Pago Pago, AMERICAN SAMOA — “Payroll approval and authorization of work hours; incorrect employee pay-rates and manual recording of hours,” is one of the findings of the Performance Audit report by the Territorial Audit Office (TAO) of the more than $14 million in federal CARES Act funding awarded to the Health Department (DoH) during the COVID pandemic.

Part three of the Samoa News report on the DoH audit looks at “Payroll” findings and the concerns raised by TAO are about the Authorization and Approval of Regular and Overtime Hours.

The report explains that the payroll process starts with employees or time administrators (or the Time Keepers) preparing and completing time sheets bi-weekly using manually recorded or automated clock hours.

Most often, the review is performed by the Supervisor (or Payroll Team under the Finance Section) and approved by the Deputy Director, Director or his designated person. After timesheets are completed and approved, these are released to the Treasury Department Payroll Unit for processing.

“However, we identified a number of control weaknesses in the Department's timekeeping and payroll practices,” said TAO.

These include written approval reflecting level of authority as there is no documentation as to who changes timesheets and payroll records, supervisory review of timesheets needs improvement and improvements needed to eliminate timesheet errors — frequent missing employee punch [card] hours.

“We were unable to locate any documentation as to why employees continue to have missing punch hours,” the audit declared. “Failure to document time approval increases the risk of inaccurate time being approved and waste or loss. In addition, the department's reliance on incomplete timesheets as the source for proper approval increases the risk of unauthorized overtime earned.”

TAO explained why this finding matters, saying that the nature and extent of approval is such that management is accountable for the approval of an employee works.

“Without prior verification, the department cannot provide assurance for such changes or prevent inaccurate time recording,” said TAO. “This helps to ensure that accurate payroll information is recorded and reported for the purposes of computing pay and related benefits.”

Exceptions to the general prohibition of employees approving their own payroll data are intended to apply in certain situations or if the employee is a high level individual.

And in these situations, an official authorized by the department must grant advance authority in writing and the department must ensure that effective controls are in place to ensure the proper reporting of the payroll data.

“By not following proper policies and procedures to support the approval process, there is no assurance mechanism to verify the accuracy and validity of timesheets or to prevent inaccurate time recording,” said TAO.

“An authorization affirms that a transaction is valid and typically takes the form of an approval by a higher level of management authority. Furthermore any incorrect timesheets and incorrect recording may result in the under or overpayment of wages,” it says.

In its response, DoH management said the IT Division is working diligently to install a biometric time clock terminal at all DoH facilities/ division to eliminate this finding and validate time in/ out of employees.

At DoH, “not al the employees are able to use the biometric time clock to clock in and out daily due to the scope of work and the limited biometric time clock terminals,” management explains.

“However, some divisions have access to it, while others have to manually sign in and out daily to capture the working hours,” said DoH, adding that: “Operating and Monitoring employee hours using an automated system grants the DOH Finance team accessibility to many electronic features that enable ‘different degrees of confidence, control, and security’.”

Furthermore, DoH Division Managers have been strongly advised to comply with the Payroll Verification and Approval Processes involving keeping track of employee time and ensuring the time provided in employee time sheets are "true, accurate and validated to the best of their knowledge," as per “recommendations" by TAO.

The second issue on payroll cited by TAO is “Retention and Availability of Payroll Records”.

“Our enquiries reveal that payroll records for the 2020 fiscal year were not properly filed.

“What we found is that payroll records were scattered in other locations instead of centralizing in a secured selected location,” said TAO. “Again, this is an audit concern on the department's inadequate filing system.”

Furthermore, the maintenance of payroll records such as time cards/ reports showing hours worked, overtime hours and so on are required by statute for instances the Internal Revenue Service and the US Department of Labor — to be kept for a set amount of time and failure to do so could result in serious penalties and fines.

Moreover, the federal CARES Act requires grant disbursements including payroll records to be retained for five (5) years as from the last payment made.

TAO recommends DoH to design a payroll management system which is efficient and is able to secure important documents. The department needs a good filing system to keep track of documents and consideration should be made for the method of filing as there are lots of payroll records to manage. Security can also be an issue as such filing methods and or systems are often easily accessible by unauthorized personnel.

In its response, DoH management concurs to this recommendation and is formulating a plan to secure, organize and store al payroll files. The payroll management system is mainly handled by the Department of Treasury, Payroll Division.

“What we can establish on our side as the Department of Health is the payroll filing system to safe keep and maintained payroll records and files,” said DoH management.