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Audit Report No. 263
March 30, 1998
We performed an audit of the Commission's payroll system between January and November 1997. We found that most management controls were generally effective and operations were conducted efficiently. Our recommended improvements are summarized below and described in the Audit Results section.
The Comptroller's Office should consider eliminating a manual spreadsheet which duplicates automated payroll data; ensure that all employees have state taxes withheld; make one employee responsible for garnishments; remind supervisors to review the final payroll report before the payroll is processed; and notify all employees of the cut-off date for processing payroll changes.
The Office of Administrative and Personnel Management should establish a checklist for new employees' withholding options, and ensure that employees are converted to the GS pay plan when appropriate.
SCOPE AND OBJECTIVES
Our objective was to determine if the payroll system was efficient and effective, and in compliance with General Accounting Office (GAO) guidance and Commission policies and procedures. During the review, we interviewed payroll staff in the Office of the Comptroller, Office of Administrative and Personnel Management, and the Central and Pacific Regional Offices. We reviewed selected payroll documentation and performed limited tests of management controls.
Our review was performed between January and November 1997 in accordance with generally accepted government auditing standards.
The Commission's payroll system, known as the Pay, Time and Leave (PTL) system, receives information from several sources. The Office of Administrative and Personnel Management (OAPM), through its Personnel Resource System (PRS), provides information on new employees' salaries and withholdings, and changes to current employees' salaries and withholdings (for example, as a result of promotions, or open seasons in the Thrift Savings Plan and the Health Benefits Plan). Employees submit changes to their tax withholdings directly to the Office of the Comptroller, while time and attendance data is submitted by timekeepers through the Enhanced Time and Attendance (ETA) system. Information on garnishments of employee salaries is provided by the Office of the General Counsel.
The Office of the Comptroller has overall responsibility for the accuracy and timeliness of payroll data and payments. A Pay and Leave Section within that office has day to day responsibility for the payroll. Automated payroll processing and related hardware and software are the responsibility of the Office of Information Technology.
To save money and simplify administration, the Commission has decided to out-source payroll processing to another agency, the Department of the Interior. Out-sourcing is tentatively scheduled for May, 1999.
We found that the payroll system was generally efficient and effective, and in compliance with GAO and Commission guidance. Payroll data and payments were generally timely and accurate, and supported by appropriate documentation. We are recommending certain enhancements, as discussed below.
Besides the PTL system (based on the mainframe), the Comptroller's Office maintains a PC-based spreadsheet. When employee payroll records are updated, payroll technicians enter the data in PTL and the spreadsheet. They then reconcile the two records. The purpose of this process is to identify errors and prevent fraud by OIT staff (who do not have access to the spreadsheet).
While the spreadsheet acts as a management control, its maintenance is time-consuming, and involves duplicate data entry. During the reconciliation, the payroll technicians spend some of their time correcting errors in the spreadsheet, which does not improve the accuracy of PTL. The cost of the spreadsheet may exceed its benefits, or cheaper controls could be as effective.
The Comptroller's Office should consider whether the payroll spreadsheet is necessary and cost effective. If not, alternative controls should be implemented.
STATE TAX WITHHOLDING
We obtained a computer print-out of the state tax withholding codes for all Commission employees. Fifteen employees did not have an associated state code, apparently because these employees had not filed the required withholding form.
The Comptroller's Office should require the fifteen employees we identified to file state tax withholding forms.
The Comptroller's Office should implement a control to ensure that new employees timely file a state tax withholding form.
Supervisors are required to review and sign the final time and attendance (T&A) data entered by timekeepers. This review helps ensure that the data are accurate, and supported by appropriate documentation (for example, leave request forms).
We recently reviewed T&A documentation in two regional offices (Audit Nos. 264 and 266). We found seven cases where the supervisor reviewed the T&A data after the date of final payroll processing. In these cases, any errors identified by the review could not be timely corrected, and a subsequent period adjustment would be necessary.
The Comptroller's Office should require supervisors to review the final T&A data before the data are submitted for processing.
GM Pay Calculations
Under the former PMRS incentive pay plan, the salaries of some GM employees were between steps on the GS pay scale. Once the PMRS was discontinued, salary increases (except promotions) for these employees had to be calculated manually by the Office of Personnel and Administrative Management, rather than automatically by the PTL system. GM employees revert to GS status whenever promoted, according to the Office of Personnel Management.
We reviewed a judgment sample of 19 GM employees for promotions after the PMRS was discontinued. We found one instance of a GM employee who was promoted, but not changed to GS status as required.
The Office of Administrative and Personnel Management should establish a procedure to ensure that GM employees are changed to the GS pay plan when they are promoted.
The Office of Administrative and Personnel Management should review all GM employees to determine whether any should be changed to GS status.
The salaries of Commissioners are paid semi-monthly (because they are defined as a semi-monthly amount), and their pay is calculated manually. To save administrative time and expense, another federal agency pays its Commissioners every two weeks through its automated system, then makes an adjustment every quarter (based on the amount of three monthly payments).
If the Commissioners have no objection, the Office of the Comptroller should pay them bi-weekly through PTL, and make a manual adjustment every quarter.
According to the Comptroller's Office, it processes about 40 salary garnishments each pay period, related to debt and tax collection, delinquent child support payments, and other court ordered levies. Currently, garnishments are handled by all technicians in the Payroll Section.
Garnishments can be fairly complex, since each state has different procedures. Also, they involve sensitive information, and require coordination with the Office of the General Counsel, which receives the writ of garnishment. For these reasons, having one senior payroll technician handle all garnishments makes sense.
The Comptroller's Office should consider assigning all garnishments to one senior payroll technician.
EMPLOYEE INITIATED CHANGES
Employees initiate many payroll changes by submitting the appropriate form to the Comptroller's Office. These changes including health and life insurance updates, tax withholdings, and bond allotments.
According to the Payroll Section, many employees call to complain that these changes are not timely. Apparently, they are unaware of the deadline for processing changes (by 5:30 pm of the Wednesday before the pay period ends). Also, they are unaware that they should ask their Administrative Contact to resolve payroll related questions, rather than contacting the Payroll Section directly.
The Comptroller's Office should remind employees of the deadline for processing employee initiated payroll changes.
The Comptroller's Office should remind employees that they should ask their Administrative Contact to resolve payroll questions.
Deductions for New Hires
The Comptroller's Office establishes payroll deductions for new hires based on receipt of the appropriate form from OAPM. If the form is lost or misplaced, no deduction is set up.
In one case, an employee enrolled in health insurance and received benefits for several years, since OAPM notified the health carrier. However, no payroll deductions were made for this employee, because the Comptroller's Office never received the health insurance form. The employee later detected the error and repaid the amount that should have been withheld. If the employee had left the Commission before detecting the error, the employee might never have paid the amount due.
This problem could be avoided if OAPM used a check list for each new employee's deductions. The Comptroller's Office could compare the check list to the attached forms, and identify any missing forms.
OAPM should develop a checklist or other procedure to ensure that the Comptroller's Office is informed of all deductions for new employees.
The Comptroller's Office should remind employees to review their earnings and leave statements for accuracy.