Audit of Compensation-eng
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PRIVY COUNCIL OFFICE Audit of Compensation (Pay and Benefits) Audit and Evaluation Division Final Report February 4, 2011 Audit of Compensation (Pay and Benefits) Table of Contents Executive Summary ......................................................................................................... i Statement of Assurance..................................................................................................iii 1.0 Introduction........................................................................................................... 1 1.1 Authority.......................................................................................................... 1 1.2 Background..................................................................................................... 1 1.3 Objective......................................................................................................... 2 1.4 Scope.............................................................................................................. 2 1.5 Criteria ............................................................................................................ 3 1.6 Approach and Methodology ............................................................................ 3 1.7 Sampling and Testing Approach..................................................................... 4 1.8 Process Overview.................................. ...
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| Publié par | Awley |
| Nombre de lectures | 26 |
| Langue | English |
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PRIVY COUNCIL OFFICE Audit of Compensation (Pay and Benefits) Audit and Evaluation Division
Final Report February 4, 2011
Audit of Compensation (Pay and Benefits) Table of Contents Executive Summary ......................................................................................................... i Statement of Assurance ..................................................................................................iii 1.0 Introduction........................................................................................................... 1 1.1 Authority.......................................................................................................... 1 1.2 Background..................................................................................................... 1 1.3 Objective ......................................................................................................... 2 1.4 Scope.............................................................................................................. 2 1.5 Criteria ............................................................................................................ 3 1.6 Approach and Methodology ............................................................................ 3 1.7 4Sampling and Testing Approach ..................................................................... 1.8 5 ...........................................................................................Process Overview 2.0 Conclusion............................................................................................................ 6 3.0 Findings and Recommendations .......................................................................... 7 3.1 Organizational Framework 7 .............................................................................. 3.2 Systems Integration ........................................................................................ 8 3.3 9Pay Processing ............................................................................................... 4.0 12Management Response and Action Plan ........................................................... Appendix A - Detailed Audit Criteria .............................................................................. 15
Privy Council Office Audit and Evaluation Division
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Audit of Compensation (Pay and Benefits) List of Acronyms Used
EX FAA FMS FTE HR HRMS LWOP MCF OGD PCO PS-GL PWGSC RPS SAP SMS SOS SPS TB TBS TOS
Executive (Management Category) Financial Administration Act Financial Management System Full Time Equivalent Human Resources Human Resources Management System Leave Without Pay Management Control Framework Other Government Department Privy Council Office Payroll System General Ledger Public Works and Government Services Canada Regional Pay System PCO’s financial system application Salary Management System Struck off Strength Standard Payment System Treasury Board Treasury Board Secretariat Taken on Strength
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Audit of Compensation (Pay and Benefits) Executive Summary Objective The objective of the Audit of Compensation (Pay and Benefits) was to assess the adequacy and effectiveness of controls in place for the delivery of pay and benefits services to Privy Council Office (PCO) staff. More precisely, the objective of the audit was to provide PCO management with independent assurance that the administration of pay and benefits is controlled, has effective and efficient processes, and complies with applicable policies, acts and regulations. Scope The audit examined the department’s Management Control Framework (MCF) for the delivery of pay and benefits services to staff, including identification, organization and communication of departmental responsibilities for pay and benefits; integration of PCO departmental processes with TBS and PWGSC centralized pay and benefits systems and requirements; management of employee pay and benefits records for the 2009 calendar year; recording of information in PCO’s human resources and financial information systems; and management oversight of pay and benefits expenditures and administrative matters. Testing of transactions was limited to the review of regular and overtime payroll transactions for PCO staff processed during the 2009 calendar year. The audit excluded overtime compensated through compensatory time-off, which does not result in a payroll transaction. The total population under review included 1,176 employee files, representing a total salary and benefits expenditure of $87,721,943. Of this amount, overtime expenditures totalled $2,376,394 or 2.7% of total salaries and benefits. Although the sample of transactions selected for review involved only departmental staff, PCO’s compensation processes are also used to deliver pay and benefits services to Ministerial staff and to staff of Commissions of Inquiry. Conclusion Complex pay and benefits services are delivered in compliance with relevant legislative requirements, policies, directives and collective agreements. Departmental financial systems are well integrated with the PWGSC centralized pay system. However, data integrity in the human resources information system (PeopleSoft) should be improved; certain elements of the organizational framework should be strengthened; and there is a need for better retention of evidence to demonstrate the application of key operational controls and to support individual pay transactions.
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Audit of Compensation (Pay and Benefits) Summary of Findings
The audit findings are detailed in the body of the report. In summary, the main findings are as follows: Organizational Framework PCO prepares two strategic HR planning. Although documents, the organizational framework for the PCO Compensation function requires improvement in the areas of operational planning, risk assessment, and performance measurement. Systems Integration.departmental financial systems are well integrated with thePCO PWGSC centralized pay system. However, data recorded in the PeopleSoft human resources information system, used to determine benefits such as pension and severance entitlements,is not always accurate, complete or timely. Pay Processing.Pay and benefits services are consistently delivered to PCO employees, and comply with relevant legislative documents, TB policies, directives, and collective agreements. However, some internal procedures lack completeness and consistency in their application, verification of transactions is not always evidenced, and pay files are not always complete.
Recommendations The audit resulted in the following three recommendations directed to the Assistant Deputy Minister, Corporate Services Branch: 1. to expand the operational HR Business Plan to include risk and mitigation strategies and goals specific to the Compensation function, a rationalization of FTEs for Compensation advisor positions and expenditures, and more detailed performance standards for the delivery of pay and benefits services. 2. to identify the number of PeopleSoft files which lack complete or accurate data, and prioritize action to ensure accurate and timely integration with PWGSC’s payroll transaction system (RPS).
3. to document decisions regarding best practices identified at bi-weekly staff meetings and communicate to all Compensation staff; and ensure that processing controls are carried out in a consistent manner with appropriate supporting evidence, in particular, verification of FAA 34 delegation of authorities, verification of the payroll register, evidence of peer review, and completion of departure sign-offs.
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Audit of Compensation (Pay and Benefits) Management Response The PCO Compensation and Benefits Unit is a highly professional and dedicated team, which strives to provide accurate and timely services to its clients: the employees, managers and exempt staff of the Privy Council Office. The results of this audit confirm that PCO employees are paid in accordance with collective agreements and terms and conditions of employment. That being said, the audit results also point to the requirement for administrative improvements which management accepts in the spirit of continuous improvement. An action plan is described in Section 4.0, Management Response and Action Plan. Statement of Assurance In my professional judgment as Chief Audit Executive, sufficient and appropriate audit procedures have been conducted and evidence gathered to support a reasonable level of assurance as to the accuracy of the conclusion provided and contained in this report. The conclusion is based on a comparison of the conditions, as they existed at the time, against pre-established audit criteria that were agreed on with management. The conclusion is applicable only to the entity examined. ORIGINAL SIGNED BY _______________________________________ SIGNATURE OFCHIEFAUDITEXECUTIVE JIMHAMER
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Audit of Compensation (Pay and Benefits) 1.0 Introduction
1.1 Authority The Audit of Compensation (Pay and Benefits) was approved in August 2009 as part of the Privy Council Office (PCO) Risk-Based Internal Audit Plan 2009-2010 to 2011-2012.
1.2 Background Responsibility for the delivery of pay and benefits to federal employees is shared by three key organizations: Treasury Board Secretariat (TBS); Public Works and Government Services Canada (PWGSC); and departments. The primary role of TBS is to establish pay and benefits policies, directives, and guidelines addressing matters such as rates of pay, collective agreements, travel and relocation, dental and health care insurance, life and disability insurance, and employee leave arrangements (e.g. sick leave, annual leave, personal leave, maternity and parental leave, education leave, leave without pay). PWGSC is responsible for administrative strategies, systems and processes for the control, validation and integrity of compensation data to support management of pension, pay and benefits products. These include provision of pay and pension processing systems; remittance and general ledger accounting functions for the Regional Pay System (RPS) used by departments to process pay transactions; advisory and training services related to pay and insurance benefits; and pension administration for the Public Service Superannuation Act. Departments, as part of their Human Resources (HR) management responsibilities, provide certain pay and benefits services directly to employees. These services include administration of hiring, transfer and separation processes; establishment and maintenance of employee records (e.g. pay rates, payroll deductions, direct deposit information, leave, pensionable service); on-line processing of bi-weekly payroll transactions through PWGSC’s Regional Pay System; management and processing of overtime, acting pay and leave without pay (LWOP) transactions; and information and advisory services to employees regarding pay and benefits provisions. As reported in the PCO Report on Plans and Priorities 2010-2011, the total departmental expenditure for the 2010-2011 fiscal year is estimated to be $143,948,000 with a Full-time Equivalent (FTE) number of staff of 1,040. Approximately 70 percent of PCO’s budget is spent on salaries. Over half of the departmental workforce is classified in three occupational groups: Administrative Support (AS, 31%); Economics and Social Sciences Services (EC, 14%); and Executive (EX, 11%).
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Audit of Compensation (Pay and Benefits) PCO uses PeopleSoft as its Human Resources Management System (HRMS); SAP as its Financial Management System (FMS); and a separate Salary Management System (SMS). PeopleSoft and SAP are not maintained by PCO, but are used under a shared services arrangement with TBS.
1.3 Objective The objective of the audit was to assess the adequacy and effectiveness of controls in place for the delivery of pay and benefits services to PCO staff. More precisely, the objective of the audit was to provide PCO management with independent assurance that the administration of pay and benefits is controlled, has effective and efficient processes, and complies with applicable policies, acts and regulations.
1.4 Scope The audit examined the department’s Management Control Framework (MCF) for the delivery of pay and benefits services to staff, including: • organization and communication of departmental responsibilities for identification, pay and benefits; • of PCO departmental processes with TBS and PWGSC centralized integration pay and benefits systems and requirements; •pay and benefits records for the 2009 calendar year; management of employee •in PCO’s human resources and financial information recording of information systems; and • management oversight of pay and benefits expenditures and administrative matters. Testing of transactions was limited to the review of regular and overtime payroll transactions for PCO staff processed during the 2009 calendar year. The audit excluded overtime compensated through compensatory time-off, which does not result in a payroll transaction. The total population under review included 1,176 employee files, representing a total salary and benefits expenditure of $87,721,943. Of this amount, overtime expenditures totalled $2,376,394 or 2.7% of total salaries and benefits. Although the sample of transactions selected for review involved only departmental staff, PCO’s compensation processes are also used to deliver pay and benefits services to Ministerial staff and to staff of Commissions of Inquiry.
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Audit of Compensation (Pay and Benefits) 1.5 Criteria As a basis for concluding on the objective of the audit, the following audit criteria were developed and agreed to by management as relevant standards of performance and control:
1. The organizational structure (direction, roles and responsibilities, resources and work allocation, and communication) is appropriate and ensures efficient and effective service delivery and financial integrity. 2. The integration of PCO departmental processes (HRMS, SMS, and FMS) with TBS and PWGSC centralized pay and benefits systems and associated procedural and financial controls and requirements for the management of compensation and overtime ensures the efficiency and effectiveness of the compensation administration process. 3. Executive and regular pay services are consistently and efficiently delivered to PCO employees and comply with relevant legislative documents, TB policies, and directives, and collective agreements. 4. The salary management processes for the authorization and recording of information in PCO’s HR and financial management systems are appropriately controlled and comply with PCO financial and HR delegation of signing authorities. 5. Management receives sufficient, complete, timely, and accurate information on pay and benefits expenditures and administrative matters. Detailed audit criteria are set out in Append ix A.
1.6 Approach and Methodology
The planning phase of the audit included a review of roles, responsibilities and process requirements; identification of management concerns and risks relating to pay and benefits administration; and the selection of specific issues and processes for further assessment. The examination phase employed a number of methodologies, including:
• interviews with pay and benefits staff to obtain clarification and further information regarding pay and benefits roles, responsibilities, processes, and procedures; • analysis of PCO policies, guidelines and other administrative documentation, and comparison to federal government requirements and regulations; •of key pay and benefits control processes, and of process mapping completion comparison to federal government requirements and regulations; • of process charts prepared by PCO, and supplementary process validation charts prepared by the audit team;
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Audit of Compensation (Pay and Benefits) • identification of key control points or control weaknesses; • of risks; confirmation • of additional financial information on supplementary pay; identification • of pay and benefits data provided by PWGSC, as well as financial and HR review transaction data provided by PCO Human Resources Division for various categories of transactions, including Taken On Strength (TOS); Struck Off Strength (SOS); and Leave Without Pay (LWOP); • reconciliationof FTEs reported in the PCO Integrated Business of the number and Human Resources Plan 2009-10, the HR system, and the PWGSC Pay Document selected for testing; • selection of a sample of pay and benefits and overtime transactions using a statistical sampling methodology, supplemented by judgmental sampling where considered appropriate; • conduct of detailed audit procedures, including the following: oto relevant original documents contained in the entitlements tracing employee file for compliance with the control framework; o the accuracy of the calculation of amounts paid and compliance verifying with applicable terms and conditions of employment, collective agreements, and other applicable Treasury Board policies and directives; and o verifying the adequacy of pay, benefits and overtime transaction authorization by a delegated manager. • of the extent to which overtime is authorized and paid in accordance assessment with TBS and departmental policies and relevant collective agreements or terms and conditions of employment.
1.7 Sampling and Testing Approach The total population under review included 1,176 employee files, representing a total salary and benefits expenditure of $87,721,943 for 2009. Of this amount, overtime expenditures totalled $2,376,394, or 2.7% of total salaries and benefits. The sampling approach involved both a statistical sampling methodology and judgmental sampling. A statistical sample of 67 transactions was selected randomly using a 90% confidence level and a ± 10% precision level. The transactions were selected either from the pay report dated December 23, 2009, or at the time the employee was hired (TOS); on leave (LWOP); or had departed (SOS). The resulting sample included 34 regular pay transactions; 19 TOS transactions; four SOS transactions; and 10 LWOP transactions. Testing included review of documentation in support of the sample transactions, and where appropriate, assessment of compliance to applicable TB policies and directives (e.g. verification of acting assignments, pay increments, and performance pay).
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