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RCC Did Not Maintain RLTAC Employee Contracts and Employment Status Forms on File and Made RLTAC Employee Contract Overpayments Totaling $28,967.

The overpayments totaled $28,967 ($16,945 for fiscal year 2018 and $12,022 for fiscal year 2019) and applied to six RLTAC contract employees.

Table of Contents

Overview

Of the 98 RLTAC employee contracts into which RCC entered during the audit period, we only received 59, totaling $363,162 (43 for fiscal year 2018, totaling $236,626, and 16 for fiscal year 2019, totaling $126,537).6 Although these 59 contracts were renewed on time, RCC could not locate the other 39 (9 for fiscal year 2018 and 30 for fiscal year 2019).

We used the pay rates and hours per week from the RLTAC employee contracts to calculate the annual pay amount for each contract. These contracts had different pay rates and hours per week. The pay rates ranged from $11 to $37 per hour, and the hours per week ranged from 10 to 37.5. Regardless of any limit stated on the contracts, we considered all the amounts that exceeded our calculated annual contract pay amounts as overpayments, because contractors should be paid in accordance with the specific terms and conditions of their contracts. Of the 59 employee contracts received, there were 9 (5 for fiscal year 2018 and 4 for fiscal year 2019) in which the annual amounts RCC paid exceeded those that we calculated. The overpayments totaled $28,967 ($16,945 for fiscal year 2018 and $12,022 for fiscal year 2019) and applied to six RLTAC contract employees.

In addition, RCC’s Human Resources (HR) Office did not always complete and retain the required Employment Status Forms (ESFs) for RLTAC contract employees during the audit period.

A policy titled “Individual Contractors: Contract Employees vs. Independent Contractor” was jointly issued by the Commonwealth’s Operational Services Division, CTR, and the state HR Division in November 2005 and last revised in September 2013. The policy provides guidance to departments to determine whether to hire a contract employee or contract with an independent contractor,7 as well as how to recruit, and execute contracts for, contract employees. The guidance includes the Commonwealth’s three-part test, which is a checklist that departments must use to determine a person’s employment status under state and federal law before procuring contract services. The department must also complete an ESF, which certifies a contractor’s employment status.

The above-mentioned policy states that the burden is on the department to support its employee status classification. Despite this requirement, we determined that none of the 74 RLTAC contract employees in our test had a completed ESF on file that definitively established his/her employment status as a contract employee, not an independent contractor.

Not retaining RLTAC employee contracts may increase the risk of contract employees working without updated contracts or working more hours than their contracts allow, as well as the risk of RCC not complying with the Massachusetts Statewide Records Retention Schedule Quick Guide Schedule Number 06-18, revised December 2018. Furthermore, not monitoring contract payments to ensure that they do not exceed the annual contract payment amounts may result in employees being paid the wrong salary and RCC’s budget being exceeded. Finally, not completing and retaining ESFs may result in the misclassification of contract employees. Because different employment obligations and associated tax obligations apply to each type of contractor, strict rules apply and misclassifications could result in either state or federal penalties.

Authoritative Guidance

Regarding the missing RLTAC employee contracts, the Massachusetts Statewide Records Retention Schedule Quick Guide Schedule Number 06-18, revised December 2018, states that recruitment and hiring records must be retained for three years after the hiring process closes.

Regarding contract overpayments, we inspected the pay rates and hours per week in each contract that we received from RCC.

Finally, the ESF states,

Departments are required to determine the type of work to be performed and whether it qualifies for contract employee or independent contractor status PRIOR TO PROCURING THE SERVICES. Once an individual contractor is hired, this form must be completed and filed with the contract. Pursuant to M.G.L. c. 149, s. 148B, an individual contractor is presumed to be a contract employee unless they meet all factors of the three-factor test. . . . The department must attach any relevant documentation in order to support independent contractor status.

Reasons for Issue

In a memo to OSA, RCC officials explained,

In the current audit there has been documentation that could not be found. These outstanding items include contracts for event staff. . . .

We have been unable to locate contracts for many of the event staff selected for testing for this audit. Many individuals listed are long-term contract staff, with contracts on file for fiscal years prior and after the audit period, but not during the audit period.

Going into [fiscal year] 2019, the College moved to using SharePoint as the application of record for all employee contracts; again, there are contracts that exist in SharePoint for some but not all of the staff selected for testing during [fiscal year] 2019.

RCC officials explained that managers are ultimately responsible for tracking how many hours their employees work; if the hours worked exceed the maximum hours allowed, the manager has to approve the timesheet and provide an explanation for the extra hours worked. RCC officials also explained that because all the RLTAC contract employees were classified as such, rather than as independent contractors, RCC personnel believed they did not have to complete or retain ESFs during the audit period. It was management’s understanding that because the ESF is used to determine whether an individual is an independent contractor, it only needs to be retained for that purpose.

Recommendations

  1. RCC should retain completed and signed contracts for all RLTAC contract employees.
  2. RCC should establish and follow policies and procedures that are specific to contract monitoring biweekly to ensure that employees do not exceed their contract terms in regard to hours and compensation.
  3. RCC should complete and retain ESFs for all contract employees.

Auditee’s Response

The College believes that the missing contracts are in hard copy form somewhere on the campus. Since there was a flood caused by a burst water pipe that affected both the HR office and the Office of Auxiliary Services, it is presumed that there are missing boxes of files for both areas. The audit period overlapped the time when paper contracts were being converted to electronic contracts in SharePoint.

New staff in RCC’s Human Resources Office have been apprised of the need to complete Employment Status Forms for all RLTAC event staff and to retain that form in the individuals’ personnel files. Contracts for all future RLTAC event staff will continue to be maintained in electronic and paper form, according to the Statewide Records Retention Schedule.

Supervisors for RLTAC event staff will be alerted to monitor event staff timesheets to ensure no staff are exceeding their contracted hours.

In a follow-up response, RCC added,

Although the flood . . . and remote work environment (caused by the COVID-19 pandemic) provided us with an opportunity to move many of our paper-based systems online, there were many more negative impacts. The vast majority of college administrators and support staff were working without full access to historical records for the past 3 years. The lack of access to historical records coupled with the challenges presented by the COVID-19 transition to remote work severely affected RCC’s ability to locate the files needed for the RLTAC audit.

Auditor’s Reply

Based on its response, RCC is taking measures to address our concerns on this matter.

6.     The $1 variance in the sum of the fiscal year 2018 and 2019 contract amounts is due to rounding.

7.     A contract employee is an individual who has a continuing relationship established with an employer. The employer has oversight of the individual’s performance, and generally various taxes are withheld from the individual’s pay, which is a regular hourly or weekly wage. An independent contractor is usually self-employed and is engaged to perform a specific project or provide services for a specific period of time. The individual is paid a flat fee for the project or service. 

Date published: October 28, 2021
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