OMB Releases Proposed 2013 Data Collection Form

The Office of Management and Budget has released a federal register notice on November 19, 2013 with final proposed changes to the 2013 Data Collection Form (DCF) for Single Audits and its instructions. Comments are due December 19, 2013. So hopefully we will soon have a DCF that can be used for our 2013 Single Audits. You will find the revised data collection form here; click 2013 Revised Data Collection form for Single Audits.

Georgia TSPLOST Accounting and Uses

I spoke this afternoon with James Stephens at the Georgia Department of Community Affairs about changes to the Georgia chart of accounts, specifically regarding TSPLOST.

It appears that most governments receiving TSPLOST funds need to set up two new funds:

235 – TSPLOST – Discretionary (25%)

335 – TSPLOST – Capital (75%)

James said that all governments will receive a portion of TSPLOST (25%) from the Georgia Financing Authority; such funds are referred to as discretionary. These monies can be used for:

  • Matching funds for transportation grants
  • Transportation related salaries
  • Transportation maintenance
  • Transportation capital

All of the discretionary revenues must first be recognized as revenue in fund 235 (such accounting will enable the Georgia Financing Authority to account for monies it has submitted to local governments); then if any portion is used for capital, it appears the funds will be transferred out of fund 235 to fund 335 where it will be spent for capital purposes.

If your government is receiving LMIG funds from the state of Georgia, such funds can be accounted for in the general fund provided such monies are used for road maintenance (e.g., patching roads). If the LMIG funds are used for capital purposes, they should be accounted for in 335.

The TSPLOST-Capital funds should be accounted for in fund 335. The TSPLOST-Capital funds and LMIG funds can both be accounted for in fund 335, provided the LMIG funds are being used for capital purposes.

How can my local government use the TIA discretionary proceeds?

Per the Georgia State Financing and Investment Commission Financing and Investment Division (in their Transportation Investment Act FAQ), the 25% discretionary funds can be used as follows:

Code Section 48-8-249 (e) provides “ proceeds shall be used by the local governments only for transportation projects as defined in paragraph (10) of Code Section 48-8-242 and may also serve as the local match as required for state transportation projects and grants.”   

Code Section 48-8-242 (10) provides “Project means, without limitation,  any new or existing airports, bike lanes, bridges, bus and rail mas transit systems, freight and passenger rail, pedestrian facilities, ports, roads, terminals, and all activities and structures useful and incident to providing, operating, and maintaining the same.  The term shall also include direct appropriations to a local government for the purpose of serving as a local match for state and federal funding.”

Ghostly Payroll Fiends

In many small businesses, governments, and not-for-profits, a limited number of persons (often one or two) handle the entire payroll function. In such situations, appropriate segregation of duties may not exist and you may well meet up with a ghostly payroll fiend.

Payroll

Common payroll fraud fiends, I mean schemes, include:

  • Inflating hours worked
  • Duplicate payments
  • Ghost employees
  • Inflating pay rates

Once we explore how these frauds occur, we’ll see if we can find appropriate incantations and actions to chase them away (in the form of segregation of duties).

Inflating Hours Worked

Many organizations use time-clocks which are activated by a swipe of the employee’s identification card. This is better than using a paper based payroll system, but the use of biometric systems is more effective in eliminating buddy-punching. Biometric systems read physical features of the employee (e.g., fingerprint). The problem with payroll identification cards is they can be left near the time-clock and workmates can clock in for a buddy while that friend is still in bed, enjoying a morning snooze. Another simple preventive measure is to install a video camera at the clock-in site; then if buddy-punching does occur, it will be captured.

Regardless of the payroll system used, it is imperative that supervisors review and approve the time records for their department – prior to the remittance of these records to accounting. Once the time records are received in accounting, it is important that the payroll clerk review the submitted information for significant variances; this should be done prior to the processing of payroll.

Duplicate Payments

Another common payroll scheme is the issuance of duplicate payroll checks, especially to the payroll clerk or finance director since they often control payroll disbursements. This is even more prevalent when these persons can also sign checks, whether physically or electronically. Be wary of situations where one person can issue payroll checks (including direct deposits) and record the transaction in the general ledger without review by a second party.

Ghost Employees

Most any discourse about payroll fraud includes a discussion of ghost employees (fictitious employees on the payroll); so I won’t disappoint. Regardless of the payroll system, the existence of ghost employees can be expensive. But in order to have a ghost employee, someone must create the employee or leave a terminated employee in the payroll system. The later is the more prevalent practice (since it’s easier to do – no drug test required, for example). By leaving a terminated employee in the payroll system, the fraudster (usually the payroll clerk or finance director) can simply change the terminated employee’s bank account number to his or her own, and, with direct deposit, the ghost employee payments are sent to the fraudster’s bank account. So how do we prevent and detect the existence of ghost employees?

  • Periodically compare each employee in the payroll system to individual personnel files – ghosts don’t normally have personnel files.
  • Examine any returned W–2s. If the ghost has a ghost address, the W–2 will be returned; compare returned W–2s to personnel files.
  • Separate the duty of adding or deleting an employee from the payroll processing function. Assign the duty to add and delete employees to the HR director, for example, and the duty to process payroll to other payroll personnel.
  • If possible, have the computerized payroll system generate an email to someone outside the payroll department (e.g., finance director) for each change of address or each person added or deleted from the system; alternatively have the system generate a monthly report of all changes to payroll – again going to a reviewer outside of payroll.
  • Use a payroll system that requires second party approval of any new personnel additions or changes to payroll records.

Inflating Pay Rates

One of the easiest ways to commit payroll theft is to inflate pay rates (e.g., hourly rates) in the master payroll file. To mitigate this risk, the organization should limit who has access to the master pay rate file. Make sure appropriate passwords are established and that those passwords are known only to authorized persons. In addition, all pay rates should be documented in each employee’s personnel file. The person authorizing the pay rate should sign and date the approval sheet.

Segregation of Duties

Most of these threats can be eliminated or greatly diminished by implementing appropriate segregation of duties. Where possible, the organization should segregate the following payroll responsibilities:

  • Setting up new employees and deleting terminated employees
  • Authorization of wage rates
  • Entering pay rates into the accounting system
  • Entering time into the accounting system
  • Processing and printing of checks
  • Distribution of physical checks
  • Reconciling the payroll bank account

If you can’t segregate these functions, have a second person review and sign off on payroll, or have a periodic audit of your payroll performed.

Any Fiends in Your Payroll?

Have you had any payroll frauds at your place of business? If yes, please share.

2013 Data Collection Form Filing Deadline Extended – Again

The Federal Audit Clearinghouse (FAC) has once again extended the 2013 Data Collection Form submission waiver language that is posted on its Web site (https://harvester.census.gov/fac/) through January 31, 2014.  The extension language appearing on the FAC Web site is now as follows:

“If a single audit for a fiscal period ending in 2013 is due before the 2013 Form is available, auditees will not be able to meet the 30 day or 9 month deadlines for submission prescribed by OMB Circular A-133 §_.320(a). Therefore, OMB has granted an extension until January 31, 2014. The extension is automatic and there is no approval required. The extension applies only to single audits for the fiscal periods ending in 2013.”

Click here for prior blog post summarizing forthcoming changes to the data collection form and related process for filing.