Whidbey General Hospital officials respond to state audit findings

Several employees at Whidbey General Hospital are seeing some smaller paychecks thanks to a snafu in a new payroll system.

Whidbey General Hospital nursing department employee Ashley Wiberg swipes her card on the hospital’s recently installed payroll machine. Auditors recently discovered the hospital didn’t have adequate controls on the hospital’s payroll system.

Several employees at Whidbey General Hospital are seeing some smaller paychecks thanks to a snafu in a new payroll system.

State auditors in a report released Feb. 18 said 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 in overpayments to employees.

Whidbey General Hospital is busy recouping the money by making deductions to the affected employees’ paychecks as allowed by state law, spokeswoman Trish Rose said in an email.

She noted “the audit did not find or allege deliberate wrongdoing on the part of any WGH employee or manager.”

The Washington State Auditor’s Office audits the hospital annually. The current audit covered Jan. 1-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 and the hospital pays between $9,000 and $12,000 a month to operate it.

Hourly employees are paid based on timecards supported by scans of their badges, while salaried employees submit monthly timesheets that record time off, according to the report.

Auditors pored through the hospital’s records during the last months of 2013 and they presented their findings to the hospital’s finance committee on Jan. 28.

The state officials noted in the report:

• A lack of segregation of duties within the departments of payroll and benefits.

• No comparison of paid time off was claimed in time records to the amount earned before it is paid.

• 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.

• 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:

• Ensure supervisors have knowledge regarding use of the automated system and employee contracts. They also have to ensure adequate monitoring and oversight of the payroll process.

• Ensure staff and supervisors review and sign off on time sheets before they’re processed.

• Develop policies and procedures for collection of overpayments to employees.

• Strengthen internal controls to decrease the chances of overpayments or unearned paid time.

• 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, and had taken steps to correct the problem.

Keith Mack, public relations liaison at Whidbey General Hospital, said in an email 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.

She said managers are receiving ongoing training on payroll procedures and how collective bargaining agreements affect them. Managers also receive weekly updates, and a new training manual is available.

The hospital also hired an additional employee to help monitor payroll transactions. The new person, along with a trained back-up, means the hospital has four employees overseeing payroll transactions, which is two more than before, Rose said.

She added internal audits are also being performed to ensure compliance with state law.

“We believe the audit was fair and we appreciate the chance to correct any shortcomings in our payroll procedures,” Rose said.

She also cited the audit report that stated “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. Auditors back then discovered an issue related to contracts, which the district resolved.


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