City Acts Swiftly On Findings Of State Auditor’s Report
Apr 21, 2020 - At tonight’s City Council Meeting, the State Auditor’s Office (SAO) presented its annual report on the City’s financial statements and book-keeping protocols. In a detailed process that takes several months, all local governments in Washington must be audited annually by the SAO. While the City’s past reports have generated clean audits, this year’s results are mixed.
Following a request by City Manager Jessi Bon to examine the accounting and internal controls associated with a number of payroll matters, the SAO identified a number of practices that it believed were problematic because of the potential for errors and inconsistencies.
“I was made aware of a number of issues in mid-November and took immediate action,” said City Manager Jessi Bon. “Although the SAO was in the final stages of its annual financial audit, I asked the auditors in December to expand their review, concentrating on the City’s internal controls related specifically to payroll and benefits administration.”
As indicated in the SAO’s report, specific corrective actions needed include the following:
“I’m not happy about the findings,” said City Manager Bon. “Every organization wants an audit free of issues and that didn’t happen this year. We are in the early stages of correcting a number of inadequate policies and processes that were identified in the SAO’s report and many others that we have self-identified. I have made this work one of the City’s top priorities for the rest of the year.”
- The timesheets for all staff, including Directors, should be reviewed and signed by a supervisor. Review of timesheets, including a supervisor signature was inconsistent, and in some cases was not happening at all.
- The City’s process for reviewing and approving vacation and comp-time cash-out requests does not have adequate oversight and is based on multiple conflicting policies, resulting in several overpayments to employees.
- Director-level staff have historically received an additional benefit at the start of the calendar year, rather than year’s end. During the years examined, departing Directors were not asked to pay back a pro-rated portion of the benefit when they separated from City employment.
- The City has historically issued a large number of manual payroll checks outside of the regular payroll cycle.
Bon indicated the following work items are already complete or in progress:
One of the challenges faced by the City is that most payroll and timekeeping functions are still performed manually. In addition to the corrective measures already taken, the City will soon implement a new software solution to modernize and automate many of the manual processes within the Human Resources and Payroll functions.
- Timecards are now consistently reviewed by supervisors, including the City Manager’s timecard which is now reviewed by the Mayor.
- In early 2020, leave accruals (vacation, comp time, sick leave etc.) were reviewed for all employees to ensure balances were accurate. Internal controls were also reviewed to ensure that leave cash-out procedures are properly administered.
- A new policy and procedure regarding the Director’s Benefit program has been drafted and is under review.
- Beginning June 1, 2020, manual checks will be issued for emergent reasons only, and those reasons will be limited.
- Many other policies and procedures are being reviewed including a significant update to the Employee Handbook, leave cash-out policies, regular employee leave accrual reviews, calculating time loss and benefit rates, Fair Labor Standards Act status for employees, and more.
“Our payroll processes have historically been managed using Excel spreadsheets, which is ripe for potential formula and data entry errors,” Bon noted. “Our personnel files are also largely in paper format, which presents risks to the City and our employees. Making the transition to the new software system will address a number of the issues presented in the SAO report and greatly improve efficiencies.”
While the key findings from the SAO’s report are traditionally delivered in a meeting with the City Manager and a few Councilmembers, this year City Manager Bon, in consultation with the City Council, made the decision to present the report at a public meeting of the full City Council.
“I know the whole Council appreciates receiving these findings from the SAO. The Council’s desire is always to implement organizational efficiency – therefore we take these matters very seriously and look forward to working collaboratively with the City Manager and staff in their timely resolution of these issues,” said Mayor Benson Wong.
The final audit report will be published on the SAO website in approximately 7 to 10 days.
Past audit reports are available on the City’s website: www.mercergov.org/financialreporting