Audit finds vacation accrual inconsistencies, CTO carryovers and payout errors in Tulare County leave audit

Kristen Odom, chief of financial reporting and audits for the Auditor-Controller's Office, presented the countywide leave balances and accruals audit covering fiscal years 07/01/2021 through 06/30/2024.

Odom reported that for fiscal year 2024 about $308,000,000 was paid in base salary and wages and roughly $56,000,000 was paid for time off. Auditors tested vacation accruals, CTO, sick leave accruals, final pay lump-sum payouts and personal holiday usage and identified five findings.

First, auditors found vacation balances exceeding policy limits. As of June 30, 2024, 19 employees had vacation balances above their allowed cap; four had waivers on file, three were due to bargaining-unit scheduling or payroll procedures, four were small system or timekeeping errors, and eight were from one department that later obtained waivers after the audit. At the start of the audit period (July 1, 2021) 60 employees were over their cap, a reduction of about 68% by June 30, 2024. Auditors noted nine employees had balances above the cap for the entire three-year period, averaging around 500 hours; excess balances for those nine totaled more than $122,000 (about $13,600 per person). Auditors recommended consistent enforcement of vacation policies, a formal written waiver policy with terms and end dates, and collaboration between departments and HR to reduce excessive balances.

Second, auditors found a liability tied to compensatory-time-off (CTO) that remains when employees transfer out of CTO-earning bargaining units. Auditors reported a compensated-absence liability for CTO of about $2.9 million, of which over $400,000 belonged to employees who no longer earn CTO (about 15%). Auditors tested a sample and observed pay-rate increases averaging 64% since the CTO was earned; extrapolating suggested about $168,000 of additional future payout cost because of higher pay rates. Auditors recommended the county consider a policy to treat CTO balances when employees change bargaining units, such as exhausting CTO before using vacation or offering a cash payout upon change in status.

Third, auditors found an incorrect sick-leave amount converted to retirement service credit for one retired employee: an overstatement of 137 hours. Tessera supplies the retirement-conversion form used by departments; auditors recommended training for payroll staff, a review of recent retirements for similar errors and discussions with Tessera to improve form validation. A joint meeting with Tessera was scheduled for October, Odom said.

Fourth, auditors found incorrect benefit payouts: three of 20 final payouts tested were incorrect (underpayments of $474, $122 and $15). Nine final pay cards in the sample were not signed by the employee. Auditors recommended departmental controls including a secondary review and preparing final pay cards before an employee’s last day so the employee can review and sign.

Fifth, auditors found personal-holiday misuse: personnel rules provide eight hours of personal holiday on July 1 to be used in eight-hour increments by June 30 or forfeit; auditors observed instances of partial-hour use, employees taking more than eight hours, and some unused personal-holiday hours not paid out at separation. Auditors recommended training for supervisors and payroll staff and regular balance reviews.

Committee members discussed the practicality of countywide waiver policies given varied departmental needs; Odom said the audit surveyed departments and would provide follow-up on waiver practices. Supervisor questions included whether Oracle has a system flag to prevent accrual beyond caps; an assistant auditor-controller said Oracle can flag and stop accruals unless a waiver applies. The committee voted to accept the audit report; the motion passed 4–0 with Chief Norman absent.