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Pay Files - 2008 Internal Audit - December 2008

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2008 INTERNAL AUDIT PAY FILES December 2008 A.F. (Tony) Mitchell Internal Audit Advisor Pay Files Audit 2008 General Outline A) Reviewed with Group Leader, Compensation Operations the tests performed by the Auditor General in prior years. B) Reviewed schedules provided by the group Leader - Payroll Description - System Description - Schedule of 2007 Hires and Terminations - Schedule of Weekly Hours 2007 - 2008 (Q1 and Q2) - Random Overtime Sample Dec 31 2007 year end - Schedule of delayed Time Sheets - T4 Summary Data 2007 Reviewed Collective Agreement C) Reviewed Process for - Adding employees - Terminating Employees - Changing Pay Grades – See summary from JJ - Interviewed the Group Leader and 2 of the Compensation Advisors - Viewed and questioned actual actions performed by the Group Leader and the compensation Advisors D) Performed detailed review of Overtime hours charged across Business Units at the Board during 2008 - Gained access to the TIME system from the Group Leader - Reviewed, by BU, hours and patterns of O/T charged and approved - Reviewed large sample of O/T claims approved - Interviewed Operations and Applications Business Unit Leaders and a selection of Team Leaders in both OPS and APPS o Developed and used standard questionnaire o Queried BUL’s and T/L’s as to possible improvements in process - Interviewed sample of ...
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2008 INTERNAL AUDIT
PAY FILES
December 2008
A.F. (Tony) Mitchell
Internal Audit Advisor
Pay Files Audit 2008
General Outline
A)
Reviewed with Group Leader, Compensation Operations the tests performed by
the Auditor General in prior years.
B)
Reviewed schedules provided by the group Leader
-
Payroll Description
-
System Description
-
Schedule of 2007 Hires and Terminations
-
Schedule of Weekly Hours 2007 - 2008 (Q1 and Q2)
-
Random Overtime Sample Dec 31 2007 year end
-
Schedule of delayed Time Sheets
-
T4 Summary Data 2007
Reviewed Collective Agreement
C)
Reviewed Process for
-
Adding employees
-
Terminating Employees
-
Changing Pay Grades – See summary from JJ
-
Interviewed the Group Leader and 2 of the Compensation Advisors
-
Viewed and questioned actual actions performed by the Group Leader and the
compensation Advisors
D)
Performed detailed review of Overtime hours charged across Business Units at
the Board during 2008
-
Gained access to the TIME system from the Group Leader
-
Reviewed, by BU, hours and patterns of O/T charged and approved
-
Reviewed large sample of O/T claims approved
-
Interviewed Operations and Applications Business Unit Leaders and a
selection of Team Leaders in both OPS and APPS
o
Developed and used standard questionnaire
o
Queried BUL’s and T/L’s as to possible improvements in process
-
Interviewed sample of employees claiming large hours of overtime
E)
Results, Findings, Observations and Recommendations
A)
Prior to commencing the audit the Group Leader, Compensation
Operations was interviewed as to the scope of the annual Cost Recovery
audit performed by the Auditor General.
The AG’s audit is thorough and
focused on overall reasonableness.
After this interview and considering
all risks it was decided to concentrate Internal Audit efforts on:
i.
Testing the controls in place for hiring and terminating
employees and for salary actions (promotions, annual
increments) during 2008,
ii.
Reviewing timeliness of timesheet submissions and approvals,
iii.
Examining the process of claiming and approving Overtime
payments which was the main focus of the audit.
B)
The documents and schedules listed on the General Outline page were
obtained from Compensation.
The Payroll Description and System
Description are attached to this report but the other listed documents are
confidential and will remain in Internal Audit files.
a.
The Payroll and Time System Descriptions are adequate.
The
descriptions are updated each year for the Cost Recovery audit with
changes highlighted from year to year.
b.
Reviewed the schedule of 2007 Hires and Terminations and tested
system inputs.
No issues were identified.
c.
Reviewed the schedule of Weekly Hours for unusual items.
No issues
identified.
d.
Reviewed schedule of delayed Time sheets and discussed with
Compensation.
Improvements have been made in recent years.
e.
The T4 Summary Data for 2007 was perused for unusual items (such
as previously terminated employees) and for reasonableness.
No
issues were identified.
f.
The following policies/procedures were also reviewed:
i.
NEB Salary Determination Guidelines
ii.
Collective Agreement – NEB & PIPSC
iii.
Time System Description
iv.
Hours of Work and Business Hours Policy
v.
Treasury Board Secretariat – Maximum Hours of Work Policy
vi.
An excerpt from the Canada Labour Code
C)
In testing the processes for adding, terminating and changing pay grades,
the Group Leader, Compensation Operations and Compensation Advisors
were interviewed as to their respective roles and their knowledge of policy
and processes.
Live actions were examined as the Group Leader,
Compensation Operations approved and implemented changes to pay
grades and added and terminated employees from the system.
Controls
are well defined and are fully understood by the Group Leader and the
Advisors.
Any variance from the process or lack of required information
is referred back to the appropriate person for corrective action before any
action is undertaken.
It should be especially noted that not only is the
process excellent and documented but also that the Group Leader and the
Advisors are thorough in their application of the process.
Checks and re-
checks of each other’s inputs are diligently implemented.
D)
The control and use of overtime represented the most effort and time in
this audit.
Various aspects of overtime were examined.
Not only was the
amount, nature and business unit usage of overtime examined, particular
attention was paid to the process by which overtime was approved and
paid.
a.
For the period January1, 2008 to October 29, 2008 13,800 hours of
overtime was incurred with the majority of hours charged in
Operations (5785 hours) and Applications (2960 hours).
Most of
Operations overtime related to audits and inspections.
Applications
overtime was mostly related to hearings in progress.
b.
The complete list of overtime by individual was examined and, on a
test basis, individual overtime claims were examined for patterns.
Special attention was paid to individuals who had a pattern of overtime
claims in the range of 20+ hours per week.
c.
In examining the list, unusual patterns of overtime usage were also
examined.
This included individuals who had small amounts of
overtime hours in per week over a longer period of time and not
related to any particular project.
An examination of the explanations / reasons noted on Time Sheets for overtime was
undertaken.
In this extended test it was confirmed that all Time Sheets had been
authorized.
A short questionnaire was developed and the Business Unit Leaders in Operations and
Applications and a large sample of Team Leaders were interviewed as to their practices
in regard to pre-authorizing and authorizing overtime.
The questionnaire and interviews
also tested the attention and importance leaders assign to safety and quality of life issues
with respect to overtime usage
E)
Results, Findings, Observations and Recommendations
Positive and full cooperation was provided by staff in Compensation and
in Operations and Applications.
All staff were generous with their time
and suggestions.
Overtime
Discussed with leaders the need for overtime and whether there
means for reducing the number of hours on a year over year basis.
It was the general belief that while some hours were as a result of
staffing issues that overtime with respect to inspections and audits
in Operations and with respect to hearings in Applications were
demand driven.
In the case of inspections, inspectors were
generally required to be on site while the contractor was working
and that was then followed up by report writing in the evening and
meetings with the contractors prior to the start of the work day the
next morning.
Staff involved agreed with this need.
Leaders had concerns that there were potential safety and health
issues among staff with heavy overtime demands.
All tried to
manage these issues mainly by close contact with those staff.
Staff
interviewed generally, with one exception, had no concerns and
managed their own time very well, with among other things,
driving long distances after a full day.
The one exception also
volunteered that the amount of overtime earned was a large part of
the reason he liked his role.
Pursued with Leaders the question of “Overtime: Burden or
Benefit?”
The response was generally neutral but overtime is held
out as a benefit often when trying to hire professionals from
industry, i.e., while the NEB can not always match the
compensation in industry the NEB does pay for overtime.
Correspondence between the Compensation Advisors and
employees or Team Leaders was reviewed.
Team Leaders rely on
the Compensation Advisors to catch any claims that do not follow
policy or that are otherwise unusual.
For example in one case an
employee had a unique pattern of hours claimed including earning
banked time and claiming lots of overtime on a consistent basis.
At the same time for any days off he was using banked time, not
taking any vacation time and requesting payout of his accrued
vacation.
The Hours of Work Policy states that banked time
should not normally result in any additional costs such as vacation
payout or overtime.
While this may have been a case of a new
employee being a very busy person and not being aware of the
rules, it might have been an attempt to “work the system” and
claim more than entitled hours.
This was only caught and
corrected when the pattern was noticed and reported to the Team
Leader by the Group Leader, Compensation Operations.
Recommendation
While the should continue their review of all TIME
reported prior to final approval, Team Leaders need to be
reminded that they do approve time sheets and therefore
they have the primary responsibility for approving all
payments from the payroll system.
All Leaders interviewed insisted on pre-approving any overtime by
staff reporting to them.
There was no formal or consistent process,
with most expecting an email from the staff member, but in some
cases approval was given verbally.
If overtime was to exceed the
amount of time pre-authorized, Leaders expected to be updated but
were not too concerned with minor variances.
Observation
Based on need, there is no advantage seen to
recommending a more formal process for pre-approval of
overtime.
TIME has the facility to record the justification / reason for
overtime claimed, but this is used by some staff some of the time
and not used by others. It would be very difficult to perform a
qualitative analysis of overtime usage due to the haphazard nature
of the explanations.
Recommendation
It is recommended that TIME require an explanation for
each period in which overtime is claimed by a staff
member.
The software has this facility and Leaders see
value in having this function activated.
Observation
Most employees now receive their pay bi-weekly by means of electronic
deposit to their bank account.
At the same time enveloped paper copies of
the pay stub are delivered to Finance where they are sorted by team.
On
the day the pay is deposited, Finance delivers the pay stubs to the
appropriate team administrative assistant who then hand delivers the stubs
to each employee in their respective teams.
If that staff member is not in
their office, the assistant will send an email to the employee directing
them to retrieve the pay stub from the assistant.
This extended process can be time consuming and adds no value either for
control purposes, confidentiality or otherwise.
Recommendation
Pay stubs are available electronically at
http://www.tpsgc-pwgsc.gc.ca/remuneration-
compensation/txt/index-eng.html
It is recommended that staff be directed to that site to
retrieve pay stubs.
In the alternative, instead of the
PWGSC delivering the pay stubs to Finance, deliver them
(as noted they are in window envelopes) to the mail room
for sorting and delivery to staff.
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