FINANCIAL MANAGEMENT
This chapter reviews the financial management functions of the Alamo Community College District (ACCD) in the following sections:
- A. Organization and Management
- B. Budgeting and Planning
- C. Tax Rate and Tuition
- D. Internal and External Auditing
- E. Accounting Operations
- Part 1
- Part 2
E. ACCOUNTING OPERATIONS (PART 1)
Accounting operations include grant accounting, payroll, accounts payable and accounts receivable. These are critical functions in any organization, including community colleges. Exhibit 5-41 presents the organization chart for the Finance and Accounting Department.
Exhibit 5-41 Source: ACCD, Fiscal Affairs Department, January 2003.
Finance and Accounting Department OrganizationEmployees must be paid correctly and promptly. Payroll represents the largest operating expenditure of community colleges. For example, ACCD's fiscal 2002 budget for payroll costs and benefits was 73 percent of total budgeted expenditures. Payroll is responsible for timely payment of wages to faculty, students and other employees, including administration, professional and classified employees. The Payroll Department also reconciles all insurance, taxes, retirement, annuities and other payments to various governmental, financial institutions and insurance companies. As a by-product of the payroll process, the payroll staff prepares various reports, including 941 reports, W-2 wage statements and other monthly, quarterly and annual reports.
The college must acquire and pay for goods and services to continue supporting the educational goals of the community. Vendors expect to be paid on time and for the correct amount. Accounts payable is responsible for processing payments that originate by purchase order, payment request or the district's student receivable system. Exhibit 5-42 presents accounts payable activity from November 2001 through November 2002.
Exhibit 5-42 Source: ACCD, Accounting Operations, January 2003.
Accounts Payable Activity Report
November 2001 through November 2002
Annual Total Monthly Average Number Amount Number Amount Payment Vouchers Entered 29,230 2,443 Checks Printed
- General
23,869 $42,751,149 1,989 $3,562,595
- Auxiliary
1,481 $1,395,118 123 $116,260
- Student Account
55,134 $26,856,487 4,595 $2,238,041
- Construction BA 95
6 $683,747 1 $56,979
- Manual Checks
174 $1,350,887 15 $112,574 Total 80,664 $73,037,378 6,723 $6,086,448 Accounts payable also has responsibility for compiling and submitting the state unclaimed property report, Internal Revenue Service 1099 forms, verifying W-9 information, instructing users on submission of online payment requests, as well as expenditure analysis and research.
The district must keep a proper accounting of student tuition and other revenues and must collect these funds on a timely basis. Accounts receivable is responsible for invoicing and collecting third-party sponsored client/employee tuition and fees, student loans, salaries for work-study students who are employed off campus and miscellaneous receivables. The accounts receivable balance at August 31, 2002 was $5 million for tuition and fees. ACCD has experienced steady growth in the continuing education programs at the colleges, and as a result the continuing education receivable balance has more than doubled since August 1999, as shown in Exhibit 5-43.
Exhibit 5-43 Source: ACCD, Accounting Operations, January 2003.
Continuing Education Receivable Balances
September 2001 through April 30, 2002
Period Amount Percentage Increase
From the Previous YearAugust 1999 $320,919 N/A* August 2000 $441,388 38% August 2001 $557,133 26% June 2002 $707,268 27% Average Annual Increase 30%
*N/A - not applicableFINDING
The district fails to enforce payroll procedures, causing operational inefficiencies for the Payroll Department. The Payroll Department experiences delays in processing paychecks and payroll changes. This is a result of department heads failing to submit timesheets to Payroll or documents required to initiate payroll action, including personnel action requests (PARs) for new employees, contract/assignment extensions for existing employees, termination notifications and benefit and deduction changes. The Human Resources Department enters the PAR information and then the Payroll Department applies the change to the employee's paycheck. Department heads must submit changes to an employee's status timely to meet the payroll-processing deadline. Exhibit 5-44 shows the published payroll deadlines, except for adjunct faculty.
Exhibit 5-44 Source: ACCD, Fiscal Affairs Department, Payroll Web site.
2002-03 Payroll Processing Schedule
Period Paid Due Date to
Payroll (by Noon)Paid Date Hourly Employee 8/13 - 8/31 9/04/02 9/30/02 9/01 - 9/11 9/11/02 9/30/02 9/12 - 10/13 10/14/02 10/31/02 10/14 - 11/07 11/08/02 11/27/02 11/08 - 12/02 12/03/02 12/20/02 12/03 - 1/12 1/13/03 1/31/03 1/13 - 2/10 2/11/03 2/28/03 2/11 - 3/06 3/07/03 3/31/03 3/07 - 4/09 4/10/03 4/30/03 4/10 - 5/11 5/12/03 5/30/03 5/12 - 6/10 6/11/03 6/30/03 6/11 - 6/30 7/02/03 7/31/03 6/11 - 7/13 7/14/03 7/31/03 7/14 - 8/11 8/12/03 8/29/03 Non-Hourly Employees 9/01 - 9/15 9/03/02 9/13/02 9/16 - 9/30 9/20/02 9/30/02 10/01 - 10/15 10/04/02 10/15/02 10/16 - 10/31 10/18/02 10/31/02 11/01 - 11/15 11/05/02 11/15/02 11/16 - 11/30 11/15/02 11/27/02 12/01 - 12/15 12/02/02 12/13/02 12/16 - 12/31 12/11/02 12/20/02 1/01 - 1/15 1/07/03 1/15/03 1/16 - 1/31 1/17/03 1/31/03 2/01 - 2/15 2/04/03 2/14/03 2/16 - 2/28 2/17/03 2/28/03 3/01 - 3/15 3/04/03 3/14/03 3/16 - 3/31 3/18/03 3/31/03 4/01 - 4/15 4/04/03 4/15/03 4/15 - 4/30 4/17/03 4/30/03 5/01 - 5/15 5/05/03 5/15/03 5/16 - 5/31 5/19/03 5/30/03 6/01 - 6/15 6/03/03 6/13/03 6/16 - 6/30 6/18/03 6/30/03 7/01 - 7/15 7/03/03 7/15/03 7/16 - 7/31 7/18/03 7/31/03 8/01 - 8/15 8/05/03 8/15/03 8/16 - 8/31 8/19/03 8/29/03 Payroll processing deadlines provide adequate time to enter timesheets, resolve any issues and pay employees on time. The Payroll Department bears the ultimate responsibility to pay employees on time and accurately, department heads must submit the data timely. When department heads do not adhere to the payroll schedule, the senior payroll assistants must process manual or supplemental paychecks for the employees affected. The result causes the payroll staff to incur unnecessary processing time and system processing time for review, corrections and follow-up efforts.
Payroll and Human Resources attempt to meet monthly to handle issues identified by Payroll and Human Resources staff. However, these meetings have not resulted in permanent resolutions of some issues. Furthermore, the department representatives do not attend these meetings, which limits the effectiveness of sustaining corrective actions, particularly when the department heads initiate payroll actions. Without input from stakeholder representation, no real change occurs, as evident by the recurring issues.
Exhibit 5-45 presents a summary of employees who were not set up in the Human Resources System (HRS) so that their paychecks could be processed timely. Although Payroll received timesheets, the department heads had not provided the PARs to Human Resources Department, causing Payroll to delay processing of these employees' timesheets and follow-up with the department and Human Resources. Some employees remained on the list for several pay periods.
Exhibit 5-45 Source: ACCD, Payroll Department.
Missing Employee Assignments Summary
November 2002-January 2003
Period Number of
EmployeesLocation November 2002 1 Northwest Vista November 2002 5 Palo Alto December 2002 1 Palo Alto January 2003 3 Palo Alto November 2002 13 San Antonio December 2002 8 San Antonio January 2003 3 San Antonio November 2002 9 St. Philip's December 2002 6 St. Philip's January 2003 9 St. Philip's Total 58 Exhibit 5-46 summarizes the number of checks issued on supplemental payroll runs for 2001-02 and 2002-03 through February, including late timesheets, contract extensions, termination notifications, new hires and others.
Exhibit 5-46 Source: ACCD, Payroll Department, March 2003.
Supplemental Payroll Runs Summary
2001-02 and 2002-03 through February 2003
Year Number of
Checks2001-02 1,928 2002-03 (through February 2003) 796 The district processes four payroll runs each month, two regular payrolls and two supplemental payrolls, which the district established as a standard payroll process. When the department processes manual checks outside of the regular or supplemental runs, the senior payroll assistants have to enter the manual transactions in the supplemental run to be recorded in the payroll system. In essence, each time the Payroll Department processes a payroll run in addition to four standard runs, the district expends unnecessary resources.
Although many, but not all, errors occur outside of the Payroll Department, the Payroll Department has primary responsible for ensuring all payroll transactions are processed accurately and timely. While ACCD must pay employees for work performed as stipulated by district policy, the policy and procedures become meaningless when the district operates outside of the requirements on a regular basis. Consistent adherence to payroll procedures by all departments provides overall efficiency in the payroll process, whether the process is manual or automated.
Recommendation 48:
Enforce payroll procedures and establish a resolution committee to improve payroll processing.
The district should implement a policy requiring adherence to payroll processing schedules and penalties for non-compliance. The Payroll Department should develop a payroll resolution committee, composed of representatives from colleges and departments to identify, resolve and eliminate bottlenecks and inefficient processes. The Payroll Department should also develop a reporting system that identifies actions in non-compliance with payroll processing schedules, departments or colleges involved and the effects on the regular payroll processing and reports.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The director Fiscal Affairs develops and submits a policy to the chancellor and board authorizing the Payroll Department to enforce payroll policies and procedures, including deadlines. September 2003 2. The chancellor and board approve the policy and provide districtwide communication of the new policy, which holds department heads accountable. October 2003 3. The director Fiscal Affairs implements the board policy. October 2003 4. The director Fiscal Affairs instructs the controller to develop a payroll resolution committee with a cross-section of stakeholders to eliminate recurring payroll issues. October 2003 5. The resolution committee forms, establishes criteria, identifies payroll issues and provides recommendations for approval with monthly reporting of issues addressed. October 2003 and Monthly 6. The director Fiscal Affairs and controller approve and implement resolutions. October 2003 and Ongoing
7. The Payroll manager develops and reports results of the payroll recommendations and exceptions to the board and chancellor. January 2004 and Ongoing FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
ACCD has a manually intensive process for hourly timesheets. The district manually processes timesheets for more than 1,200 temporary hourly and work-study students as of February 2003. Departments submit manual timesheets for their hourly and work-study employees indicating the number of hours worked. The hourly employees and work-study students account for 25 percent of
the district's workforce. The senior payroll assistant must perform the following tasks for this portion of the workforce:
- verify the mathematical accuracy of each employee's time;
- verify the pay rate (if handwritten on the timesheet) and account number for the HRS; and
- manually enter the Social Security number, account code, pay identification, pay period, assignment, employee classification, hours, rate and account number.
The senior payroll assistant manually adds all hours and compares the total hours per the timesheets to the payroll system balance report. The senior payroll assistant takes approximately two weeks to process timesheets for more than 1,200 hourly employees who are paid on a monthly basis. This manual process is time consuming and labor intensive.
ACCD provides a Web-based service for employees to view their personnel data, including payroll stubs. To enhance payroll processing, the Payroll staff is considering using a new web-based time reporting capability that was released in January 2003 for its payroll module. Payroll and Information System staff began reviewing, testing and evaluating the suitability of the basic system to meet the district's needs. However, Payroll has not developed a formal project or action plan for assessment or implementation.
Organizations that apply payroll best practices to their payroll processing minimize payroll operating costs and maximize service to employees within the constraints of the organization's policy and government regulations. They typically use technology that streamlines and automates payroll activities, while offering employees more convenient and secure payment options and easier and faster ways to obtain payroll information. ACC implemented an electronic time reporting system in 2002 to increase the efficiency of its payroll processing.
Recommendation 49:
Develop a formal plan to test and evaluate the time reporting module.
Payroll and Information Systems should formalize the testing and evaluation of the automated time reporting module of its human resources system. In addition, the Payroll manager should include affected stakeholder representation in the process. If the time reporting module cannot meet the district's needs, the Payroll manager should identify another way to electronically receive employees' time.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The Payroll manager and Information Systems staff develop and document a formal plan to test and evaluate the time reporting module, including action steps, timelines and implementation. August 2003 2. The Payroll manager submits the plan to the controller and director Fiscal Affairs for approval. September 2003 3. The Payroll manager directs the testing and evaluation of the module, including identifying alternative plans if the module does not meet the district's needs. October 2003 FISCAL IMPACT
This recommendation can be implemented with existing resources.
FINDING
The Payroll Department does not have a formal process for the disposition of unclaimed or held payroll checks. Unclaimed checks are created from one of three scenarios:
- the employee does not pick up his or her check from the bursars or department heads;
- Human Resources or a department head instructed the senior payroll assistant to hold the employee's check for various reasons, including employment changes not submitted timely or the employee owing the district money; or
- the check was returned to district due to undeliverable address.
The Bursar's Office picks up payroll checks and a check register from the Payroll Department. At most locations a department designee signs and picks up the payroll checks for his or her department from the Bursar's Office and distributes them to employees. Hourly employees and employees at other locations pick up their checks directly form the Bursar's Office.
Departments are required to return all unclaimed checks to the bursar on the same day they picked them up. The bursar stores the unclaimed checks in a vault on each campus. The bursars generally try to contact the employees to give their checks to them. After approximately 30 days, the bursar is required to return all unclaimed checks to the Payroll Department. Some bursars return the checks to Payroll with a list of checks returned, and other bursars attach a note with the returned checks.
When the bursars deliver unclaimed payroll checks, the senior payroll assistant files the checks in a locked cabinet until the employee comes to claim them. The senior payroll assistant does not prepare a formal list of these checks in an automated system. Without a system that tracks and documents the release of these checks, it is possible for a staff member to take and cash these checks. This theft would be undiscovered in the normal course of operations. The senior payroll assistant requires employees to provide identification before releasing checks and obtains authorization to release a check to an employee if the check is more than 90 days old. However, the senior payroll assistant does not conduct any follow-up with Human Resources to determine if a more current address is available for checks returned undeliverable. For checks held because changes were not submitted timely or the employee owing the district money, the senior payroll assistant logs the request and pulls the check for further instructions from Human Resources or the Bursar's Office.
The district has more than 140 unclaimed payroll checks, dating back to October 1999, and it has more than 860 unclaimed payroll stubs as of February 15, 2003. The Payroll Department and the Bursar's Office have custody of these unclaimed payroll checks. Exhibit 5-47 summarizes the unclaimed payroll checks as of February 15, 2003.
Exhibit 5-47 Source: ACCD, Payroll Department.
Unclaimed Payroll Checks
As of February 15, 2003
Location Payroll Checks Payroll Stubs Payroll 48 0 San Antonio College 30 63 St. Philip's College 17 289 Palo Alto College 30 354 Northwest Vista College 18 155 Total 143 861 The Payroll Department does not follow up with the bursars to ensure that unclaimed checks are forwarded to Payroll after holding them for the 30-day period. Payroll relies on the bursars to remit the checks on time.
The district is exposed to the risk of unauthorized access and improper release of unclaimed payroll checks if the checks are not accounted for and properly safeguarded.
As required by the Texas Property Code, the Payroll Department submits unclaimed checks three or more years old to the Texas Comptroller's office.
Recommendation 50:
Develop and implement formal procedures to provide accurate accounting and final resolution of unclaimed payroll checks.
The district should develop proper controls and procedures to safeguard unclaimed checks from unauthorized access and improper release. The Payroll manager should establish and implement procedures to track unclaimed checks and to require bursars to return unclaimed checks within 30 days.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The Payroll manager develops formal procedures to account for and resolve unclaimed payroll checks. October 2003 2. The Payroll manager submits draft procedures to the controller and director Fiscal Affairs for approval. November 2003 3. The controller and director Fiscal Affairs approve procedures. December 2003 4. The Payroll manager provides written documentation, communication and training of approved procedures for unclaimed payroll checks to appropriate stakeholders. January 2004 5. The Payroll manager provides periodic status of unclaimed payroll checks to the controller and director Fiscal Affairs. January 2004 and Quarterly FISCAL IMPACT
This recommendation can be implemented with existing resources.
Accounting Operations - Part 2
