payroll controls, risks & measures robin r. rabii nys - director of state payroll services david...

PayrollPayrollControls, Risks & MeasuresControls, Risks & Measures

Robin R. RabiiRobin R. RabiiNYS - Director of State Payroll ServicesNYS - Director of State Payroll ServicesDavid R. HancoxDavid R. HancoxNYS - Director of State AuditsNYS - Director of State Audits

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GASBGASB

• The Board of Trustees of the Financial The Board of Trustees of the Financial Accounting Foundation confirmed Accounting Foundation confirmed that the Governmental Accounting that the Governmental Accounting Standards Board has the jurisdictional Standards Board has the jurisdictional authority to include "service efforts authority to include "service efforts and accomplishments" in its financial and accomplishments" in its financial accounting and reporting standard accounting and reporting standard setting activities for state and local setting activities for state and local governmental entities. governmental entities.

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Likelihood of occurrence

•The probability that an unfavorable event would occur if there were no controls to prevent or reduce the risk.

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Impact

•The effect an unfavorable event would have on the organization if the event were to occur.

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RiskRisk

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Performance measurement for Performance measurement for governmentgovernment

• The act of measuring (assessing) the The act of measuring (assessing) the manner and effectiveness in which manner and effectiveness in which something or somebody functions, something or somebody functions, operates, or behaves in carrying out operates, or behaves in carrying out a given task or action within a branch a given task or action within a branch or agency of a political system. or agency of a political system.

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What to MeasureWhat to Measure

• You ought measure something that You ought measure something that counts!counts!

• If it “counts,” it ought to be an area If it “counts,” it ought to be an area of riskof risk

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The New York State PayrollThe New York State Payroll

• One of the largest centralized payroll One of the largest centralized payroll system in the worldsystem in the world– Over 250,000 employees Over 250,000 employees – Over $12 billion annuallyOver $12 billion annually

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The New York State PayrollThe New York State Payroll

Collaborative Processing EnvironmentCollaborative Processing Environment

• 250 state agencies250 state agencies

• Nearly 500 separate payrollsNearly 500 separate payrolls

• 2,500 payroll system users2,500 payroll system users

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The New York State PayrollThe New York State Payroll

• Multi-system environment:Multi-system environment:– PayServ (payroll data)PayServ (payroll data)– NYSTEP (personnel data)NYSTEP (personnel data)– Central Accounting System Central Accounting System – NYBEAS (benefits information)NYBEAS (benefits information)– Internal agency systemsInternal agency systems

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The New York State PayrollThe New York State Payroll

• 66 labor unions66 labor unions

• 120 bargaining units120 bargaining units

• Over 750 types of earningsOver 750 types of earnings

• 339,000 W-2 forms issued last year339,000 W-2 forms issued last year

• 7 major retirement systems7 major retirement systems

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The New York State PayrollThe New York State PayrollInvoluntary DeductionsInvoluntary Deductions• Child support, garnishments, Child support, garnishments,

bankruptcies, education loan defaults, bankruptcies, education loan defaults, and tax leviesand tax levies

• $65 million collected annually$65 million collected annually• Over 1,500 new garnishment orders Over 1,500 new garnishment orders

each weekeach week

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WAYS TO IDENTIFY INTERNAL WAYS TO IDENTIFY INTERNAL CONTROL WEAKNESSESCONTROL WEAKNESSES

• Conduct AuditsConduct Audits

• Assessments of business processAssessments of business process

• Involuntary disclosuresInvoluntary disclosures

• Performance MeasurementPerformance Measurement

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What is a Performance What is a Performance Measure?Measure? • A quantifiable, enduring indicator of

output, outcomes, efficiency or cost• A statistic or metric chosen as a gauge• Usually expressed as a number or percent• A signal for planning, monitoring and

evaluating results• A tool to help improve performance,

achieve objectives and ensure accountability

WHAT……WHAT…… Basics of a Performance Basics of a Performance

Measure? Measure?

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RESULT THAT

MATTERS

YOUR BEHAVIOR

MEASURES

Car lasts a long time

Consult car performance data in Consumer Reports

Repair rates on different car models

Owners’ satisfaction scores

Savings grow Compare mutual fund

performance before investing

Historical fund return rates

Child’s college education results in good job

Study how graduates of colleges under consideration do in the job market

Colleges’ job placement rates

Average first year salaries of graduates

Surviving an operation

Compare available information about performance of different hospitals in your area

Number of deaths as percent of admissions

Number of malpractice lawsuits

Measures in Daily Life

WHY….WHY….Purposes of Performance Purposes of Performance

MeasurementMeasurement

““If you don’t measure If you don’t measure you can’t improve.”you can’t improve.”

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The Universal Psychology of

People in Organizations Trying to Use Performance

Measurement…

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Nobody reallyNobody really wantswants to do this –to do this –

“Too time-consuming!”

“Too much self-discipline needed!”

“Too many ambiguities!”

“Too tedious!”

“Too hard on the brain!”

“Too revealing!”

“Too much math!”

“Too distracting from my real job!”

“Too much information!”

and I mean nobody!WHY NOT?

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• Is the measure important to Is the measure important to goals…?goals…?

• ……that are important to that are important to customers and stakeholders?customers and stakeholders?

• Is it used to improve service?Is it used to improve service?

“The Acid Test”

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The Power and Pitfalls of The Power and Pitfalls of Performance MeasurementPerformance Measurement

“In Poland under communism, the performance of furniture factories was measured in the tons of furniture shipped. As a result, Poland had the heaviest furniture on the planet.”

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WHAT DID WE DO?WHAT DID WE DO?

Performance Measurement - Case StudyPerformance Measurement - Case Study

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Strategic PlanningStrategic Planning

• Defined our:Defined our:

a) PURPOSEa) PURPOSE

b) CUSTOMERSb) CUSTOMERS

c) PARTNERSc) PARTNERS

d) RESULTSd) RESULTS

Performance Measurement- Case StudyPerformance Measurement- Case Study

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Our ResultsOur Results • Payments are issued accuratelyPayments are issued accurately• Payments are issued on timePayments are issued on time• Payments are issued in compliance with Payments are issued in compliance with

relevant laws, regulations, contracts, etc.relevant laws, regulations, contracts, etc.• Administrative costs of making Administrative costs of making

payments are reasonablepayments are reasonable

Performance Measurement – Case StudyPerformance Measurement – Case Study

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Four Central MeasuresFour Central Measures• TimelinessTimeliness - Are - Are wewe paying employees on time? paying employees on time? - How long does it take - How long does it take usus to pay employees on time? to pay employees on time?• AccuracyAccuracy - Are we under/overpaying employees?- Are we under/overpaying employees? - What is the dollar value of these overpayments?- What is the dollar value of these overpayments?• Cost EffectivenessCost Effectiveness - How reasonable are the costs of processing the payroll?- How reasonable are the costs of processing the payroll?• Customer SatisfactionCustomer Satisfaction - Do our partners have information to meet their business - Do our partners have information to meet their business needs?needs?

Performance Measurement – Case StudyPerformance Measurement – Case Study

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WHAT DID WE FIND?WHAT DID WE FIND? THE BIRTH OF STRATEGIC MEASURESTHE BIRTH OF STRATEGIC MEASURES

Performance Measurement – Case StudyPerformance Measurement – Case Study

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Measures of TimelinessMeasures of Timeliness

Performance Measurement – Case StudyPerformance Measurement – Case Study

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How are we doing compared with the last two How are we doing compared with the last two years?years?

Are We Paying Employees On Time?

Performance Performance MeasureMeasure

April-April-March March 20042004

April- April- March March 20052005

April- April- March March 20062006

Change: Change: Current to Current to Previous Previous

YearYear

Employees Not Employees Not Paid On Time Paid On Time

(Total)(Total)

9,5379,537 8,0548,054 8,0158,015 -0.5%-0.5%

Value of Late Value of Late Payments (Total)Payments (Total)

$9.40 $9.40 millionmillion

$9.08 $9.08 millionmillion

$9.94 $9.94 millionmillion

+9%+9%

Late Payment Late Payment RateRate

(Total)(Total)

18.8%18.8% 14.3%14.3% 13.3%13.3% -7%-7%

Days from Days from Expected to Expected to

Actual Payment Actual Payment (Total)(Total)

29.129.1 30.030.0 46.346.3 +54%+54%

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Measures of AccuracyMeasures of Accuracy

Performance Measurement – Case StudyPerformance Measurement – Case Study

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How are we doing compared with the last two How are we doing compared with the last two years?years?

Performance Performance MeasureMeasure

April-April-March March 20042004

April- April- March March 20052005

April- April- March March 20062006

Change: Change: Current to Current to Previous Previous

YearYear

Number of New Number of New Overpayments Overpayments

(Total)(Total)

7,6607,660 5,1265,126 4,6654,665 -9%-9%

Value of New Value of New Overpayments Overpayments

(Total)(Total)

$7.21 $7.21 millionmillion

$5.42 $5.42 millionmillion

$5.40 $5.40 millionmillion

-0.2%-0.2%

Number of Number of Returned Checks Returned Checks

(Total)*(Total)*

3,8183,818 3,0173,017 2,9012,901 -4%-4%

Value of Returned Value of Returned Checks (Total)*Checks (Total)*

$4.53 $4.53 millionmillion

$3.00 $3.00 millionmillion

$3.06 $3.06 millionmillion

+2%+2%

Are We Paying Employees Correctly?

*Excludes Forms AC909 used to return checks from prior year appropriations, which are not entered into the State Payroll System.

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How are we doing compared with the last two How are we doing compared with the last two years?years?

Performance Performance MeasureMeasure

April-April-MarchMarch

20042004

April-April-MarchMarch

20052005

April-April-MarchMarch

20062006

Change: Change: Current to Current to Previous Previous

YearYear

Number of Number of Outstanding Outstanding

Overpayments Overpayments (Average)(Average)

1,8641,864 2,9252,925 3,4073,407 +16%+16%

Value of Value of Outstanding Outstanding

Overpayments Overpayments (Average)(Average)

$2.24$2.24

millionmillion$3.54$3.54

millionmillion$4.41 $4.41

millionmillion+24%+24%

Are We Paying Employees Correctly?

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How are we doing compared with the last two How are we doing compared with the last two years?years?

Performance Performance MeasureMeasure

April-April-JanuaryJanuary

20042004

April- April- JanuaryJanuary

20052005

April- April- JanuaryJanuary

20062006

Change: Change: Current to Current to Previous Previous

YearYear

Employees Paid Employees Paid After Termination After Termination

(Total)*(Total)*

2,1522,152 1,8111,811 1,6681,668 -8%-8%

Number of Days’ Number of Days’ Pay Issued to Pay Issued to Terminated Terminated

Employees**Employees**

15,97015,970 12,82112,821 11,84911,849 -8%-8%

Are We Paying Employees Correctly?

*Post-termination totals are through January 2006, as not all late terminations have been entered for the most recent months.**Mid-pay period terminations pro-rated based on assumed 5-day Monday through Friday work schedule.

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How are we doing compared with the last two How are we doing compared with the last two years?years?

Performance Performance MeasureMeasure

April-April-JanuaryJanuary

20042004

April- April- JanuaryJanuary

20052005

April- April- JanuaryJanuary

20062006

Change: Change: Current to Current to Previous Previous

YearYear

Value of Post-Value of Post-Termination Termination

Payments (Total)*Payments (Total)*

$1.58 $1.58 millionmillion

$1.35 $1.35 millionmillion

$1.33 $1.33 millionmillion

-2%-2%

Rate of Rate of Employees Paid Employees Paid

After Termination After Termination (Total)*(Total)*

11.8%11.8% 6.4%6.4% 5.6%5.6% -11%-11%

Paychecks Issued Paychecks Issued to Terminated to Terminated

Employees Employees (Total)*(Total)*

0.039%0.039% 0.0340.034%%

0.0310.031%%

-9%-9%

Are We Paying Employees Correctly?

*Post-termination totals are through January 2006, as not all late terminations have been entered for the most recent months.

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WHAT ELSE DID WE FIND?WHAT ELSE DID WE FIND? EXAMINATION OF THE BUSINESS PROCESSEXAMINATION OF THE BUSINESS PROCESS

Performance Measurement – Case StudyPerformance Measurement – Case Study

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HIRING & TERMINATION HIRING & TERMINATION PROCESSPROCESS

• PEOPLEPEOPLE - Hired employee- Hired employee - Employees in Business units (Program area, HR,- Employees in Business units (Program area, HR, Payroll, Finance, Control Agencies)Payroll, Finance, Control Agencies)

• ROLESROLES - Employee- Employee - Business units (Program area, HR, Payroll, Finance,- Business units (Program area, HR, Payroll, Finance, Control Agencies)Control Agencies)

• PROCESS PROCESS - Business Rules, Paperwork, Approvals, Processing- Business Rules, Paperwork, Approvals, Processing

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VULNERABILITY POINTSVULNERABILITY POINTS

• PEOPLEPEOPLE

- Hired employee - Hired employee

- Lack of understanding of roles- Lack of understanding of roles

- Lack of understanding of rules- Lack of understanding of rules

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VULNERABILITY POINTSVULNERABILITY POINTS

• COMMUNICATIONCOMMUNICATION

- Between employee and Program area- Between employee and Program area

- Between Program area and Business units- Between Program area and Business units

- Business units and Business Units - Business units and Business Units

- Business Units and Control Agencies - Business Units and Control Agencies

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VULNERABILITY POINTSVULNERABILITY POINTS

PROCESS PROCESS

- Complexity of the process (internally and- Complexity of the process (internally and

externally)externally)

- Too much paperwork - No automation- Too much paperwork - No automation

- Too many approvals (internally and externally)- Too many approvals (internally and externally)

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Performance Measurement – Case StudyPerformance Measurement – Case Study

The PartnershipThe Partnership

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Payroll Users GroupPayroll Users Group

Performance Measurement – Case StudyPerformance Measurement – Case Study

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Partnering with State Agency UsersPartnering with State Agency Users

User Group established:User Group established:• Subcommittee on Performance MeasuresSubcommittee on Performance Measures

• Two clearly understood Performance Two clearly understood Performance MeasuresMeasures

• Performance TargetsPerformance Targets

• Agency Report CardsAgency Report Cards

Performance Measurement – Case StudyPerformance Measurement – Case Study

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Performance Measurement – Case StudyPerformance Measurement – Case Study

The Report CardThe Report Card

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What Is Standard Deviation?What Is Standard Deviation?

• Standard deviation measures the amount Standard deviation measures the amount of dispersion in a data set, or how many of dispersion in a data set, or how many and how far individual scores are from the and how far individual scores are from the average.average.

• Measured in standard deviations from the Measured in standard deviations from the average, agency performance can be average, agency performance can be interpreted as the same or different than interpreted as the same or different than that of other agencies.that of other agencies.

1

)( 2

N

XXs

Performance Measurement – Case Study

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Agency Report Card Color Agency Report Card Color CodingCoding

Heavenly Blue – Exceptional Performance: No Occurrences orScore < Average – 1 Standard Deviation (65% + Significance)

Institutional Green – Above Average Performance, < 65% Signif.Score Between Average & Average – 1 Standard Deviation

Screaming Yellow – Below Average Performance, < 65% Signif.Score Between Average & Average + 1 Standard Deviation

Pumpkin – Below Average Performance, 65% - 95% Signif.Score Between Average + 1 Std Dev & Average + 2 Std Dev

Blush – Poor Performance, 95%+ SignificanceScore > Average + 2 Standard Deviations

Performance Measurement – Case Study

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Performance Measurement – Case StudyPerformance Measurement – Case Study

Celebrated Achievements Celebrated Achievements

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Celebrated AchievementsCelebrated Achievements

Payroll Users Group:Payroll Users Group:

• Established First Annual Comptroller’s Achievement AwardsEstablished First Annual Comptroller’s Achievement Awards

• First Statewide recognition of payroll function in NYS government – Supported by ComptrollerFirst Statewide recognition of payroll function in NYS government – Supported by Comptroller

• Publicized event – Letters to VIP’s from ComptrollerPublicized event – Letters to VIP’s from Comptroller

• Recognized agency performance in various categories: Recognized agency performance in various categories: a. 1 & 5 yeara. 1 & 5 year b. Individual & Composite measuresb. Individual & Composite measures

• Second Annual Achievement AwardsSecond Annual Achievement Awards

Performance Measurement – Case StudyPerformance Measurement – Case Study

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WHERE ARE WE NOW?WHERE ARE WE NOW?

Performance Measurement – Case StudyPerformance Measurement – Case Study

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Before versus NowBefore versus Now20012001

• Statewide goals & objectives unclear

• Sparse perf. data• Results difficult to

track• Ad hoc Statewide

improvement efforts• “Trust me” culture• “Hidden” best

practices• No recognition of pro-

fession/professionals• Will performance

measures work?

20052005• Strategic goals known

and perf. targets pursued

• Performance data tracked

• Quantifiable perf. results

• Regular perf. reviews• “Results” culture• Shared best practices• Statewide recognition

of profession/professionals

• Agencies are exceeding Statewide targets!

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Performance Measurement – Case StudyPerformance Measurement – Case Study

WHAT DID WE LEARN?WHAT DID WE LEARN?

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Awareness & Understanding of

Customers, Core Services

Data Collection

Reporting & Review

& Improvement

Performance Measurement

Customers, Core Services & Key Results

Clarification of Purpose,

Selection & Definition of Measures

Performance

Performance Management

Implementing a Performance Measurement System

…takes discipline!

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WHAT DID WE LEARN?WHAT DID WE LEARN? • Just start it!Just start it!

• Don’t make first attempt too difficultDon’t make first attempt too difficult

• Understand organizational purpose and directionUnderstand organizational purpose and direction

• Strategic staff involvementStrategic staff involvement

• Strategic CommunicationStrategic Communication

• Consistent ReportingConsistent Reporting

• Involve Partners or StakeholdersInvolve Partners or Stakeholders

Performance Measurement – Case StudyPerformance Measurement – Case Study

Questions ?Questions ?