INTERNAL AUDIT REPORT

PAYROLL SYSTEM

JANUARY 1, 2013  AUGUST 31, 2015

ISSUE DATE: DECEMBER 1, 2015
REPORT NO. 2015-12

PAYROLL SYSTEM                                         INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015
EXECUTIVE SUMMARY 

AUDIT OBJECTIVES AND SCOPE 

The purpose of the audit was to determine whether management controls over the Payroll System are
adequate to ensure:
1. Accuracy and timeliness of payroll disbursements.
2. Compliance with applicable legal requirements.
We reviewed information for the period January 1, 2013  August 31, 2015. Details of our audit's scope 
and methodology are on page 3.

BACKGROUND 

The Port uses the PeopleSoft Human Capital Management (HCM) module to manage all human resource
and payroll processing activities. This module is used from hiring to resignation. All employee and
payroll-related information resides in this module. The Port uses this module to administer over $215 
million annually in pay, benefits and taxes for Port employees.
For purposes of this audit, only the processes related to producing bi-weekly and weekly payrolls are
within scope.
The Port has used the HCM module since 1997, and has undergone five upgrades since that time. The
most recent upgrade was in October 2015. This upgrade ensures continued technical support and
ongoing software updates and security patches from the software vendor.
The Port employs approximately 1,800 FTEs. It processes the majority of payroll bi-weekly. It issues a
weekly payroll for about 50 employees.
O 
AUDIT RESULT
Management controls over the Payroll System are adequate to ensure (1) accuracy and timeliness of
payroll disbursements and (2) compliance with applicable legal requirements.



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PAYROLL SYSTEM                                         INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015

TABLE OF CONTENTS 

EXECUTIVE SUMMARY ..................................................................................................i 
I.    TRANSMITTAL LETTER......................................................................................... 1 
II.     BACKGROUND.................................................................................................. 2 
III.     FINANCIAL HIGHLIGHTS ...................................................................................... 2 
IV.    HIGHLIGHTS AND ACCOMPLISHMENTS ..................................................................... 3 
V.   AUDIT SCOPE AND METHODOLOGY.......................................................................... 3 
VI.    CONCLUSION................................................................................................... 4

PAYROLL SYSTEM
INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015

TRANSMITTAL LETTER 


Audit Committee
Port of Seattle
Seattle, Washington
We have completed an audit of the management controls over and transaction processing in the
Payroll System. We reviewed information relating to the Payroll System from January 1, 2013  August
31, 2015.
We conducted this performance audit in accordance with Generally Accepted Government Auditing
Standards and the International Standards for the Professional Practice of Internal Auditing. Those
standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings and conclusions based on our
audit objectives.
We extend our appreciation to management and staff of the Accounting and Financial Reporting
Department for their assistance and cooperation during the audit.


Joyce Kirangi, CPA, CGMA
Internal Audit, Director

AUDIT TEAM                    RESPONSIBLE MANAGEMENT TEAM
Ruth Riddle, Senior Auditor             Duane Hill, Senior Manager, Disbursements, AFR
Jack Hutchinson, Audit Manager         Rudy Caluza, Director, AFR




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PAYROLL SYSTEM
INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015

BACKGROUND

The Port uses the PeopleSoft Human Capital Management (HCM) module to manage all human resource
and payroll processing activities. This module is used from hiring to resignation. All employee and
payroll-related information resides in this module. The Port uses the system to administer over $215
million annually in pay, benefits and taxes for Port employees.
For purposes of this audit, only the processes related to producing bi-weekly and weekly payrolls are
within scope.
The Port has used the HCM module since 1997, and has undergone five upgrades since that time. The
Port upgraded to Version 9.1 in 2013 and Version 9.2 in October 2015. The most recent upgrade
ensures continued technical support and ongoing software updates and security patches from the
software vendor.
The Payroll Work Group consists of five staff. They are responsible for processing bi-weekly payroll for
approximately 1800 FTEs, plus a weekly payroll for about 50 of total FTEs. Pay periods end on
Saturday. Time reports must be submitted to the Payroll Work Group no later than 2 p.m., on the
following Monday. Between Monday and Wednesday, the Payroll Work Group conducts a rigorous
process of verifying the submitted time, addressing all system-flagged exceptions, and producing a
final confirmed payroll register. Bank uploads for direct deposits and hard copy checks typically occur
by close-of-business Wednesday. Direct deposits are available in employees' personal bank accounts
on Friday morning.

FINANCIAL HIGHLIGHTS 
AVERAGE BI-WEEKLY PAYROLL
Average % Average % of  Average  Total Annual
Average       of      Non-  Number  Salaries and
YEAR
Payroll Represented Represented   Checks     Wages
Staff       Staff Processed     Expense
2013 $ 5,854,078       39       61    1780  $151,718,831
2014 $ 6,082,446       41       59    1817 $ 153,495,732
Data Source: PeopleSoft Financials



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PAYROLL SYSTEM
INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015

HIGHLIGHTS AND ACCOMPLISHMENTS

Management continues to reduce hard copy payroll checks. As of August 2015, the majority
(96%) of the Port's approximately 1,800 staff receives salary and wage payments by direct
deposit to personal bank accounts or pay cards.  This accomplishment provides multiple
benefits:
o  Eliminates printing and mailing of paper checks. 
o  Reduces fraud risk of stolen or altered checks. 
o  Eliminates employees' trips to the bank. 
o  Facilitates payments to employees during emergencies and natural disasters. 
Management, in concert with the Port's Continuous Process Improvement team, Human
Resources and Development, and Labor Relations, has revisited various payroll processes, to
decrease processing steps, increase efficiencies, and reduce risk of errors.
The Payroll Work Group completes its rigorous process from receipt of timesheet submission to
production of final payroll register within 2.5 days for approximately 1,800 FTEs.
In keeping with the Port of Seattle's Go Green Initiative, management implemented electronic
W-2s, in lieu of paper, which has reduced printing and mailing costs.

AUDIT SCOPE AND METHODOLOGY 

We reviewed information for the period January 1, 2013  August 31, 2015. We utilized a risk-based
approach from planning to testing. We gathered information through research, interviews,
observations, and analytical review, in order to obtain a complete understanding of management
controls over and transaction processing in the payroll system. We evaluated risk and tested the
mitigating controls, to determine whether they were operating as intended.
The key management controls we tested and the detailed tests we performed are as follows:
1. To determine whether management controls are adequate to ensure:

a. Payroll is accurate:
i. We evaluated the process for assigning and authorizing access to the payroll
system.
ii. We determined whether there was adequate management oversight of user
accounts to ensure users are current and valid.

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PAYROLL SYSTEM
INTERNAL AUDIT 
JANUARY 1, 2013  AUGUST 31, 2015
iii. We tested authorizations of user accounts for 1st quarter 2013, 3rd quarter 2014,
and 2nd quarter 2015.
iv. We determined whether conflictive responsibilities were segregated:
o  Data entry.
o  Approval of changes.
o  Reconciliation of data entry.
o  Transmission of withholding.
o  Custody of hard copy checks.
v. For the pay period ended 8-22-15, we reconciled payroll issued to underlying
time submissions.
vi. For the period ended 8-22-15, we reconciled payroll withholding to subsequent
payments for:
o  Federal withholding.
o  Retirement.
o  Charitable contributions.
vii. For the period 5-1-15 to 9-21-15, we traced positive pay exceptions to
supporting documents.
b. Payroll is timely:
i. We reviewed payroll processing from submission of staff's time to issuance of
payroll.
ii. We reviewed the timeline for entering adjustments/corrections in the system
iii. For the pay period ended 8-22-15, we identified the date by which payroll staff:
o  Completed payroll processing.
o  Produced the final payroll register.
o  Uploaded positive pay advice to the payroll bank account and produced
hard copy checks.
VII.    To determine whether management controls are adequate to ensure payroll is in compliance
with applicable legal requirements, we reviewed the processes and conducted detailed tests as
follows:
c. Submission of federal withholding.
d. Submission of retirement deductions.
e. Remittance of charitable deductions.
f. We determined whether the following withholding and deductions were remitted to the
appropriate recipients
i. Federal withholding (pay period ended 8-22-15).
ii. Retirement deductions (pay period ended 8-22-15).
iii. Charitable deductions (2nd quarter 2015).
CONCLUSION 

Management controls over the Payroll System are adequate to ensure (1) accuracy and timeliness of
payroll disbursements and (2) compliance with applicable legal requirements. 


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