Payroll Auditing and Review Training October 2014 October 2014 Payroll 2 Overview Seminar Objectives Agency Risks Associated with Payroll Available Tools and Reports PreCertification Review Process ID: 768404
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Payroll Auditing and Review Training October 2014
October 2014Payroll2Overview Seminar Objectives: Agency Risks Associated with Payroll Available Tools and Reports Pre-Certification Review Process Certification Requirements and Guidelines Post Certification Review Process Tax Reconciliations and Other Reviews
Risks Associated with Payroll11 Costly Payroll Mistakes:Failing to deposit withheld income taxes, FICA taxes and employer matching amounts on timeUnder-withholding and failing to match required amountsFailing to pay or under-paying state and federal unemployment taxes October 2014 Payroll 3
Risks Associated with Payroll11 Costly Payroll Mistakes:Failing to process wage garnishments correctlyMaking unauthorized deductions from an employee’s payTreating some workers as independent contractors when they are not October 2014 Payroll 4
Risks Associated with Payroll11 Costly Payroll Mistakes:Failing to include the value of awards, bonuses, and fringe benefits (when required) in the employee’s taxable incomeUsing bogus or incorrect Social Security numbers for employees on their W-2 Forms and failing to accurately complete I-9 Forms. October 2014 Payroll 5
Risks Associated with Payroll11 Costly Payroll Mistakes:Failing to pay at least the higher of the federal or state minimum wage to non-exempt employees…as well as overtime in any seven-day workweek in which they work more than 40 hours.Not preparing and filling W-2 forms, and failing to send them to employeesFailure to abide by state laws October 2014 Payroll 6
Risks Associated with PayrollHow to Avoid these Costly Mistakes:Awareness Respect for the PositionCooperation and Communication Deference to the Proper Authority Thorough Pre-Certification and Post-Certification Audits October 2014 Payroll 7
Risks Associated with PayrollQuestions/Comments October 2014 Payroll 8
Reports and ToolsAccessing CIPPS ReportsReportline Security Form: http://www.doa.virginia.gov/Payroll/Forms/PaylinePATSecurityForm.pdfPAT (Payroll Audit Tool) Security Form: http://www.doa.virginia.gov/Payroll/Forms/PaylinePATSecurityForm.pdf October 2014 Payroll 9
Reports and ToolsReportline:CIPPS ReportsReport 1006 or 1010 - Changes made to the CIPPS Masterfile by Operator ID.Report 1004 - Batch transactions keyedReport 10 - Current Gross-to-net calculation of all employees as requested by the user.CIPPS Ad Hoc Reports requested on HSRUT and HSRPT as listed on http://www.doa.virginia.gov/Payroll/ReportWriterMatrix.pdf ) October 2014 Payroll 10
Reports and ToolsOctober 2014Payroll11
Reports and ToolsOctober 2014Payroll12
Reports and ToolsOctober 2014Payroll13
Reports and ToolsOctober 2014Payroll14
Reports and ToolsPAT (Payroll Audit Tool):Salary Regular Pay Comparison – Uses the selected “soft copy” Report 10 file to compare the H0BID salary to the amount of Regular Pay Received.Report 10 Comparison – Compares two “soft copy” Report 10 files and prints the gross pay differences between the two.Perform queries and download to Excel to create your own reports October 2014 Payroll 15
Reports and ToolsOctober 2014Payroll16 Report Name DESCRIPTION CAN BE GENERATED UsAGe Summary Report 10 for Wage Employees Gives a printout of the hourly rate and hours keyed for the wage employees listed on a selected Report 10 File. The day after edit or certification is requested Review to ensure wage hours entered are correct. Report 10 Salary/Rate and Regular Pay Comparison Lists any salaried employee on the selected Report 10 File that has regular pay that is unequal to the semi-monthly salary rate on H0BID. The day after edit or certification is requested Review and ensure that pay items are correct. Special Pays Listing Lists all employees on the selected Report 10 file that are receiving a special pay. (Items keyed on HUE01 or HUC01). The day after edit or certification is requested Review for accuracy. Deduction Amount Change Comparison Compares two selected Report 10 Files and prints deductions for employees when the amounts have changed. The day after edit or certification is requested Review for accuracy. State and Federal Tax Withholding Comparison Compares two selected Report 10 Files and prints those employees whose tax amounts have changed when there was no change in gross pay. The day after edit or certification is requested Review for accuracy. Rate Amount Change Comparison Compares two selected Report 10 Files and prints those employees who have had a change to the H0BID Salary/Rate amount. The day after edit or certification is requested Review for accuracy. Comparison Report 10 Compares two selected Report 10 Files and prints those employees who have a difference in gross to net pay amounts. The day after edit or certification is requested Review for accuracy. Employee Information Sheet Gives a one page printout for the selected employee number showing all the relevant masterfile field values. The day after the update is made to the Employee Masterfile Review for accuracy. PAT (Payroll Audit Tool) Reports
Reports and ToolsQuestions/Comments October 2014 Payroll 17
Payroll Life Cycle
Data Entry Process“High Risk” Entry ItemManually enteredRequires precision for one or multiple fields in CIPPSPotential to cause a legal or financial impact to the employee or the agencyIncorrect entry is not easily detected using reports and reconciliations
Data Entry Process“High Risk” Entry Item #1:Tax Withholding FormsAn unsigned form or a form with conflicting information can make it invalidIf the FIT/SIT Status indicator is not “6” the additional amount specified will not processEmployees who live an work (tele -working) in other states can legally require you to withhold for that state Lock-In Letters can override a W-4 Best to review this on the screen to ensure it was entered correctly
Data Entry Process“High Risk” Entry Item #2:Direct Deposit FormIf the account or routing number is keyed incorrectly, you won’t know until the employee calls on paydayThe account/routing number could be correct, but the utility field on H0ZDC could be wrongNotice at the bottom of the direct deposit form – “CIPPS Updated by” – “Reviewed by”
Data Entry Process“High Risk” Entry Item #3:Garnishments, Wage Assignments, Child SupportWe provide best practice examples in CAPP Topic 50405, but there are multiple fields involvedIt is best to review each garnishment amount on the Report 10 to ensure the amount withheld meets federal and state guidelinesWho signs for your garnishments? Was this ordered by a court?
Data Entry Process
Data Entry Process“High Risk” Entry Item #4:Deductions for 457 or 403(b) PlanDeferred Comp/AnnuitiesHybrid Retirement Plan – Only establish in CIPPS if Member Record is in VNAVEmployer Cash Match deductions for these plans
Data Entry Process“High Risk” Entry Item #5:Tax Rate of Special PaysIRS Regulations specify when certain items are to be taxed at the supplemental rate vs. the tax table. Payroll Officer makes a choice of which rate to use by keying an indicator in the batch. “0” as the tax indicator takes supplemental rate, “5” withhold according to tax table. However, if “0” is keyed and the amount is combined with regular pay, the tax table rate will be applied.
Data Entry Process“High Risk” Entry Item #6:Incorrect HSBFM Batch DeletionsDELETE ONLY THOSE TRANSACTION S THAT ARE IBC OR IN 700, 800, 900 SERIESMANUAL PAYSETS MUST BE REVERSED!! DO NOT DELETE!!Only key in Sequence Number 1 – let overnight process fill in Sequence Number 2Have someone review your work!
Data Entry Process“High Risk” Entry Item #7:Deduction Refunds and Manual PaysetsWhen refunding a pretax item to an employee who will receive no additional funds – reduce by the amount of FICA taxes dueWhen reversing a non-taxable item for a terminated employee, you may need to pay a penny to process the FICA refund.Be careful with end of file and employer deductions!
Data Entry Process“High Risk” Entry Item #8:Incorrect/Omitted edit request on PYEDTFailure to request an edit can cause issues during the pre-certification processDifficult to get the correct certification dollar amount – could cause the agency to be reported on the Comptroller’s Quarterly Report The Pay Period Indicator does matter! Is there a deadline for entering an edit request? Recommend a double set of eyes
Pre-Certification ProcessOctober 2014Payroll29 Comptroller's Report on Statewide Financial Management and Compliance The Comptroller's Report on Statewide Financial Management and Compliance Quarterly Report) is a summary of measures used by DOA to monitor transactions involving public funds and report findings to the Governor, his Cabinet, and other senior State officials. The Quarterly Report uses exception reporting and summary statistics to highlight key findings and trends. The Department also provides additional detailed statistics for agencies and institutions of higher education. Reported Items Gross Pay amount certified has a variance of more than $20,000 from the actual Gross Pay amount certified has a variance of more than $1.00 and was not explained by COB the next day I key a certification late or make a change to a certification after 3:30 on certification day In addition to your review, DOA performs a comparison of CIPPS records and PMIS records each pay period. If exceptions are found, erroneous payments are discovered, or salaries exceed classification limits, your agency will have to provide a written explanation to DOA. Untimely updates to CIPPS or PMIS and insufficient audits can result in your agency being reported.
Pre-Certification ProcessAugust 2011Payroll30 > GUH _____________________________________________________________ ON PYCTF ------ CIPPS PAYROLL CERTIFICATION ------ _ CONTROL AGENCY: 00000 DATE: 00/00/0000 PAGE NO: 0000 THE FOLLOWING PAYROLLS ARE APPROVED FOR PAYMENT: PAY VOUCHER PAY PERIOD PERIOD CHECK CURRENT PAY LOGON TIME CO # FREQ NUMBER PER BEG DT END DT DATE GROSS TYP ID ENTERED 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ 00000 00 ________ 0 00000000 00000000 00000000 0000000.00 _ ______ ________ I CERTIFY THAT I HAVE REVIEWED THE REFERENCED PAYROLL DATA IN ACCORDANCE WITH PROCEDURES OUTLINED IN THE CAPP MANUAL, VOL 1, SECTION 50810, AND REASONABLY BELIEVE THAT THESE TRANSACTIONS ARE NECESSARY, ACCURATE AND APPROPRIATE.
Data Entry Process“High Risk” Entry Item #9:Incorrect certification request on PYCTFKey your certification dates as the edit was keyed – use Report U104 or Report 2001Don’t key changes on Certification dayDeadline is 3:30 pm on Certification deadline – Don’t Wait! Have a thorough Pre-Certification Audit process Special Pays (Pay Type 9) cannot be entered on the same night a Regular Pay (Pay Type 3) for an agency even if it is for different frequencies. (You can, however edit one frequency and pay the other). Employee cannot have same check date as what is on H0BES Use Online Pending screens (H1K01, H1K02, H1K03) to get the Sequence Number when deleting on HSBFM
Data Entry ProcessQuestions/Comments?
Pre-Certification ProcessCAPP Topic Guidance:Batch Processing and Balancing: http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/50130.pdfPre-Certification Activities: http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/50810.pdfPayroll Audit Tool (PAT): http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/70735.pdf October 2014 Payroll 33
Pre-Certification ProcessOctober 2014Payroll34
Pre-Certification ProcessAugust 2011Payroll35
Pre-Certification ProcessAugust 2011Payroll36
August 2011Payroll37
August 2011Payroll38
August 2011Payroll39 4 APPLES
Pre-Certification ProcessAugust 2011Payroll40
Pre-Certification ProcessOctober 2014Payroll41 Gross Pay Reconciliation
Pre-Certification ProcessOctober 2014Payroll42 PAYROLL RECONCILIATION SHEET AGY NUMBER: 0 PAY PERIOD: 8/10-24/14 Amount Certified Last Payroll 146,668.02 Minus: Previous Wage Payroll 0.00 Minus: Previous Imputed Life (1,195.26) Minus: Previous Sick Leave Payouts 0.00 Minus: Previous Annual Leave Payouts 0.00 Minus: Previous Classified Overtime 0.00 Minus: Previous Invol Sep (2,024.55) Minus: Previous VSDP 0.00 Minus: Previous Partial Payments to Term EES (2,224.45) Add: Previous Dockings LWOP 138.59 Add: Previous VSDP Adj Amount to Reg Pay 0.00 crosswalk Salaried Base Pay Previous Payroll 141,362.35 141,362.35 0.00 All of this information came from the previous reconciliation spreadsheet
Pre-Certification ProcessOctober 2014Payroll43 Salaried Base Pay Previous Payroll 141,362.35 141,362.35 Permanent Classified Base Pay Adjustments (List Names) New Salaried: Eff Date 0.00 Terminated Classified Employees: Eff Date Old Semi Increase/Decrease 0.00 0.00 Salary Increases: Eff Date Old Semi New Semi Increase/Decrease Don Johnson 8/24/09 2827.25 3,166.50 339.25 0.00 0.00 0.00 339.25 Adjusted Base Pay Classified Payroll 141,701.60 All of this data can be gleaned from the Rate/Amount Change Comparison in PAT
Pre-Certification ProcessOctober 2014Payroll44 Adjusted Base Pay Classified Payroll 141,701.60 Partial Pay to Term EES Semi Partial 0 0.00 Dock Semi Sal PP Docked PP Hrs Hrs to Dock Total Dock Notes D. Johnson -308.4 88 -308.4 Salary effect mid period 88 0 -308.4 -308.40 VSDP Items: Semi Sal Reg Pay VSDP ADJ AMT 0 0 0.00 0.00 0 0 0 0 Add: Imputed Life Current Payroll 0.00 Add: Current Overtime Classified Payroll 0.00 Add: Current Involuntary Sep 2,024.55 Add: Current Wage Payroll 0.00 Add: Current Leave Payouts 5,309.42 7,333.97 8456.02 Current Payroll Certified Amount 148,727.17 Amount Certified on PYCTF 148,727.16 Differences (0.01) These items should be visible on the Salaried/Reg. Pay Comparison Report in PAT. These items should be visible on the Company Total page of the Report 10
Pre-Certification ProcessWage Employee Hours:Hours that are keyed manually should be balanced by using a spreadsheet with the employee’s pay rateTAL agencies can download the hours from TALThis spreadsheet can be compared to PAT Wage Employee Report 10 Summary October 2014 Payroll 45
Pre-Certification ProcessOvertime Hours:Hours that are keyed manually should be balanced by using a spreadsheet with the employee’s pay rateTAL agencies can download the hours from TALWhy? October 2014 Payroll 46
Pre-Certification ProcessVSDP Benefits/Dockings/Leave Payouts:Have the person responsible for the review of the VSDP Benefits/Dockings key them to a spreadsheet after they have reviewed the source documents.The totals can be passed on to the person certifying the payrollUse our spreadsheets October 2014 Payroll 47
Pre-Certification ProcessDeductions:A spreadsheet can be keyed comparing last pay period deduction totals to current. PAT Deduction Comparison Report will show detail for differencesPerson responsible for Garnishments can maintain spreadsheet of reviewed amounts and provide total to certifier October 2014 Payroll 48
Pre-Certification ProcessDeductions:If the deduction is interfaced, the third party administrator is the source. Do not make changes without their authorization October 2014 Payroll 49
Pre-Certification ProcessDeferred Compensation:Transfer form no longer exists. Employees who move from one agency to another must contact ICMA again to restart deduction.This is true also for Hybrid Voluntary ContributionsBe “suspicious” of dollar changes in second half of month (PAT Deduction Comparison) October 2014 Payroll 50
Pre-Certification ProcessDeferred Compensation:Wage employees must enroll directly with ICMA.Hybrid Employees are not automatically enrolledEmployees that wish to defer leave payouts must be enrolled at least one month prior to the payment October 2014 Payroll 51
Pre-Certification ProcessCash Match:Hybrid Employees not contributing 4% voluntary are not eligible for cash match.Recent changes – cash match works in tandem with deductions #38 and #39 – do not turn off frequency when employee on LWOPReportwriter 906 is helpful October 2014 Payroll 52
Pre-Certification ProcessInterface Reports that MUST be dealt with manually:Items that cannot be added to CIPPS via the interface must be entered manuallyCare must be taken when entering these items Error reports are essential October 2014 Payroll 53
Pre-Certification ProcessImputed Life:You can monitor changes that occur monthly and verify those that occur in second pay period.Reportwriter 852 is very helpful hereYou should download birthdates regularly and check for birthdates that are recent (example 2014) October 2014 Payroll 54
Pre-Certification ProcessPre-Certification CONTBASE Recon:HR/Snapshot Certifier should be able to pass along the monthly contributions basis from the previous month.Report U180/U181 for PMIS agencies will identify CONTBASE changes that occurred for the month. October 2014 Payroll 55
Pre-Certification ProcessPre-Certification CONTBASE Recon:Take verified CONTBASE amount from Report 10 total and multiply by .0119 (current rate) and balance to Group Insurance Deduction #120. October 2014 Payroll 56
Pre-Certification ProcessPre-Certification CONTBASE Recon:Subtract ORP Employee CONTBASE and “G” Employee CONTBASE from verified CONTBASE amountMultiply by 5% and balance to total of Deduction #12 – Employee Retirement and Deduction #15 – EE Mandatory HybridReport 14 Deductions Not Taken register can be helpful in identifying differences. October 2014 Payroll 57
Pre-Certification ProcessPre-Certification CONTBASE Recon:Hybrid Voluntary Contributions (Deduction #16) should only change once a quarter at the top of the quarter (unless one of the employees had a salary change)Voluntary Contributions cannot be reconciled the same way as other retirement contributions because there is a mix of percentages involved. October 2014 Payroll 58
Pre-Certification ProcessQuestions? October 2014 Payroll 59
Post-Certification ProcessGross Pay Differences – U118PAT Report 10 ComparisonReport 2007 – Recycled Pending TransactionsReport 14 – Deductions Not TakenReport U029 – GLI Default Report 59 – Gross Pay Limit Exceeded Report 831 – Direct Deposit Mandate October 2014 Payroll 60
Post-Certification ProcessOutgoing funds/checks in CIPPS other than Gross:Net Pay (Deduction Refunds)Third Party Checks (U003)Checks Issued Register (Garnishments, etc) October 2014 Payroll 61
Post-Certification ProcessOther Post Certification Reviews – Reports not generated until later:U149 Cash Match Discrepancy ListingU075 Flexible Reimbursement Error Report October 2014 Payroll 62
Post-Certification ProcessQuestions? October 2014 Payroll 63
CIPPS to CARS ReconciliationCathy McGillAsst. Director State Payroll Operations October 2014 Payroll 64
“10 to 33” ReconEarly deduction is the key!The only valid reason for uncollected FICA on the W-2 is?Uncollected FICA that occurred from Imputed Life for terminated employeesRead the U092 summary page to understand why exception appears on U093 ReportControl Totals are available in PAT October 2014 Payroll 65
Quarterly ReconIf you did your job during “10 to 33” Recon – this should be easyBalance Report 56 and Report 880 totals to Control TotalsIf you review Report 14 during the year, you should not have invalid exceptions on Report 881 for Uncollected FICAVEC Reporting – we send what is on U057 to VEC. You have to make adjustments if you have FIPS code errors on U090. October 2014 Payroll 66
Quarterly ReconQuestions? October 2014 Payroll 67