Conducting an Internal Payroll Audit 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,

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1 Conducting an Internal Payroll Audit 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 About the Speaker 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 2007 Vice 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

3 Agenda Making the Case for Internal Payroll Audits Audit Strategies Where to Begin Documentation Scheduled Audits

4 The Case for Internal Payroll Audits Primary Purpose Ensure compliance with Federal, State and Local laws Ensure compliance with our company policies and procedures

5 Federal, State and Local Increase in DOL audits Penalties being assessed Coordinated audits Publicity

6 Policies and Procedures Ensure compliance with company policies and procedures Identify non-compliant policies and procedures Ensure enforcement of company policies Internal fraud

7 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

8 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

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10 Get Your Head in the Game We re all in this together We are looking for our mistakes Give permission in advance

11 Payroll team Get Everyone Onboard Management Human Resources Accounting Vendors

12 Set a Realistic Timeframe Accuracy over speed Knowing when not to begin o Payroll schedule o Company schedule Commit and stick

13 Identify Your Resources Your team Your tools Your policies and procedures Primary sources Secondary sources

14 Maintain Objectivity

15 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?

16 Never Assume

17 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

18 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

19 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

20 Fringe Benefits Taking a deep dive 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

21 Exempt vs. Non-exempt This payroll audit item is NOT about determining exemption status It IS about payroll practices specific to exempt employees

22 Subtopics: On call time Travel time Waiting time Paid time off Holidays Training time Off the clock work Paid time off Holidays Cleaning pay Hours worked

23 Regular Rate of Pay and Overtime calculations Subtopics: Bonuses Commissions Shift differential Manual calculations Retro pay increases Weighted averages

24 State by State (Locality by Locality)

25 Documentation Audit topic and findings Recommendations Company policy Supporting documentation

26 Scheduled Audits Manual processes Pre and post open enrollment Year end 401k ACA

27 Final Thoughts Keep learning Keep listening Keep training Keep looking for better ways Create a plan of action