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California State Prison, Solano - Payroll Process Review
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CALIFORNIA STATE PRISON, SOLANO
Review Report
PAYROLL PROCESS REVIEW
February 1, 2015, through January 31, 2018
BETTY T. YEE
California State Controller
June 2019
BETTY T. YEE
California State Controller
June 28, 2019
Robert Neuschmid, Warden
California State Prison, Solano
2100 Peabody Road
Vacaville, CA 95696
Dear Mr. Neuschmid:
The State Controller’s Office has reviewed the California State Prison, Solano’s (CSP-Solano)
payroll process and transactions for the period of February 1, 2015, through January 31, 2018.
The agency’s management is responsible for maintaining a system of internal control over the
payroll process within its organization, and for ensuring compliance with various requirements
under state laws and regulations regarding payroll and payroll-related expenditures.
Our review found material weaknesses in internal control over CSP-Solano’s payroll process.
These weaknesses contributed to CSP-Solano employees’ excessive vacation and annual leave
balances, improper and questioned payments, and long-outstanding unrecovered salary advances,
costing the State an estimated net total of $10,297,045.
If you have any questions, please contact Andrew Finlayson, Chief, State Agency Audits Bureau,
by telephone at (916) 324-6310.
Sincerely,
Original signed by
JIM L. SPANO, CPA
Chief, Division of Audits
JLS/as
Robert Neuschmid, Warden -2- June 28, 2019
cc: Joseph Popovits, Associate Warden
California State Prison, Solano
Giselle Matteson, Chief Deputy Administrator
California State Prison, Solano
Shannon Desmarais, Correctional Business Manager
California State Prison, Solano
Carlos Navarro-Medina, Institutional Personnel Officer
California State Prison, Solano
Kenneth Pogue, Undersecretary of Administration & Offender Services
California Department of Corrections and Rehabilitation
Kathleen Allison, Undersecretary of Operations
California Department of Corrections and Rehabilitation
Katherine Minnich, Deputy Director of Human Resources
California Department of Corrections and Rehabilitation
Mai Lee Vang, External Audits Manager
Office of Audits and Court Compliance
California Department of Corrections and Rehabilitation
Mark Rodriguez, Chief
Administrative Services Division
California Department of Human Resources
Marissa Revelino, Chief
Personnel and Payroll Services Division
State Controller’s Office
California State Prison, Solano Payroll Process Review
Contents
Review Report
Summary ............................................................................................................................ 1
Background ........................................................................................................................ 1
Objectives, Scope, and Methodology ............................................................................... 2
Conclusion .......................................................................................................................... 3
Views of Responsible Officials .......................................................................................... 4
Restricted Use .................................................................................................................... 4
Schedule—Summary of Findings ......................................................................................... 5
Findings and Recommendations ........................................................................................... 6
Appendix—Sampling Methodology ..................................................................................... A1
Attachment—California State Prison, Solano’s Response to Draft Review Report
California State Prison, Solano Payroll Process Review
Review Report
Summary The State Controller’s Office (SCO) audited the California State Prison,
Solano’s (CSP-Solano) payroll process for the period of February 1, 2015,
through January 31, 2018. CSP-Solano’s management is responsible for
maintaining a system of internal control over the payroll process within its
organization, and for ensuring compliance with various requirements
under state laws and regulations regarding payroll and payroll-related
expenditures.
Our limited review identified material weaknesses in internal control over
the CSP-Solano payroll process that leave CSP-Solano at risk of additional
improper payments if not mitigated. We found that CSP-Solano has a
combination of deficiencies in internal control over its payroll process
such that there is a reasonable possibility that a material misstatement in
financial information or noncompliance with provisions of laws,
regulations, or contracts will not be prevented, or detected and corrected,
on a timely basis.
Specifically, CSP-Solano had an ineffective control environment and
lacked adequate segregation of duties and compensating controls over its
processing of payroll transactions. In addition, CSP-Solano
inappropriately granted 12 employees keying access to the State’s payroll
system, which leaves payroll data at risk of misuse, abuse, and
unauthorized use. These deficiencies have a pervasive effect on the
CSP-Solano payroll process, and impair the effectiveness of other controls
by rendering their design ineffective or by keeping them from operating
effectively.
We also found that the CSP-Solano lacked sufficient controls over the
processing of specific payroll-related transactions to ensure that
CSP-Solano complies with collective bargaining agreements and state
laws, and that only valid and authorized payments are processed. As
quantified in the Schedule, these control deficiencies contributed to the
CSP-Solano employees’ excessive vacation and annual leave balances,
improper and questioned lump sum payments, improper and questioned
overtime compensation, questioned regular pay, improper holiday pay and
credit accruals, improper leave buybacks, improper uniform allowances,
and long-outstanding unrecovered salary advances, costing the State an
estimated net total of $10,297,045.
Background In 1979, the State of California adopted collective bargaining for state
employees. This created a significant workload increase for the SCO’s
Personnel and Payroll Services Division (PPSD), as PPSD was the State’s
centralized payroll processing center for all payroll-related transactions.
PPSD decentralized the processing of payroll, allowing state agencies and
departments to process their own payroll-related transactions. Periodic
reviews of the decentralized payroll processing at state agencies and
departments ceased due to budget constraints in the late 1980s.
In 2013, the California State Legislature reinstated these payroll reviews
to gain assurance that state agencies and departments maintain adequate
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California State Prison, Solano Payroll Process Review
internal control over payroll, provide proper oversight over their
decentralized payroll processing, and comply with various state laws and
regulations regarding payroll processing and related transactions.
Review Authority
Authority for this review is provided by California Government Code
(GC) section 12476, which states, “The Controller may audit the uniform
state pay roll system, the State Pay Roll Revolving Fund, and related
records of state agencies within the uniform state pay roll system, in such
manner as the Controller may determine.” In addition, GC section 12410
stipulates that “The Controller shall superintend the fiscal concerns of the
state. The Controller shall audit all claims against the state, and may audit
the disbursement of any state money, for correctness, legality, and for
sufficient provisions of law for payment.”
Objectives, Scope, We performed this review to determine whether CSP-Solano:
and Methodology
Processed payroll and payroll-related disbursements accurately and in
accordance with collective bargaining agreements and state laws,
regulations, policies, and procedures;
Established adequate internal control over payroll to meet the
following control objectives:
o Payroll and payroll-related transactions are properly approved and
certified by authorized personnel;
o Only valid and authorized payroll and payroll-related transactions
are processed;
o Payroll and payroll-related transactions are accurate and properly
recorded;
o Payroll systems, records, and files are adequately safeguarded;
o State laws, regulations, policies, and procedures are complied
with regarding payroll and payroll-related transactions;
Complied with existing controls as part of the ongoing management
and monitoring of payroll and payroll-related expenditures;
Maintained accurate records of leave balances; and
Administered and recorded salary advances properly and in
accordance with state laws, regulations, policies, and procedures.
We reviewed CSP-Solano’s payroll process and transactions for the period
of February 1, 2015, through January 31, 2018.
To achieve our objectives, we:
Reviewed state and CSP-Solano policies and procedures related to the
payroll process to understand CSP-Solano methodology for
processing various payroll and payroll-related transactions;
Interviewed CSP-Solano payroll personnel to understand
CSP-Solano’s methodology for processing various payroll and
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California State Prison, Solano Payroll Process Review
payroll-related transactions, determine their level of knowledge and
ability relating to payroll transaction processing, and gain an
understanding of existing internal control over the payroll process and
systems;
Selected transactions recorded in the State’s payroll database using
statistical sampling as outlined in the Appendix, and targeted selection
based on risk factors and other criteria for review;
Analyzed and tested transactions recorded in the State’s payroll
database, and reviewed relevant files and records to determine the
accuracy of payroll and payroll-related payments; accuracy of leave
transactions; propriety of review and approval of transactions;
adequacy of internal control over the payroll process and systems; and
compliance with collective bargaining agreements and state laws,
regulations, policies, and procedures (errors found from statistically-
determined samples were projected to the intended population); and
Reviewed salary advances to determine whether CSP-Solano
administered and recorded them in accordance with state laws,
regulations, policies, and procedures.
Conclusion Based on the results of our review, we found that CSP-Solano:
Did not process payroll and payroll-related disbursements accurately
and in accordance with collective bargaining agreements and state
laws, regulations, policies, and procedures (see Findings 4 through
12);
Lacked adequate internal control over payroll and payroll-related
transactions (see Findings 1 through 12);
Did not comply with existing controls as part of the ongoing
management and monitoring of payroll and payroll-related
expenditures (see Finding 3);
Did not maintain accurate records of leave balances (see Findings 5,
7, and 10); and
Did not administer salary advances in accordance with state laws,
regulations, policies, and procedures (see Finding 9).
As quantified in the Schedule and described in the Findings and
Recommendations section of this review report, these material
weaknesses1 in internal control over the payroll process contributed to
1An evaluation of an entity’s payroll process may identify deficiencies in its internal control over the process. A
deficiency in internal control 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 and correct,
misstatements in financial information, impairments of effectiveness or efficiency of operations, or noncompliance
with provisions of laws, regulations, or contracts on a timely basis.
Control deficiencies, either individually or in combination with other control deficiencies, may be evaluated as
significant deficiencies or material weaknesses. A material weakness is a deficiency, or a combination of deficiencies,
in internal control such that there is a reasonable possibility that a material misstatement in financial information,
impairment of effectiveness or efficiency of operations, or noncompliance with provisions of laws, regulations, or
contracts will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency,
or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention from those charged with governance.
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California State Prison, Solano Payroll Process Review
CSP-Solano employees’ excessive vacation and annual leave balances,
improper and questioned payments, and long-outstanding unrecovered
salary advances, costing the State an estimated net total of $10,297,045.
Views of We issued a draft review report on May 21, 2019. Robert Neuschmid,
Warden, responded by letter dated June 13, 2019 (Attachment). CSP-
Responsible
Solano indicated that it has taken steps to address and remedy the findings
Officials since the review. We will follow up during the next payroll audit to ensure
that these corrective actions were adequate and appropriate. We have
provided comments to CSP-Solano’s responses to Findings 2, 3, 4, 6, 8, 9,
and 11. Our responses are included in the Findings and Recommendations
section.
Restricted Use This audit report is solely for the information and use of CSP-Solano and
the SCO; it is not intended to be and should not be used by anyone other
than these specified parties. This restriction is not intended to limit
distribution of this audit report, which is a matter of public record and is
available on the SCO website at www.sco.ca.gov.
Original signed by
JIM L. SPANO, CPA
Chief, Division of Audits
June 28, 2019
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California State Prison, Solano Payroll Process Review
Schedule—
Summary of Findings
February 1, 2015, through January 31, 2018
Number of Issues as a Total Dollar
Number of Dollar Amount Selections Percentage Dollar Dollar Amount of
Finding Selections Method of of Selections with of Selections Amount of Amount of Known and
Number Issues Reviewed Selection Selection Unit Reviewed Issues Reviewed * Known Issues Likely Issues Likely Issues
1 Ineffective control environment N/A N/A N/A N/A N/A N/A N/A N/A N/A
over payoll transactions unit
resulting from inadequate staffing
2 Inadequate segregation of duties N/A N/A N/A N/A N/A N/A N/A N/A N/A
and compensating controls over
payroll transactions
3 Inappropriate keying access to the 2 4 Targeted Employee $ - 12 50% $ - N/A $ -
State’s payroll system
4 Inadequate controls over vacation 7 6 Targeted Employee 2 ,021,078 76 100% 2 ,021,078 N/A 2 ,021,078
and annual leave balances,
resulting in liability for excessive
balances
5 Inadequate controls over
separation lump-sum pay,
resulting in improper and
questioned payments:
Overpayments 5 1 Statistical Employee 2 ,047,063 38 75% 1 08,517 $ 5 7,608 166,125
Underpayments --Same selections above-- 2 4% ( 553) ( 293) ( 846)
Questioned payments --Same selections above-- 11 22% 4 84,711 2 57,315 742,026
Overpayments 1 0 Targeted Employee 1 ,564,416 2 20% 1 0,994 N/A 10,994
Questioned payments --Same selections above-- 2 20% 2 72,796 N/A 272,796
6 Inadequate controls over overtime
and regular pay, resulting in
improper and questioned
payments:
Overpayments 6 0 Statistical Overtime 8 9,730 4 7% 6 83 2 78,168 278,851
transaction
Underpayments --Same selections above-- 12 20% ( 684) ( 278,575) ( 279,259)
Questioned payments --Same selections above-- 4 7% 1 ,320 5 37,683 539,003
Overpayments 2 1 Targeted Overtime 4 42,811 5 24% 8 2,500 N/A 82,500
transaction
Underpayments --Same selections above-- 6 29% ( 151) N/A ( 151)
Questioned payments --Same selections above-- 2 10% 1 04,625 N/A 104,625
Inadequate controls over regular 6 0 Statistical Overtime 3 66,590 4 7% 1 5,126 6 ,174,108 6,189,234
pay, resulting in questioned transaction
payments
7 Inadequate controls over leave 3 5 Targeted Transactions 9 7,855 24 69% 6 5,368 N/A 65,368
buy-backs, resulting in improper
and questioned payments
8 Inadequate controls over holiday
pay, resulting in improper
payments
Overpayments 6 0 Statistical Transactions 2 5,204 1 2% 3 91 4 6,387 46,778
Underpayments --Same selections above-- 3 5% ( 9) ( 1,068) ( 1,077)
9 Inadequate controls over salary 3 0 Targeted Salary 4 1,461 30 100% 4 1,461 N/A 41,461
advances, resulting in failure to advances
recover outstanding amounts
10 Inadequate controls over holiday -
credits, resulting in improper
accruals
Over-credited 2 9 Targeted Holiday credit 1 5,143 21 72% 9 ,195 N/A 9 ,195
transaction
Questioned --Same selections above-- 1 3% 1 18 N/A 1 18
11 Inadequate controls over uniform 1 2 Judgmental Employee 3 4,613 11 92% 8 ,226 N/A 8 ,226
allowance, resulting in improper
payments
12 Lack of supporting documentation 3 0 Judgmental Transactions N/A 4 13% N/A N/A N/A
to support effective date
transactions
Total $ 6 ,745,964 $ 3,225,712 7,071,333 $ 10,297,045
* All percentages are rounded to the nearest full percentage point.
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California State Prison, Solano Payroll Process Review
Findings and Recommendations
FINDING 1— CSP-Solano lacked an effective control environment within its payroll
transactions unit necessary to ensure that management is able to recruit,
Ineffective control
develop, and retain competent individuals. Appropriate staffing is critical
environment over
and vital in meeting the unit’s objectives.
payroll
transactions unit
GC sections 13400 through 13407 mandate that state agencies establish
resulting from
and maintain an effective internal control system, including personnel of
inadequate staffing
a quality commensurate with their responsibilities. Personnel who have
the necessary competence level are able to complete their assigned tasks
with a reduced likelihood of error, noncompliance with policies and
procedures, and additional oversight.
Our review found that CSP-Solano Business Services Division has
experienced high employee turnover, resulting in various individuals
working out-of-class assignments. In the Personnel Specialist series,
CSP-Solano is budgeted for 12 positions: two Personnel Supervisor I, one
Personnel Supervisor II, one Senior Personnel Specialist, and eight
Personnel Specialists. During our review period, nine individuals in this
series transferred or separated, with the highest turnover, of five
individuals, in 2015.
High employee turnover creates a chain effect when vacant positions must
be filled immediately. For example, in May 2016, seven employees in
Personnel Services were working out-of-class assignments. The table
below shows the various out-of-class assignments. To fill critical
positions, each vacant position that results from an out-of-class assignment
must be filled by another individual. As noted in the table, three Office
Technicians were working out-of-class as Personnel Specialists. Two of
the Personnel Specialist positions were vacant because the specialists were
working out-of-class on other assignments. Personnel Specialists must
appropriately apply laws, regulations, and bargaining contract provisions
to ensure that payroll and payroll-related transactions are accurate and
properly recorded. Time, adequate supervision, and training are necessary
to develop the competence required to perform these duties. Given that
out-of-class assignments are designed to be relatively short, staff cannot
be developed or trained adequately to obtain the necessary competence,
resulting in a higher risk of error and improper payments.
Employee Current Classification Out-of-Class Assignment
A Institutional Personnel Officer Correctional Business Manager
B Return-to-Work Coordinator Institutional Personnel Officer
C Personnel Specialist Labor Relations Analyst
D Personnel Specialist Senior Personnel Specialist
E Office Technician Personnel Specialist
F Office Technician Personnel Specialist
G Office Technician Personnel Specialist
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California State Prison, Solano Payroll Process Review
Lack of adequate staffing has an adverse and pervasive effect on
CSP-Solano’s payroll process, and impairs the effectiveness of other
controls by rendering their design ineffective or by keeping them from
operating effectively. This control deficiency, in combination with other
deficiencies discussed in Finding 2, demonstrates CSP-Solano’s lack of
adequate internal controls over the payroll process and payroll-related
transactions.
Recommendation
We recommend that CSP-Solano:
Hold individuals accountable to established policies and procedures
by evaluating their competence within their positions;
Foster an environment in which employees are rewarded for their
effective performance; and
Establish succession and contingency plans for replacing competent
personnel and responding to sudden personnel changes that could
otherwise compromise the internal control system.
FINDING 2— CSP-Solano lacked adequate segregation of duties within its payroll
transactions unit to ensure that only valid and authorized payroll
Inadequate
transactions were processed. CSP-Solano also failed to implement other
segregation of
controls to compensate for this risk.
duties and
compensating
GC sections 13400 through 13407 require state agencies to establish and
controls over maintain internal controls, including proper segregation of duties and an
payroll effective system of internal review. Adequate segregation of duties
transactions reduces the likelihood that fraud or error will remain undetected by
providing for separate processing by different individuals at various stages
of a transaction and for independent review of the work performed.
Our review found that CSP-Solano payroll transactions unit staff
performed conflicting duties. Staff members performed multiple steps in
processing payroll transactions, including entering data into the State’s
payroll system; auditing employee timesheets; reconciling payroll,
including reconciling system output to source documentation; reporting
payroll exceptions; and processing adjustments. For example, staff
members keyed in regular and overtime pay and reconciled the master
payroll, overtime, and other supplemental warrants. CSP-Solano failed to
demonstrate that it implemented compensating controls to mitigate the
risks associated with such a deficiency. We found no indication that these
functions were subjected to periodic supervisory review.
The lack of adequate segregation of duties and compensating controls has
a pervasive effect on the CSP-Solano’s payroll process, and impairs the
effectiveness of other controls by rendering their design ineffective or by
keeping them from operating effectively. These control deficiencies, in
combination with other deficiencies discussed in Findings 3 through 12,
represent a material weakness in internal control over the payroll process
such that there is a reasonable possibility that a material misstatement in
financial information or noncompliance with provisions of laws,
regulations, or contracts will not be prevented, or detected and corrected,
on a timely basis.
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California State Prison, Solano Payroll Process Review
Good internal control practices require that the following functional duties
be performed by different work units, or at minimum, by different
employees within the same unit:
Recording transactions – This duty refers to the record-keeping
function, which is accomplished by entering data into a computer
system.
Authorization to execute – This duty belongs to individuals with
authority and responsibility to initiate and execute transactions.
Periodic review and reconciliation of actual payments to recorded
amounts – This duty refers to making comparisons of information at
regular intervals and taking action to resolve differences.
Recommendation
We recommend that CSP-Solano:
Separate conflicting payroll function duties to the greatest extent
possible. Adequate segregation of duties will provide a stronger
system of internal control whereby the functions of each employee are
subject to the review of another.
If it is not possible to segregate payroll functions fully and
appropriately, CSP-Solano should implement compensating controls.
For example, if the payroll transactions unit staff member responsible
for recordkeeping also performs a reconciliation process, then the
supervisor should perform and document a detailed review of the
reconciliation to provide additional control over the assignment of
conflicting functions. Compensating controls may also include dual
authorization requirements and documented reviews of payroll system
input and output; and
Implement formal procedures for performing and documenting
compensating controls.
CSP-Solano’s Response
SCO review states, “SOL’s payroll transactions unit staff performed
conflicting duties. Staff members performed multiple steps in processing
payroll transactions, including entering data into the State’s payroll
system; auditing employee timesheets; reconciling payroll, including
reconciling system output to source documentation; and reporting
payroll exceptions.” SOL is committed to ensuring sufficient separation
of duties exist within the Personnel Office, including controls to ensure
the timekeeper duties do not overlap with the personnel transaction staff
who key in the payroll system. SOL has implemented additional periodic
supervisory reviews to help mitigate risk.
SCO’s Comment
Controls are not only necessary to ensure that the timekeeper duties do not
overlap, they also ensure that personnel who enter data in the State’s
payroll system do not make improper payments. Appropriate controls
could have identified the overpayment of $24,000 in overtime
compensation to one employee (see Finding 5).
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California State Prison, Solano Payroll Process Review
FINDING 3— CSP-Solano lacked adequate controls to ensure that only appropriate staff
have keying access to the State’s payroll system. CSP-Solano
Inappropriate
inappropriately granted 12 employees keying access to the state payroll
keying access to the
system. If not mitigated, this control deficiency leaves the payroll data at
State’s payroll
risk of misuse, abuse, and unauthorized use.
system
The SCO maintains the State’s payroll information system. The system is
decentralized, thereby allowing employees of state agencies to access the
system. The SCO’s PPSD has established a Decentralized Security
Program Manual that all state agencies are required to follow in order to
access the payroll systems. The program’s objectives are to secure and
protect the confidentiality and integrity of payroll data against misuse,
abuse, and unauthorized use.
We reviewed the records of 24 employees at CSP-Solano who had keying
access to the state payroll system at various times between
February 1, 2015, and January 31, 2018. Of the 24 employees, 12 had
inappropriate keying access to the State’s payroll system. Specifically,
three individuals not in the Personnel Specialist classification had keying
access without a letter of justification. An additional nine individuals did
not have their keying access immediately removed after their separation
from state service, transfer to another agency, or change in classification.
For example, a Personnel Specialist transferred to another agency on
August 17, 2015; however, the request to remove the employee’s access
was not made until February 1, 2016, 168 days later.
The Decentralized Security Program Manual states, in part:
The PPSD system contains sensitive and confidential information.
Access is restricted to persons with an authorized, legal, and legitimate
business requirement to complete their duties.
Currently, PIMS, HIST, KEYM, PIP, LAS, MPC and/or ACAS
applications are restricted to Personnel Specialists or Personnel
Technician classifications because their need is by definition a function
of their specific job duties and any change in those duties requires a
reevaluation of the need for access.
If the employee's duties change, such that the need for access no longer
exists, the access privilege MUST be removed or deleted immediately
by a request submitted by the department/campus.
To prevent unauthorized use by a transferred, terminated or resigned
employee's user ID, the Security Monitor must IMMEDIATELY submit
all pages of the PSD125A to delete the user’s system access. Using an
old user ID increases the chances of a security breach which is a serious
security violation. Sharing a user ID is strictly prohibited and a serious
violation.
Recommendation
We recommend that CSP-Solano:
Implement adequate controls to ensure that employees with keying
access to the State’s payroll system do not enter their own data into
the system;
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California State Prison, Solano Payroll Process Review
Update keying access to the State’s payroll system immediately after
employees leave CSP-Solano, transfer to another unit, or change
classifications; and
Periodically review access to the system to verify that access complies
with the Decentralized Security Program Manual.
CSP-Solano’s Response
The SCO review states that three individuals not in the Personnel
Specialist series had keying access without a justification letter. While
SOL could not locate and furnish copies of the justification letters, we
believe they were created and provided to the SCO’s decentralized
security team. The security team is responsible for granting access and
would have required the letters in order to give the access to the three
staff mentioned. SOL will take steps to ensure historical records are
maintained in a “Decentralized Security Binder.” In regards to SCO’s
recommendations, SOL will ensure proper controls are in place so that
the employees with keying access do not enter their own data. SOL
previously had some difficulties with security requests that resulted in
some inefficiencies and delays. Since then, SOL has made direct contact
with the decentralized security unit at SCO and can now submit
documents via secure email which has eliminated delay in adding or
removing access to the SCO system. SOL has, as recommended, updated
the procedures for updating and reviewing periodically the system access
it maintains.
SCO’s Comment
PPSD requires each agency to designate a responsible individual as
Security Monitor. CSP-Solano’s Security Monitor is responsible for
maintaining Security Authorization forms, and it is CSP-Solano’s
responsibility to maintain documentation as evidence that the forms were
submitted to the SCO.
FINDING 4— CSP-Solano failed to implement controls to ensure that it adhered to the
Inadequate requirements of collective bargaining agreements and state regulations to
limit the accumulation of vacation and annual leave credits. This
controls over
deficiency resulted in liability for excessive leave balances with a value of
vacation and
$2,021,078 as of January 31, 2018. We expect the liability to increase if
annual leave
CSP-Solano does not take action to address the excessive vacation and
balances, resulting
annual leave balances.
in liability for
excessive balances Collective bargaining agreements and state regulations limit the amount
of vacation and annual leave that most state employees may accumulate to
no more than 80 days (640 hours). The limit on leave balances helps state
agencies manage leave balances and control the State’s liability for
accrued leave credits. State agencies may allow employees to carry a
higher leave balance only under limited circumstances. For example, an
employee may not be able to reduce accrued vacation or annual leave
hours below the limit due to business needs. When an employee’s leave
accumulation exceeds or is projected to exceed the limit, state agencies
should work with the employee to develop a written plan to reduce leave
balances below the applicable limit.
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California State Prison, Solano Payroll Process Review
Our review of leave accounting records found that CSP-Solano had
1,194 employees with unused vacation or annual leave credits as of
January 31, 2018. Of those employees, 76 (6%) exceeded the limit set by
collective bargaining agreements and state regulations. For example, one
employee had an accumulated balance of 2,629 hours of annual leave, or
1,989 hours beyond the 640-hour limit. Collectively, the 76 employees
accumulated more than 36,000 hours of excess vacation and annual leave,
with a value of $2,021,078 as of January 31, 2018. This estimated liability
does not adjust for salary rate increases and additional leave credits2.
Accordingly, we expect that the amount needed to pay for the liability
would be higher. For example, a CSP-Solano employee separated from
state service with 2,451 hours in leave credits, including 2,398 hours in
annual leave credit. After adjusting for additional leave credits, the
employee was paid for 2,835 hours, or 16% more.
We performed additional review of 20 of 76 employees to determine
whether CSP-Solano complied with collective bargaining agreements and
state regulations. We determined that CSP-Solano could not demonstrate
that it had complied with the exceptions specified in collective bargaining
agreements and state regulations when allowing these 20 employees to
maintain excess vacation or annual leave balances. We found no
procedures at CSP-Solano regarding excess leave usage.
If CSP-Solano does not take action to reduce the excessive credits, the
liability for accrued vacation and annual leave will most likely increase,
as most employees will receive salary increases or use other non-
compensable leave credits instead of vacation or annual leave, increasing
their vacation or annual leave balances. In addition, the state agency
responsible for paying these leave balances may also face a cash flow
problem if a significant number of employees with excessive vacation or
annual leave credits separate from state service. Normally, state agencies
are not budgeted to make these lump-sum payments. However, the State’s
current practice dictates that the state agency that last employed an
employee pays for that employee’s lump-sum separation payment,
regardless of where the employee accrued the leave balance.
Recommendation
We recommend that CSP-Solano:
Implement controls, including existing policies and procedures, to
ensure that its employees’ vacation and annual leave balances are
maintained within levels allowed by collective bargaining agreements
and state regulations;
Conduct ongoing monitoring of controls to ensure that they are
implemented and operating effectively; and
Participate in leave buy-back programs if the State offers such
programs and funds are available.
2Most state employees receive pay rate increases every year pursuant to state laws and/or collective bargaining
agreements. In addition, when an employee’s accumulated leave balances upon separation are calculated for lump-
sum pay, the employee is credited with additional leave credits equal to the amount that the employee would have
earned had the employee taken time off and not separated from state service.
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California State Prison, Solano Payroll Process Review
CSP-Solano’s Response
This is a Department-wide issue, partially stemming from State furlough
and “personal leave plans” implemented from February 2009 through
July 2013. Those policies resulted in significant and unforeseen impacts
on the 24-hour facilities. The Department has been actively working to
reduce the accrued time while maintaining institutional security.
Additionally, SOL is exploring ways to reduce excessive credits through
participation in a leave reduction plan process which may include the
recommendation of a leave buy-back program, if funds are available.
SCO’s Comment
While we acknowledge that state policies may have affected CSP-Solano,
it is still the agency’s responsibility to ensure that annual and vacation
leave of over 640 hours meets Memorandum of Understanding provisions.
CSP-Solano could not provide documentation to ensure that the
employees with over 640 hours met the exceptions specified in the
Memorandum of Understanding or that employees had plans in place to
reduce their leave balances.
FINDING 5— CSP-Solano lacked adequate controls over the processing of employee
Inadequate separation lump-sum pay. We identified $177,119 in overpayments, $846
controls over in underpayments, and $1,014,822 in questioned payments for separation
lump-sum pay, consisting of $119,511 in overpayments, $553 in
separation
underpayments, and $757,507 in questioned payments based on actual
lump-sum pay,
transactions reviewed (“known”); and $57,608 in overpayments, $293 in
resulting in
underpayments, and $257,315 in questioned payments based on the results
improper and
of statistical sampling (“likely”). If not mitigated, the control deficiencies
questioned
leave CSP-Solano at risk of additional improper separation lump-sum
payments payments.
GC section 19839 allows lump-sum payment for accrued eligible leave
credits when an employee separates from state employment. Collective
bargaining agreements include similar provisions regarding separation
lump-sum pay.
Payroll records show that CSP-Solano processed payments for separation
lump-sum pay, totaling $7,298,176, for 254 employees between February
2015 and January 2018, as follows:
Separation Lump-Sum Pay Group Unit Amount
Bargaining Unit R06 employees (statistically sampled) 78 $ 3,133,771
Ten highest payments to non-Bargaining Unit 6 employees
(items examined 100%) 10 1,564,416
Remaining payments to non-Bargaining Unit 6 employees
(not tested) 166 2,599,989
Total population 254 $ 7,298,176
_____________________
* Amounts in this table are rounded to the nearest dollar.
We examined the separation lump-sum pay for 10 non-Bargaining Unit 6
employees with the highest payments, totaling $1,564,416. Of the 10
employees, CSP-Solano overpaid two employees by approximately
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California State Prison, Solano Payroll Process Review
$10,994 because the payroll transactions unit staff miscalculated the leave
balance paid. In addition, we questioned two payments totaling $272,796
due to the lack of supporting documentation. Without the required
documentation, there is no record of calculation and approval of payments
for separation lump-sum pay. Therefore, we could not determine the
validity, accuracy, and propriety of the two payments.
Of the payments to Bargaining Unit 6 employees for separation lump-sum
pay, totaling $3,133,771, we randomly selected a statistical sample (as
described in the Appendix) of 51 employees who were paid separation
lump-sum pay, totaling $2,047,063.
Of the 51 statistically-determined samples, CSP-Solano overpaid
38 employees by approximately $108,517 and underpaid two employees
by approximately $553. We also questioned a total of $484,711 in
payments for 11 employees due to lack of supporting documentation.
Without the required documentation, there is no record of calculation and
approval of payments for separation lump-sum pay. Therefore, we could
not determine the validity, accuracy, and compliance of the 11 payments,
totaling $484,711, without supporting documentation. As a result, we
questioned these payments. The known improper and questioned
payments resulted in a net total of $592,675.
As we used a statistical sampling method to select the employees whose
payments for separation lump-sum pay were examined, we projected the
amount of likely overpayments to be $57,608 and likely underpayments to
be $293. We could also estimate that there may have been additional
missing documentation associated with separation lump-sum pay, totaling
$257,315. As supporting documentation is required to authorize separation
lump-sum pay, we also questioned these payments. Therefore, the known
and likely improper and questioned payments totaled a net approximate
$907,305, consisting of $166,125 in overpayments, $846 in
underpayments, and $742,026 in questioned payments.
The following table summarizes the results of our statistical sampling:
Known improper and questioned payments, net $ 592,675
Divide by: Sample 2,047,063
Error rate for projection (differences due to rounding) 28.95%
Population that was statistically sampled 3,133,771
Multiply by: Error rate for projection 28.95%
Known and likely improper and questioned payments, net (difference due to rounding) 907,305
Less: Known improper and questioned payments, net 592,675
Likely improper and questioned payments, net $ 314,630
_____________________
* Amounts in this table are rounded to the nearest dollar.
The known overpayments and underpayments occurred because payroll
transactions unit staff members miscalculated the leave balance paid.
CSP-Solano also lacked adequate supervisory review to ensure accurate
processing of separation lump-sum pay.
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California State Prison, Solano Payroll Process Review
GC sections 13400 through 13407 require state agencies to establish and
maintain internal controls, including an effective system of internal
review.
Recommendation
We recommend that CSP-Solano:
Establish adequate controls to ensure accurate calculation and
payment of separation lump-sum pay;
Conduct a review of payments for separation lump-sum pay made
during the past three years to ensure that the payments were accurate
and in compliance with collective bargaining agreements and state
law; and
Recover overpayments made to separated employees in accordance
with GC section 19838 and State Administrative Manual (SAM)
section 8776.6, and properly compensate those employees who were
underpaid.
FINDING 6— CSP-Solano lacked adequate controls over the processing of overtime and
regular pay. We identified $361,351 in overpayments, $279,410 in
Inadequate
underpayments, and $643,628 in questioned payments for overtime pay,
controls over
consisting of $83,183 in overpayments, $835 in underpayments, and
overtime and
$105,945 in questioned payments based on actual transactions reviewed
regular pay,
(“known”); and $278,168 in overpayments, $278,575 in underpayments,
resulting in
and $537,683 in questioned payments based on the results of statistical
improper and
sampling (“likely”). In addition, we identified $6,189,234 in questioned
questioned payments for regular pay, consisting of $15,126 based on actual
payments transactions reviewed (“known”); and $6,174,108 based on the results of
statistical sampling (“likely”). If not mitigated, the control deficiencies
leave CSP-Solano at risk of additional improper payments for overtime
and regular pay.
Collective bargaining agreements and state laws and policies contain
specific clauses regarding overtime pay. Payroll records show that
CSP-Solano processed 24,987 overtime pay transactions, totaling
$37,692,139, between February 2015 and January 2018, as follows:
Overtime Payment Type By Group Unit Amount
Work Week Group E/SE –
At least $10,000 paid (items examined 100%) 10 $ 305,113
Work Week Group E/SE – Less than $10,000 paid
(not tested) 164 615,087
Work Week Group 2 – At least $10,000 paid
(items examined 100%) 11 137,698
Work Week Group 2 – Less than $10,000 paid
(statistically sampled) 24,721 36,634,241
Total population 24,906 $ 37,692,139
___________________
* Amounts in this table are rounded to the nearest dollar.
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California State Prison, Solano Payroll Process Review
We examined all 11 overtime pay transactions, totaling $137,698, for work
week group (WWG) 2 employees who were paid at least $10,000. Of the
11 transactions, three were overpaid by a total of $25,851. Specifically,
one of the employees was overpaid by $24,000 because the payroll
transactions unit staff member keyed an incorrect hourly rate. The staff
member incorrectly keyed an hourly rate of $560 instead of $60. In
addition, five of the 11 transactions were underpaid by a total of $74.
We also examined the 10 highest overtime pay transactions, totaling
$305,113 for WWG E/SE employees who were paid at least $10,000. Of
the 10 transactions, two were overpaid by a total of $56,649, and one was
underpaid by a total of $77. In addition, we questioned two payments
totaling $104,625 due to the lack of supporting documentation. These
improper payments occurred because payroll transaction unit staff
members did not reduce, or incorrectly reduced, employee leave balances
for compensating time off and/or on-call hours.
Of the 24,721 overtime pay transactions, totaling $36,634,241, for
WWG 2 employees who were paid less than $10,000 of overtime per
transaction, we randomly selected a statistical sample (as described in the
Appendix) of 60 transactions, totaling $89,730. Of the 60 transactions,
CSP-Solano overpaid four by a total of $683, and underpaid 12 by a total
of $684. We also questioned four transactions, totaling $1,320, due to the
lack of supporting documentation. Without the required documentation,
there is no record of hours worked, or of supervisory review and approval.
Therefore, we could not determine the validity and authorization of
payments for overtime pay, totaling $1,320.
As we used a statistical sampling method to select the overtime pay
transactions examined, we projected the amount of likely overpayments to
be $278,168 and likely underpayments to be $278,575. We could also
estimate that there may have been additional missing documentation
associated with overtime pay, totaling $537,683. Accordingly, as
supporting documentation is required to authorize overtime pay, we also
questioned these payments. Therefore, the known and likely improper and
questioned payments totaled a net of approximately $538,595 consisting
of $278,851 in overpayments, $279,259 in underpayments, and $539,003
in questioned payments.
The following table summarizes the results of our statistical sampling:
Known improper and questioned payments, net $ 1,319
Divide by: Sample 89,730
Error rate for projection (differences due to rounding) 1.47%
Population that was statistically sampled 36,634,241
Multiply by: Error rate for projection 1.47%
Known and likely improper and questioned payments, net (differences due to rounding) 538,595
Less: Known improper and questioned payments, net 1,319
Likely improper and questioned payments, net $ 5 37,276
_________________
* Amounts in this table are rounded to the nearest dollar.
The known improper payments were made because payroll transactions
unit staff members miscalculated overtime hours and improperly reduced
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California State Prison, Solano Payroll Process Review
leave balances. Improper payments also were made because California
Department of Corrections and Rehabilitation’s (CDCR) Business
Information System incorrectly rounded down fractional overtime hours.
CSP-Solano also lacked adequate supervisory review to ensure accurate
processing of overtime pay. CSP-Solano could not explain why the system
allowed such errors.
For the 60 statistically-determined overtime pay transactions, we also
reviewed associated regular pay, totaling $366,590. As CSP-Solano could
not provide timesheets for four of the overtime selections, we also
questioned the associated regular pay, totaling $15,126. Although the
State’s payroll system makes all computations and prepares the
“negative”3 payrolls, timesheets are still required to substantiate the hours
worked for regular pay. Without timesheets, there is no record of hours
worked or of supervisory review and approval. Therefore, we could not
determine the validity and authorization of payments for regular pay,
totaling $15,126, for the four employees whose timesheets could not be
located. As a result, we questioned these payments. Because we used a
statistical sampling method to select the payments examined, we could
also estimate that there may have been missing timesheets associated with
regular pay, totaling $6,174,108. Accordingly, as timesheets are required
to authorize pay, we questioned these payments for regular pay.
The following table summarizes the results of our statistical sampling:
Known questioned payments, net $ 15,126
Divide by: Sample $ 366,590
Error rate for projection (difference due to rounding) 4.13%
Population that was statistically sampled 150,000,740
Multiply by: Error rate for projection 4.13%
Known and likely questioned payments, net (difference due to rounding) 6,189,234
Less: Known questioned payments, net 1 5,126
Likely questioned payments, net $ 6 ,174,108
GC sections 13402 through 13407 require state agencies to establish and
maintain internal controls, including a system of policies and procedures
adequate to ensure compliance with applicable laws and other
requirements, and an effective system of internal review.
Recommendation
We recommend that CSP-Solano:
Conduct a review of payments made for overtime pay during the past
three years to ensure that the payments complied with collective
bargaining agreements and state laws and policies; and
3According to SCO’s Payroll Procedures Manual, “These are referred to as ‘negative’ payrolls because attendance
reports have not been submitted and no working payrolls have been cleared with agencies/campuses when the
payrolls are prepared. This payroll writing operation is performed for the majority of state employees during the
period from the cutoff day in each pay period to the 27th and 28th of the month.”
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California State Prison, Solano Payroll Process Review
Recover overpayments made to employees through an agreed-upon
collection method in accordance with GC section 19838, and properly
compensate those employees who were underpaid.
We further recommend that, to prevent improper payments for overtime
pay from recurring, CSP-Solano:
Establish adequate internal controls to ensure that payments are
accurate and comply with collective bargaining agreements and state
laws and policies; and
Provide adequate oversight to ensure that payroll transactions unit
staff members process only valid and authorized payments that
comply with collective bargaining agreements and state laws and
policies.
CSP-Solano’s Response
SOL has implemented controls to prevent improper overtime payments.
Personnel Supervisors analyze and review a selection of pay unit
timesheets to ensure compliance and provide daily monitoring of pay
issued in the State payroll system. Additionally, SOL has seen a decline
in overtime errors due to the implementation of the Business Information
System – Time and Shift application, which is responsible for calculating
and downloading overtime electronically to the SCO system. SOL has
also implemented a regular audit process to identify un-submitted 998s.
SCO’s Comment
While a majority of CSP-Solano’s employee overtime is processed
through the Business Information System (BIS), there is still some
overtime that must be manually calculated and keyed into the State’s
payroll system. Proper controls must be implemented to prevent errors in
the remaining keyed overtime payments and processing of any
compensating time-off cash-outs. We will follow up the next audit to
ensure that BIS is properly calculating and downloading overtime to the
SCO system.
FINDING 7— CSP-Solano lacked adequate controls over leave buy-back payments. We
Inadequate reviewed 35 leave buy-back payments and identified 23 improper
controls over leave payments, totaling $61,649. In addition, buy-back documentation could
not be provided for one payment, totaling $3,719. If not corrected, this
buy-backs,
control deficiency leaves CSP-Solano at risk of additional improper leave
resulting in
buy-back payments.
improper and
questioned
On an annual basis, California Department of Human Resources (CalHR)
payments
determines whether to offer the Excluded Employee Buy-Back Program,
which authorizes payment of leave credits to employees who are excluded
from Collective Bargaining. Eligible employees may receive payments at
their regular salary rates in exchange for accrued vacation, annual leave,
personal leave, and/or personal holiday credits. We reviewed 35 leave
buy-back payments and found that 23 were improper because leave credits
had not been properly reduced in the leave accounting system.
Approximately 1,272 hours were not reduced in the leave accounting
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California State Prison, Solano Payroll Process Review
system for these 23 payments, totaling $61,649. Documentation could not
be provided for one leave buy-back payment; therefore, we questioned the
payment of 80 hours, totaling $3,719.
The following table summarizes the improper leave buy-back payments
by leave type:
Leave Buy- Improper Number of
Back Leave Buy- Hours Not
Buy-Back Payments Back Reduced Estimated
Leave Type Tested Payments in CLAS Cost
Annual Leave 12 6 480 $ 22,741
Personal Leave 2 1 40 2,451
Personal Holiday 7 6 107 5,772
Holiday Credit 14 10 645 30,685
Total 35 23 1,272 $ 61,649
We found that when processing leave buy-back payments, the payroll
transactions unit staff members did not reduce corresponding leave credits
in the state leave accounting system. CSP-Solano also lacked adequate
supervisory review to ensure accurate processing of leave buy-back.
Recommendation
We recommend that CSP-Solano:
Conduct a review of all leave buy-back payments made during the past
three years to ensure that the payments complied with CalHR policies;
and
Recover overpayments made to employees through an agreed-upon
collection method in accordance with GC section 19838.
We further recommend that, to prevent improper leave buy-back
payments, CSP-Solano:
Provide adequate oversight to ensure that payroll transactions unit
staff members accurately process leave buy-back transactions; and
Provide training to payroll transactions unit staff members involved in
keying transactions to ensure that they understand the CalHR
requirements regarding leave buy-back.
FINDING 8— CSP-Solano lacked adequate controls over the processing of holiday pay.
We identified $46,778 in overpayments and $1,077 in underpayments,
Inadequate
consisting of $391 in overpayments and $9 in underpayments based on
controls over
actual transactions reviewed (“known”); and $46,387 in overpayments and
holiday pay,
$1,068 in underpayments based on the results of statistical sampling
resulting in
(“likely”). If not mitigated, the control deficiencies leave CSP-Solano at
improper
risk of additional improper payments for holiday pay.
payments
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California State Prison, Solano Payroll Process Review
Pursuant to the collective bargaining agreement for Bargaining Unit 6,
employees working in a posted position are entitled to holiday pay for
hours worked on a holiday. Payroll records indicated that CSP-Solano
processed 7,556 holiday pay transactions for employees in a posted
position between February 2015 and January 2018, as follows:
Holiday Payment Type Unit Amount
Holiday (SG) Pay (statistically-sampled) 7,556 $ 3,015,327
Total population 7,556 $ 3,015,327
________________
* Amounts in this table are rounded to the nearest dollar.
Of the 7,556 holiday pay transactions, totaling $3,015,327, we randomly
selected a statistical sample (as described in the Appendix) of
60 transactions, totaling $25,204. Of the 60 transactions, CSP-Solano
overpaid one by $391, and underpaid three by $9. As we used a statistical
sampling method to select the holiday pay transactions examined, we
projected the amount of likely improper payments to be $45,319.
Accordingly, the known and likely improper payments totaled a net
approximate $45,701, consisting of $46,778 in overpayments, and $1,077
in underpayments.
The following table summarizes the results of our statistical sampling:
Known improper payments, net $ 382
Divide by: Sample 25,204
Error rate for projection (difference due to rounding) 1.52%
Population that was statistically sampled 3,015,327
Multiply by: Error rate for projection 1.52%
Known and likely improper payments, net (difference due to rounding) 45,701
Less: Known improper payments, net 382
Likely improper payments, net $ 45,319
_____________________
* Amounts in this table are rounded to the nearest dollar.
The overpayment was made because a payroll transactions unit staff
member improperly keyed holiday pay for an employee who did not work
the holiday. The unknown underpayments occurred because CDCR’s
Business Information System incorrectly rounded down fractional holiday
pay hours. CSP-Solano could not explain why the system allowed such
errors. CSP-Solano also lacked adequate supervisory review to ensure
accurate processing of holiday pay.
Recommendation
We recommend that CSP-Solano:
Conduct a review of holiday pay made during the past three years to
ensure that the payments complied with collective bargaining
agreements and state law and policies;
Recover overpayments made to employees through an agreed-upon
collection method in accordance with GC section 19838.
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California State Prison, Solano Payroll Process Review
We further recommend that, to prevent improper holiday pay,
CSP-Solano:
Provide adequate oversight to ensure that payroll transactions unit
staff accurately process holiday pay transactions; and
Provide training to payroll transactions unit staff involved in keying
transactions to ensure that they understand the requirements under
collective bargaining agreements and state law regarding holiday pay.
CSP-Solano’s Response
SOL believes appropriate controls are currently in place as they relate to
holiday pay. The BIS system captures and calculates data for a large
majority of our staff to ensure holiday pay is paid out correctly. This
process has been evolving since its application and has already
compensated for known errors. The Personnel Specialists and
Supervisors work very closely with the BIS team to ensure errors are
identified and worked prior to pay being issued. Additionally, Personnel
Specialists receive regular refresher training on holiday compensation.
SCO’s Comment
Results of our testing of the randomly selected holiday pay transactions
identified inadequate controls over BIS during the audit period. We will
follow up in the next audit to ensure that BIS is correctly calculating
holiday pay.
FINDING 9— CSP-Solano lacked adequate controls over salary advances to ensure that
they were recovered in accordance with state law and policies. Thirty
Inadequate
salary advances, totaling $41,461, remained outstanding as of January 31,
controls over
2018, due to CSP-Solano’s noncompliance with the State’s collection
salary advances,
policies and procedures. The oldest unrecovered salary advance was
resulting in failure
outstanding for over six years. This control deficiency leaves CSP-Solano
to recover
at risk of further failures to collect salary advances if not mitigated.
outstanding
amounts At January 31, 2018, CSP-Solano’s accounting records showed
59 outstanding salary advances totaling $101,502, including 30 balances,
totaling $41,461, that had been outstanding for more than 120 days.
Generally, the prospect of collection diminishes as an account ages. When
an agency is unable to collect after three years, the possibility of collection
is remote.
GC section 19838 and SAM sections 8776 and 8776.7 describe the State’s
collection policies and procedures, which require CSP-Solano to collect
salary advances in a timely manner and maintain proper records of
collection efforts.
Of the 30 salary advances reviewed, five resulted in outstanding
differences between salary advance documentation and the aging report.
CSP-Solano could not provide an explanation for the variances or which
was the correct amount. For example, documentation for one salary
advance supported an amount of $335 due an employee. However, the
aging report showed that the employee had an outstanding balance of
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California State Prison, Solano Payroll Process Review
$1,091. In addition, salary advance documentation could not be provided
for five salary advances. We also noted that 20 of the 30 long outstanding
salary advances were to employees still employed at CSP-Solano.
The lack of adequate controls over salary advances reduces the likelihood
of collection, increases the amount of resources expended on collection
efforts, and negatively impacts cash flow.
Recommendation
We recommend that CSP-Solano:
Ensure that it recovers salary advances in a timely manner pursuant to
GC section 19838 and SAM sections 8776 and 8776.7;
Implement procedures and perform reconciliations to ensure the
accuracy and reliability of its salary advance records; and
Maintain documentation of its collection efforts and payment of salary
advances.
CSP-Solano’s Response
Since the review, SOL has provided additional training to Personnel
Specialists and placed an even greater emphasis on collection efforts. Of
the current 22 salary advances over 120 days, nearly all of them are
awaiting action from SCO. Additionally, for the items on the aging report
spanning years, SOL has run into major difficulties in obtaining
necessary documentation to proceed with the collection process. As a
result of the recent results, SOL currently has controls in place to
mitigate the need for salary advances and also to ensure their swift
collection.
SCO’s Comment
CSP-Solano should continue to address issues identified by this review.
We will follow up in the next audit to ensure that controls were
implemented to mitigate these issues.
FINDING 10— CSP-Solano lacked adequate controls over the processing of holiday credit
Inadequate transactions. We identified approximately $9,195 in improper holiday
controls over credits. In addition, supporting documentation could not be provided for
one transaction. Therefore, we questioned $118. If not mitigated, this
holiday credits,
control deficiency leaves CSP-Solano at risk of additional improper
resulting in
holiday credits.
improper accruals
GC section 19853 specifies the compensation that an eligible employee is
entitled to receive when required to work on a qualifying holiday. The
collective bargaining agreement between the State and various bargaining
units includes similar provisions regarding holiday compensation for
represented employees.
We examined 29 holiday credit transactions, totaling approximately
$15,143. These transactions were selected due to unusually high credits in
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California State Prison, Solano Payroll Process Review
a given month. Of the 29 transactions, 21 involved improper credits,
costing an estimated $9,195. In addition, supporting documentation could
not be provided for one transaction, totaling $118. The improper holiday
credit transactions were made because the payroll transactions unit staff
members erroneously keyed incorrect hours. CSP-Solano also lacked
adequate supervisory review to ensure accurate processing of holiday
credits.
GC sections 13400 through 13407 require state agencies to establish and
maintain internal controls, including an effective system of internal
review.
Recommendation
We recommend that CSP-Solano:
Conduct a review of holiday credits granted during the past three years
to ensure that credits complied with collective bargaining agreements
and state law;
Correct any improper holiday credits in the state leave accounting
system; and
Establish adequate controls to ensure that holiday credits granted are
valid and comply with collective bargaining agreements and state law.
FINDING 11— CSP-Solano lacked adequate controls to ensure that the payroll
Inadequate transactions unit staff members processed only valid and authorized
controls over uniform allowances that complied with collective bargaining agreements.
We identified 11 employees who received improper payments, totaling
uniform allowance,
$8,226. If not mitigated, the control deficiencies also leave CSP-Solano at
resulting in
risk of additional improper payments.
improper
payments
Pursuant to collective bargaining agreements between the State and
Bargaining Unit 6, employees required to wear a uniform and uniform
accessories are entitled to receive a maximum annual uniform allowance
of $950 per year. The maximum allowance previously was $530 per year.
If the employee leaves the classification entitled to the uniform allowance,
the employee receives a prorated share of the annual uniform allowance.
Between February 2015 and January 2018, CSP-Solano paid
884 employees for uniform allowance. We reviewed 40 payments to
12 employees, totaling $34,613. We found that 14 payments for 11 of the
12 employees were improperly paid $8,226. Five employees received a
uniform allowance twice in one year, and six employees received more
than the allowable amount per the bargaining contract. The six employees
received an additional payment, which exceeded the maximum allowable
amount, for being on a “Crisis Response Team.”
The improper uniform allowance transactions were made because the
payroll transactions unit staff members keyed duplicate payments or made
payments not in accordance with bargaining contracts. CSP-Solano also
lacked adequate supervisory review to ensure accurate processing of
uniform allowance.
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California State Prison, Solano Payroll Process Review
Recommendation
We recommend that CSP-Solano:
Establish adequate internal controls to ensure that payments comply
with collective bargaining agreements. These controls should require
payroll transactions unit staff to verify that payments are granted only
to eligible employees and do not exceed the amounts allowed by
collective bargaining agreements;
Provide adequate oversight to ensure that payroll transactions unit
staff processes only valid and authorized payments that comply with
collective bargaining agreements; and
Provide training to staff involved in keying transactions to ensure that
they understand the requirements under collective bargaining
agreements.
CSP-Solano’s Response
All Personnel Specialists received refresher training annually on uniform
allowance. The additional CRT uniform allowance that was paid out was
due to a one-time oversight of new MOU language. One month
following the oversight, the Division of Adult Institutions sent out
clarification email Department-wide and the error has not been repeated.
SOL has since stopped honoring any additional uniform allowance
memos not covered by MOUs. SOL will continue to monitor the uniform
allowance process to ensure all payments are valid and in compliance
with MOUs.
SCO’s Comment
Continued monitoring of uniform allowances by CSP-Solano should
ensure a reduction in errors. We will follow up in the next audit to ensure
that uniform allowance payments are valid and in compliance with the
Memorandum of Understanding.
FINDING 12— CSP-Solano lacked supporting documentation to ensure that transactions
Lack of supporting for effective dates were keyed in accurately. We reviewed a total of
30 transactions with codes A01 and 335. Documentation could not be
documentation to
provided for four of the 30 transactions. If not mitigated, this control
support effective
deficiency leaves CSP-Solano at risk of improper entries that could result
date transactions
in improper payments.
CDCR’s Records Retention Schedule indicates that for Request for
Personnel Action forms, the agency should retain the documentation for
four years, with two years in the office. We reviewed a total of
30 transactions, 21 for transaction code A01 and nine for transaction code
335. Documentation could not be provided for four A01 transactions.
Transaction code A01 is keyed in by personnel specialists for list
appointments. We could not determine whether the effective dates for
these four transactions were correctly entered into the system. If effective
dates are incorrectly entered into the system, it is possible that employees
will be overpaid or underpaid.
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California State Prison, Solano Payroll Process Review
We also found no indication the transactions had been reviewed by an
individual other than the payroll transactions unit staff member
responsible for keying these transactions into the system.
Recommendation
We recommend that CSP-Solano maintain documentation as required by
the CDCR’s Records Retention Schedule to support transactions for audit
and review purposes.
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California State Prison, Solano Payroll Process Review
Appendix—
Sampling Methodology
February 1, 2015, through January 31, 2018
We used attributes sampling for test of compliance. The following table outlines our sampling application for review areas that included errors:
Results
Sample Projected to
Review Type Population Population Sampling Selection Confidence Tolerable Expected Sample Intended Finding
Area of Test (Unit) (Dollar) Unit Method Level Error Rate Error (Rate)¹ Size Population Number
Separation Compliance 78 $ 3 ,133,771 Employee Computer- 95% 5% 0 (0%) 60 Yes 5
lump-sum pay generated
simple
random
Overtime pay Compliance 24,721 $ 3 6,634,241 Payment Computer- 95% 5% 0 (0%) 60 Yes 6
transactions generated
simple
random
Regular Pay Compliance 23,967 $ 1 50,000,740 Payment Computer- 95% 5% 0 (0%) 60 Yes 6
transactions generated
simple
random
Holiday Pay Compliance 7,556 $ 3,015,327 Payment Computer- 95% 5% 0 (0%) 60 Yes 8
transactions generated
simple
random
____________________________
1Pursuant to the AICPA’s Audit Guide: Audit Sampling (May 1, 2017 edition), pages 131-133, the expected error is the expected number of errors planned for in the sample. It is
derived by multiplying the expected error rate by the sample size. The expected number of errors in the sampling tables on pages 135-136 was rounded upward, e.g., 0.2 errors
becomes 1 error.
-A1-
California State Prison, Solano Payroll Process Review
Attachment—
California State Prison, Solano’s
Response to Draft Review Report
State Controller’s Office
Division of Audits
Post Office Box 942850
Sacramento, CA 94250
http://www.sco.ca.gov
S18-PAR-9006