Agenda Item: Report on the Internal Audit of Payroll and Related Human Resources Processes Action Required: □ Approval □ Discussion X Information Motion: N/A Summary: A review of payroll and related human resource processes was included as part of the internal audit schedule for the 2010-11 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 Alignment: 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 Wilfrid Laurier University BOARD OF GOVERNORS BRIEFING NOTE 2010-2011 Meeting Date: January 25, 2011 Agenda Item #: A7 X Public □In-Camera 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
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Agenda Item: Report on the Internal Audit of Payroll and Related Human Resources Processes
Action Required: □ Approval □ Discussion X Information
Motion: N/A
Summary: A review of payroll and related human resource processes was included as part of the
internal audit schedule for the 2010-11 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
Alignment: 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
A.5 Centralized vs. Decentralized Payroll Processing 12
A.6 Timesheet Approvals 13
A.7 Faxed Timesheets 13
A.8 E-mailed 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
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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
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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 2010.
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.
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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.
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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.
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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 2010. In addition, a pilot deployment of web time entry functionality is
expected to be completed by April 2011. 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
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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
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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.
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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 Bi-
weekly or Food Services payroll by the end of summer 2011. This will reduce the number of bi-weekly
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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 2011. Changing monthly pay to bi-weekly will be considered in terms of cost/benefit.