Bulletin 1 - Ministry of Education

Update on reporting payroll matters in Annual Financial Statements
30 January 2015
The purpose of this update is to provide you with some general information regarding the
process for reporting payroll matters in your school’s Annual Financial Statements for
FY2014. This update also describes the payroll information that you can expect to receive
from the Ministry.
There are some improvements to the way information will be provided to you this year so
we would appreciate it if you could take the time to familiarise yourself with the contents of
this update.
Key dates:
27 February 2015
31 March 2015
2 June 2015
School Annual Accrual Report, leave liability reports and payroll error
schedules with overpayments, stop pays and any other known errors will be
available on Novopay Online
Financial Statements should be with auditors
Annual Reports to be submitted to the Ministry (the statutory deadline is 31
May, but this falls on the Queen’s irthday weekend in 2015)
We would encourage boards to send their draft Financial Statements to their auditor well
before the 31 March deadline.
The reports you will receive are:
School Annual Accrual Report (SAAR)
Leave Liability Reports
Overpayments Error Schedule
Stop Pays Error Schedule
Funding Code Error Schedule
This year, all these reports will be available for download from Novopay Online. They can be
found in My Reporting > School Reports. Copies of these reports can also be requested
directly from the Ministry of Education from 27 February 2015.
As per last year, the Ministry has been reviewing the quality of data over the past few
months. In support of the Ministry’s process, Ernst & Young, in their role as the AuditorGeneral’s appointed audit service provider to the Ministry, are conducting independent and
objective assurance procedures across the payroll service, with the exception of the
maintenance of leave utilisation records by schools. We believe this should increase
confidence in the payroll reports.
As part of this work, some schools will also receive an Exception report highlighting payroll
issues or anomalies identified centrally that need explanation at school level. This report will
be sent to schools before the end of March.
School Annual Accrual Report (SAAR)
The report contains summarised salary and wage information from your Staff Usage and
Expenditure (SUE) reports for your employees from 28 January 2014 to 27 January 2015. It
also contains specific financial data you require for the completion of your financial
statements (e.g. estimated ACC Levy data).
The accrual report will still need to be checked by boards and any required changes made.
Guidance on checking the report will be provided in detail in the instructions issued with the
The error schedules will include the following known errors in the payroll:
 Overpayments
 Stop Pays
 Payments from incorrect funding code(s)
Because these errors have not been adjusted within your fortnightly SUE reports they have
been carried into the SAAR, which sums your SUE data into a single report, and therefore
require correction in the financial statements.
Subject to the error schedules and the school’s own checks, boards may have confidence in
relying on the annual accrual report.
How to get from your SAAR to your Financial Statement
Your principal and chairperson, on behalf of the Board of Trustees (board), should review
this report and confirm the reasonableness of the contents of the SAAR by completing the
following actions:
1. Review your School Annual Accrual Report
2. Review your leave liability reports and confirm these reflect the correct leave balances
and subsequent liabilities
3. Review your error schedules and confirm these reflect all known errors
4. Record any errors you have identified that have not been included on the SAAR or error
schedules on the payroll certification form
5. Confirm that the employees shown on your SAAR were employed by your board during
the year and the amounts shown against each employee are substantially correct.
Where this is not the case these should be recorded on the payroll certification form
6. Complete and sign the payroll certification form and show it to your auditor as part of
the audit process
7. The payroll certification form should be retained on the school’s payroll file for the year.
This error schedule will contain a list of all overpayments where the earnings data has not
been adjusted in the payroll, by funding stream. This list will be split by calendar year and
will provide:
The Gross amount of the overpayment – this is the full amount paid including all tax
and deductions
The Net amount – this is the amount that was paid to the employee after tax and
other deductions were taken off; this is what is owed by the employee
Repayments made to date
Details of any refunds to the school for PAYE, KiwiSaver and Student Loan
components of the overpayment
Full details of the actions to be undertaken using these amounts will be included in the
instructions issued with this report.
If the overpayments are not material or the board is uncertain as to whether the
outstanding debt is recoverable from an employee they should include it as a contingent
asset instead. A disclosure note will need to be added to the financial statements in the
form of,
“The Board has a contingent asset in the form of accounts receivable (debtors) due to
overpayments made to staff from Operating Grants. The exact amount of realisable
recovery on these is unable to be reliably estimated and has therefore not been
Debts forgiven by the Ministry
These debts by their very nature (being less than $100 gross value) should have no material
impact on School Financial Statements. As the debts have been forgiven by the Ministry and
schools subsequently reimbursed for the gross amount of the forgiven debt, these
transactions do not affect the data provided in the SAAR. Further information on the
forgiveness policy can be found at this link:
Stop Pays
Stop pays occur when an error is discovered after the pay is run; the payment is deleted
from the bank file and the staff member is not paid; however, the gross amount is still
deducted from the school’s bank account and recorded in the school’s SUE/SAAR. Generally,
the net amount for these has been reimbursed to the school immediately, but for payments
towards the end of the year the gross amount may be outstanding at December 2014.
In most cases only the tax and deductions will be outstanding (gross minus net) which will
be reimbursed to schools by the Ministry once calculations have been finalised. These
amounts may be immaterial and if so no adjustment will be required.
If the net amount has not been reimbursed, however, or if the tax and deductions
component is material, then there will need to be an adjustment made for the amount
outstanding. These should be accounted for in Accounts Receivable in the same manner as
Overpayments (see above). Full details of the actions to be undertaken using these amounts
will be included in the instructions issued with this report.
Funding code errors
Funding code errors cause amounts to be incorrectly charged to schools when they should
have been charged to the Ministry and vice versa. For affected schools their Bulk Grant will
be increased/decreased to take into account these amounts. This adjustment will not be
reflected in the SAAR and an adjustment will be required.
We will provide a list of transactions with incorrect funding codes indicating whether these
have been taken from or added to the school’s funds. Your school will need to account for
this in their 2014 Financial Statements. Full details of the actions to be undertaken using
these amounts will be included in the instructions issued with this report.
School advances
If your school has made a payment to an employee (when they have not received their
fortnightly pay), but has not completed the appropriate note for Novopay to deduct the
advance payment amount (a Novo33 form), then this amount is a debt owed to the school.
This should be accounted for as a current asset as part of Accounts Receivables under
‘Debtors’ and should be included on the payroll certification form as an adjustment.
The form can be found at the following link:
Leave liability accruals
Boards are required to report a liability in dollar terms for annual leave and long-service
leave for their non-teaching staff. The leave liability reports will show the value of
outstanding leave balances as at the end of the pay fortnight immediately following 31
December 2014. Boards should ensure leave liability reports are checked to ensure they are
The liability should be reported in the school’s urrent !ccounts Payable note to the
Financial Statements. Full details of the actions to be undertaken using these amounts will
be included in the instructions issued with these reports.
If there are errors identified your school should make every effort to reconcile these into
the liability figures provided by the Ministry. While some errors may be caused by the
system, others could be due to leave taken not having been recorded, which cannot be
identified by the Ministry’s centralised assurance procedures. If leave taken has not been
recorded or other errors have been identified then the school will need to apply an
adjustment to the liability for the relevant employee(s). If the leave liability has been
adjusted you will need to provide your auditor with suitable leave records to support the
amended balance.
If, even after these checks and efforts made to reconcile the liability the Board still considers
the data too unreliable or the school does not have appropriate records held locally to
support the leave liability, then a liability should not be included in the financial statements.
This will need to be disclosed as a contingent liability in the notes to the financial
statements in the form of,
“The Board has a liability for leave for {who and type of leave} which has not been
able to be quantified due to the unreliability of the underlying leave records for these
staff. Accordingly no liability has been included in the financial statements.
If the leave accrual has not previously been recognised due to unreliable underlying
information then the full amount of the leave should be charged to expenditure in 2014.
We would encourage the initial recognition of a leave liability to be separately disclosed.
Banking staffing
If you have any queries about the implications of banking staffing on your annual financial
statements, please contact your Senior Regional Financial Advisor. If you have any queries
about the banking staffing scheme in general, please email the Ministry of Education at
[email protected]
Additional errors not identified
All error schedules produced by the Ministry are on the basis of data the Ministry holds.
Where a school has notified Novopay of an issue but the issue is yet to be addressed this
should be included on the payroll certification form, unless the amount is under $500.
Document retention
Boards are reminded that all payroll documentation should be retained and available for
review by your school’s auditor. Guidelines for document retention are available on the
Novopay website and can be found at this link:
Payroll certification
An updated Payroll Certification form for 2014 will be available on the Ministry’s website.
Further advice and guidance
If school administrators have payroll-specific questions, they should contact the Novopay
Service Centre in the first instance on 0508 NOVOPAY (0508 668 6729) or by email to
[email protected]
If schools, financial service providers or auditors have specific questions about preparing the
annual financial statements, they should contact their Regional Senior Financial Advisor in
the Ministry, as below:
Carmel Riordan
Northern Region
Phone: 09 632 9440
Email: [email protected]
Ann Clarke
Central North Region
Phone: 06 833 6734
Email: [email protected]
David Hyland
Central South Region
Phone: 04 463 8673
Email: [email protected]
Fiona Hollingworth
Southern Region
Phone: 03 378 7373
Email: [email protected]