M I D W E S T R E G I O N A L P A Y R O L L C O N F E R E N C E O C T O B E R 5 , 2 0 1 6
Conducting an Internal Payroll Audit
In her role as Director of Payroll Administration at Axcet HR Solutions , Jo McClure is responsible for the development and implementation of strategic payroll goals and the management of an outstanding team of payroll professionals.
Jo obtained her CPP in April of 2006 and has held the following positions in the Greater Kansas City Chapter of the American Payroll Association:
Chapter Coordinator in 2007Vice President in 2008 President in 2009
She has served as a guest speaker at the 2007 and 2008 Midwest Regional Payroll Conferences.
She has also published an article: Selecting a New Payroll System in the April 2008 issue of Kansas City Small Business Monthly magazine.
Areas of expertise include: Implementation, payroll compliance auditing, payroll best practice recommendations
About the Speaker
Agenda
Making the Case for Internal Payroll Audits
Audit Strategies
Where to Begin
Documentation
Scheduled Audits
The Case for Internal Payroll Audits
Primary Purpose
Ensure compliance with Federal, State and Local
laws
Ensure compliance with our company policies
and procedures
Federal, State and Local
• Increase in DOL audits
• Penalties being assessed
• Coordinated audits
• Publicity
Policies and Procedures
• Ensure compliance with company policies and procedures
• Identify non-compliant policies and procedures
• Ensure enforcement of company policies
• Internal fraud
The Case for Internal Payroll Audits
Additional benefits of an internal audit
• Increased efficiencies
• Cross training
• New, updated, improved, centralized documentation
• Education
• Team morale
• Employee confidence
Audit Strategies
Get your head in the game
Get everyone onboard
Set a realistic timeframe
Identify your resources
Maintain objectivity
Audit policy and practice
Never assume
Get Your Head in the Game
• We’re all in this together
• We are looking for our mistakes
• Give permission in advance
Get Everyone OnboardPayroll team
Management
Human Resources
Accounting
Vendors
Set a Realistic Timeframe
• Accuracy over speed
• Knowing when not to begin
o Payroll schedule
o Company schedule
• Commit and stick
Identify Your Resources
• Your team
• Your tools
• Your policies and procedures
• Primary sources
• Secondary sources
Maintain Objectivity
Audit Policy and Practice
• Do the policy and the practice match?
• Is the policy compliant?
• Does the company policy exceed federal, state or local requirements?
Never Assume
Where to Begin
Create an internal audit checklist
Prioritize
Exempt vs. Nonexempt
Hours worked
Regular rate of pay and overtime pay calculations
Compare regulations to the actual practice and then to the policy
Develop process in advance for:
Reporting noncompliance issues as they are found
Dealing with them as they arise
The Audit Checklist
• A documented, comprehensive list of all payroll areas to be audited
• Include everything that could possibly be paid to or deducted from an employee
• Consider DOL and IRS (tax) implications
• Start with the highlights and break it down from there
The Audit Checklist
Regular rate of pay
Overtime
I-9 forms
Time & attendance
Garnishments
Exempt employees
Deductions
Minimum wage
Employee files
Relocations
Fringe Benefits
Allowances
Reimbursements
New hires
Terminations
Paid time off
Loans
Overpayments
Constructive receipt
Employee data changes
Taking a deep dive
Fringe Benefits
Gift cards
Service awards
Employee discounts
Gym memberships
Personal use of company vehicle
Company paid benefit premiums for owners of S-corporations
And many, many more
Exempt vs. Non-exempt
• This payroll audit item is NOT about determining exemption status
• It IS about payroll practices specific to exempt employees
Hours worked
Subtopics: On call time Travel time Waiting time Paid time off Holidays Training time Off the clock work Paid time off Holidays Cleaning pay
Regular Rate of Pay and Overtime calculations
Subtopics:
Bonuses
Commissions
Shift differential
Manual calculations
Retro pay increases
Weighted averages
State by State (Locality by Locality)
Documentation
Audit topic and findings
Recommendations
Company policy
Supporting documentation
Scheduled Audits
Manual processes
Pre and post open enrollment
Year end
401k
ACA
Final Thoughts
Keep learning
Keep listening
Keep training
Keep looking for better ways
Create a plan of action