management (where no merit was received) and was overlooked in the process. As a result of the audit, it was concluded that the employee was owed the merit component and that it was to be processed as a retroactive adjustment to July 1, Recommendation: To ensure all merit increases are processed as intended, reconciliation between the merit listing provided by HR should be completed and agreed to merit increases processed by Payroll. In addition, Payroll Manager should review all salary increases processed to ensure these agree to those provided by HR. When processing the merit increases, specific consideration should be given to those employees that are in the process of changing employee groups to ensure they are captured in the system. Management Response and Action Plan: Management agrees with this recommendation. In this particular situation, timing was the issue as the employee changed groups at the same time the merit was processed. Manager, Payroll Services and Director, Total Compensation will use this example as a check in future merit / salary increases. Implementation: July 2011 (during next merit setting process) ; Pamela Cant, Director: Total Compensation 33

36 G. EXCEPTION REPORTS G.1 Dollar Amount Processed (Classification: Low-Medium Risk / Process Improvements) Observation: As part of the bi-weekly payroll process, Payroll Administrators run exception reports where net pay is greater than $2,500 or $1,500 per pay. Since general threshold is used for all groups within the bi-weekly payroll, there is a risk that not all errors will be reflected on to the exception reports (refer to example for fellowship error as noted in F.1 above). Recommendation: It is recommended that Management review the exception report requirements and develop more specific exception amounts that would correspond to each employee group. These different limits would ensure that payments processed in error would more likely be caught as they would be more applicable for each group. Exception reports should be run after each pay is processed and before it is finalized. In addition, edit checks should be set up at a point of data entry to double check the accuracy of input in those cases where total payment exceeds a certain dollar threshold. This point of entry threshold should be determined by management for each of the employee groups. Management Response and Action Plan: Management will investigate and determine appropriate threshold reporting to better reflect typical pay levels by employee group. Management will work with Information Technology, and Manager, HRIS to assess the feasibility of the recommendation to apply edit checks at point of entry, by employee group. Implementation: Fiscal 2011/2012 Accountability: Manager, Payroll Services; Manager, HRIS G.2 Hours processed (Classification: Low-Medium Risk / Process Improvements) Observation: An exception report currently run is one that shows hours processed that are less than zero. There does not appear to be a report run that would provide information on hours processed that exceed a certain threshold. There is a risk that hours may be processed inaccurately, especially with certain employee groups that are subject to payroll adjustments (refer to A.2 above). Recommendation: It is recommended that an exception report for hours processed in excess of certain threshold is run before payroll process is finalized. Any hours in excess of certain threshold should be reviewed to ensure accurately input. The threshold should be determined based on normal hours of work expected for each of the various groups at the University. In addition, edit check should be set up at a point of data entry to double check the accuracy of input if hours exceed a certain threshold amount. Management Response and Action Plan: Management is currently determining the most appropriate and feasible response regarding the above recommendation. However, Manager, Payroll Services will work with Manager, HRIS to investigate the recommendation further. 34

37 Implementation: To be determined G.3 Dock Report (Classification: Low Risk / Process Improvements) Observation: Dock report is a required exception report that is to be run when processing each biweekly pay and reviewed against employee timesheet to ensure no pay is docked if there are sufficient overtime / sick / personal hours available in the bank. In one instance during testing, an employee was docked overtime hours because sufficient overtime hours were not available in the bank. However, during that pay period, employee earned enough overtime hours, par t of which he requested be paid out immediately. In discussing this issue with the Payroll Administrator, it was unclear as to why this had occurred unless the dock report was not reviewed or issue was missed during review of the dock report. Recommendation: Though it is a requirement to run dock reports before finalizing process, it is also imperative that the report be reviewed against supporting documentation thoroughly, to ensure issues as identified above do not occur. Therefore, it is recommended that Management strongly encourage thorough review of all exception reports, including the dock report. A Senior Payroll Administrator or Payroll Manager should sign off on exception reports once reviewed, to ensure the process is actually completed at the staff level. Additionally, Management should clarify or develop a policy that would state whether overtime hours earned on current pay are eligible for immediate overtime payout or whether they need to be banked in the system first before they can be paid out. This process is currently unclear and needs to be consistent with any Union requirements. Management Response and Action Plan: Management agrees with the recommendation to thoroughly review all exception reports including dock reports with sign off by Payroll Manager. In this particular instance the dock report would not have identified the error. The employee was banking the time in the same period as taking the time. Both bank and taking are updated after the payroll is calculated. The current dock report will be rerun after the payroll is completed and any time listed will be communicated to the employee and adjusted on the next pay period. Although the recommendation of a policy to clarify overtime taken immediately is an excellent suggestion, the collective agreements define the terms for overtime and banked time off. Implementation: Dock reports will be run and reviewed immediately. 35