September 2017 - CAR Newsletter

Newsletter Archive | Statewide Accounting Manual | Forms | State Comptroller


October Columbus Day Federal Holiday

In planning your work for October, it is important to remember that Columbus Day is Monday, Oct. 8. Although not a state holiday, Columbus Day is a federal/bank holiday. As a reminder, all payrolls and documents must be received five (5) business days prior to the actual pay date to ensure adequate time for audit and processing. Adherence to this policy will ensure payrolls are processed to pay timely.

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Pathfinder Retirement Plan Coverage Begin Date

New or rehired employees eligible for the Pathfinder retirement plan should have a Coverage Begin Date starting the first day of the month following the month of employment. For example, an employee was hired/rehired Aug. 21, 2017. In the HCM system, when entering the Savings Plan Election, the Coverage Begin Date should be entered as Sept. 1, 2017. For additional information, please refer to the Oklahoma Administrative Code for additional information. 

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Compensation to Employees and Former Employees, Including Settlements

All compensation to employees and former employees, no matter what form, constitutes wages unless specifically excluded by the Internal Revenue Code. This includes stipends, allowances, employee lawsuits and settlements, gifts, prizes, awards and fringe benefits to name just a few. Before compensation is given to employees or former employees, agencies must determine the correct method of payment (payroll vs accounts payable) and reporting required (W-2, 1099, or none). In an audit, the Internal Revenue Service will focus on the reason for the payment.

If the payment settles a lawsuit, the auditor will focus on the basis of the lawsuit. The IRS has a recorded webinar that provides valuable information for the taxability of lawsuits and settlements. Agency payroll, finance, human resources and legal departments should obtain the knowledge needed to accurately process compensation to employees or former employees. Agencies are responsible for complying with IRS requirements for withholding and reporting.

If an agency has a settlement agreement that requires the payment be processed through accounts payable instead of the payroll system to expedite processing, and the payment is reportable as compensation, then applicable federal, state and FICA taxes must be remitted to OMES on the same day the item is processed/provided to the individual. If taxes are not withheld on the payment, the agency must gross up the amount and pay both the employee and employer share of taxes. The employee’s record will be updated for year-end reporting. If additional guidance is needed, please contact Lisa Raihl at 405-521-3258 or

NOTE: The Internal Revenue Service has determined that Oklahoma public school teachers receiving payments from a state agency are to be treated as employees of the state. As such, any payments to teachers need to be evaluated to see if the payments should be considered wages. If so, the amounts must be paid through the payroll system, not accounts payable, to be reported on Form W-2 by the paying agency.

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SoonerSave Contributions and Eligible Compensation

As a reminder to agencies, certain types of earnings are eligible for deferral to SoonerSave while others are not considered eligible compensation.

Annual leave payout is generally eligible for SoonerSave deferral on termination of employment.  However, payments on severance from employment do not qualify as compensation for SoonerSave deferrals.  Therefore, payments under voluntary buyouts (VOBO) and reductions in force (RIF) would be excluded from deferral consideration.

Only compensation from an agency that is attributable to services performed for the agency may be considered as earnings from which SoonerSave deferrals can be taken.  This would include regular pay, overtime, shift differential and other similar payments based on employment.  If an amount would have been paid had the employment continued, such as annual leave, then deferrals can be taken.  

Please advise employees that changes in deferral amounts must be submitted to the SoonerSave Administrator and approved before processing through payroll.  For additional information, agency personnel should contact their SoonerSave Coordinator or the SoonerSave Administrative office at 1-800-733-9008 or 405-858-6781.

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Taxable Fringe Benefits

As we approach the end of the calendar year, be reminded that the payroll system has been structured to accommodate the reporting of non-cash, taxable fringe benefits. Of specific concern to state employees, the following benefits should be reviewed to determine if W-2 wage adjustments are necessary:

  • Group Term Life Insurance
  • Employee Use of State Vehicles
  • Maintenance, Car and Housing Allowances
  • Additional non-cash benefits

Reporting of these benefits is required by state and federal law, and it is the responsibility of the individual agency to ensure compliance. If the item is not run through the payroll system in the current year, the employer can deduct the taxes associated with the wage item on a following paycheck in the next year as a miscellaneous deduction.  The state is responsible for timely depositing the taxes. Any taxes associated with items not run through the payroll system will need to be sent to OMES in a timely manner so the tax deposits can be made and the items posted to the employee’s earnings record.

Under IRS rules, an employer can choose to pay the employee’s share of taxes on group term life, auto fringe, and other non-cash benefits. If the employer pays these taxes without deducting them from the individual, those taxes must be included as wages for federal, state, social security and Medicare wages (boxes 1, 3, 5, and 16). This increase in the employee’s wages is also subject to employee social security and Medicare taxes. This again increases the amount of additional taxes the employer must pay.

Example: Tom received a non-cash benefit valued at $100.00. The agency decides to pay the employee’s taxes on all non-cash benefits. The employee’s taxes would be $7.65 [(100 x 6.2%) + (100 x 1.45%)]. This amount that the employer is paying for the employee is another benefit to the employee and must be taxed [(7.65 x 6.2%) + (7.65 x 1.45%)] = $0.58. This additional $0.58 is again taxable to the employee [(0.58 x 6.2%) + (0.58 x 1.45%)] = $0.05. Total taxes to the employee are $8.28, for total wages of $108.28. An easier way to calculate, is to “gross up” the benefit.  Divide the benefit amount by 92.35% (100% - 6.2% - 1.45%) to get the gross wages to report. From this amount, the Social Security and Medicare taxes are calculated. 100.00/92.35% = $108.28 (the taxable wage amount). [(108.28 x 6.2%) + (105.28 x 1.45%)] = $8.28 (taxes).

Please refer to the W-2 instructions and Publication 15A, Employer’s Supplemental Tax Guide for additional information if needed. Also, please refer to OMES Human Capital Management Division rules to determine whether these payments are a valid pay plan for a particular agency.

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Employee Overpayments Collected After Year End

Employee overpayments that are collected in the next calendar year are to be repaid at the gross overpayment amount in accordance with Internal Revenue Service regulations. If an employee owes the agency, please be certain to let the employee know if the amount is not paid in full by Dec. 31, 2017, the amount they owe will increase to the gross amount.

In accordance with 74 O.S. § 840-2.19, the agency must send a notice to the employee within 10 days of identifying an overpayment.  The employee then has 30 days to respond to this notification.  Employees have several options for repaying overpaid payroll amounts:

  • reduction of annual leave (for the gross overpaid),
  • reduction of current gross salary (for the gross overpaid) in a lump sum or installments over a term not to exceed the term in which the overpayment(s) occurred,
  • lump-sum cash repayment,
  • miscellaneous payroll deduction (for the net overpaid) in a lump sum or installments over a term not to exceed the term in which the overpayment(s) occurred,
  • any combination of the above options.

With the calendar year end nearing, the collection of any outstanding overpayments is especially important and must be conveyed to employees who owe any monies back to the agency. When an overpayment is paid back in a subsequent year, IRS rules state that the employee must pay back at the gross amount because they had use of the funds in the prior year and as such, they are taxable to that year. Additionally, federal and state wages and taxes cannot be reduced for prior years when repayments are made after the end of that calendar year.

For example, John Doe was overpaid in August by $1,000.00 regular wages. This was discovered in September and the agency calculated what the correct payroll should have been. The net check difference is $743.50; the amount the employee owes the agency if making the reimbursement by personal check or miscellaneous deduction in the current year. If the employee does not reimburse the net amount by Dec. 31, 2017, the employee owes the agency the full $1,000.00 gross overpayment.

If the employee reimburses the entire gross amount after year end, the applicable W-2, Corrected W-2, or W-2C will only reflect a change in the Social Security and Medicare wages and taxes. Since the employee received and had use of the funds during the year of overpayment, the amount is still taxable for federal and state purposes. The W-2 form will not correct federal or state taxable wages or income taxes. The employee may be entitled to either a deduction or credit on their current year Form 1040, and should be advised to speak to their tax accountant.

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Reduction of Annual Leave Hours for Overpayments

When an employee chooses to pay back an overpayment using annual leave, the amount of annual leave reduced should equal the gross amount of overpayment. In the past there have been instances where agencies have incorrectly reduced the annual leave by the net amount of the overpayment.

If an employee reimburses an overpayment using terminal leave, an OMES Form 94P must be submitted to correct the retirement amounts reported on the check that included the overpayment. Terminal leave is not included in retirement wage calculations; therefore, a payroll earnings adjustment is required.

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Federal Tax Payment Notifications And Deadlines – Higher Ed Payrolls

Federal tax deposits must be released by the State Treasurer’s office no later than the day prior to the effective date of the payment.  The deadline for notifying OMES to release a federal tax deposit for the following day is 10 a.m. the day prior to the release date.  Submissions received after the 10 am deadline will miss being released to the IRS timely and may result in late deposit penalties for untimely payments for which the institutions would be responsible.  The timing of the notification to OMES is critical to allow for the timely release of funds to the IRS.  Some institutions are failing to comply with the established deadlines.  The process was established and communicated to the agencies prior to the change in payroll processing which took place Jan. 1, 2016.    

The training provided to all institutions on Nov. 3, 2015 included specific instructions on the manner and timing of payroll tax deposits.  That presentation can be found in the Financial Module News under the Business Application Services link of OMES,  Significant steps and times in the process include:

  1. Calculate the tax deposit.
  2. Enter payment into ACES with appropriate data including the effective date.
  3. Enter  and save a journal entry into PeopleSoft with complete and appropriate chartfields using the current date as the journal date.
  4. Send e-mail to DCAR Accounting to be received by 10:00 am – OMES will check all e-mails received by this time to include in that day’s processing.  E-mails received by OMES after that time will not be picked up for the current day processing.
  5. Be sure the e-mail includes the agency number, journal entry number, contacts and screen shot of ACES payment.
  6. OMES will check the journal entries for accuracy, log the request for tracking, edit and post the entry before forwarding the transaction to OST for processing by 10:45 a.m.
  7. OST will verify that the ACES entry agrees with amounts submitted by OMES and release the payments.
  8. Between 1 and 2 pm the agency should log in to the ACES system to make sure that the payment has been released.
  9. Notify OMES as soon as possible if a tax deposit was not released in accordance with these procedures.

Step 7 is necessary to ensure that communications were received and payments were released.  This will help mitigate the risk that the initial e-mail did not get delivered timely or was held up by filtering programs looking for spam e-mail.

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TBD Vouchers

In 2009 a change was made preventing an online voucher from saving when an invalid expenditure account is on the voucher. If an invalid account is copied from a purchase order, the error message will include “Vouchers with TBD overwritten will be deleted.” A voucher with a TBD account that is overwritten on the voucher distribution line after it has been copied from the PO will save because the change verifies the validity of the account number, but it does not recognize that the expenditure will budget check as a direct expenditure and will not liquidate an encumbrance. Please make the payers are aware of this change and ask them to be attentive to the error messages.  The TBD must be changed on the PO before a voucher is created. If left as TBD, the vouchers will be deleted upon receipt when the TBD Voucher query runs (twice daily). Contact if assistance is needed.

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Replacement Warrants – OMES Form 20R

There continues to be some confusion with the replacement warrant process. We have updated the OMES Form 20R and prepared an OMES FORM 20R GUIDE for users to have as reference in preparing and submitting the replacement requests.  The revised 20R and the Guide will soon be added to the CAR Forms list once the formats are web approved.

To assist in proper use of the Form 20R, please recycle any older paper copies of the 20R form and remove any digital copies from agency computers. Please click here and save as a bookmark for easy access to the latest 20R form. This will also be where the guide will be placed.

Updated form features include:

  • Additional spacing for information
  • Streamlined notary section
  • Updated replacement information
  • Form submission and contact information

For assistance with completing the new form or question concerning the guide, email

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Audit Report Deadline – Pensions/Component Units/College & Universities

All pension trusts, colleges and universities, and other component units (with a fiscal year of June 30) should be working with their auditors to complete financial statements. The deadline for submitting these, and any necessary financial reporting packages, to the OMES Financial Reporting Unit is Oct. 31. Failure to complete these statements in a timely manner jeopardizes the State’s ability to complete the audit of the CAFR in time to meet disclosure requirements set forth by bond issuers and the GFOA. A potential risk of missing the deadline includes a downgraded bond rating for the State.  All component units are expected to ensure their auditors are aware of the deadline and complete their final reports in time for you to provide it to OMES no later than Oct. 31.

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Financial Reporting - Related Party Transactions

Related party transactions are transactions conducted with other parties with which an agency or a key decision-maker in the agency has a close association. Many related party transactions occur in the normal course of business.  Generally Accepted Accounting Principles require the disclosure of material related party transactions. 

There are many types of transactions that can be conducted between related parties, such as sales, asset transfers, leases, lending arrangements, guarantees, allocations of common costs, etc. Because of this, all state agencies must have internal controls in place to identify any related party relationships and monitor all related party transactions to be able to account for and properly disclose related party activity. 

The disclosures for the agency financial statements (if applicable) and the Statewide CAFR should include:

  • General. Disclosure of all material related party transactions of the agency, including the nature of the relationship, the nature of the transactions, the dollar amounts of the transactions, the amounts due to or from related parties and the settlement terms.
  • Control relationship. Disclosure of the nature of any control relationship where the agency and other entities/individuals are under common management control, and this control could yield results different from what would be the case if the other entities were not under similar control, even if there are no transactions between the businesses.
  • Receivables. Separate disclosure of any receivables from board members, management, employees, or affiliated entities.

For several years, many state agencies relied on the Statement of Financial Interests form that was required and collected by the Ethics Commission to assist in analyzing related party relationships.  However, due to recent changes, the Ethics Commission no longer requires the completion of this form by any person other than elected officials.  Therefore, each agency should have controls in place to detect related party relationships, collect the necessary information, and make the proper disclosures. There are various ways that this can be done.  For example, your agency could create a form similar to the Statement of Financial Interests form to collect and evaluate the necessary information.  Your agency could also create an affidavit type form where each employee would attest they do or do not have any related party relationships with the agency and provide any additional information as necessary.  The method for collecting and analyzing the information is a management decision and may vary by agency.

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Volume 28, Number 3
Fiscal Year-2018
September 11, 2017

In This Issue ...


2017 Oklahoma Payroll Conference

Presented by the Oklahoma City and Northeastern Oklahoma Chapters of the American Payroll Association 

Friday, Sept. 15, 2017

Northeastern State University
3100 New Orleans Street
Broken Arrow, OK 74014

For more information please visit their website.

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OKFMA Quarterly Meeting

Mark your calendars for the next Oklahoma Financial Managers Association quarterly meeting on Thursday, Sept. 21, 2017.   In an effort to cut down costs and continue providing these seminars free of charge we are asking all participants to print their own copies of available documents from the website.  To ensure that an adequate number of refreshments are available, please register at:

Date:   Sept. 21, 2017
Time:   1:30 - 4 p.m.
Place:   Business Conf. Center Auditorium
MetroTech Springlake Campus
1900 Springlake Drive
Oklahoma City, OK  73111

Click here for the agenda.

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The Complete Guide to Payroll Taxes and 1099 Issues

Presented by the Oklahoma Society of Certified Public Accountants (OSCPA)

Friday, Sept. 29, 2017 – Oklahoma City

For more information, please visit: OSCPA website

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OKC American Payroll Association Monthly Lunch & Learn Chapter Meetings

OKC American Payroll Association
Monthly Lunch & Learn Chapter Meetings

Payroll Thunderdome
Thursday Oct. 19, 2017
11:30 a.m. - 1 p.m.

For more information, please visit their website.

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APA Preparing for Year End and 2018

Presented by American Payroll Association
Friday, Oct. 27, 2017 - Tulsa
For more information, please visit:  APA website

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Payroll Law 2017

Presented by Fred Pryor Seminars
Dec. 4, 2017 - Tulsa
Dec. 5, 2017 – Oklahoma City
For more information, please visit their website.

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State Comptroller:
Lynne Bajema, CPA

Deputy State Comptroller:
Steve Funck, CPA, CGFM

OMES Services CAR Accounting:
Jennie Pratt, CPA, CGFM

Agency Business Services:
Steven Hawkins, CGFM 

Financial Reporting Unit:
Matt Clarkson, CPA

Transaction Processing Manager:
Steve Wilson

Statewide Accounts Payable:
Courtney Cowart

Replacement Warrants:

Voucher Processing:

Payroll Transaction Processing:
Elsa Kunnel

Payroll Reporting:
Lisa Raihl, CPA

Purchase Cards and Travel (Online Booking) Assistance:
Linda Powell

Vendor Registration:
Victoria Baker

Vendor File Maintenance:

Vendor Remittance Updates:
Updates to remittance contact for vendor payment notification.

OMES Service Desk:
405-521-2444 or toll-free 866-521-2444