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