CONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 UDIT PROGRAM. WP REF AUDITOR INITIALS ‘GENERAL, ‘The Payroll Department is responsible for processing 24 payrolls annually for over $,000 laried, hourly and substitute employees. The Department also plays a critical role in the administration and recordkeeping of various benefits offered by the District. Administering the payroll cequites a high level of knowledge of many State and Federal laws and regulations, as ‘well as a thorough understanding of the District's policies with respect to employment and benefit issues, DIT OBJECTIVES Comprehensive policies and procedures addressing Payroll Overtime and Supplemental Pay have been developed and documented: The District is in compliance with established policies, federal and state laws Overtime and Supplemental Pay: OT and Supplemental Pay was paid only to actual, current, eligible employees, as designated by CISD policies and procedures: Wages are authorized, supported and accurately recorded Payrolls containing OT and Supplemental Pay are properly prepared, approved, and recorded: 6. Payroll disbursements are properly controlled: 7. OT and Supplemental Pay is rezouable foreach employee and departnent: and S. Procedures for seconding and reposting OT and Supplemental Pay are effective and INTERNAL CONTROLS Documeat internal controls in the processes and activities related to PR OT/Supplemeutal Pay. 2. Are employees familiar with these? 3, Ate these controls documented? 4, Are they operating as intended? (ONSIDERATION OF FRAUD RISKS Brainstorm for where PR OT/Supplemental Pay fraud could occur. Note: a, What it would look like Who might commit ‘Tests that could reveal Controls in place to prevent. Are they operating as designed? Adjust audit program as needed to test for fraud weaknesses. For all tests in audit program, include employees of PR Department and employees of ‘Technology Department who have access to PR or employee records. exonsCONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 WP AUDITOR UDIT PROGRAM. REF INITIALS, ‘AUDIT PROCEDURES 1) General a) Obtain: i) CISD Policies and Procedures ii) Prior Audit Reports {ii) External Auditor Management letter comments iv) Job Descriptions and Organizational Charts v) Related Information Regarding Laws and Regulations bb) Review policies and procedures to determine adequacy, Ensure the policies and procedures have been communicated to appropriate personnel, ©) Utilized Forms: i) Obtain copies of al forms used by the department ii) Evaluate for adequacy and effectiveness 4) Obsain copies or examples of all reports segarding OT/Supplemental Pay generated for the personnel and payroll departments and determine their use and distribution, Include system reports, PC reports, and manval reports. Ensure that the information ‘presented in these repors is tested or analyzed at some point inthe audit program. ©) Review any prior audit reports to determine whether corrective action has been implemented for noted deficiencies {Obtain report of all OT and Supplemental Pay for the audit period and sum by ‘organization and job ttle, 2) Lead Schedule a) Prepare a lead schedule of all accounts affected and indicate the balance as of the audit date. Prior to completion of the audit, ensure that all accounts have been verified by reconciliation, analytical review, or testing exonsCONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 UDIT PROGRAM. WP REF AUDITOR INITIALS, 3) Payroll Processing a) ») ° a Document the flow of documents throi reports to printing final checks and pay th payroll processing. (From receiving time abs.) Payroll procedures should be reviewed for appropriate contols to enswe the accuracy of salary payments. Verify the following: i) Signatures of employees preparing salary payment calculations and the supervisor reviewing the same i) Ensure that file copies of Employee Statements of Eamings and Payroll Registers are maintained in the custody of the Payroll Department personnel iii) Determine that all computer/manual payroll registers are reviewed to ensure that the information has been accurately calculated and entered into the PR system. Select a sample of individuals from the last payzoll register of the audit period and perform the following: i) Trace the pay rate and all deductions to properly authorized forms in the cemployee"s personnel file i) Agree departmental classifications in payroll and verify against personnel records, iil) Trace any overtime or supplemental pay to properly approved forms. If time cards are used in the calculation of gross pay, determine that the rate has been properly calculated, approved, and file. iv) Recalculate all amounts, including gross pay, deductions, stipends, and net pay. Trace elective deductions to signed authorization forms and reference taxes 0 appropriate sources. ¥) Trace disbursement to appropriate employee. vi) Trace total payroll amounts to posting inthe proper general ledger accounts. Document controls for protection and distribution of payroll checks. Conclude on adequacy, 4) Terminated Employees a Obtain a listing of employees who terminated their employment with the District during the pertinent school year and select a sample to test the following 1) Verify that the employee's personnel fle contains proper documentation of their termination. ii) Verify that the employee is properly marked as “non-active” in the payroll system, and no subsequent checks for salary or supplemental pay have been generated. exonsCONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 UDIT PROGRAM. WP REF AUDITOR INITIALS, 5. Hourly/Daily Rate Employees Obtain a lst of individuals that were hourly/daily rate employees with the District luring the audit period. From ths list select a sample of 25 employees for testing. Then) obtain time sheets for these 25 employees forthe following pay dates: 12/15/09, 4/29/10, 6/30/10 and 10/1/10 in order to test the following: i, Gross pay recalculated, ties to what was actually paid, ii, Time sheet or Kronos hours properly add up and agree to employee's regular work schedule, iii, Any OT or Supplemental Pay was approved in advance, necessary and properly recorded and calculated iii, Noted appropriate approval on time sheet or Kronos. 6. Overtime Test 8, Obtain a report that lists all employees that had overtime pay for the payrolls run during the audit period and 2 pay periods after fiscal year-end, Then verify the following: i. Verity that only 150% was ealeulated by Kronos system or school/department’s payroll clerk. ii, Verify that only 150% was entered by Payroll in order to calculate time and a half iii. Verify that correct base salary was used in calculation. iv. Verify thet OT was actually due based on hours worked and CISD Policies and Procedures. 7. Supplemental Pay Test 8. Obtain a report of all employees who received Supplemental Pay during the audit period and two pay periods after the fiseal year- end. i, Determine the types of jobs being performed for Supplemental pay i, Determine if consistent rates of pay are being paid for similar jobs. iil, Determine ifthe rate of pay that was originally authorized, isthe rate of pay that iv, Determine that Supplemental Pay was authorized per CISD policies & procedures vy, Examine the Supplemental Pay sheets and Kronos records to determine the supplemental hours were correctly calculated and sent to Payroll ‘vi, Examine payroll records to determine that Supplemental Pay amounts sent to Payroll from schoolsidepartments agreed to amounts entered in Payroll system, vii, Determine that Supplemental Pay recorded alter fiscal year-end was offset against payroll acerual to charge the prior fiscal year. exonsCONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 AUDIT PROGRAM. WP REF AUDITOR INITIALS, 8) Reconciliations ») 3 a Obtain the reconciliations of all payroll-rlated deposit accounts and payroll-related Liability accounts. Trace balances to the general ledger, bank statements, and supporting documentation. Test transactions as necessary. Verify the accuracy of the reconciliation and the propriety of any outstanding items, Evaluate reconciliations to ensure that business standards are implemented, including 1) Reconciliation is prepared within thirty days of the end of the period. ii) The account title and account numbers are documented. iil) The general ledger date is documented iv) The reconciliation balance tiesto the general ledger ending balance. '¥) Signature of the preparer and the reviewer as well as the respective dates are documented vi) Descriptions of outstanding items are adequate and explicit. vii) Origination dates of outstanding items are clearly documented. viii) Reconciling items are cleared within sixty days. ix) Backup documentation, including general ledger pages, reports, ete. are attached 8) The reconciliation is clear and able to be reasonably understood by individuals not involved in its preparation, Examine in detail the contents of the most recent bank statement. Ensure that all checks earry the appropriate signatures and verify the propriety of the endorsement, ‘Compare dates on the deposit slips to the date the deposits were recorded by the bauk to ensure that deposits are being promptly processed 9) Custody of Payroll Records 1a. Ensure that access to payroll records is limited to authorized employees only. Determine whether files are consistently safeguarded during and after business hows. b. Determine that blank check stock is adequately safeguarded. Inventory the supply of blank payroll checks and determine the first umber on the supply of checks is in sequence with the last one issued. exonsCONROE INDEPENDENT SCHOOL DISTRICT PAYROLL - OVERTIME AND SUPPLEMENTAL PAY AUDIT PROGRAM 9/1/2009 — 8/31/2010 UDIT PROGRAM. WP REF AUDITOR INITIALS, 10) Miscellaneous, Lw2 a. Determine the employees in the Payroll and other related departments who have access to change pay rates. Document that selection and seview their pay for the pertinent calendar year and compare to the W-2 form for gross pay, federally taxable salary and withholding, b.. Verify that OT/Supplemental Pay is recorded on their W-2 2.Stipends a. Obtain a listing of employees who have received stipends during the school year. Determine that the proper documentation is on file b. Ensure that employees do not receive both a stipend and (OT/Supplemental pay for the same work 3. Payroll changes a. Document the process of payroll changes the add OT/Supplemental pay. Select a random sample of recent payroll changes and determine that proper authorization is on file b. Determine if there are any other areas that should be reviewed and test as WORK PAPERS: 1. Organize all relevant workpapers in a clear and logical and manner and eross reference audit steps to their corresponding workpapers. Create a final index for the workpaper bundle. 3. Compile and secusely store audit files for reference if needed, AUDIT FINDINGS & REPORTING: 1. Document suramaries of all audit findings as soon as exceptions are noted. Recommend to auditee any appropriate adjustments, internal control or operational recommendations as a result of the audit 3. Determine whether to include each audit finding in final audit report based on the audit disposition, the overall materiality tothe audit and the relative tisk exposure. 4. Prepare the draft audit report for review by auditee Distribute tentative and preliminary audit report to auditee and request responses ‘within two weeks, 6. Compile final audit report with auditee’s responses, review for errors, and distribute to auditee, Audit Committee, Superintendent and appropriate district management, exons