HomeMy WebLinkAboutAdditional wage paymentsAdditional wage payments report #12/13-2 May 2013
Additional wage payments
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Deschutes County,
Oregon
David Givans, CPA, CIA, CITP, CGMA
Deschutes County Internal Auditor
PO Box 6005
1300 NW Wall St, Suite 200
Bend, OR 97708-6005
(541) 330-4674
David.Givans@Deschutes.org
Audit committee:
Gayle McConnell, Chair - Public member
Chris Earnest - Public member
Jean Pedelty - Public member
Greg Quesnel - Public member
Michael Shadrach - Public member
Jennifer Welander - Public member
Anthony DeBone, County Commissioner
Dan Despotopulos, Fair & Expo Director
Scot Langton, County Assessor
Additional wage payments report #12/13-2 May 2013
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Additional wage payments report #12/13-2 May 2013
TABLE OF
CONTENTS:
HIGHLIGHTS
1. INTRODUCTION
1.1. Background on Audit …………..…………………………………………. 1
1.2. Objectives and Scope ………………….………………………………… 1
1.3. Methodology …………………………………….………………………… 2
1.4. Background on Additional Wage Payments ………….……………… 2-3
2. FINDINGS and OBSERVATIONS ……………………….……............… 3-7
3. MANAGEMENT RESPONSES
Department of Personnel………………………………………….........… 8-9
Road Department …………………………………………………….…… 9-10
Deschutes County Sheriff’s Office ……………………………………... 10-11
Additional wage payments report #12/13-2 May 2013
HIGHLIGHTS
What is recommended
Recommendations
include:
develop a policy for
handling lead pay that
extends beyond one
year.
reconsider the need for
the wellness program at
the Sheriff’s Office.
consider adjusting the
employee association
language regarding bi-
lingual pay testing.
Provide the Department
of Personnel with all
supporting
documentation for
additional wage
payments.
Additional wage payments
Why this audit was performed:
Additional wage payments (add pays) come in a variety of categories to compensate employees
for amounts not considered in their base pay. Additional wage payments in FY12 amounted to
over $2 million. As a percentage of gross pay they amounted to 4% of gross wage payments.
These types of costs have not been part of previous internal audits and therefore could benefit
from a review. Computerized procedures can be utilized to extract all relevant data from County
systems.
What was found
The audit indicated there was sufficient documentation for additional wage payments.
There were a couple of circumstances identified that indicated lead pay should be periodically
reviewed. In one case, a Director no longer thought lead pay was warranted. In another
situation, lead pay was being paid when it might have been more appropriately classified as “out
of class” pay. If these came up for periodic review, they may be more quickly addressed.
The Sheriff’s Office has a wellness compensation program that is currently utilized by one
employee. The program has significant documentation requirements. Physical fitness is
encouraged; however the wellness program goals could be improved.
The Deschutes County Sheriff’s Employee Association agreement calls for annual bi-lingual
testing for those paid for those skills. This annual testing requirement is unique to the Sheriff’s
Office. Neither the Personnel Department nor Sheriff’s Office have established annual testing.
For a couple of departments, documentation of some additional pays is retained by departments.
The Personnel Department has not always received copies of the supporting documentation.
Deschutes County Internal Audit
Additional wage payments report #12/13-2 May 2013
Page 1
1.
Introduction
1.1 BACKGROUND ON AUDIT
Audit Authority:
The Deschutes County Audit Committee authorized the audit of the additional wage payments (computerized
procedures) in the revised Internal Audit Program Work Plan for 11/13.
Computerized procedures can be utilized to extract all relevant data from County systems. Payroll
represents a significant expense for the County. Ongoing payroll changes are tested and reviewed by the
County’s external auditors. These are also routinely reviewed by Department and County management.
Additional pays increase wages and come from a number of sources. Through discussion with Personnel,
these types of costs have not received as much review and oversight and therefore could benefit from a
review.
1.2 OBJECTIVES and SCOPE
Objectives:
The objectives were.
1) Identify and analyze premium/additional wage payments. Some of these occur through the payroll system and
some occur through manual adjustments.
2) Review premium/add pay oversight process.
3) Select types of premium/additional pay for review of support.
Scope and timing:
The audit commenced in November 2012 and continued through February 2013 as time permitted.
Information was collected back to July 2011.
The scope of the audit did not include all aspects of internal controls employed.
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
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Page 2
1.3 METHODOLOGY
Audit procedures included:
Interviewed staff on practices and procedures,
Developed, reviewed and analyzed personnel wage data including additional payments by type,
Identified which add pays might be of greatest risk of being misapplied and were of the largest dollar
value,
Developed approach to evaluating significant add pay amounts,
Developed approach to obtain data from payroll/accounting system,
Identified selection criteria applied to employee data,
Tested for support and appropriateness for selected additional wage payments,
Analyzed add pays as a percentage of gross pays, and
Additional testing performed in review of floating holiday.
We conducted this performance audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit
objectives. (2011 Revision of Government Auditing Standards, issued by the Comptroller General of the United States.)
1.4 BACKGROUND ON ADDITIONAL WAGE PAYMENTS
Additional wage payments (add pays) come in a variety of categories to compensate employees for amounts
not considered in their base pay. Many of these amounts and types are determined through union
agreements. Add pays vary under those union agreements and for different job descriptions.
Additional wage payments in FY12 amounted to over $2 million. As a percentage of gross pay they
amounted to 4% of gross wage payments.
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
DESCHUTES COUNTY
INTERNAL AUDIT
REPORT
Additional wage payments report #12/13-2 May 2013
Page 3
TABLE I:
FY12 Additional
wage payment
types and
composition
Additional wage payment type Amount %
Longevity pay $ 821,000 40%
Certificate pay 668,000 33%
ORPAT1 pay 228,000 11%
Lead pay 121,000 6%
Other add pay types 77,000 4%
Cell phone allowance 76,000 4%
Bilingual pay 38,000 2%
TOTAL $ 2,029,000 100%
1 Oregon physical abilities test (ORPAT)- Annual certification used by Sheriff's Office
For many employees the additional wage payments can add considerably to their overall compensation.
Some employees receive as much as 16% of their gross wages in add pays.
2. Findings
and
Observations
The audit included procedures to assess whether additional wage payments were approved and the process
for oversight effective. Audit findings result from incidents of non-compliance with stated procedures and/or
departures from prudent operation. The findings are, by nature, subjective. The audit disclosed certain
policies, procedures and practices that could be improved. The audit was neither designed nor intended to
be a detailed study of every relevant system, procedure or transaction. Accordingly, the opportunities for
improvement presented in the report may not be all-inclusive of areas where improvement may be needed
and does not replace efforts needed to design an effective system of internal control.
A significant deficiency is defined as an internal control deficiency that could adversely affect the entity’s
ability to initiate, record, process, and report financial data consistent with the assertions of management in
the financial statements. The findings noted were not considered significant deficiencies.
Overall, sufficient support for additional wage payments.
The audit focused on the types of additional wage payments with the greatest dollar amounts across various
County departments. Longevity, certificate, Oregon Physical Abilities Test (ORPAT), and lead pay represent
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Page 4
90% of the additional wage payments. Longevity is a payroll setting and the most automated of the
additional wage payments.
There was sufficient documentation for current additional wage payments. The audit did not identify any
systematic issues with the payment of additional wage payments. A couple of isolated issues were identified
for consideration, and are noted below.
Ongoing lead pay requires review.
In a couple of cases, lead pay was identified that appeared to be no longer warranted or used for something
other than lead pay. In one case, the lead pay had been going on for some time and the Director indicated
the lead job duties were not being performed and the lead pay may no longer be applicable. In one other
situation, an exempt supervisory employee was paid lead pay to compensate for temporary or extended
duties even though they were not of a higher job class and did not appear to require additional workload.
Paying these additional lead pay amounts continued for years. The additional pay was not revisited in recent
years with the turnover in County Administrators. Documentation of the communication with employees on
the nature and extent of the new role was not documented in the personnel files. In most cases, there was
some indication of awareness and approval from the County Administrator.
Lead pay is defined in the Personnel Rules for performing some lead role (usually some level of coordinating
work among employees, supervision and review) the lead work must be assigned in writing by the
department, and must be approved by the County Administrator. The context of additional pay in this
additional pay type is for adding a leadership element to an employee whose job description does not include
such responsibilities.
In one case, the lead pay was eliminated due to budgetary constraints. It was unclear when and whether the
work had changed. The original request for lead pay indicated they would extend only as long as the
underlying lead pay work continued. When the lead work was discontinued, the lead pay continued. This
raises the question as to whether the lead pay was warranted. If this pay could be construed as out-of-class
pay then it should be justified as such. Not having clear communication between the department and the
employee and administration can lead to confusion. There is an out-of-class pay type, but it is not currently
being used by County departments.
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There are currently no specific polices for handling ongoing/continuing lead pay.
Since lead pay can range from 5-10%, amounts can accumulate and be significant. Since there hasn’t been
an implicit re-evaluation of the lead pay, amounts are often continued from year to year.
It is recommended the County develop a policy to handle lead pay that extends beyond one year.
Those policies may include
requiring periodic re-approval (perhaps biennial) by the County Administrator (or designee)
after review of the department’s support for continued lead pay. The County might consider
having all departments resubmit a request for all current lead pays and submit new support to
jumpstart a new process. Lead pays that are no longer necessary would be eliminated.
considering use of the out-of-class pay type for those warranted circumstances and review
them annually.
Sheriff’s Office wellness program is infrequently used.
The Sheriff’s Office Wellness Program is underused and program criteria need updating so that the goals are
more in line with typical wellness program goals.
The “wellness compensation program” is only being used by one Sheriff’s Office employee. The program
provides $50 in additional monthly compensation and documentation required is provided by the employee
on an honor system. Employees are required to log time spent on physical fitness and volunteerism in the
community.
The wellness program requires certain physical conditioning logs be maintained as well as documentation of
public service activities. The information collected does not necessarily correlate with typical wellness goals.
The lack of participation may be an indicator that the current program does not meet the needs or interests of
the employees.
The Sheriff’s Office believes physical fitness and public service are important to the profession and employee
participation is encouraged. Current wellness goals are general and documentation may or may not be
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helpful to show that goals are being met. In the absence of expected agency wellness goals and objectives, it
is possible the payments are not fostering improved wellness in the employees.
Since the wellness benefit is within the bargaining agreement, any changes will need to be negotiated.
It is recommended that the Sheriff’s Office reconsider the need for the wellness program. If a need is
determined, revisions to the wellness program are recommended to further the agency’s wellness
goals in their workforce and provide outcomes that are measurable and can be easily documented.
Annual bi-lingual testing not performed for Sheriff’s Office.
Sheriff’s Office staff who want to be paid for using their bi-lingual skills are tested initially but not on an annual
basis, as indicated in the employee association agreement. A number of Sheriff’s Office employees receive
bi-lingual pay. Original testing was conducted and documented in their personnel files. Bi-lingual pay
amounts to $150 per month.
The Department of Personnel administers the initial bi-lingual testing program but has not established an
annual testing program for the Sheriff’s Office. There is no evidence that bi-lingual skills have declined
without subsequent testing. The Sheriff’s Office employee association agreement is the only union
agreement requiring annual testing.
Currently, the Personnel Department and Sheriff’s Office have not implemented an annual testing program to
satisfy the employee association agreement requirements.
Since the bi-lingual pay is within the bargaining agreement, any changes will need to be negotiated. To be in
line with other County bargaining agreements, the Sheriff’s Office favors eliminating the annual testing
requirement during the next contract negotiation.
It is recommended the Sheriff’s Office consider adjusting the employee association language
regarding bi-lingual pay to reflect that subsequent testing may be requested by a supervisor and or
language that is similar to other County union association agreements. If no changes are made,
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Personnel should consider implementing an annual testing program as indicated in the union
association agreement.
Some additional pay documentation held by departments.
The Personnel Department does not always receive original documentation for additional pays in personnel
files. It was noted for a number of certificate pays and ORPAT pay that the personnel files sometimes
included an email from the department indicating which employee(s) should receive additional pay. In
reviewing department records, after the fact, they sometimes did not have the specific certificates but some
other record of achievement. This was noted primarily with Road Department employees.
The County personnel file is the absolute record for all personnel actions and should be complete. The
departments appear to be doing a good job of following up and tracking these additional pays based on
periodic testing and certification.
The Personnel Department has had a practice of using email communications for documentation. This
occurred primarily with the Sheriff’s Office and the Road department.
Though no specific issues were identified with the certifications, some of the records go back many years and
cross over departments. Use of emails to support this form of additional pay seems inadequate.
It is recommended for the Personnel department to obtain the supporting documentation for
personnel files from departments. The actual originating certificates or testing would support the
continuation or initiation of an additional pay.
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3.
MANAGEMENT
RESPONSES
Department of
Personnel
April 30, 2013
TO: David Givans, County Internal Auditor
FROM: Tracy Scott and Debbie Legg, Personnel Department
RE: Management Response to Audit Report
RECOMMENDATION:
It is recommended the County develop a policy to handle lead pay that extends beyond one year.
Those policies may include
Requiring periodic re-approval (perhaps biennial) by the County Administrator (or
designee) after review of the department’s support for continued lead pay.
The County may consider having all departments resubmit a request for all current lead pays and
submit new support to jumpstart a new process. Lead pays that are no longer necessary would be
eliminated.
Considering use of the out-of-class pay type for those warranted circumstances and review
them annually.
a) We concur with this recommendation.
b) Comments: Administration will need to write a policy and define the process. Including
notification to Department Heads and Managers of the policy and expectations.
c) Estimated date of corrective action would be dependent upon how long it takes Administration
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to write, define and approve a policy.
d) Estimated cost to implement recommendation: The cost of the time to develop and approve the
policy. Additional staff time will be required of departments to request lead pay and
administration to approve lead pay on a biennial or annual basis. Currently there are
approximately 25 employees receiving lead pay.
RECOMMENDATION:
It is recommended for the Personnel Department to obtain the supporting documentation for
personnel files from departments. The actual originating certificates or testing would support the
continuation or initiation of an additional pay.
a) We concur with this recommendation.
b) Comments:
c) Estimated date of corrective action: I believe this can be implemented immediately. As long as,
this recommendation is supported by Administration.
d) Estimated cost to implement recommendation: None.
Road
Department
Chris Doty,
Director
MEMORANDUM
DATE: April 30, 2013
TO: David Givans, County Internal Auditor
Additional wage payments report #12/13-2 May 2013
Page 10
FROM: Chris Doty, PE/PTOE, Director
RE: Additional wage payments audit
______________________________________________________________________
I concur with the recommendations.
The Road Department will provide appropriate documentation to support additional wage payments to
the Personnel Department. This will be effective immediately for future additions. The cost is
insignificant.
Deschutes
County Sheriff’s
Office
Sheriff Larry
Blanton
Memo
To: Mr. David Givans, County Internal Auditor
From: Sheriff Larry Blanton
Date: 4/29/2013
Re: Management Response to Audit Report: Sheriff’s Office Wellness Program and Bi-lingual Testing
Recommendation: It is recommended that the Sheriff’s Office reconsider the need for the Wellness
Program. If a need is determined, revisions to the Wellness Program are recommended to further
the agency’s wellness goals in their workforce and provide outcomes that are measurable and can
be easily documented.
Additional wage payments report #12/13-2 May 2013
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a) I concur with this recommendation, yet I value any existing program that encourages physical
fitness.
b) Comments: Physical fitness for sworn staff is very important in our line of work. We want
deputies to stay fit and involved in their community off-duty. Even though the Wellness Program
is currently serving one employee we believe it is encouraging that employee to perform logged
physical activity.
c) Estimated date of corrective action would be during the next employee contract negotiation June,
2016.
Recommendation: It is recommended that the Sheriff’s Office consider adjusting the employee
association language regarding bi-lingual pay to reflect that subsequent testing may be requested
by a supervisor and or language that is similar to other County union association agreements. If
no changes are made, Personnel should consider implementing an annual testing program as
indicated in the union association agreement.
a) I concur with this recommendation.
b) Comments: Our office has not had any adverse effects on our bi-lingual program in the absence
of annual testing. Our bi-lingual employees are competent in their duties and it is an effective
program. I agree that we need to modify the bi-lingual pay language in accordance with the
recommendation. We have just completed contract negotiations; this will be completed in the
next contract negotiation period.
c) Estimated date of corrective action will be June, 2016.
d) There should be no cost associated with this corrective action.
{End of Report}
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