3. Payroll Compliance Group The mission of the Payroll Compliance Group is to provide guidance and training to State Organizations on the proper administration of Payroll functions; compliance with applicable laws, rules, and regulations; and, maintaining effective internal controls.

4. PAYROLL COMPLIANCE GROUP (PCG) Debra Cormier – State Payroll Manager Debra.Cormier@state.de.us 302-672-5543 Statewide Payroll Regulatory Compliance Payroll Policies Debbie (Hurd) Ide – State Accountant IV Deborah.Ide@state.de.us 302-672-5506 Payroll Planner Internal Control Plans Payroll Administration Training Delivery Adrienne Cobb – State Accountant III Adrienne.Cobb@state.de.us 302-672-5517 Payroll Authorizations Wage Overpayments / Repayments Wilmington City Wage Tax Direct Deposit Participation Funding Reconciliations

5. Resources for Payroll Officers Division of Accounting Website http://accounting.delaware.gov/payroll_comp.shtml PCG Policies Explains “Why”… Rules, Regulations, and Laws PCG Procedures Covers “How”… Step-By-Step Guidance PCG Bulletins Focuses on IRS Regulations and Delaware Code Response to Organization Inquiries Conclusion of Compliance Examinations Reviewed Annually for Regulatory Changes PCG Memos and Alerts

6. Resources for Payroll Officers Budget and Accounting Policy Manual (BAM) http://www.budget.delaware.gov/accounting- manual/account-manual.shtml Coming Soon: Payroll Compliance Chapter 14 PHRST Website http://extranet.phrst.state.de.us/ FSF Website http://extranet.fsf.state.de.us/ Internal Revenue Service Website www.irs.gov

7. PAYROLL FORUM MISSION By drawing on the collective experience of members Discuss recent developments, initiatives & practices in Payroll. Leverage the hard-won lessons of seasoned professionals. Sharpen skills thru exposure to new ideas and peer networking. Promote the personal professional growth of participants. Improve operational efficiency and enhance internal controls. Ensure regulatory compliance is “Priority 1 ”. Educate.

8. COMPETING PRIORITIES Tax Laws Pay Confirm Meetings Controls System Changes Funding Who looks this relaxed while juggling all this???

11. Rule #1 Always Talk About Forum

12. Rule # 2 Forum is a Judgment-Free Zone

13. Rule #3 Forum Participants are Fearless Don’t let the little voice in your head that’s trying to stifle your real voice win. This is a safe environment – remember Rule #2!

14. Rule #4 Payroll Forum is about Sharing! Here’s how we solved that issue… That’s a great idea! Did you hear about the latest tax law? How did you get the word out? Does that apply to my employees? I’m not sure. Let’s discuss it with the group. When is it effective? I have to let my boss know! Oh, great… I love Forum!

15. Rule # 5 At the Payroll Forum… We Don’t Shoot The Messenger!

16. PCG Especially if it’s ME!

17. Rule #6 There’s No Crying in Payroll! in Payroll!!

18. PCG INITIATIVES

19. 2012 – 2013 PCG Initiatives Payroll Administration Training Currently Developing Chapters Coming in 2014 ! Statewide Compliance Examinations Fringe Benefits Educational Assistance Programs Internal Control Plans New Survey & Template Random Field Audits Wage Overpayment/Repayment Policy & Procedure Payroll Forum!!!

20. PAYROLL ADMINISTRATION TRAINING TOPICS Over 20 Chapters of Content In The Works: Payroll Repayments Paychecks and Advices Internal Control Plans Worker Classification Form W- 4 Coming: Taxation Fringe Benefits Payroll Calculations More!

21. BREAK

22. Fringe Benefits Examination Statistics

23. UNREPORTED FRINGE BENEFITS BY TYPE

24. TAX EXPOSURE CALENDAR YEAR TOTALTAX RATE 2009341,437.0040.3% 2010539,292.0040.3% 2011454,193.0038.3% 2012262,250.0038.3% Total1,597,172.00 Taxable Non-Wage Compensation 1,597,172.00 Income Tax & OEC’s40.3% or 38.3% Taxes Owed$629,332.00

25. Open Discussion

26. Fringe Benefits Where does the IRS Start?

27. Everything is Taxable Unless a specific IRS exemption applies, all payments or items of value given to employees are considered compensation, and are subject to federal, state, and local (if applicable) income tax and associated OECs. Fringe benefits include any compensation other than cash wages. The Internal Revenue Code (IRC) provides exclusions for numerous forms of noncash compensation provided to employees. Working Condition Fringe Benefits are excludable from taxable income.

28. Fringe Benefits Examination Uniforms & Clothing PCG Bulletin 2013_002 – Uniform And Clothing Allowance Workshops Coming Meals PCG Bulletin 2012_004 – Meal Provisions Employee Gifts/Awards PCG Bulletin 2012_002 – Employee Awards State-Owned Housing PCG Bulletin Coming

29. Educational Assistance Examination

30. Educational Assistance Refer to PCG Bulletin 2013_001 Coming: Educational Assistance Model Program Section 127 – Multiple-Job Employees When aggregate reimbursements for non-job-related courses from all State Organizations reach the $5,250 threshold, all future non-job-related course reimbursements from any Organization are taxable. Coming: PCG Policy – Aggregate Reimbursements

31. Payroll Authorizations

32. Improved – Simpler Process: Review Confirmed Reports Compare to FSF Reports Submit Verification email on or Before Payday Done! Establish Base-Line for Effective Internal Controls Organizations can implement additional Internal Controls Audited EVERY Year Keep Your Authorized Signature Cards Current Submit Your Funding Authorizations Timely

33. Wage Overpayments Payroll Repayments

34. Necessary Tools PCG-OVRPAY – Wage Overpayment Policy Rules & Regulations to consider when Recouping Funds PCG-REPAY – Payroll Repayment Procedure Step-by-Step Instructions; Repayment Calculations; Employee Notifications; Repayment Agreements; Record Corrections Supporting Process Forms: Worksheets (Current & Prior Year) Notification of Wage Overpayment Form (Current & Prior Year) Payroll Repayment Form PayBreezeII

35. What’s Changed? Recovering Funds Through PHRST Payroll System: Current Year: Reduce Wages (ARO/Other Earning Code) Prior Year: After-Tax Deduction Code PAYDUE Timely Repayments: < 6 months/Current Year Employee Approvals: Not Required Outstanding Balance Deducted From Final Payout Overpayments > $2500.00 are reported to Secretary of Finance, Attorney General, Auditor of Accounts Employee Notification of Wage Overpayment Form: Explains Overpayment & Outlines Repayment Plan

37. What’s Changed? (cont) Non-Responsive Employees: Begin Recouping Funds on Next Paycheck Alternative Options: Attach wages through a Garnishment Accrue 1 % Interest on outstanding balance Report Unpaid Balance to State of Delaware Tax Refunds and/or Attorney General’s Office

38. Payroll Repayments Any questions, Call Adrienne Cobb, PCG, 672-5517 Importance of Accurate Forms and Repayment Checks Confidence Buster: Over- or Under-Charging an Employee Forms are Used to Correct Records in PHRST System Forms are Used to Correct W- 2 Information

39. Payroll Internal Control Plans

40. Establishes, Maintains, and Assesses Controls in Place to Protect the Integrity of Sensitive Payroll Data Reflects Transparency and Accountability to Taxpayers New Format Used for FY 2014 The PICP Plan The PICP Questionnaire

41. Payroll Internal Control Plans Round 1 – FY 2012 (Plans Only) Just over half complied Plans not Uniform Across the State Segregation of Duties not Apparent on Some Plans Round 2 – FY 2014 (Plans and Questionnaire) 90 % Compliance Plans are More Uniform Across the State Easier to Detail Segregation of Duties

42. Payroll Internal Control Plans What’s next…. Plans and Questionnaires Reviewed & Scored Organizations will be sent Written Reviews Random Organizations will be visited by ICE team

43. Closing Remarks

44. Payroll Officers Must Be Fearless Go Ahead! Poke the Bear! IRS Auditor Status Quo Complacency Payroll

45. Questions

46. Evaluation / Survey How Did This Inaugural Meeting Go? List Topics For Future Meetings Complete Survey