Several employees at Whidbey General Hospital are seeing some smaller paychecks as a result of a problem in a new payroll system.
In a report released Feb. 18, state auditors reported hospital officials did not have adequate controls over payroll to safeguard public resources.
The result of that condition caused the hospital to make $183,000 worth of overpayments to employees, the report said.
Whidbey General Hospital is busy recouping the money by deducting from the affected employees’ paychecks as allowed by state law, spokeswoman Trish Rose said in an email.
“The audit did not find or allege deliberate wrongdoing on the part of any WGH employee or manager,” Rose said.
The Washington State Auditor’s Office conducts an annual audit of the hospital. The current audit covered Jan. 1, 2012 through Dec. 31, 2012.
Whidbey General Hospital employs approximately 700 people and has revenue expenditures of $48.9 million.
The hospital district also has five collective bargaining agreements in place.
Officials installed a new electronic payroll system in 2011. The payroll system cost approximately $45,000.
Hourly employees are paid based on time cards supported by scans of their badges while salaried employees submit monthly time sheets that record time off, according to the audit report.
Auditors reviewed the hospital’s records during the last months of 2013 and presented their finding to the hospital’s finance committee on Jan. 28.
In the report, auditors noted the following:
n A lack of segregation of duties within the departments of payroll and benefits.
n No comparison of paid time off was claimed in time records to the amount earned before it is paid.
n Payroll manager manually enters leave accruals for staff with contracts that have collective bargaining agreements. There is no secondary review to ensure the entries are accurate.
n Supervisors don’t have adequate knowledge regarding use of the automated system and employee contracts.
“The district has not made it a priority to assess the risk associated with its payroll process,” the report states. “It also has not documented the required procedures for the process nor provided adequate training for the employees and supervisors. As a result, any intended controls are either unknown or not being followed.”
To remedy the situation, state auditors recommended:
n Ensure supervisors have knowledge regarding use of the automated system an employee contracts. They also have to ensure adequate monitoring and oversight of the payroll process.
n Ensure staff and supervisors review and sign off on time sheets before they’re processed.
n Develop policies and procedures for collection of overpayments to employees.
n Strengthen internal controls to decrease the chances of overpayments or unearned paid time.
n Limit employee access to the payroll system only to functions they need to perform their duties.
Rose said the hospital staff discovered the problem in August, months before the audit was conducted and was already taking steps to correct the problem.
Keith Mack, public relations liaison at Whidbey General Hospital, said in an email that the largest overpayment was the result of one error, which was quickly identified.
That error, which accounted for around 95 percent of the overpayments identified, was repaid less than a week after it occurred. Approximately 99 percent of the overpayments had been recouped by the time the auditor’s office issued its report.
Managers are receiving ongoing training on payroll procedures and how collective bargaining agreements affect them, Rose said.
Managers also receive weekly updates and a new training manual is available.
The hospital hired an additional employee to help monitor payroll transactions. That employee, along with a trained back-up, means the hospital has four employees overseeing payroll transactions, an increased from two, Rose said.
Internal audits are also being performed the ensure compliance with Washington state law, Rose said.
“We believe the audit was fair and we appreciate the chance to correct any shortcomings in our payroll procedures,” Rose said.
She noted the audit report stated that “district management has been responsive to our audit recommendations. We believe this reflects the district’s desire and commitment to maintain a strong financial system.”
State auditors last issued a finding for Whidbey General Hospital in 2003. That finding related to an issue with contracts, which the hospital district resolved.