Bureau of Medicine and Surgery2012 Navy Medicine Audit Readiness Training
Symposium
Civilian Payroll: Path to Audit Readiness
June 5th – 6th, 2012
FOR OFFICIAL USE ONLY
Audit ReadinessContext DoD is required to assert audit readiness for the Statement of
Budgetary Resources (SBR) by the end of Fiscal Year 2014. As part of Navy Medicine’s audit readiness effort, the Civilian Payroll business process has been identified as an assessable unit for which assertion must take place.
Purpose To discuss the Key Control Objectives (KCOs), Key Supporting
Documents (KSDs), identified gaps and potential corrective actions for Civilian Payroll.
Outcome An understanding of the status of the Civilian Payroll assessable
unit, including major deficiencies and what can be done now at the field level to facilitate a successful financial statement audit. Some assessable units may not require field action at this time.
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Civilian Payroll Scope & Definition
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Definition Includes hiring, time and attendance, payroll, accrual, reconciliation, personnel changes, separation and retirement of civilian personnel
Assessable Unit Lead/Team
Ms. Kimberly McIntireMs. Mitzi CruzMs. Terry Carey
Assessable Unit Support
Bhavin Patel – [email protected] Swingle – [email protected]
Q1 FY12 Disbursements
$313 million
Audit Readiness Timeline
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FY12 FY13 FY14
Assessable Units – Wave 2 Max Assertion Date Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Travel 4 SEP 2012Consumables 3 DEC 2012Reimbursable Work Orders – Grantor
3 DEC 2012
Reimbursable Work Orders – Performer (Non-UBO)
1 APR 2013
Military Payroll (including RPN) 1 APR 2013Contract Administration 1 JUL 2013Non-Federal Receivables (UBO/Medical Treatment)
1 JUL 2013
Federal Receivables (UBO/Medical Treatment)
3 SEP 2013
Civilian Payroll 2 DEC 2013Financial Reporting 2 DEC 2013Funds Management (FBWT) 2 DEC 2013
Assessable Unit AssertionInterim Progress Milestones (90 Days, 50 %, 75 %)
Control Testing Time Period
Audit Readiness Process
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Tasks Work Products Completed
Document Assessable Units1 Determine which key business processes are
Assessable Units• Process
Narrative
• Process Flowchart
Mar. 1st2 Document Assessable Units through interviews and
observation
Assess Internal Controls3 Determine control objectives for each Assessable Unit
• Control Assessment
Mar. 1st
4 Highlight internal controls in process documentation
5 Assess whether controls are effective in meeting control objectives
Assess Supporting Documentation6 Determine what supporting documents exist for each
transaction type • Key Supporting Document Matrix
Apr. 16th
7 Assess whether there are any unsupported transactions
Identify and Prioritize Deficiencies8 Create list of deficiencies for any objectives that are
not met or transactions that are not supported • Deficiencies Listing
Apr. 30th
9 Prioritize deficiency list based on audit criteria
Key Control Objectives
KCO #
KCO Description
Need for Resource
1 Salary and benefits for new hires do not exceed funding authorityRecords Management (Personnel Action)
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Civilian personnel actions are valid (authorized/approved transactions supported by requests for personnel action) and recorded accurately
3 All civilian personnel actions are recorded timely
4Personnel and payroll records are adequately secured and appropriately safeguarded in compliance with established law and regulations
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KCOs – Represent outcomes needed to achieve proper financial reporting and are a basis by which the effectiveness of control activities can be evaluated.
Key Control ObjectivesKCO
#KCO Description
Time and Attendance
5Time and Attendance information is valid (authorized/approved transactions supported by timesheet) and is recorded correctly
6 All Time and Attendance information is recorded timely
Records Processing
7Civilian payroll salary and benefit information is accurately calculated and paid based on correct data processing
8 Payroll obligations, accruals, and disbursements are valid (authorized/approved transactions supported by pay file, disbursing voucher, etc.) and are accurately recorded and classified in the General Ledger(s)
9 All payroll obligations, accruals and disbursements are recorded in the General Ledger(s) timely
FOR OFFICIAL USE ONLY7
Key Control ObjectivesKCO
#KCO Description
Adjustments
10 All obligations and accruals are reviewed for validity, and adjusted as necessary
Information Technology
11User access is consistent with assigned rights and privileges in accordance with Federal Information System Controls Audit Manual (FISCAM) requirements
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Key Supporting Documentation
Execution Code
Description of Transaction
Key Supporting Documentation
540 To record an obligation for Civilian Labor
• OPTAR)amount in the BUMED Annual Planning Figure (BAPF)
510 To record an accrual for Civilian Labor
• No Key Supporting Documentation
610 To record a disbursement for Civilian Labor
• LXL3935 – Labor Report
• LXL3951 – Fringe Benefits Report
FOR OFFICIAL USE ONLY9
KSDs – Documentation retained to support individual financial transactions and accounting events.
Deficiency TypesMaterial Weakness – A deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected timely.
Significant Deficiency – A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Control Deficiency – A deficiency that exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements in a timely manner.
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Considerations For Deficiency Type
Quantitative Materiality - Dollar impact or potential impact to the financial statements
Qualitative Materiality - Non-quantitative factors such as complexity of transactions, legal or regulatory concern or system deficiencies
Pervasiveness - Number of activities or transactions affected by the deficiency
Audit Dealbreaker - Issues that prevent an audit from occurring
Existing Guidance - Determining whether current policy or SOP is in place that meet financial reporting requirement
FOR OFFICIAL USE ONLY11
Civilian Payroll Material Weaknesses
Material Weakness 1: Lack of Reconciliation Between the Standard Accounting and Reporting System – Field Level (STARS-FL), Defense Civilian Pay System (DCPS), and Treasury
Material Weakness 2: Time & Attendance Inconsistencies
General Causes:• Lack of Standard Processes; No SOP• Availability of Data• Multiple Error Possibilities
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FOR OFFICIAL USE ONLY
Lack of Reconciliation in Payroll Processing
Issue Detail No standardized reconciliation occurring at Navy Medicine between
Gross Pay File transmitted by DCPS, STARS-FL, and Treasury. Reconciliation is required to ensure that amounts included in Gross Pay
File are being accurately recorded in STARS-FL, as well as at Treasury. Reconciliation should be performed on a bi-weekly pay period basis. Reconciliation gives assurance that what was paid to employees is
accurately reflected in financial statements. Impact on Audit Readiness This reconciliation is utilized to detect any errors that may have
occurred during the system interface between STARS-FL and DCPS. Errors might include incomplete file transmission, duplicate file
transmission, or rejection of certain data detail due to errors in file coming from DCPS.
Such errors might cause misstatements of the Gross Outlays line item on the SBR.
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FOR OFFICIAL USE ONLY
Lack of Reconciliation in Payroll Processing
Path ForwardIn conjunction with the Navy Medicine Standard Operating Procedure (SOP) team, the Civilian Payroll Audit Readiness team conducted a week long Civilian Payroll working group, the purpose of which was to develop a standard reconciliation process to address the identified material weakness. The developed standard process is scheduled to be documented in an SOP to be drafted by August 2012.
Potential Activity Actions•Participate in development of Civilian Payroll SOP via actively submitting change requests and feedback where possible.•Once complete, Activities will be responsible for reconciling the Master Employee Record (MER) to SLDCADA and the Gross Pay File (GPF) to the general ledger (STARS-FL) and Work Year Personnel Cost (WYPC) in accordance with the SOP..
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FOR OFFICIAL USE ONLY
Time & Attendance Inconsistencies
Issue Detail Variations exist across the enterprise in how Time & Attendance is
recorded and certified. Over time certification processes have shifted at the field level on a
varying basis, creating no standard process. Some activities have a decentralized process; others are centralized.
Lack of standardized processes creates a situation in which controls can not be adequately assessed. This increases the risk that time and attendance may be reported incorrectly, and that payroll disbursements may be based on incorrect time and attendance amounts.
Impact on Audit Readiness Time and Attendance accuracy affects every disbursement recorded
for Civilian Payroll. This means that we can not ensure that these amounts are accurate and correctly stated in the ‘Gross Outlays’ line of the SBR.
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Path ForwardThe Dept. of Navy has developed a high-level process for Civilian Payroll; Navy Medicine supported creation of this process. Navy Medicine will update the Time & Attendance Instruction to mirror this Navy process, at a much more detailed level, and create a plan to guide activities in implementing the new process.
FOR OFFICIAL USE ONLY
Time & Attendance Inconsistencies
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Navy Medicine Civilian Payroll Process (Page 1 of 1)
Timekeeping Entry and Accounting
Em
ploy
eeM
ilita
ry T
reat
men
t Fac
ility
5.Costs captured in
STARS
3.Enter time into
SLDCADA
2.Record Time
10 .Employee receives
check
8.DFAS makes payment
4. Upload to DCAS
via SLDCADA
START A 1.Work Hours
9.Review Payment
6.End of Month
7.Record Accruals
End
Navy Medicine Civilian Payroll Process (Page 1 of 1)
Timekeeping Entry and Accounting
Em
ploy
eeM
ilita
ry T
reat
men
t Fac
ility
5.Costs captured in
STARS
3.Enter time into
SLDCADA
2.Record Time
10 .Employee receives
check
8.DFAS makes payment
4. Upload to DCAS
via SLDCADA
START A 1.Work Hours
9.Review Payment
6.End of Month
7.Record Accruals
End
Navy Medicine Civilian Payroll Process (Page 1 of 1)
Timekeeping Entry and Accounting
Em
ploy
eeM
ilita
ry T
reat
men
t Fac
ility
5.Costs captured in
STARS
3.Enter time into
SLDCADA
2.Record Time
10 .Employee receives
check
8.DFAS makes payment
4. Upload to DCAS
via SLDCADA
START A 1.Work Hours
9.Review Payment
6.End of Month
7.Record Accruals
End
Navy Medicine Civilian Payroll Process (Page 1 of 1)
Timekeeping Entry and Accounting
Em
ploy
eeM
ilita
ry T
reat
men
t Fac
ility
5.Costs captured in
STARS
3.Enter time into
SLDCADA
2.Record Time
10.Employee receives
check
8.DFAS makes payment
4. Upload to DCAS via SLDCADA
START A 1.Work Hours
9.Review Payment
6.End of Month
7.Record Accruals
End
Navy Medicine Time &
Attendance Corrective Action Plan
NMENME
NMCSDNMCSD
NMLCNMLC
Navy MedicineNavy Medicine
Single ProcessSingle Process
Other Civilian Payroll Deficiencies
Deficiency 1: Lack of Oversight over Service Providers
Deficiency 2: Variations in the New Hire Process
Deficiency 3: No Enterprise Standard Labor Data Collection and Distribution Application (SLDCADA) Administrator
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FOR OFFICIAL USE ONLY
Lack of Oversight at Service Providers
Issue Detail There is a lack of oversight by BUMED over the service
providers at Human Resource Service Center (HRSC) and Defense Finance and Accounting Service (DFAS)
Effect on Audit Readiness Without validating transactions processed at service providers,
there is a risk for misstatements in the financial statements
Potential Activity Actions Review SSAE-16 Service Audit Report for DCPS payroll
processing Ensure SF-52 is correctly processed by reviewing against final
SF-5018
FOR OFFICIAL USE ONLY
No Enterprise SLDCADA Administrator
Issue Detail There is no enterprise SLDCADA administrator
Impact on Audit Readiness Having an enterprise administrator allows standardization
of control activities and processes across the organization
Potential Activity Actions Determine feasibly of an enterprise SLDCADA
administrator
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FOR OFFICIAL USE ONLY
In The Mean Time……. DECENTRALIZE!
Communication (up and down the chain) Work in progress
CIVPAY Audit Toolkit Check sheet for timekeeping (employee, supervisor,
CSR/SA) Draft of Timekeeping instruction Accrual basics Region Recon tool Activities Recon tool
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FOR OFFICIAL USE ONLY
Questions?
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