1. Payroll Controls, Risks & Measures
Robin R. Rabii
NYS - Director of State Payroll Services
David R. Hancox
NYS - Director of State Audits

2. GASB
The Board of Trustees of the Financial Accounting Foundation confirmed that the Governmental Accounting Standards Board has the jurisdictional authority to include "service efforts and accomplishments" in its financial accounting and reporting standard setting activities for state and local governmental entities.

3. Likelihood of occurrence
The probability that an unfavorable event would occur if there were no controls to prevent or reduce the risk.

4. Impact
The effect an unfavorable event would have on the organization if the event were to occur.

5. Risk

6. Performance measurement for government
The act of measuring (assessing) the manner and effectiveness in which something or somebody functions, operates, or behaves in carrying out a given task or action within a branch or agency of a political system.

7. What to Measure You ought measure something that counts!
If it “counts,” it ought to be an area of risk

8. The New York State Payroll
One of the largest centralized payroll system in the world
Over 250,000 employees
Over $12 billion annually

9. The New York State Payroll
Collaborative Processing Environment
250 state agencies
Nearly 500 separate payrolls
2,500 payroll system users

10. The New York State Payroll
Multi-system environment:
PayServ (payroll data)
NYSTEP (personnel data)
Central Accounting System
NYBEAS (benefits information)
Internal agency systems

11. The New York State Payroll
66 labor unions
120 bargaining units
Over 750 types of earnings
339,000 W-2 forms issued last year
7 major retirement systems

12. The New York State Payroll
Involuntary Deductions
Child support, garnishments, bankruptcies, education loan defaults, and tax levies
$65 million collected annually
Over 1,500 new garnishment orders each week

13. WAYS TO IDENTIFY INTERNAL CONTROL WEAKNESSES
Conduct Audits
Assessments of business process
Involuntary disclosures
Performance Measurement

14. What is a Performance Measure?
A quantifiable, enduring indicator of output, outcomes, efficiency or cost
A statistic or metric chosen as a gauge
Usually expressed as a number or percent
A signal for planning, monitoring and evaluating results
A tool to help improve performance, achieve objectives and ensure accountability

15. WHAT…… Basics of a Performance Measure?

16. Measures in Daily Life

17. Purposes of Performance Measurement
WHY….
Purposes of Performance Measurement

18. “If you don’t measure you can’t improve.”

19. The Universal Psychology of People in Organizations Trying to Use Performance Measurement…

20. Nobody really wants to do this –
and I mean nobody!
WHY NOT?
“Too hard on the brain!”
“Too much self-discipline needed!”
“Too tedious!”
“Too much math!”
“Too time-consuming!”
“Too many ambiguities!”
“Too distracting from my real job!”
“Too much information!”
“Too revealing!”

21. “The Acid Test” Is the measure important to goals…?
…that are important to customers and stakeholders?
Is it used to improve service?

22. The Power and Pitfalls of Performance Measurement
“In Poland under communism, the performance of furniture factories was measured in the tons of furniture shipped. As a result, Poland had the heaviest furniture on the planet.”

23. Performance Measurement - Case Study
WHAT DID WE DO?
WE HAD A SECOND ATTEMPT AT PERFORMANCE MEASURES!

24. Performance Measurement- Case Study
Strategic Planning
Defined our:
a) PURPOSE
b) CUSTOMERS
c) PARTNERS
d) RESULTS
OUR SECOND ATTEMPT
USED PUBLIC STRATEGIES CONSULTING GROUP!
Purpose – Why we exist
Customers – Primary beneficiary of our services
Partners – Stakeholders that help us provide these services
Results – Outcomes we want to achieve – HOW WE DEFINED SUCCESS!
MOST CRITICAL OF ALL!

25. Performance Measurement – Case Study
Our Results
Payments are issued accurately
Payments are issued on time
Payments are issued in compliance with relevant laws, regulations, contracts, etc.
Administrative costs of making payments are reasonable
1. Why is this important? Defined the outcomes we need to achieve to be successful!

26. Performance Measurement – Case Study
Four Central Measures
Timeliness
- Are we paying employees on time?
- How long does it take us to pay employees on time?
Accuracy
- Are we under/overpaying employees?
- What is the dollar value of these overpayments?
Cost Effectiveness
- How reasonable are the costs of processing the payroll?
Customer Satisfaction
- Do our partners have information to meet their business
needs?
IDENTIFYING THE RESULTS ALLOWED TO ASK THESE CENTRAL QUESTIONS AND EXTRACT DATA TO FIND THE ANSWERS!
WE WILL NOT INCLUDE THE LAST 2 MEASURES IN THIS PRESENTATION!

27. Performance Measurement – Case Study
WHAT DID WE FIND?
THE BIRTH OF STRATEGIC MEASURES

28. Performance Measurement – Case Study
Measures of Timeliness

29. How are we doing compared with the last two years?
Are We Paying Employees On Time?
How are we doing compared with the last two years?
Performance Measure
April-March 2004
April- March 2005
April- March 2006
Change: Current to Previous Year
Employees Not Paid On Time (Total)
9,537
8,054
8,015
-0.5%
Value of Late Payments (Total)
$9.40 million
$9.08 million
$9.94 million
+9%
Late Payment Rate
(Total)
18.8%
14.3%
13.3%
-7%
Days from Expected to Actual Payment (Total)
29.1
30.0
46.3
+54%

30. Performance Measurement – Case Study
Measures of Accuracy

31. How are we doing compared with the last two years?
Are We Paying Employees Correctly?
How are we doing compared with the last two years?
Performance Measure
April-March 2004
April- March 2005
April- March 2006
Change: Current to Previous Year
Number of New Overpayments (Total)
7,660
5,126
4,665
-9%
Value of New Overpayments (Total)
$7.21 million
$5.42 million
$5.40 million
-0.2%
Number of Returned Checks (Total)*
3,818
3,017
2,901
-4%
Value of Returned Checks (Total)*
$4.53 million
$3.00 million
$3.06 million
+2%
*Excludes Forms AC909 used to return checks from prior year appropriations, which are not entered into the State Payroll System.

32. How are we doing compared with the last two years?
Are We Paying Employees Correctly?
How are we doing compared with the last two years?
Performance Measure
April-March
2004
2005
2006
Change: Current to Previous Year
Number of Outstanding Overpayments (Average)
1,864
2,925
3,407
+16%
Value of Outstanding Overpayments (Average)
$2.24
million
$3.54
$4.41
+24%

33. How are we doing compared with the last two years?
Are We Paying Employees Correctly?
How are we doing compared with the last two years?
Performance Measure
April-January
2004
April- January
2005
2006
Change: Current to Previous Year
Employees Paid After Termination (Total)*
2,152
1,811
1,668
-8%
Number of Days’ Pay Issued to Terminated Employees**
15,970
12,821
11,849
*Post-termination totals are through January 2006, as not all late terminations have been entered for the most recent months.
**Mid-pay period terminations pro-rated based on assumed 5-day Monday through Friday work schedule.

34. How are we doing compared with the last two years?
Are We Paying Employees Correctly?
How are we doing compared with the last two years?
Performance Measure
April-January
2004
April- January
2005
2006
Change: Current to Previous Year
Value of Post-Termination Payments (Total)*
$1.58 million
$1.35 million
$1.33 million
-2%
Rate of Employees Paid After Termination (Total)*
11.8%
6.4%
5.6%
-11%
Paychecks Issued to Terminated Employees (Total)*
0.039%
0.034%
0.031%
-9%
*Post-termination totals are through January 2006, as not all late terminations have been entered for the most recent months.

35. Performance Measurement – Case Study
WHAT ELSE DID WE FIND?
EXAMINATION OF THE BUSINESS PROCESS

36. HIRING & TERMINATION PROCESS
PEOPLE
- Hired employee
- Employees in Business units (Program area, HR,
Payroll, Finance, Control Agencies)
ROLES
- Employee
- Business units (Program area, HR, Payroll, Finance,
Control Agencies)
PROCESS
- Business Rules, Paperwork, Approvals, Processing

37. VULNERABILITY POINTS PEOPLE - Hired employee
- Lack of understanding of roles
- Lack of understanding of rules

38. VULNERABILITY POINTS COMMUNICATION - Between employee and Program area
- Between Program area and Business units
- Business units and Business Units
- Business Units and Control Agencies

39. VULNERABILITY POINTS PROCESS
- Complexity of the process (internally and
externally)
- Too much paperwork - No automation
- Too many approvals (internally and externally)

40. Performance Measurement – Case Study
The Partnership

41. Performance Measurement – Case Study
Payroll Users Group
Payroll Users Group – Consultative body of agency payroll rep
Shared influence and decision making to get better decisions, buy-in & better outcomes
Strengthened relationship building with stakeholders
More credibility with Users
User was appointed chair of

42. Performance Measurement – Case Study
Partnering with State Agency Users
User Group established:
Subcommittee on Performance Measures
Two clearly understood Performance Measures
Performance Targets
Agency Report Cards
Payroll Users Group – Consultative body of agency payroll rep
Shared influence and decision making to get better decisions, buy-in & better outcomes
Strengthened relationship building with stakeholders
More credibility with Users
User was appointed chair of

43. Performance Measurement – Case Study
The Report Card

44. What Is Standard Deviation?
Performance Measurement – Case Study
What Is Standard Deviation?
Standard deviation measures the amount of dispersion in a data set, or how many and how far individual scores are from the average.
Measured in standard deviations from the average, agency performance can be interpreted as the same or different than that of other agencies.

45. Agency Report Card Color Coding
Performance Measurement – Case Study
Agency Report Card Color Coding
Heavenly Blue – Exceptional Performance: No Occurrences or
Score < Average – 1 Standard Deviation (65% + Significance)
Institutional Green – Above Average Performance, < 65% Signif.
Score Between Average & Average – 1 Standard Deviation
Screaming Yellow – Below Average Performance, < 65% Signif.
Score Between Average & Average + 1 Standard Deviation
Pumpkin – Below Average Performance, 65% - 95% Signif.
Score Between Average + 1 Std Dev & Average + 2 Std Dev
TAKE A LOOK AT YOUR SAMPLE DISTRIBUTION FIRST
ALPHABETS EQUAL THE AGENCIES
THE NUMBERS EQUAL THE OCCURENCES
THE AVERAGE OF ALL NUMBERS IS 2.50
THE STANDARD DEVIATION FROM THE AVERAGE IS 1.47
AVERAGE LESS OR PLUS THE STANDARD DEVIATIONS EQUAL NUMBERS
(2.5 MINUS THE 1.47 = 1.03……2,5 PLUS 1.47 = 3.97)
7. COLOR CODED WHERE AGENCIES FELL & DEVELOPED A REPORT CARD
TAKE A LOOK AT REPORT CARD SAMPLE
Blush – Poor Performance, 95%+ Significance
Score > Average + 2 Standard Deviations

46. Performance Measurement – Case Study
Celebrated Achievements

47. Performance Measurement – Case Study
Celebrated Achievements
Payroll Users Group:
Established First Annual Comptroller’s Achievement Awards
First Statewide recognition of payroll function in NYS government – Supported by Comptroller
Publicized event – Letters to VIP’s from Comptroller
Recognized agency performance in various categories:
a. 1 & 5 year
b. Individual & Composite measures
Second Annual Achievement Awards

48. Performance Measurement – Case Study
WHERE ARE WE NOW?

49. Before versus Now
2005
Strategic goals known and perf. targets pursued
Performance data tracked
Quantifiable perf. results
Regular perf. reviews
“Results” culture
Shared best practices
Statewide recognition of profession/professionals
Agencies are exceeding Statewide targets!
2001
Statewide goals & objectives unclear
Sparse perf. data
Results difficult to track
Ad hoc Statewide improvement efforts
“Trust me” culture
“Hidden” best practices
No recognition of pro- fession/professionals
Will performance measures work?

50. Performance Measurement – Case Study
WHAT DID WE LEARN?

51. Implementing a Performance Measurement System …takes discipline!
Performance Management
& Improvement
Measurement
Performance
System
Reporting & Review
…takes discipline!
Data Collection
Selection & Definition of
Measures
Clarification of Purpose,
Customers, Core Services
Customers, Core Services
& Key Results
Awareness & Understanding of
Performance Measurement

52. Performance Measurement – Case Study
WHAT DID WE LEARN?
Just start it!
Don’t make first attempt too difficult
Understand organizational purpose and direction
Strategic staff involvement
Strategic Communication
Consistent Reporting
Involve Partners or Stakeholders
Just Start it! – No perfect time…..Start, learn & refine
Don’t make first attempt to difficult – Avoid frustration & celebrate quick-wins! ….Information gathering can be a big effort – you may want to focus first on where there is easy access to data until you have the resources to dedicate more time to the initiative
Understand purpose and direction – Strategic Planning or some understanding your organization’s purpose and direction makes it easier to identify the most important measures to focus on. If you already have a Strategic Plan, tie what you measure to the goals in your plan
Strategic Staff Involvement – Involve “rank and file” to increase ownership and avoid perception of “MANAGEMENT FAD” – However, be selective about the staff your involve in the begininng..you want those who will speak positively about the initiative
Strategic Communications – Communicate clearly about the goals and purpose of Performance Measures…Sometimes explaining what it is Not is more important that what it is! – Some individuals may see it as an opportunity to deliver bad news about their personal performance & take action against them! -
Consistent Reporting – Share your performance results on a routine schedule - Create a dashboard if you can and display it in the same location
Involve Partners or Stakeholders - Sharing information and influence with your stakeholders increases opportunity for buy-in and support of the effort

53. Questions ?