Payroll Auditing and Review Training October 2014

1. Payroll Auditing and Review Training October 2014

2. Overview • 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 Payroll

3. Risks Associated with Payroll • 11 Costly Payroll Mistakes: • Failing to deposit withheld income taxes, FICA taxes and employer matching amounts on time • Under-withholding and failing to match required amounts • Failing to pay or under-paying state and federal unemployment taxes Payroll

4. Risks Associated with Payroll • 11 Costly Payroll Mistakes: • Failing to process wage garnishments correctly • Making unauthorized deductions from an employee’s pay • Treating some workers as independent contractors when they are not Payroll

5. Risks Associated with Payroll • 11 Costly Payroll Mistakes: • Failing to include the value of awards, bonuses, and fringe benefits (when required) in the employee’s taxable income • Using bogus or incorrect Social Security numbers for employees on their W-2 Forms and failing to accurately complete I-9 Forms. Payroll

6. Risks Associated with Payroll • 11 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 employees • Failure to abide by state laws Payroll

7. Risks Associated with Payroll • How to Avoid these Costly Mistakes: • Awareness • Respect for the Position • Cooperation and Communication • Deference to the Proper Authority • Thorough Pre-Certification and Post-Certification Audits Payroll

8. Risks Associated with Payroll • Questions/Comments Payroll

9. Reports and Tools • Accessing CIPPS Reports • Reportline Security Form: http://www.doa.virginia.gov/Payroll/Forms/PaylinePATSecurityForm.pdf • PAT (Payroll Audit Tool) Security Form:http://www.doa.virginia.gov/Payroll/Forms/PaylinePATSecurityForm.pdf Payroll

10. Reports and Tools • Reportline: • CIPPS Reports • Report 1006 or 1010 - Changes made to the CIPPS Masterfile by Operator ID. • Report 1004 - Batch transactions keyed • Report 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) Payroll

11. Reports and Tools Payroll

12. Reports and Tools Payroll

13. Reports and Tools Payroll

14. Reports and Tools Payroll

15. Reports and Tools • PAT (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 Payroll

16. Reports and Tools PAT (Payroll Audit Tool) Reports Payroll

17. Reports and Tools • Questions/Comments Payroll

18. Payroll Life Cycle

19. Data Entry Process • “High Risk” Entry Item • Manually entered • Requires precision for one or multiple fields in CIPPS • Potential to cause a legal or financial impact to the employee or the agency • Incorrect entry is not easily detected using reports and reconciliations

20. Data Entry Process • “High Risk” Entry Item #1: • Tax Withholding Forms • An unsigned form or a form with conflicting information can make it invalid • If the FIT/SIT Status indicator is not “6” the additional amount specified will not process • Employees 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

21. Data Entry Process • “High Risk” Entry Item #2: • Direct Deposit Form • If the account or routing number is keyed incorrectly, you won’t know until the employee calls on payday • The account/routing number could be correct, but the utility field on H0ZDC could be wrong • Notice at the bottom of the direct deposit form – “CIPPS Updated by” – “Reviewed by”

22. Data Entry Process • “High Risk” Entry Item #3: • Garnishments, Wage Assignments, Child Support • We provide best practice examples in CAPP Topic 50405, but there are multiple fields involved • It is best to review each garnishment amount on the Report 10 to ensure the amount withheld meets federal and state guidelines • Who signs for your garnishments? • Was this ordered by a court?

23. Data Entry Process

24. Data Entry Process • “High Risk” Entry Item #4: • Deductions for 457 or 403(b) Plan • Deferred Comp/Annuities • Hybrid Retirement Plan – Only establish in CIPPS if Member Record is in VNAV • Employer Cash Match deductions for these plans

25. Data Entry Process • “High Risk” Entry Item #5: • Tax Rate of Special Pays • IRS 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.

26. Data Entry Process • “High Risk” Entry Item #6: • Incorrect HSBFM Batch Deletions • DELETE ONLY THOSE TRANSACTION S THAT ARE IBC OR IN 700, 800, 900 SERIES • MANUAL PAYSETS MUST BE REVERSED!! DO NOT DELETE!! • Only key in Sequence Number 1 – let overnight process fill in Sequence Number 2 • Have someone review your work!

27. Data Entry Process • “High Risk” Entry Item #7: • Deduction Refunds and Manual Paysets • When refunding a pretax item to an employee who will receive no additional funds – reduce by the amount of FICA taxes due • When 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!

28. Data Entry Process • “High Risk” Entry Item #8: • Incorrect/Omitted edit request on PYEDT • Failure to request an edit can cause issues during the pre-certification process • Difficult 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

29. Pre-Certification Process • 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. Payroll

30. Pre-Certification Process • > 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. Payroll

31. Data Entry Process • “High Risk” Entry Item #9: • Incorrect certification request on PYCTF • Key your certification dates as the edit was keyed – use Report U104 or Report 2001 • Don’t key changes on Certification day • Deadline 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

32. Data Entry Process Questions/Comments?

33. Pre-Certification Process • CAPP Topic Guidance: • Batch Processing and Balancing: http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/50130.pdf • Pre-Certification Activities: http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/50810.pdf • Payroll Audit Tool (PAT): http://www.doa.virginia.gov/Admin_Services/CAPP/CAPP_Topics/70735.pdf Payroll

34. Pre-Certification Process Payroll

35. Pre-Certification Process Payroll

36. Pre-Certification Process Payroll

37. Payroll

38. Payroll

39. 4 APPLES Payroll

40. Pre-Certification Process Payroll

41. Pre-Certification Process • Gross Pay Reconciliation Payroll

42. Pre-Certification Process All of this information came from the previous reconciliation spreadsheet Payroll

43. Pre-Certification Process All of this data can be gleaned from the Rate/Amount Change Comparison in PAT Payroll

44. Pre-Certification Process 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 Payroll

45. Pre-Certification Process • Wage Employee Hours: • Hours that are keyed manually should be balanced by using a spreadsheet with the employee’s pay rate • TAL agencies can download the hours from TAL • This spreadsheet can be compared to PAT Wage Employee Report 10 Summary Payroll

46. Pre-Certification Process • OvertimeHours: • Hours that are keyed manually should be balanced by using a spreadsheet with the employee’s pay rate • TAL agencies can download the hours from TAL • Why? Payroll

47. Pre-Certification Process • VSDP 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 payroll • Use our spreadsheets Payroll

48. Pre-Certification Process • Deductions: • A spreadsheet can be keyed comparing last pay period deduction totals to current. • PAT Deduction Comparison Report will show detail for differences • Person responsible for Garnishments can maintain spreadsheet of reviewed amounts and provide total to certifier Payroll

49. Pre-Certification Process • Deductions: • If the deduction is interfaced, the third party administrator is the source. Do not make changes without their authorization Payroll

50. Pre-Certification Process • Deferred 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 Contributions • Be “suspicious” of dollar changes in second half of month (PAT Deduction Comparison) Payroll