Presentation on theme: "Payroll Controls, Risks & Measures"— Presentation transcript:
1 Payroll Controls, Risks & Measures Robin R. RabiiNYS - Director of State Payroll ServicesDavid R. HancoxNYS - Director of State Audits
2 GASBThe 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 ImpactThe effect an unfavorable event would have on the organization if the event were to occur.
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 worldOver 250,000 employeesOver $12 billion annually
9 The New York State Payroll Collaborative Processing Environment250 state agenciesNearly 500 separate payrolls2,500 payroll system users
10 The New York State Payroll Multi-system environment:PayServ (payroll data)NYSTEP (personnel data)Central Accounting SystemNYBEAS (benefits information)Internal agency systems
11 The New York State Payroll 66 labor unions120 bargaining unitsOver 750 types of earnings339,000 W-2 forms issued last year7 major retirement systems
12 The New York State Payroll Involuntary DeductionsChild support, garnishments, bankruptcies, education loan defaults, and tax levies$65 million collected annuallyOver 1,500 new garnishment orders each week
13 WAYS TO IDENTIFY INTERNAL CONTROL WEAKNESSES Conduct AuditsAssessments of business processInvoluntary disclosuresPerformance Measurement
14 What is a Performance Measure? A quantifiable, enduring indicator of output, outcomes, efficiency or costA statistic or metric chosen as a gaugeUsually expressed as a number or percentA signal for planning, monitoring and evaluating resultsA tool to help improve performance, achieve objectives and ensure accountability
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 PlanningDefined our:a) PURPOSEb) CUSTOMERSc) PARTNERSd) RESULTSOUR SECOND ATTEMPTUSED PUBLIC STRATEGIES CONSULTING GROUP!Purpose – Why we existCustomers – Primary beneficiary of our servicesPartners – Stakeholders that help us provide these servicesResults – Outcomes we want to achieve – HOW WE DEFINED SUCCESS!MOST CRITICAL OF ALL!
25 Performance Measurement – Case Study Our ResultsPayments are issued accuratelyPayments are issued on timePayments are issued in compliance with relevant laws, regulations, contracts, etc.Administrative costs of making payments are reasonable1. Why is this important? Defined the outcomes we need to achieve to be successful!
26 Performance Measurement – Case Study Four Central MeasuresTimeliness- 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 businessneeds?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 MeasureApril-March 2004April- March 2005April- March 2006Change: Current to Previous YearEmployees 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%
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 MeasureApril-March 2004April- March 2005April- March 2006Change: Current to Previous YearNumber 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%*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 MeasureApril-March200420052006Change: Current to Previous YearNumber of Outstanding Overpayments (Average)1,8642,9253,407+16%Value of Outstanding Overpayments (Average)$2.24million$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 MeasureApril-January2004April- January20052006Change: Current to Previous YearEmployees Paid After Termination (Total)*2,1521,8111,668-8%Number of Days’ Pay Issued to Terminated Employees**15,97012,82111,849*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 MeasureApril-January2004April- January20052006Change: Current to Previous YearValue 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 andexternally)- 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 GroupPayroll Users Group – Consultative body of agency payroll repShared influence and decision making to get better decisions, buy-in & better outcomesStrengthened relationship building with stakeholdersMore credibility with UsersUser was appointed chair of
42 Performance Measurement – Case Study Partnering with State Agency UsersUser Group established:Subcommittee on Performance MeasuresTwo clearly understood Performance MeasuresPerformance TargetsAgency Report CardsPayroll Users Group – Consultative body of agency payroll repShared influence and decision making to get better decisions, buy-in & better outcomesStrengthened relationship building with stakeholdersMore credibility with UsersUser was appointed chair of
43 Performance Measurement – Case Study The Report Card
44 What Is Standard Deviation? Performance Measurement – Case StudyWhat 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 StudyAgency Report Card Color CodingHeavenly Blue – Exceptional Performance: No Occurrences orScore < Average – 1 Standard Deviation (65% + Significance)Institutional Green – Above Average Performance, < 65% Signif.Score Between Average & Average – 1 Standard DeviationScreaming Yellow – Below Average Performance, < 65% Signif.Score Between Average & Average + 1 Standard DeviationPumpkin – Below Average Performance, 65% - 95% Signif.Score Between Average + 1 Std Dev & Average + 2 Std DevTAKE A LOOK AT YOUR SAMPLE DISTRIBUTION FIRSTALPHABETS EQUAL THE AGENCIESTHE NUMBERS EQUAL THE OCCURENCESTHE AVERAGE OF ALL NUMBERS IS 2.50THE STANDARD DEVIATION FROM THE AVERAGE IS 1.47AVERAGE 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 CARDTAKE A LOOK AT REPORT CARD SAMPLEBlush – Poor Performance, 95%+ SignificanceScore > Average + 2 Standard Deviations
46 Performance Measurement – Case Study Celebrated Achievements
47 Performance Measurement – Case Study Celebrated AchievementsPayroll Users Group:Established First Annual Comptroller’s Achievement AwardsFirst Statewide recognition of payroll function in NYS government – Supported by ComptrollerPublicized event – Letters to VIP’s from ComptrollerRecognized agency performance in various categories:a. 1 & 5 yearb. Individual & Composite measuresSecond Annual Achievement Awards
48 Performance Measurement – Case Study WHERE ARE WE NOW?
49 Before versus Now2005Strategic goals known and perf. targets pursuedPerformance data trackedQuantifiable perf. resultsRegular perf. reviews“Results” cultureShared best practicesStatewide recognition of profession/professionalsAgencies are exceeding Statewide targets!2001Statewide goals & objectives unclearSparse perf. dataResults difficult to trackAd hoc Statewide improvement efforts“Trust me” culture“Hidden” best practicesNo recognition of pro- fession/professionalsWill performance measures work?
50 Performance Measurement – Case Study WHAT DID WE LEARN?
51 Implementing a Performance Measurement System …takes discipline! Performance Management& ImprovementMeasurementPerformanceSystemReporting & Review…takes discipline!Data CollectionSelection & Definition ofMeasuresClarification of Purpose,Customers, Core ServicesCustomers, Core Services& Key ResultsAwareness & Understanding ofPerformance Measurement
52 Performance Measurement – Case Study WHAT DID WE LEARN?Just start it!Don’t make first attempt too difficultUnderstand organizational purpose and directionStrategic staff involvementStrategic CommunicationConsistent ReportingInvolve Partners or StakeholdersJust Start it! – No perfect time…..Start, learn & refineDon’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 initiativeUnderstand 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 planStrategic 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 initiativeStrategic 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 locationInvolve Partners or Stakeholders - Sharing information and influence with your stakeholders increases opportunity for buy-in and support of the effort