Human Resources Audit

Objectives and Procedures, Stage 1

date dd/mm/yy
Overall Objective
To ensure that proper controls, policies and procedures are in place for
each of the outlined areas below, and that records, disclosures, and other
information are consistent with plan documents and in compliance with
applicable laws and regulation.

Preliminary Steps

W/P Ref

1. Send a preaudit/intro memo and hold a meeting with the main auditees.
2. Complete a preaudit review of accounts, previous audit concerns,
examination and external findings, board minutes, fraud files, etc.
3. Obtain and evaluate strategic and incentive goals for the area, if any.
4. Interview unit management to determine if there were any significant
offages or losses attributed to employee error or possible fraud. Document
each incident, including the final action against the employee, and the
filing of any police reports, SAR's, or bond claims. Adjust audit tests as
necessary.
5. Research internal and internet sources for possible program updates,
document sources referenced and used.
6. Update the audit program based on the results in steps 1 thru 5 above.
7. Complete a Lead Sheet listing accounts to be considered for review.
8. List DWH and other reports needed and request as necessary.
9. Estimate the time period and number of hours for completion.
10. Submit the results of these steps to the VP of Audit for review.

Objective A--Incentive Programs

Determine that incentive programs are properly documented, approved
and communicated, established targets and levels are appropriate, and
reported results and payouts are accurate.
Control Considerations
1. Incentive programs are formally documented and have been
approved by the proper board committee and/or executive management.

Yes

2. Incentives are part of an overall documented compensation

strategy for the positions involved.
3. Incentive programs are properly disclosed and communicated
to all eligible employees.
4. Individual goals are appropriately linked to unit and overall
organizational performance goals.
5. Management analyzes the success of the incentive programs by
quantitative and qualitative analysis, and reports the results of the analysis
to the board committee and/or executive management.
6. Results, incentives and rewards are accurately calculated and reported.
7. Incentive programs conform with regulatory requirements.

Procedures
1. Obtain written documentation on all incentive plans. Review
goals and targets. Compare to CU strategic goals. Determine that they
have been properly reviewed and approved.
2. Review management's analysis of the program's effectiveness in
incenting or rewarding performance toward individual and organizational sales
goals.
3. Document processes and controls involved in tracking, tabulating,
reporting, and paying for results for the program.
4. Perform analytical review of aggregate incentive totals. Calculate %
of payout to base wages. Compare individual incentives as a % of base
wages for a sample of employees. Compare to program goals.
5. Obtain individual calculations of results for selected periods. Trace
back to proof of sales. Determine accuracy of reported results.
6. Recalculate incentives and compare to reported amounts. Trace reported
amounts to actual payroll posting.
7. Determine that the plans are properly structured and monitored in
compliance with applicable NCUA rules and regulations.
8. Conclude on the objective.

Date
Completed

Objective B--Employee Bonus Program

Determine that the employee bonus program is properly documented, approved
and communicated, established targets and levels are appropriate, and
reported results and payouts are accurate.
Control Considerations
1. The bonus program is formally documented and has been approved
by the proper board committee and/or executive management.
2. Plan goals are appropriately linked to the overall organizational
performance goals of the CU.
3. The bonus program is properly disclosed and communicated
to all eligible employees.
4. Bonuses are accurately calculated, reported and paid.

Procedures

Yes

Date
Completed

1. Obtain written documentation on the bonus program. Review

goals and targets and compare to CU strategic goals. Determine that the
program has been properly reviewed and communicated.
2. Document processes and controls involved in tracking, computing
reporting, and paying bonuses.
3. Perform analytical review of CU performance against program targets.
Determine whether or not a bonus should have been paid for each applicable
quarter.
4. Recalculate bonus percentages. Determine eligible employees for
selected payout quarters, and trace to proper calculation and payroll payment.
5. Conclude on the objective.

Objective C--Executive Bonus Program

Determine that the executive bonus program is properly documented, approved
and communicated, established targets and levels are appropriate, and
reported results and payouts are accurate.
Control Considerations
1. The executive bonus program is formally documented and has been approved
by the executive committee of the board.
2. Plan goals are appropriately linked to the overall organizational
performance goals of the CU.
3. The bonus program is properly disclosed and communicated
to all eligible employees.
4. Bonuses are accurately calculated, reported and paid.

Procedures
1. Obtain written documentation on the bonus program. Review
goals and targets and compare to CU strategic goals. Determine that the
program has been properly reviewed and approved.
2. Document processes and controls involved in tracking, computing
reporting, and paying bonuses.
3. Perform analytical review of CU performance against program targets.
Determine whether or not a bonus should have been paid for each applicable
period.
4. Recalculate expected bonus percentages based on plan documentation.
Obtain confirmation that bonuses paid were accurate based on this calculation.
5. Conclude on the objective.

Yes

Date
Completed

Objective D--Pension (PEP) Plan

Determine that the benefits accrued, earned and paid under the PEP plan are
estimated, calculated, communicated, and paid on an accurate and timely basis.
Also, determine that the records of the trustee accurately reflect the aggregate of
participant asset balances, earnings and transaction activity.
Control Considerations
1. The plan is properly documented and communicated to all employees

Yes

at date of hire, date of eligibility, and at other periods as appropriate or required.

2. Plan information is constantly updated and made available to employees
via the corporate intranet and other delivery methods.
3. Accurate, individual estimates are made available to employees on
a confidential and timely basis.
4. Tools are provided via the corporate internet or other delivery methods to
allow employees to reasonably calculate future estimated plan benefits.
5. All eligible employees are included in the plan on a timely basis.
6. Annual census and payroll information is accurately reported to the plan
actuary.
7. Benefit payments are calculated accurately and paid timely.
8. Balances per the trustee statements are reasonable based on investment
activity, contribution activity, investment gains and losses, and plan expenses.
9. Investment allocations and activity are within the established
investment policy's guidelines.
10. Investment income and unrecognized gains/losses are reasonable.
11. TCU contributions are properly and timely recognized by the trustee.
12. Aggregate participant payout information is accurately reflected in the
trustee's records.
13. Overall plan costs and investment returns are analyzed by management
and/or the appropriate board committee.
14. Pension cost is properly recognized in the financial statements at 12/31.
15. Transition to new providers of investments services and recordkeeping/actuary
services, if any, was done appropriately, timely and accurately.

Procedures
1. Review the plan document. Note key provisions for participation, benefit
determination, vesting and withdrawal. Discuss with HR staff and review pension
committee minutes for any plan changes since the last audit.
2. Determine whether any changes were made to investment managers or
actuaries/recordkeepers during the audit period. Briefly document the research,
selection, approval and communication processes.
3. Review employee policies and communications relating to the PEP plan.
Assess the quality, accuracy and understandability of the information.
4. Document the processes for enrollment and processing terminations.
5. Pull information from the HR system to test new employees and newly
eligible employees for inclusion in the plan. Test accuracy of reported
information against actuary reports.
6. Pull information from the HR system to test for employee terminations.
Review actuary documents and trace to trustee records for evidence
of accurate disbursement directly to credit of the participant.
7. Recompute a sample of benefits paid for accuracy of calculation based
on participant data and plan provisions.
8. Review a sample of individual employee estimates for the last two years.
Verify the amounts and percentages used and recalculate the estimated benefits.
9. Obtain a trustee listing of participant payouts. Trace to evidence
of termination.
10. Obtain trustee statements for the audit period. Schedule activity and review
for reasonableness.
11. Determine cash contributions made by the CU during the audit period. Trace

Date
Completed

to trustee statements and approval by committee or board.

12. Review administrative expenses paid per the trustee statement. Compare to
amounts per TCU financial statements. Determine appropriateness per contract.
13. Obtain annual benefit plan statements from the actuary. Determine that
benefit costs are properly recognized in TCU financial statements.
14. Review management's or the board committee's analysis of the performance
of the actuary and trustee.
15. Trace balances from prior to current providers. Determine that balances
were transferred accurately, timely and at the proper value.
16. Conclude on the objective.
Objective E--401(k) Plan
Determine that employee and company contributions, earnings, loans,
withdrawals and payouts are accounted for accurately and timely.
Also, determine that the records of the trustee accurately reflect the aggregate of
participant asset balances, earnings and transaction activity.
Control Considerations
1. The plan is properly documented and communicated to all employees
at date of hire, date of eligibility, and at other periods as appropriate or required.
2. Plan information is constantly updated and made available to employees
via the corporate intranet, provider website and materials, periodic meetings, etc.
3. Participants receive quarterly statements on a timely basis that accurately
show their investment allocations, balances, activity and contributions.
4. Tools are provided via the internet or other delivery methods to
allow employees to reasonably calculate future estimated benefits.
5. Newly eligible employees receive timely information on their ability to
participate in the plan.
6. Open enrollments periods are maintained in compliance with the plan
document.
7. Periodic enrollment meetings are held to communicate the benefits of the
plan to potential and current participants.
8. Adequate information is provided on investment options to allow employees
to make informed choices as required by regulation.
9. Only licensed representatives provide investment advice to participants.
10. Company matches are calculated and posted accurately and timely.
11. Loans and hardship withdrawals are administered in accordance with the
plan document.
12. Plan terminations are paid accurately and timely.
13. Balances per the trustee statements are reasonable based on investment
activity, contribution activity, investment gains and losses, and plan expenses.
14. Investment allocations are made accurately and timely to participant
accounts.
15. Investment income and unrecognized gains/losses are reasonable.
16. Participant and TCU contributions are properly segregated and allocated.
17. Aggregate participant payout information is accurately reflected in the
trustee's records.
18. Plan costs and contributions are properly recognized in TCU's financial
statements.
19. Overall plan costs and investment returns are analyzed by management

Yes

and/or the appropriate board committee.

20. Transition to new providers of investments services and recordkeeping,
if any, was done appropriately, timely and accurately.

Procedures
1. Review the plan document. Note key provisions for participation, benefit
determination, vesting and withdrawal. Discuss with HR staff and review pension
committee minutes for any plan changes since the last audit.
2. Determine whether any changes were made to investment managers or
recordkeepers during the audit period. Briefly document the research, selection,
approval and communication processes.
3. Review employee policies and communications relating to the 401(k) plan.
Assess the quality, accuracy and understandability of the information.
4. Pull information from the HR system to determine that newly eligible and
eligible non-participants are informed timely of their option to participate.
5. Document the process for processing loans, terminations, and paying benefits.
6. Pull information from the HR system to test for employee terminations.
Trace to trustee records for evidence of accurate disbursement directly to the
credit of the participant.
7. Review loan disbursements. Trace to receipt by the participant.
Determine that loan terms conform to the plan document.
8. Trace payments to canceled checks on a test basis and compare
compare endorsements to signatures on file, if applicable.
9. Obtain trustee statements for the audit period. Schedule activity and review
for reasonableness.
10. Obtain a trustee listing of participant payouts. Trace to loan agreements
or evidence of termination.
11. Determine total contributions made by the CU during the audit period. Trace
to trustee statements.
12. Review administrative expenses paid per the trustee statement. Compare to
amounts per TCU financial statements. Determine appropriateness per contract.
13. Review management's or the board committee's analysis of the performance
of the actuary and trustee and compare to the investment policy standards.
14. Trace balances from prior to current providers. Determine that balances
were transferred accurately, timely and at the proper value.
15. Conclude on the objective.

Date
Completed

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Completed

No

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