1. Photo by Karl Steinbrenner Payroll Auditing and Review Training October 2014

2. October 2014 Payroll 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

3. Risks Associated with Payroll 11 Costly Payroll Mistakes: 1.Failing to deposit withheld income taxes, FICA taxes and employer matching amounts on time 2.Under-withholding and failing to match required amounts 3.Failing to pay or under-paying state and federal unemployment taxes October 2014 Payroll 3

4. Risks Associated with Payroll 11 Costly Payroll Mistakes: 4.Failing to process wage garnishments correctly 5.Making unauthorized deductions from an employee’s pay 6.Treating some workers as independent contractors when they are not October 2014 Payroll 4

5. Risks Associated with Payroll 11 Costly Payroll Mistakes: 7.Failing to include the value of awards, bonuses, and fringe benefits (when required) in the employee’s taxable income 8.Using 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

6. Risks Associated with Payroll 11 Costly Payroll Mistakes: 9.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. 10.Not preparing and filling W-2 forms, and failing to send them to employees 11.Failure to abide by state laws October 2014 Payroll 6

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 October 2014 Payroll 7

8. Risks Associated with Payroll Questions/Comments October 2014 Payroll 8

9. Reports and Tools Accessing CIPPS Reports Reportline Security Form: http://www.doa.virginia.gov/Payroll/Forms/ PaylinePATSecurityForm.pdf http://www.doa.virginia.gov/Payroll/Forms/ PaylinePATSecurityForm.pdf PAT (Payroll Audit Tool) Security Form: http://www.doa.virginia.gov/Payroll/Forms/ PaylinePATSecurityForm.pdf http://www.doa.virginia.gov/Payroll/Forms/ PaylinePATSecurityForm.pdf October 2014 Payroll 9

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/ReportWriterMatri x.pdf) http://www.doa.virginia.gov/Payroll/ReportWriterMatri x.pdf October 2014 Payroll 10

11. Reports and Tools October 2014 Payroll 11

12. Reports and Tools October 2014 Payroll 12

13. Reports and Tools October 2014 Payroll 13

14. Reports and Tools October 2014 Payroll 14

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 October 2014 Payroll 15

16. Reports and Tools October 2014 Payroll 16 REPORT NAMEDESCRIPTIONCAN BE GENERATEDUSAGE Summary Report 10 for Wage EmployeesGives 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 ListingLists 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 ComparisonCompares 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 ComparisonCompares 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 10Compares 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 SheetGives 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

17. Reports and Tools Questions/Comments October 2014 Payroll 17

18. Payroll Life Cycle PYCTF After the payroll has passed Pre- Certification Review Final Audits Adjustments (Void check/Re- issue) Explanations for Gross Pay Differences CIPPS/PMIS Exceptions Pre-Certification Review Manual Entry Interfaces Batches PYEDT – Edit Request Request Reportwriter Reports Data Entry/ Request Edit Review Edit and Make Corrections Certify Payroll Post- Certification Review

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. “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 October 2014 Payroll 29 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.

30. Pre-Certification Process August 2011 Payroll 30 > 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 _ ______ ________ 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.

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_Servic es/CAPP/CAPP_Topics/50130.pdf http://www.doa.virginia.gov/Admin_Servic es/CAPP/CAPP_Topics/50130.pdf –Pre-Certification Activities: http://www.doa.virginia.gov/Admin_Servic es/CAPP/CAPP_Topics/50810.pdf http://www.doa.virginia.gov/Admin_Servic es/CAPP/CAPP_Topics/50810.pdf –Payroll Audit Tool (PAT): http://www.doa.virginia.gov/Admin_Servic es/CAPP/CAPP_Topics/70735.pdf http://www.doa.virginia.gov/Admin_Servic es/CAPP/CAPP_Topics/70735.pdf October 2014 Payroll 33

34. Pre-Certification Process October 2014 Payroll 34

35. Pre-Certification Process August 2011 Payroll 35

36. Pre-Certification Process August 2011 Payroll 36

37. August 2011 Payroll 37

38. August 2011 Payroll 38

39. August 2011 Payroll 39 4 APPLES

40. Pre-Certification Process August 2011 Payroll 40

41. Pre-Certification Process October 2014 Payroll 41 Gross Pay Reconciliation

42. Pre-Certification Process October 2014 Payroll 42 PAYROLL RECONCILIATION SHEET AGY NUMBER:0 PAY PERIOD:8/10-24/14 Amount Certified Last Payroll146,668.02 Minus:Previous Wage Payroll0.00 Minus:Previous Imputed Life(1,195.26) Minus:Previous Sick Leave Payouts0.00 Minus:Previous Annual Leave Payouts0.00 Minus:Previous Classified Overtime0.00 Minus:Previous Invol Sep(2,024.55) Minus:Previous VSDP0.00 Minus:Previous Partial Payments to Term EES(2,224.45) Add:Previous Dockings LWOP138.59 Add:Previous VSDP Adj Amount to Reg Pay0.00 crosswalk Salaried Base Pay Previous Payroll 141,362.35 0.00 All of this information came from the previous reconciliation spreadsheet

43. Pre-Certification Process October 2014 Payroll 43 Salaried Base Pay Previous Payroll 141,362.35 Permanent Classified Base Pay Adjustments (List Names) New Salaried:Eff Date 0.00 Terminated Classified Employees: Eff DateOld SemiIncrease/Decrease 0.00 Salary Increases: Eff DateOld SemiNew SemiIncrease/Decrease Don Johnson8/24/092827.253,166.50339.25 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

44. Pre-Certification Process October 2014 Payroll 44 Adjusted Base Pay Classified Payroll 141,701.60 Partial Pay to Term EES SemiPartial 00.00 Dock Semi SalPP Docked PP HrsHrs to Dock Total DockNotes D. Johnson-308.488-308.4 Salary effect mid period 880 -308.4-308.40 VSDP Items: Semi SalReg PayVSDP ADJ AMT 0 00.00 0000 Add: Imputed Life Current Payroll0.00 Add: Current Overtime Classified Payroll0.00 Add: Current Involuntary Sep2,024.55 Add: Current Wage Payroll0.00 Add: Current Leave Payouts5,309.427,333.978456.02 Current Payroll Certified Amount 148,727.17 Amount Certified on PYCTF148,727.16 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

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 October 2014 Payroll 45

46. Pre-Certification Process Overtime 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 Why? October 2014 Payroll 46

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 October 2014 Payroll 47

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 October 2014 Payroll 48

49. Pre-Certification Process Deductions: If the deduction is interfaced, the third party administrator is the source. Do not make changes without their authorization October 2014 Payroll 49

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) October 2014 Payroll 50

51. Pre-Certification Process Deferred Compensation: Wage employees must enroll directly with ICMA. Hybrid Employees are not automatically enrolled Employees that wish to defer leave payouts must be enrolled at least one month prior to the payment October 2014 Payroll 51

52. Pre-Certification Process Cash 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 LWOP Reportwriter 906 is helpful October 2014 Payroll 52

53. Pre-Certification Process Interface Reports that MUST be dealt with manually: Items that cannot be added to CIPPS via the interface must be entered manually Care must be taken when entering these items Error reports are essential October 2014 Payroll 53

54. Pre-Certification Process Imputed Life: You can monitor changes that occur monthly and verify those that occur in second pay period. Reportwriter 852 is very helpful here You should download birthdates regularly and check for birthdates that are recent (example 2014) October 2014 Payroll 54

55. Pre-Certification Process Pre-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

56. Pre-Certification Process Pre-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

57. Pre-Certification Process Pre-Certification CONTBASE Recon: Subtract ORP Employee CONTBASE and “G” Employee CONTBASE from verified CONTBASE amount Multiply by 5% and balance to total of Deduction #12 – Employee Retirement and Deduction #15 – EE Mandatory Hybrid Report 14 Deductions Not Taken register can be helpful in identifying differences. October 2014 Payroll 57

58. Pre-Certification Process Pre-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

59. Pre-Certification Process Questions? October 2014 Payroll 59

60. Post-Certification Process Gross Pay Differences – U118 PAT Report 10 Comparison Report 2007 – Recycled Pending Transactions Report 14 – Deductions Not Taken Report U029 – GLI Default Report 59 – Gross Pay Limit Exceeded Report 831 – Direct Deposit Mandate October 2014 Payroll 60

61. Post-Certification Process Outgoing funds/checks in CIPPS other than Gross: Net Pay (Deduction Refunds) Third Party Checks (U003) Checks Issued Register (Garnishments, etc) October 2014 Payroll 61

62. Post-Certification Process Other Post Certification Reviews – Reports not generated until later: U149 Cash Match Discrepancy Listing U075 Flexible Reimbursement Error Report October 2014 Payroll 62

63. Post-Certification Process Questions? October 2014 Payroll 63

64. CIPPS to CARS Reconciliation Cathy McGill Asst. Director State Payroll Operations October 2014 Payroll 64

65. “10 to 33” Recon Early 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 employees Read the U092 summary page to understand why exception appears on U093 Report Control Totals are available in PAT October 2014 Payroll 65

66. Quarterly Recon If you did your job during “10 to 33” Recon – this should be easy Balance Report 56 and Report 880 totals to Control Totals If you review Report 14 during the year, you should not have invalid exceptions on Report 881 for Uncollected FICA VEC 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

67. Quarterly Recon Questions? October 2014 Payroll 67