Make changes now to avoid problems later
Auditors share tips for error-free accounting
Originally Published in Statewise Winter 2007
by Bill Hornstein and Barbara Neyens
Every agency wants to reduce the number of problems found in an audit. As the old saying goes, an ounce of prevention is worth a pound of cure. By making small changes in the way you do business all year, you can eliminate many of the issues that auditors commonly find.
Here are some common post-payment audit errors, along with some suggestions for how to avoid them.
Security after employee termination
Employee access to statewide systems and accounts is one focus for post-payment auditors. They look to see if any terminated employees still had security in the Uniform Statewide Accounting System (USAS) after termination. They also check to see if employees remained on agency signature cards for more than five days after termination. Did these individuals process any payments after termination? This is double-checked as well. See 34 TEX. ADMIN. CODE sec. 5.61 (2007) for more information.
To prevent security issues after employee termination: Immediately revoke access to systems and payment processes when an employee leaves your agency. Make sure the person responsible for removing security is notified of terminations as soon as possible.
Control over expenditure processing
Employees should not be able to both enter and release payments. This would allow employees to process documents without any oversight — a significant control weakness. Auditors recommend that entering and releasing be split between different employees in USAS, the Uniform Statewide Payroll/Personnel System (USPS) and the Texas Identification Number System (TINS). Auditors also check current signature cards during fieldwork.
To avoid control findings: Regularly review your agency's controls over expenditure processing. Whenever possible, do not allow transactions to be processed by only one person.
Payments made through USAS will trigger an automatic check of the vendor's warrant hold status. However, if a purchase is being made with petty cash, travel advance funds, local funds or payment cards, you must check the vendor's warrant hold status before making the purchase. You are not required, however, to print or store verification screens.
To avoid warrant hold errors: Establish reliable procedures for checking warrant hold status and make sure staff follow them. The most current warrant hold information is available in the Texas Identification Number System (TINS). If you don't have access to TINS, contact your agency security coordinator.
Analysts generate reports on agency expenditures that can identify possible duplicate payments. Using factors such as service date, sources of funding and payment cancellations, they create a list of possible duplicate payments for the agency to review. The auditors may also choose to review the agency's documents themselves.
To prevent or detect duplicate payments:
- Ensure that your agency's accounts payable process not only performs three-way matching on invoice payments but also provides a controlled way to replace lost or canceled payments.
- Before reissuing a payment, verify that the original warrant was canceled using Treasury Operations' Web Warrant Inquiry and Cancellation System (WWIC).
- Take steps to ensure that a payment is not made twice from two separate sources of funding, particularly when you are reimbursing local expenses.
Auditors do a statewide analysis to see if any agency has funds in unclaimed property in Texas or other states. They then notify the agency so it can claim the funds.
To track down agency funds: Check the Web for unclaimed property on a regular basis and recover any that belongs to your agency.
Auditors run a report showing which transaction codes (T-Codes) and vendors were used to process third-party transactions. Often the correct vendor name is not used with the appropriate T-Code.
To avoid T-Code reimbursement errors: See Processing Third-Party Transactions (FPP A.043), which explains how to use T-Codes and TINs to process these payments in USAS.
Here are some tips:
- Travel Transactions — A traveling employee's TIN should always accompany a travel object code on a transaction. For directly billed travel transactions, use T-Code 264 (Voucher Payable Non-Payroll Direct Bill Detail) to record the employee's TIN and appropriate object code. Use T-Code 905 (Payment Direct Bill Vendor) to remit payment to a directly billed vendor or the business travel account credit card.
- Payment card purchases — T-Code 264 must reference either the specific vendor TIN or the non-specific payment card TIN. Reference the payment card vendor for T-Code 905.
- Employee reimbursements — When reimbursing employees, use T-Code 247 (Vouchers Payable Non-Payroll Reimbursement) and 904 (Payment Reimbursement Vendor). Reference the vendor for T-Code 247. T-Code 904 must represent the employee being reimbursed.
Assets and state property accounting
Auditors select several assets during an audit and physically verify them. They check to see that the property tag is attached to the item and confirm that the asset is correctly recorded in the State Property Accounting (SPA) system. The most common error is moving an asset from one location or assignee to another without updating the SPA system to reflect the change.
To avoid state property accounting errors: Regularly review SPA records and ensure that every asset is accounted for and properly entered.
State service accounting
Agencies must ensure that the amount of state service for every employee is credited accurately so longevity and benefit replacement pay are calculated correctly. They also must review the prior state service of every employee to ensure that the information is up to date.
To avoid employee service errors: Whenever a new hire joins your agency, carefully review his or her prior state service to make sure the correct dates and amounts are used in pay calculations. Agencies should also periodically review state service records for all existing employees.
You can't have too much training
Audit results often reflect the amount of training an agency's employees have received. Auditors check to see how many employees have attended Fiscal Management training classes and whether the agency regularly sends employees to the classes. If an agency has significant findings with its payments, auditors may recommend more training.
For more information
You can read quarterly summaries of post-payment audits on FMX. In addition, you can visit Training Center for classes related to common audit issues.