YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

March 10, 2004

Report No. 2004-19

The following problems were discovered as a result of an audit conducted by our office of the Statewide Advantage for Missouri - Human Resources/Payroll (SAM II-HR) System.

The SAM II-HR system was fully implemented by the State of Missouri on April 1, 2001.

We requested agencies to provide written documentation of their policies or procedures for segregation of duties between personnel and payroll functions.  Only four of thirty-four agencies provided written documentation which demonstrated adequately segregated personnel and payroll functions or allowed for other compensating management controls when the segregation of duties was not possible.  Fifteen agencies indicated they had implemented procedures to segregate duties but did not have a written policy.  Additionally, state agencies are responsible for preparing internal control plans and submitting the plans to the Office of Administration (OA).  These plans document an agency's internal control policies and procedures.  We reviewed these internal control plans and noted that nineteen of thirty-four agencies had not submitted a plan as of June 2003.  Most of the plans that were submitted did not provide for an adequate segregation of personnel/payroll duties. 

In converting to the new SAM II-HR system, the state decided to implement a semi-monthly payroll cycle.  Because the system calculates pay on the 15^th and last day of the month, each pay period covers varying numbers of actual hours.  However, to issue pay checks for salaried employees that do not vary in amount, the system assigns a standard number of work hours (86.7) to each pay period.  The discrepancy between the 86.7 standard hours and the actual hours in the pay period incurs additional costs in administrative time to process the payroll.  This added time and cost could be avoided if the state adopted a bi-weekly pay cycle rather than the current semi-monthly cycle.

The OA has four non-appropriated bank accounts outside the state treasury to facilitate processing payments to outside entities for various payroll deductions.  Open items lists were not prepared and reviewed by supervisors.  As a result, three accounts held funds that should have been disbursed to other entities in a more timely manner, including $108,000 in the Earnings Tax account for processing fees withheld from payroll taxes collected on behalf of local (city) taxing authorities as well as interest earned on the bank balances between 1999 and 2002.  Additionally, the Deferred Compensation account included approximately $20,000 of interest earned between 1999 and 2002 that should have been disbursed in a  more timely manner.  These monies were due to the state's General Revenue Fund.

Our report also includes the results of surveys sent to user agencies regarding the efficiency and effectiveness of the SAM II-HR at the agency level.

Complete Audit Report