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

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Presentation on theme: "Payroll Controls, Risks & Measures Robin R. Rabii NYS - Director of State Payroll Services David R. Hancox NYS - Director of State Audits."— Presentation transcript:

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

3 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. 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.

4 3 Likelihood of occurrence The probability that an unfavorable event would occur if there were no controls to prevent or reduce the risk.

5 4 Impact The effect an unfavorable event would have on the organization if the event were to occur.

6 5 Risk

7 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. 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.

8 7 What to Measure You ought measure something that counts! You ought measure something that counts! If it counts, it ought to be an area of risk If it counts, it ought to be an area of risk

9 8 The New York State Payroll One of the largest centralized payroll system in the world One of the largest centralized payroll system in the world –Over 250,000 employees –Over $12 billion annually

10 9 The New York State Payroll Collaborative Processing Environment 250 state agencies 250 state agencies Nearly 500 separate payrolls Nearly 500 separate payrolls 2,500 payroll system users 2,500 payroll system users

11 10 The New York State Payroll The New York State Payroll Multi-system environment: Multi-system environment: –PayServ (payroll data) –NYSTEP (personnel data) –Central Accounting System –NYBEAS (benefits information) –Internal agency systems

12 11 The New York State Payroll 66 labor unions 66 labor unions 120 bargaining units 120 bargaining units Over 750 types of earnings Over 750 types of earnings 339,000 W-2 forms issued last year 339,000 W-2 forms issued last year 7 major retirement systems 7 major retirement systems

13 12 The New York State Payroll Involuntary Deductions Child support, garnishments, bankruptcies, education loan defaults, and tax levies Child support, garnishments, bankruptcies, education loan defaults, and tax levies $65 million collected annually $65 million collected annually Over 1,500 new garnishment orders each week Over 1,500 new garnishment orders each week

14 13 WAYS TO IDENTIFY INTERNAL CONTROL WEAKNESSES Conduct Audits Conduct Audits Assessments of business process Assessments of business process Involuntary disclosures Involuntary disclosures Performance Measurement Performance Measurement

15 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

16 WHAT…… Basics of a Performance Measure? WHAT…… Basics of a Performance Measure?

17 16 Measures in Daily Life

18 WHY…. Purposes of Performance Measurement

19 If you dont measure you cant improve.

20 19 The Universal Psychology of People in Organizations Trying to Use Performance Measurement…

21 20 Nobody really wants to do this – Too time-consuming! Too much self-discipline needed! Too many ambiguities! Too tedious! Too hard on the brain! Too revealing! Too much math! Too distracting from my real job! Too much information! and I mean nobody! WHY NOT?

22 21 Is the measure important to goals…? Is the measure important to goals…? …that are important to customers and stakeholders? …that are important to customers and stakeholders? Is it used to improve service? Is it used to improve service? The Acid Test

23 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.

24 23 WHAT DID WE DO? Performance Measurement - Case Study

25 24 Strategic Planning Strategic Planning Defined our: Defined our: a) PURPOSE a) PURPOSE b) CUSTOMERS b) CUSTOMERS c) PARTNERS c) PARTNERS d) RESULTS d) RESULTS Performance Measurement- Case Study

26 25 Our Results Payments are issued accurately Payments are issued accurately Payments are issued on time Payments are issued on time Payments are issued in compliance with relevant laws, regulations, contracts, etc. Payments are issued in compliance with relevant laws, regulations, contracts, etc. Administrative costs of making payments are reasonable Administrative costs of making payments are reasonable Performance Measurement – Case Study

27 26 Four Central Measures Timeliness Timeliness - Are we paying employees on time? - Are we paying employees on time? - How long does it take us to pay employees on time? - How long does it take us to pay employees on time? Accuracy Accuracy - Are we under/overpaying employees? - Are we under/overpaying employees? - What is the dollar value of these overpayments? - What is the dollar value of these overpayments? Cost Effectiveness Cost Effectiveness - How reasonable are the costs of processing the payroll? - How reasonable are the costs of processing the payroll? Customer Satisfaction Customer Satisfaction - Do our partners have information to meet their business - Do our partners have information to meet their business needs? needs? Performance Measurement – Case Study

28 27 WHAT DID WE FIND? THE BIRTH OF STRATEGIC MEASURES Performance Measurement – Case Study

29 28 Measures of Timeliness Performance Measurement – Case Study

30 29 How are we doing compared with the last two years? Are We Paying Employees On Time? Performance Measure April- March 2004 April- March 2005 April- March 2006 Change: Current to Previous Year Employees Not Paid On Time (Total) 9,5378,0548,015-0.5% 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) 29.130.046.3+54%

31 30 Measures of Accuracy Performance Measurement – Case Study

32 31 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) 7,6605,1264,665-9% Value of New Overpayments (Total) $7.21 million $5.42 million $5.40 million -0.2% Number of Returned Checks (Total)* 3,8183,0172,901-4% Value of Returned Checks (Total)* $4.53 million $3.00 million $3.06 million +2% Are We Paying Employees Correctly? *Excludes Forms AC909 used to return checks from prior year appropriations, which are not entered into the State Payroll System.

33 32 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) 1,8642,9253,407+16% Value of Outstanding Overpayments (Average) $2.24million$3.54million$4.41million+24% Are We Paying Employees Correctly?

34 33 How are we doing compared with the last two years? Performance Measure April- January 2004 2005 2006 Change: Current to Previous Year Employees Paid After Termination (Total)* 2,1521,8111,668-8% Number of Days Pay Issued to Terminated Employees** 15,97012,82111,849-8% Are We Paying Employees Correctly? *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.

35 34 How are we doing compared with the last two years? Performance Measure April- January 2004 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% Are We Paying Employees Correctly? *Post-termination totals are through January 2006, as not all late terminations have been entered for the most recent months.

36 35 WHAT ELSE DID WE FIND? EXAMINATION OF THE BUSINESS PROCESS Performance Measurement – Case Study

37 36 HIRING & TERMINATION PROCESS PEOPLE PEOPLE - Hired employee - Hired employee - Employees in Business units (Program area, HR, - Employees in Business units (Program area, HR, Payroll, Finance, Control Agencies) Payroll, Finance, Control Agencies) ROLES ROLES - Employee - Employee - Business units (Program area, HR, Payroll, Finance, - Business units (Program area, HR, Payroll, Finance, Control Agencies) Control Agencies) PROCESS PROCESS - Business Rules, Paperwork, Approvals, Processing - Business Rules, Paperwork, Approvals, Processing

38 37 VULNERABILITY POINTS PEOPLE PEOPLE - Hired employee - Hired employee - Lack of understanding of roles - Lack of understanding of roles - Lack of understanding of rules - Lack of understanding of rules

39 38 VULNERABILITY POINTS COMMUNICATION COMMUNICATION - Between employee and Program area - Between employee and Program area - Between Program area and Business units - Between Program area and Business units - Business units and Business Units - Business units and Business Units - Business Units and Control Agencies - Business Units and Control Agencies

40 39 VULNERABILITY POINTS PROCESS - Complexity of the process (internally and - Complexity of the process (internally and externally) externally) - Too much paperwork - No automation - Too much paperwork - No automation - Too many approvals (internally and externally) - Too many approvals (internally and externally)

41 40 Performance Measurement – Case Study The Partnership

42 41 Payroll Users Group Performance Measurement – Case Study

43 42 Partnering with State Agency Users User Group established: Subcommittee on Performance Measures Subcommittee on Performance Measures Two clearly understood Performance Measures Two clearly understood Performance Measures Performance Targets Performance Targets Agency Report Cards Agency Report Cards Performance Measurement – Case Study

44 43 Performance Measurement – Case Study The Report Card

45 44 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. 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. Measured in standard deviations from the average, agency performance can be interpreted as the same or different than that of other agencies. Performance Measurement – Case Study

46 45 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 Blush – Poor Performance, 95%+ Significance Score > Average + 2 Standard Deviations Performance Measurement – Case Study

47 46 Performance Measurement – Case Study Celebrated Achievements

48 47 Celebrated Achievements Payroll Users Group: Established First Annual Comptrollers Achievement Awards Established First Annual Comptrollers Achievement Awards First Statewide recognition of payroll function in NYS government – Supported by Comptroller First Statewide recognition of payroll function in NYS government – Supported by Comptroller Publicized event – Letters to VIPs from Comptroller Publicized event – Letters to VIPs from Comptroller Recognized agency performance in various categories: Recognized agency performance in various categories: a. 1 & 5 year a. 1 & 5 year b. Individual & Composite measures b. Individual & Composite measures Second Annual Achievement Awards Second Annual Achievement Awards Performance Measurement – Case Study

49 48 WHERE ARE WE NOW? Performance Measurement – Case Study

50 49 Before versus Now Before versus Now 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? 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!

51 50 Performance Measurement – Case Study WHAT DID WE LEARN?

52 51 Awareness & Understanding of Customers, Core Services Data Collection Reporting & Review & Improvement Performance Measurement Customers, Core Services & Key Results Clarification of Purpose, Selection & Definition of Measures Performance Performance Management Implementing a Performance Measurement System …takes discipline!

53 52 WHAT DID WE LEARN? Just start it! Just start it! Dont make first attempt too difficult Dont make first attempt too difficult Understand organizational purpose and direction Understand organizational purpose and direction Strategic staff involvement Strategic staff involvement Strategic Communication Strategic Communication Consistent Reporting Consistent Reporting Involve Partners or Stakeholders Involve Partners or Stakeholders Performance Measurement – Case Study

54 Questions ?


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