Fair Labor Standards Act Compliance

Key information on Fair Labor Standard Act compliance and employee tracking including exempt vs non exempt employees, difference between employees and independent contractors and issues specifically related to nonprofits.

1. Gerard P. Panaro, Esq.
Of Counsel
Howe Hutton, Ltd.
Avoiding Pitfalls with FLSA Compliance
and Employee Timekeeping
Anna M. Hofmeister, CPA
Partner – Outsourced Services
Tate & Tryon CPAs and Consultants
May 9, 2012

2. Agenda
9:00– 10:15 am: Gerard P. Panaro, Esq., Of Counsel, Howe & Hutton
Overview of FLSA Requirements
Understanding Exempt vs Non-exempt employee classifications
The difference between employees and independent contractors
Common FLSA compliance issues for nonprofits

10:15– 10:25 am: Break
10:25– 11:20 am: Anna Hofmeister, CPA, Partner, Tate & Tryon
Best Practices in time and record keeping

Best practices in producing meaningful and accurate personnel cost information
11:20 pm–11:30 am: Questions?

3. Fair Labor Standards Act:
Classes of exempt employees:
There are eight categories:
1.Executives (those who manage the business,
supervise 2 or more people)
2.Administrators (those who exercise independent
judgment and discretion on matters of importance
and who work in a line of the business (e.g., finance,
facilities management, food service, etc.))
3.Professionals (e.g., in-house counsel, CPA, doctor
(but not bookkeepers; not nurses (generally)))
4.Computer programmers (two exemptions: 1) paid at
least $455/wk or 2) paid at least $27.63/hr (the
equivalent of about $57,500 a year))
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

4. Fair Labor Standards Act:
Classes of exempt employees:
There are eight categories (cont’d):
5.“Creative” or artistic people (but not necessarily
graphics people or copyeditors or proofreaders)
6.“Highly compensated” employees (those who do
work such as the foregoing, but make at least
$100,000 a year)
7.Teachers or instructional employees
8.Athletic coaches
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

5. Criteria for exemption as an executive
employee:
1.Compensated on a salary basis at a rate of not less
than $455 per week
2.Whose primary duty is management of the enterprise in
which the employee is employed or of a customarily
recognized department or subdivision thereof;
3.Who customarily and regularly directs the work of two
or more other employees; and
4.Who has the authority to hire or fire other employees or
whose suggestions and recommendations as to the
hiring, firing, advancement, promotion or any other
change of status of other employees are given
particular weight.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

6. Criteria for exemption as an administrative
employee
1.Compensated on a salary or fee basis at a rate of not
less than $455 per week
2.Whose primary duty is the performance of office or
non-manual work directly related to the management or
general business operations of the employer or the
employer's customers; and
3.Whose primary duty includes the exercise of discretion
and independent judgment with respect to matters of
significance to the business. This means acting with
minimal supervision and being able to commit the
organization.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

7. Exercise of discretion and independent
judgment:
In general, the exercise of discretion and independent
judgment involves:
1.The comparison and the evaluation of possible courses of
conduct, and
2.Acting or making a decision after the various possibilities
have been considered
3.The exercise of discretion and independent judgment implies that the employee has authority to make an independent choice, free from immediate direction or supervision.

“Matters of significance”
refers to the level of importance or
consequence of the work performed.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

8. In evaluating whether the requisite discretion and independent
judgment exists, the following job duties should be
considered:
[01.] Whether the employee has authority to formulate,
affect, interpret, or implement management policies
or operating practices;
[02.] Whether the employee carries out major
assignments in conducting the operations of the
business;
[03.] Whether the employee performs work that affects
business operations to a substantial degree, even if
the employee’s assignments are related to operation
of a particular segment of the business;
[04.] Whether the employee has authority to commit the
employer in matters that have significant financial
impact;
[05.] Whether the employee has authority to waive or
deviate from established policies and procedures
without prior approval;
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

9. In evaluating whether the requisite discretion and independent
judgment exists, the following job duties should be
considered:
[06.] Whether the employee has authority to negotiate and
bind the company on significant matters;
[07.] Whether the employee provides consultation or
expert advice to management;
[08.] Whether the employee is involved in planning long
or short-term business objectives;
[09.] Whether the employee investigates and resolves
matters of significance on behalf of management;
and
[10.] Whether the employee represents the company in
handling complaints, arbitrating disputes or
resolving grievances.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

10. What “discretion and independent judgment”
does not mean:
Must be more than the use of skill in applying well-
established techniques, procedures or specific
standards described in manuals or other sources.
Does not include clerical or secretarial work,
recording or tabulating data, or performing other
mechanical, repetitive, recurrent or routine work.

An employee who simply tabulates data is not exempt, even if labeled as a “statistician.”

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

11. What “discretion and independent
judgment” does not mean:
“Matters of significance” do not mean merely that
the employer will experience financial losses if the employee fails to perform the job properly.
Employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance

merely because improper performance of the employee's duties may cause serious financial loss to the employer.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

12. Examples of exempt/nonexempt administrative
jobs
Clerical duties are nonexempt:
Data entry for accounts payable and accounts receivable;
Modifying account names/attributes in accounting
software;
Word processing;
Sending notices;
Receptionist duties;
Ordering routine office supplies
(DOL Field Operations Handbook).
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

13. Meeting planner/Events coordinator is exempt
administrative position

There is no question that a meetings planner or events coordinator meets the criteria for exempt administrative status. According to the DOL Field Operations Handbook (Rev. 661, revised 11/29/2010), managers of convention and visitors service sales are exempt

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

14. Criteria for exemption as a professional
employee:
1.Compensated on a salary or fee basis at a rate of not
less than $455 per week
2.Whose primary duty is the performance of work:
a.Requiring knowledge of an advanced type in a field
of science or learning customarily acquired by a
prolonged course of specialized intellectual
instruction; or
b.
Requiring invention, imagination, originality or
talent in a recognized field of artistic or creative
endeavor.



Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

15. Criteria for exemption as a computer employee
1.Computer systems analysts, computer
programmers, software engineers or other similarly
skilled workers in the computer field
2.Compensated on a salary or fee basis at a rate of
not less than $455 per week or
3.
Compensated on an hourly basis at a rate not less than $27.63 an hour

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

16. Criteria for exemption as a computer employee
4.Primary duty consists of:
a.The application of systems analysis techniques and
procedures, including consulting with users, to determine
hardware, software or system functional specifications;
b.The design, development, documentation, analysis,
creation, testing or modification of computer systems or
programs, including prototypes, based on and related to
user or system design specifications;
c.The design, documentation, testing, creation or
modification of computer programs related to machine
operating systems; or
d.A combination of the aforementioned duties, the
performance of which requires the same level of skills.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

17. Computer network, internet and database
administration is an example of work “directly
related to management or general business
operations” and will therefore qualify as an exempt
administrative position
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

18. On the other hand, “information technology (IT)
support specialists” is not an exempt position, as far
as the DOL is concerned.
According to the DOL Field Operations Handbook:

An IT Support Specialist (renamed from Help Desk Support Specialist) who is responsible for the diagnosis of computer-related problems,
conducts problem analysis and research, troubleshoots, resolves complex problems either in person or by using remote control software, and ensures timely closeout of trouble tickets is not exempt as an administrative or professional employee.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

19. Case Study
Heffelfinger v. Electronic Data Systems Corp., 580 F.Supp.2d 933
(C.D.Cal., 2008)
Held: Information technology workers were exempt employees
Nature of work:
The information technology workers worked at different customer locations
and were charged with writing code, programming, and administering
databases or networks
Workers did more than “only installing and troubleshooting computer
systems.” One employee was responsible for the design and integrity of
database structures for a customer
Employee suggested various architectures and presented representations
of network design which the customer accepted upon the employee's
recommendations approximately 50 percent of the time
Second employee served as a technical team lead for a project which was
highly visible, important, and critical to the customer's business operations.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

20. Criteria for exemption as highly compensated
employee
An employee with total annual compensation of at
least $100,000 is deemed exempt if the employee
customarily and regularly performs any one or more
of the exempt duties or responsibilities of an
executive, administrative or professional employee
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

21. Employee vs. Independent contractor
FLSA uses an “economic reality” test.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

22. Factors to be considered:
1.The degree of control exercised by the employer
over the workers
2.The workers' opportunity for profit or loss and their
investment in the business
3.The degree of skill and independent initiative
required to perform the work
4.e permanence or duration of the working
relationship
5.
The extent to which the work is an integral part of the employer's business

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

23. Factors to be considered (cont’d):
6.No one factor standing alone is dispositive and
courts are directed to look at the totality of the
circumstances and consider any relevant
evidence.”
7.
“[T]he final and determinative question must be whether the total[ity] of the [circumstances
considered] establishes the personnel are so
dependent upon the business with which they are
connected that they come within the protection of the FLSA or are sufficiently independent to lie outside its ambit.”
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

24. Opportunity for profit/loss. The appropriate inquiry has to do
with relative investments, with control over larger aspects of
the business, and with like forms of initiative.
Degree of skill/initiative. Does work require extensive skill,
training, and expertise?
Permanence /duration of relationship. The more permanent
the relationship, the more likely it is that a court will find a worker to be an employee.
Work integral part of business. Focus is on the work, not the
individual person’s role. Courts consider this factor because
independent contractor relationships often involve work that is
not integral to the business—for example, if a pipe bursts and
a plumber is hired to fix it, the plumber would typically be an
independent contractor
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

25. Interns and the FLSA
The Test For Unpaid Interns:
1.The internship, even though it includes actual operation of the
facilities of the employer, is similar to training which would be
given in an educational environment;
2.The internship experience is for the benefit of the intern;
3.The intern does not displace regular employees, but works
under close supervision of existing staff;
4.The employer that provides the training derives no immediate
advantage from the activities of the intern; and on occasion
its operations may actually be impeded;
5.The intern is not necessarily entitled to a job at the conclusion
of the internship; and
6.
The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

26. Additional explanation: factors for/against
intern status (1)
1.
In general, the more an internship program is structured around a classroom or academic
experience as opposed to the employer’s actual
operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

27. Additional explanation: factors for/against
intern status (1)
2.
The more the internship provides the individual with skills that can be used in multiple employment
settings, as opposed to skills particular to one
employer’s operation, the more likely the intern would be viewed as receiving training.
3.Under these circumstances the intern does not
perform the routine work of the business on a
regular and recurring basis, and the business is not dependent upon the work of the intern.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

28. Additional explanation: factors for/against
intern status (2)
4.
On the other hand, if the interns are engaged in the
operations of the employer or are performing productive
work (for example, filing, performing other clerical work,
or assisting customers), then the fact that they may be
receiving some benefits in the form of a new skill or
improved work habits will not exclude them from the
FLSA’s minimum wage and overtime requirements
because the employer benefits from the interns’ work.
5.If an employer uses interns as substitutes for regular
workers or to augment its existing workforce during
specific time periods, these interns should be paid at least the minimum wage and overtime compensation for
hours worked over forty in a workweek.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

29. Additional explanation: factors for/against
intern status (3)
6.
If the employer would have hired additional
employees or required existing staff to work
additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled compensation under the FLSA.
7.Conversely, if the employer is providing job
shadowing opportunities that allow an intern to
learn certain functions under the close and
constant supervision of regular employees, but the
intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

30. Additional explanation: factors for/against
intern status (3)
8.
On the other hand, if the intern receives the same
level of supervision as the employer’s regular
workforce, this would suggest an employment relationship, rather than training.
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

31. WHD Advisory Opinion Letter on Volunteers
9.The internship should be of a fixed duration,
established prior to the outset of the internship.
10.Further, unpaid internships generally should not be
used by the employer as a trial period for
individuals seeking employment at the conclusion
of the internship period.
11.If an intern is placed with the employer for a trial period with the expectation that he or she will then
be hired on a permanent basis, that individual
generally would be considered an employee under the FLSA.
U.S. Department of Labor/Wage and Hour Division (April 2012)
Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

32. WHD Advisory Opinion Letter On Volunteers
1.Person is volunteer provided the services are not the
same type of service the employee is employed to
perform and take place outside of the employee’s
normal working hours.
2.The FLSA recognizes the generosity and public benefits
of volunteering and allows individuals to freely
volunteer time to religious, charitable, civic,
humanitarian, or similar non-profit organizations as a
public service.
3.Such a person will ordinarily not be considered an
employee for FLSA purposes if the individual volunteers
for such organizations without contemplation or receipt
of compensation.

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

33. WHD Advisory Opinion Letter On Volunteers
4.Paid employees may not volunteer to perform the same
type of services for their employer that they are
normally employed to perform.
5.
The employee must also be a bona fide volunteer who
performs the services for civic, charitable, or
humanitarian reasons without coercion or undue
pressure.



Source: FLSA2006-18 ( June 2, 2006)

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

34. Stipends for volunteers:
1.A “volunteer” may receive “no compensation,” but may be paid
“expenses, reasonable benefits, or a nominal fee.”
2.A fee would not be considered nominal if it is, in fact, a substitute for
compensation or tied to productivity.
3.Generally, a key factor in determining if a payment is a “substitute
for compensation” or “tied to productivity” is “whether the amount
of the fee varies as the particular individual spends more or less time
engaged in the volunteer activities.”
4.If the amount varies, it may be indicative of a substitute for
compensation or tied to productivity and therefore not nominal.
5.Generally an amount not to exceed 20 percent of the total
compensation that the employer would pay someone for performing
comparable services would be deemed nominal.
Source:http:// www.dol.gov/whd/opinion/FLSA/2008/2008_12_18_16_FLSA.pdf


Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

35. Common FLSA compliance issues for nonprofits
Misclassification of employees as exempt
Misclassification of workers as independent
contractors
Misclassification of workers as “interns” or
“volunteers”
Use of “comp time”
Improper timekeeping; accounting for overtime
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

36. Recordkeeping requirements for nonexempt
employees (1):
1.Name
2.Home address, including zip code
3.Date of birth, if under 19
4.Sex and occupation in which employed
5.Time of day and day of week on which the employee's
workweek begins
6.Regular hourly rate of pay for any workweek in which
overtime compensation is due
7.Explain basis of pay by indicating the monetary amount paid
on a per hour, per day, per week, per piece, commission on
sales, or other basis
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

37. Recordkeeping requirements for nonexempt
employees (2):
8.The amount and nature of each payment which is excluded
from the “regular rate”
9.Hours worked each workday and total hours worked each
workweek
10.Total daily or weekly straight-time earnings or wages due for
hours worked during the workday or workweek, exclusive of
premium overtime compensation
11.Total premium pay for overtime hours
12.Total additions to or deductions from wages paid each pay
period including employee purchase orders or wage
assignments
13.The dates, amounts, and nature of the items which make up
the total additions and deductions
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

38. 14.Total wages paid each pay period
15.Date of payment and the pay period covered by payment
16.Record and preserve, as an entry on the pay records, the
amount of retroactive payment of wages/compensation paid
under supervision of WHD to each employee, the period
covered by such payment, and the date of payment
17.Prepare a report of each such payment
18.Preserve a copy as part of the records
19.Deliver a copy to the employee
20.File the original with the WHD within 10 days
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]
Recordkeeping requirements for nonexempt
employees (3):

39. Recordkeeping requirements for nonexempt
employees (4):
21.With respect to employees working on fixed schedules, an
employer may maintain records showing instead of the hours
worked each day and each workweek, the schedule of daily
and weekly hours the employee normally works
22.In weeks in which an employee adheres to this schedule,
indicates by check mark, statement or other method that such
hours were in fact actually worked by him
23.In weeks in which more or less than the scheduled hours are
worked, shows that exact number of hours worked each day
and each week

Source: 29 CFR §516.2

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

40. Recordkeeping requirements for exempt
employees (1):
1.Name
2.Home address, including zip code
3.Date of birth, if under 19
4.Sex and occupation in which employed
5.Time of day and day of week on which the employee's workweek
begins
6.Total wages paid each pay period
7.Date of payment and the pay period covered by payment
8.The basis on which wages are paid in sufficient detail to permit
calculation for each pay period of the employee's total
remuneration for employment including fringe benefits and
prerequisites
Source: 29 CFR §516.3
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

41. Records to be kept for three years:
Payroll records.
Certificates, agreements, plans, notices, etc.
(collective bargaining agreements, plans, trusts,
employment contracts, individual contracts, written
agreements or memoranda summarizing the terms
of oral agreements or understandings,
Sales and purchase records.

Source: 29 CFR §516.5
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

42. Records to be kept for two years:
Basic employment and earnings records. All basic
time and earning cards or sheets
Wage rate tables
Order, shipping, and billing records

Source: 29 CFR § 516.6

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

43. Where records show insubstantial or
insignificant periods of time
1.
In recording working time under the Act, insubstantial or
insignificant periods of time beyond the scheduled working
hours, which cannot as a practical administrative matter be
precisely recorded for payroll purposes, may be disregarded
2.This rule applies only where there are uncertain and indefinite
periods of time involved of a few seconds or minutes
duration, and where the failure to count such time is due to
considerations justified by industrial realities
3.An employer may not arbitrarily fail to count as hours worked
any part, however small, of the employee's fixed or regular working time or practically ascertainable period of time
he is
regularly required to spend on duties assigned to him
4.10 minutes a day is not de minimis
Source: 29 CFR §785.47
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

44. Use of time clocks (1)
Time clocks are not required
Employees who voluntarily come in before their regular
starting time or remain after their closing time, do not
have to be paid for such periods provided, of course,
that they do not engage in any work.
Their early or late clock punching may be disregarded
Minor differences between the clock records and actual
hours worked cannot ordinarily be avoided, but major
discrepancies should be discouraged since they raise
a doubt as to the accuracy of the records of the hours
actually worked
Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

45. Use of time clocks (2)
1.“Rounding” practices. There has been the practice
for many years of recording the employees' starting
time and stopping time to the nearest 5 minutes, or
to the nearest one- tenth or quarter of an hour
2.For enforcement purposes this practice of
computing working time will be accepted
3.But it must not result, over a period of time, in
failure to compensate the employees properly for
all the time they have actually worked
Source: 29 CFR §785.48

Gerard P. Panaro Howe Hutton 1901 Pa Av NW DC 20006 301-518-9267 (cell) 202-466-7252 x 102 (o) [email protected]

46. Speaker Biography
Gerard P. Panaro, Esq. is of counsel to Howe &
Hutton, Ltd. in its Washington, D.C. office. He has
over 30 years of experience in the practice of
employment law and representation of nonprofit
organizations in the District of Columbia and Maryland.

Jerry advises tax-exempt organizations and small
businesses and negotiates on their behalf on matters
related to employment, corporate and tax matters,
antitrust and administrative law. He is the author of
Employment Law Manual (1998), and writes a
newsletter on employment law for Aspen/Panel Press.
He also does writing, training and seminars on
employment law matters for clients and has done
webinars for BankersonLine.com.



Gerard P. Panaro, Esq.
Of Counsel
Howe Hutton, Ltd.
Washington DC - Chicago IL
- St. Louis MO

Mobile: [phone]
Office: 202-466 -7252 x 102
E-mail: [email protected]
www.howehutton.com

47. Overview:
Accounting requirements
Reliable financial information
Effective & efficient internal controls
Grant requirements
What to look for in timekeeping & payroll
systems

48. Accounting Requirements
Reasonable
Consistent
Timesheets
Estimates

49. Reliable Financial Information
Labor is often the largest expenditure
Daily time recording
Signed by the employees and approved by their
supervisors
Payroll recorded based on timesheets
Benefits recorded based on personnel

Well documented and communicated procedures

50. Effective Internal Control
Following should occur and have confidence of
staff that it is in operation:
Time is tracked accurately
Transactions are authorized and approved
Segregate the timekeeping, payroll preparation,
payroll approval, and payment functions
Information is properly and promptly retained

Applicable risks are weighed to ensure errors
and omissions are minimized

51. Effective Internal Control (continued)

Meet needs of users
Monitor the results/outputs for accuracy
Clearly written and communicated policies and
procedures setting forth responsibilities

Applying available technology and concepts to achieve efficiency and effectiveness

52. Grant Requirements

Acceptance of grant creates legal obligation
OMB Circulars
Grant agreement

53. Grant Requirements (continued)
Overview
Segregate federal grant/contract program costs
Support all payroll and fringe benefit costs
Consistent application
Ensure no expenses claimed were misused
Administrative or financial capability to manage
grant/contract funds

Awareness to document labor expenditures

54. Grant Requirements (continued)
Personnel Activity Reports:
Must reflect after-the-fact determination of true activity
Must account for total activity for which employee is
compensated
Must be signed by the employee and responsible
supervisor
Approvals must be visual with an audit trail
Must be prepared daily and coincide with one or more
pay periods
Must reconcile to dollars charged to grant/contract

55. Grant Requirements (continued)
When Audited
Substantiate federal grant/contract expenditures.
Appropriate timekeeping procedures are in place
Procedures are documented
Appropriate accounting and payroll tracking system in
accordance with government agency directives are in
place

56. Efficient Internal Control

Weigh cost vs. benefit of processes and details
required
Integrated timesheet, payroll and accounting
systems
Reminders
Programmed approval process

57. What to Look for in a Tracking System
Compliance with applicable legal requirements
Compliance with grant requirements
Reliable financial information
Be effective
Be efficient

58. What to Look for in a Tracking System (cont.)
Multiple approvers
Lock out codes
Deactivate codes
Adjust rates based on hours worked
Export capabilities
Syncing to other systems

59. What to Look for in a Tracking System (cont.)
Remote access
Reminders
Reports
Back- ups

60. Questions?

61. Speaker Biography
Anna. M. Hofmeister, CPA is the partner in charge of
Tate and Tryon’s Outsourced Accounting Services
department and has more than 20 years of experience
servicing the accounting, consulting, audit, and tax needs
of the nonprofit industry. She is responsible for
overseeing all phases of our outsourced accounting
engagements.

In her role as an interim or permanent CFO, Ms.
Hofmeister frequently presents to finance committees and
boards of directors on topics such as financial results, key
performance indicators, improving financial performance,
cash flow projections, cost allocations, U.S. and foreign
operations and unrelated business income. Some of the
most notable clients she oversees include the Alexander
Graham Bell Association for the Deaf and Hard of
Hearing, American Association of Poison Control Centers,
Global Health Council, and National Court Reporters
Association.

Anna M. Hofmeister, CPA
Partner - Outsourced Services
Tate & Tryon CPAs and
Consultants
Direct: 202-419-5103
E-mail:
[email protected]
www.tatetryon.com