HomeMy WebLinkAbout2324-5 Wage Equity (Final 3-18-24)Wage Equity: Equal-Pay Analysis Planned—Audit #23/24-5
March 2024
Wage Equity: Equal Pay Analysis
Planned
The Office of County Internal Audit:
Elizabeth Pape, CIA, CFE – County Internal Auditor
Aaron Kay – Performance Auditor
Audit committee:
Daryl Parrish, Chair - Public member
Jodi Burch – Public member
Joe Healy - Public member
Kristin Toney - Public member
Summer Sears – Public member
Stan Turel - Public member
Patti Adair, County Commissioner
Charles Fadeley, Justice of the Peace
Lee Randall, Facilities Director
To request this information in an alternate format, please call (541) 330-4674
or send email to internal.audit@Deschutes.org
Take survey by
clicking here
Recommendations
5
Wage Equity: Equal Pay Analysis Planned—Audit #23/24-5
March 2024
Table of Contents:
1. Introduction ....................................................................................... 1
2. Observations ...................................................................................... 3
Overtime contributes to wage gaps ............................................................................. 5
Jobs that are not gender and race diverse contribute to wage gaps ........................ 7
Lower retention for Non-white women contributes to wage gaps ........................... 9
3. Findings ............................................................................................. 10
The County was conducting an equal-pay analysis .................................................. 11
The Equity Review process did not include employees offered entry level salaries
........................................................................................................................................ 12
4. Management Response .................................................................. 16
5. Appendix A: Objective, Scope, and Methodology ........................ 19
Objectives and Scope ................................................................................................... 19
Methodology ................................................................................................................. 20
Wage Equity: Equal Pay Analysis Planned—Audit #23/24-5
March 2024
Deschutes County Office of the Internal Auditor
Highlights:
Why this audit was
performed:
The Audit Committee
added an audit about
wage equity to the
fiscal year 2024 audit
plan.
We recommended:
The County continue
with plans to conduct
an equal-pay analysis
and report on
outcomes.
Human Resources
update rules and
procedures related to
setting starting wages
for new employees.
Wage Equity: Equal Pay Analysis
Planned
Our audit objective was to determine whether race
and gender wage disparities existed at the
organizational level and whether there were
procedures in place to prevent them.
We found that wage gaps existed at the organizational
level and the County was in the process of
implementing an equal-pay analysis to determine
whether differences among individual employees
performing comparable work resulted from factors
allowed by the Oregon Equal Pay Act. We also found
that the procedure designed to ensure new employee
salary offers complied with the Act didn’t apply to
employees offered entry level salaries and that
personnel rules discouraged the procedure.
The Oregon Equal Pay Act addresses many factors
explaining wage gaps but does not apply to all factors
that might lead to wage differences including how
much overtime people work, what jobs people
perform, and how long they are employed. In addition
to conducting an equal-pay analysis, Deschutes
County may wish to work on eliminating gender and
race disparities in these areas to increase pay equity.
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Deschutes County Office of the Internal Auditor Page 1 of 21
1. Introduction
Nationwide, there is a consistent wage gap between men and
women and among races.
The U.S. Congress passed the Equal Pay Act prohibiting gender-
based wage discrimination in 1963. Title VII of the 1964 Civil
Rights Act extended those protections to include race, color,
religion, and national origin.
Despite the passage of these laws, the wage gap remains.
In 2021, women across the nation earned $0.84 for every dollar
earned by men. It was an improvement on the $0.61 women
earned in 1960, but still far from equal.
Source: U.S. Census
By race, the gap is barely budging. The U.S. Census reports wage
earning by race based on households, not individuals, and the
data is not available for as long as it is for gender. Households
that identified as two or more races earned $0.86 for every dollar
earned by White households. For Non-white Hispanic households,
the number was $0.77; for American Indian and Black households
it was $0.65. Asian households earned more: $1.34 for every
dollar earned by White households.
Figure I:
National gender
wage gap
decreased since
1960 but remains.
Wage Equity: Equal Pay Analysis Planned—Audit #23/24-5
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Deschutes County Office of the Internal Auditor Page 2 of 21
Source: U.S. Census
Oregon adopted an Equal Pay Act that strengthened existing laws
prohibiting employment discrimination in 2017. The Act was an
attempt to reduce the persistent and commonplace wage gaps
existing in Oregon across industries. The Act requires employers
to pay the same amount to people performing comparable work
unless differences are based on specific factors including
seniority, merit, education, and experience. If workers are subject
to illegal wage differences, they can file complaints to receive
back wages.
The Equal Pay Act allows for an equal-pay analysis to correct wage
disparities among employees. In an equal-pay analysis, an
employer reviews wages earned by employees who perform work
of comparable character and determines whether differences in
wage are allowed by the factors specified in the Act. If differences
are not explained by allowed factors, employers must adjust the
wage of the lower paid employee. The Act gives courts the
authority to disallow compensatory and punitive damages related
to disparate wages if the employer conducted an equal-pay
analysis within three years and made progress towards
eliminating disparate wages. Even with an equal-pay analysis,
employers are required to raise wages for identified employees.
Figure II:
National race
earnings gap
remained steady
since early 2000s.
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Deschutes County Office of the Internal Auditor Page 3 of 21
2. Observations
The Oregon Equal Pay Act addresses many factors explaining
wage gaps but does not apply to all factors that might lead to
wage differences including how much overtime people work,
what jobs people perform, and how long they are employed.
These other factors can cause aggregate gender and race
disparities even when organizations comply with the Act. For
example, Oregon Secretary of State auditors found that even
after two rounds of equal-pay analyses at state agencies, women
earned $0.83 on the dollar compared to men and Non-white
people earned $0.88 for every dollar earned by White people.
This section lists observations rather than findings because it
includes factors that are not out of compliance with the Oregon
Equal Pay Act, but impact wage equity. Deschutes County may
want to address these factors to increase wage equity.
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Deschutes County Office of the Internal Auditor Page 4 of 21
How We Reported on Gender and Race
Reporting on Deschutes County employee gender and race was based
on data collected by the Human Resources Department for
compliance with federal Equal Employment Opportunity rules.
Employees self-selected gender and race when applying for a County
position. According to Equal Employment Opportunity program rules,
if a person did not self-select a demographic, County staff should
select a gender and race for them based on staff perception. People
who did not have a gender and race selected were excluded from
calculations, but there were so few of these that the removal did not
impact overall trends.
Gender categories included male, female, and nonbinary. Race
categories included American Indian, Asian, Black, Hispanic or Latino,
Pacific Islander, White, and Two or More Races.
Decisions about how to report on small statistical populations take
consideration of potential benefits and drawbacks. Reporting on
small populations can highlight diversity among subgroups or
amplify voices. But it also can cause privacy concerns if individual
people can be identified based on averages.
Auditors chose to exclude people who identified as nonbinary in the
gender category to protect privacy.
Auditors chose to aggregate race categories into White and Non-
white. We reported on Wage data for Latina women because there
were more than 30 people in this category.
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Deschutes County Office of the Internal Auditor Page 5 of 21
Overtime contributes to wage gaps
Overtime impacts pay disparities at Deschutes County. Including
overtime in aggregate wage gap analysis decreases disparities for
Non-white men but increases disparities for women. When
looking at base wages, Non-white women earn $0.76 for every
dollar earned by White men, but it decreases to $0.72 when
overtime is included.
Source: Deschutes County Financial System
Researchers have found childbearing responsibilities impact
women’s opportunities to earn overtime. A survey by the
Economist found 44-75% of women with children at home scaled
back their work hours, switched to a less demanding job, or opted
for one requiring less overtime.
Among people who were eligible to work overtime at Deschutes
County, women were less likely to work it.
Figure III:
Overtime decreases
compensation
disparities for Non-
white men but
increases
disparities for
women.
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Deschutes County Office of the Internal Auditor Page 6 of 21
Source: Deschutes County Financial System
Overtime use at Deschutes County increased in 2023. The
consensus among County staff is that overtime increased due to
staffing shortages and the competitive job market.
Source: Deschutes County Financial System
Most conversations about the cost of overtime center on
increased financial expenses, employee fatigue, and burnout. An
increase in inequitable wages is a more subtle consequence
decision-makers might be less aware of.
Figure IV:
Compared to men,
a lower percentage
of women who
were eligible to
work overtime did
so.
Figure V:
Overtime increased
as a percentage of
overall personnel
costs in 2023. (cost
in millions)
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Deschutes County Office of the Internal Auditor Page 7 of 21
Jobs that are not gender and race diverse contribute to wage gaps
According to a study by Glassdoor, job sorting, the tendency for
women and men to work different jobs, explains 54 percent of
the overall gender wage gap in the United States. For example,
nurses tend to be women and they earn less than police officers
who tend to be men.
Women tend to work in lower paying jobs at the County as well.
For jobs with more than ten people, most jobs either have more
than 75% men or less than 25% men. Jobs with fewer men pay
less.
Source: Deschutes County Financial System
There was some job sorting by race as well, but the pattern was
not as strong as it was for gender. No County jobs with more than
10 people were staffed by fewer than 60 percent White people.
Jobs with more White people covered the entire range of wages
from highest to lowest; including the lowest paid job which was
100 percent White. That said, no jobs with fewer than 90% White
people paid over $50 per hour.
Figure VI:
Jobs with fewer
than 25% men tend
to pay less than Jobs
with more than
75% men.
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Deschutes County Office of the Internal Auditor Page 8 of 21
Source: Deschutes County Financial System
During interviews of a random sample of staff, staff said positions
were either mostly male or mostly female with less than a quarter
saying there was gender diversity within positions.
Reasons given for the lack of diversity in positions included
• a lack of diversity in the field
• work suited to one gender
• job impositions on family obligations
• disregard for gender or race when making hiring decisions.
When people spoke about career paths, they mentioned moving
up within a position rather than moving among positions. For
example, moving from an administrative technician to an
administrative supervisor, or from a patrol deputy to a sergeant.
There were fewer answers related to moving to a different kind of
position which might serve to decrease job sorting and increase
diversity.
People were most likely to say they found out about their job
through word of mouth, which is not likely to increase diversity.
Figure VII:
Jobs with fewer
White people at the
County paid less
than jobs with more
White people
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Deschutes County Office of the Internal Auditor Page 9 of 21
Creating pathways for movement between jobs or focusing on
recruiting a diverse candidate pool could decrease wage gaps.
Lower retention for Non-white women contributes to wage gaps
A third allowed factor potentially leading to wage gaps was
tenure. County employees earn more the longer they stay with
the County.
Looking at people hired in the past few years, White people
stayed with the County longer than people from other races.
Fewer than 30 percent of White people and Non-white men left
the County within two years of being hired. The number jumped
to 55 percent for Non-white women who left the County within
two years.
Source: Deschutes County Financial System
Taking a longer look, White men had been with the County for
more years, increasing how much they earned. Based on an
analysis of all people employed at the County, White men had
been at the County an average of 9.2 years compared to 4 years
for Non-white and Non-latina women.
Figure VIII:
55 percent of Non-
white women left
the County within
two years of being
hired.
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Deschutes County Office of the Internal Auditor Page 10 of 21
Source: Deschutes County Financial System
Focusing on retention of Non-white women may decrease wage
inequities at the County.
3. Findings
Our audit objective was to determine whether race and gender
wage disparities existed at the organizational level and whether
there were procedures in place to prevent them.
We found that wage gaps existed at an organizational level and
the County was in the process of implementing an equal-pay
analysis to determine whether differences among individual
employees performing comparable work resulted from allowed
factors. We also found that the procedure designed to ensure
new employee salary offers complied with the Oregon Equal
Pay Act didn’t apply to employees offered entry level salaries
and that personnel rules discouraged the procedure.
Figure IX:
White men had
more years with
the County than
other groups.
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Deschutes County Office of the Internal Auditor Page 11 of 21
The County was conducting an equal-pay analysis
Deschutes County is not immune to the nation-wide wage gap
trend. When looking at overall compensation, the amount earned
including overtime and premium pay, White men earned about
$100,000 annually compared to about $73,000 for Non-white
women. The wage gap is greater for gender than for race, but
worse for Non-white women than other women.
Source: Deschutes County Financial System
This means that Non-white men earned $0.90, White women
earned $0.81, and Non-white women earned $0.73 for every
dollar earned by White men.
Overall wage gaps do not mean Deschutes County is violating the
Oregon Equal Pay Act. The differences in wages may result from
employees performing different work or having different levels of
education and experience. Rather than proving a violation of the
Act, the gaps show the County needs to take a closer look at why
they exist by conducting an equal-pay analysis.
Figure X:
White men earned
more in total
compensation than
other staff in 2022.
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March 2024
Deschutes County Office of the Internal Auditor Page 12 of 21
In the fall of 2023, Deschutes County appropriated funds to
conduct an equal-pay analysis and was in the process of selecting
a consultant to conduct the study in the winter of 2024.
In the past, the County has not reported on pay equity or wage
gaps. Other reports on gender and race disparities didn’t address
wage gaps directly. Reporting is an integral part of an
organization’s system of internal control. Though it wouldn’t be
appropriate to report on any specific disparities identified
through the equal-pay analysis, reporting on the work that was
conducted and overall conclusions will increase transparency and
accountability.
1. County Administration should continue with the plan to
conduct an equal-pay analysis.
2. County Administration should report results of the equal-
pay analysis in a format accessible to leadership,
employees, and community members.
The Equity Review process did not include employees offered
entry level salaries
Employees at Deschutes County have only one chance to
negotiate their wages: when they accept their starting salary.
After that, increases in wages are determined by step, even for
promotions. This underscores the importance of determining
starting wage and shows inequities at the hiring stage can follow
someone throughout their career at the County.
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Deschutes County Office of the Internal Auditor Page 13 of 21
About the Deschutes County Compensation Structure
There is a pre-determined wage range for each job. Ranges are
split into steps, usually ranging from one to seven. An employee
increases in step with each year in the position if they have
received a favorable annual review. After reaching the top step,
employees no longer receive increases in wages other than cost
of living increases based on inflation. Deschutes County hiring
supervisors can start new employees at any point on the wage-
range, but anything higher than step one or two is considered
more than entry level and requires an Equity Review.
The Human Resources Department created the Equity Review
process to make sure decisions about starting salary were
consistent. The process involved both hiring supervisors and
Human Resources staff.
There was inconsistency in how often supervisors requested
Equity Reviews. Auditors spoke with a random sample of hiring
supervisors to find out more about how they decided starting
salary offers. Most supervisors said half or more of the people
they hired came with some experience. Supervisors from three
departments said they have been asked to do an Equity Review
for all new hires. In contrast, three supervisors said they always
told applicants that most people start at step one.
Figure XI:
The Equity
Review
Process.
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Deschutes County Office of the Internal Auditor Page 14 of 21
Based on a random sample of Equity Reviews, the distribution of
steps generally aligned with experience but there were
anomalies. In one case, a new hire with seven years of experience
should have been placed higher on the pay scale, but the hiring
supervisor did not request an Equity Review. The rule only
required a Review for applicants placed at step three or higher,
not at step one.
Outdated personnel rules contributed to different outcomes by
leaving some employees out of the process. The language in
County personnel rules related to starting wage offers gave the
impression that most employees should start at step one or two
and not receive an Equity Review. The rules were written before
the Equity Review process and did not reflect current practice.
The rules stated:
New employees shall generally be placed at the first
step of the pay grade. When a new employee has
extensive prior experience and the department
believes it is justified, an employee may be hired at
the second step of the pay grade. Hiring at step
three or above requires prior approval by the
County Administrator and will only be granted in
extraordinary circumstances. (emphasis added)
Practices have changed since the rule was written. Supervisors
said a few years ago, it was rare for anyone to be hired above
step two even with experience. A supervisor following the
personnel rule would be less likely to consider a higher step
thereby missing the chance for Human Resources to conduct an
Equity Review. The change in practice means it is even more
important for there to be a review of the rules that govern it.
Without an Equity Review, Human Resources staff did not have a
chance to independently review a new applicant’s experience
against current employees.
County employees and hiring supervisors had mixed reviews for
the Human Resources Department Equity Review process based
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Deschutes County Office of the Internal Auditor Page 15 of 21
on interviews with a random sample of employees.
• Most people thought the process was fair, but a few said it
was not.
• Most people were happy with their initial salary offer.
However, two people said they regretted not negotiating
for higher wages.
• More than half of the people we spoke with said they
exceeded minimum qualifications when they were hired.
Two of them still ended up being offered the lowest salary
and another placed at the low end of the range was
disappointed with the offer. That may be because when a
higher step is offered, it is usually the supervisor who
proposes it.
• Some of the supervisors we spoke with mentioned the
process for determining salary for promotions was not fair
and based on previous salary.
The procedures for conducting Equity Reviews did not include
instructions for offering employees step one or two. Human
Resources staff said that they began informally reviewing step
one or two offers and would conduct a full equity review if there
were any red flags. But the process was not formalized in the
procedure.
Additionally, the Supervisor Toolkit on the County intranet did not
provide information about Equity Reviews, though it provided
other guidance about the hiring process including how to
evaluate job candidates and check references.
3. Human Resources should update the Personnel Rules to
include the Equity Review process.
4. Human Resources should update the Equity Review
procedures to include review for employees offered steps one
or two.
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Deschutes County Office of the Internal Auditor Page 16 of 21
5. Human Resources should add the Equity Review process and
procedures to the Supervisor Tool Kit.
4. Management Response
TO: County Internal Auditor Elizabeth Pape
FROM: Nick Lelack, County Administrator
Kathleen Hinman, Human Resources Director
RE: Wage Equity: Equal Pay Analysis Planned Audit #23/24-5
DATE: March 15, 2024
_______________________________________________________________________________________
Thank you for the opportunity to provide feedback on the Wage Equity: Equal Pay
Analysis Planned Audit #23/24-5.
We appreciate your work on this important topic. The data contained in your report is
informative and the observations you’ve provided will be helpful for the leadership
team to explore further in future work.
The County is committed to ensuring that our compensation structure and practices
align with the Oregon Equal Pay Act. We value our employees and recognize their
commitment by providing them with competitive compensation, benefits, and
retirement package that is internally equitable and fiscally responsible to the residents
and taxpayers of Deschutes County. Our goal is to attract, reward, and retain a
talented and diverse workforce to deliver services to our community.
As you noted in your report, we are currently completing a salary and equity study. In
October 2023, the Board of County Commissioners provided approval for the County
to hire a consultant to complete a salary and equity study. This project is now
underway.
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Deschutes County Office of the Internal Auditor Page 17 of 21
The study will include work to help the County:
• Understand the equity and competitiveness of our employee’s compensation
and benefits,
• Update the existing program so that the program is competitive, sustainable,
and equitable for the future, and
• Recommend a budget plan to appropriately realign employees’ compensation
as necessary.
This project will encompass a thorough wage review and market analysis for Non-
represented and AFSCME represented employees, as well as look at internal equity
and pay equity within the organization. A compensation structure will be
recommended that includes methods to easily update the wage structure as new
market indicators and minimum wage changes occur; as well recommendations for
addressing employee and position equity, advancement, and development.
The consultant hired will guide the County through processes to facilitate project
planning and engage County leadership on establishing comparable agencies,
updating the County’s compensation philosophy, and reviewing salary structure for
competitiveness and equity. The consultant will conduct strategy meetings with
stakeholders, review all positions within the scope of the project, collect salary survey
data, and make compensation recommendations regarding salary ranges and
structure.
The consultant will also complete a review of existing policies and procedures
applicable to administering compensation to ensure the organization follows industry
best practices and managers and leaders are able to administer compensation in a
disciplined way to ensure that compensation of employees across the County is
managed equitably and consistently.
The consultant will also review internal equity for outliers and areas of compression
and complete an analysis ensuring the County’s compliance with pay equity laws. The
consultant's main objective will be to ensure adherence to pay equity laws. However,
their analysis, coupled with insights gathered from the audit, will assist the County in
determining what changes may be effective in attempting to address and improve
aggregate wage equity.
Please find County Administration and Human Resources’ responses to audit
recommendations:
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March 2024
Deschutes County Office of the Internal Auditor Page 18 of 21
#1 – County Administration should continue with the plan to conduct an
equal pay-analysis.
Agree. This work is contracted and underway.
#2 – County Administration should report results of the equal-pay analysis
in a format accessible to leadership, employees, and community members.
Agree. At the conclusion of the Salary Study and Market Review project, a report
will be generated and presented that will include deliverables that address the
requirements listed above. Throughout the process, the selected consultant will
assist the County with all appropriate communications.
#3 – Human Resources should update the Personnel Rules to include the
equity review process.
#4 – Human Resources should update the Equity Review procedures to
include review for employees offered steps one or two.
#5 – Human Resources should add the Equity Review process and
procedures to the Supervisor Tool Kit.
The following response is appliable to recommendations #3-5:
We are committed to making sure it is clear to departments and offices when they
should engage with Human Resources on the pay equity review process. The
consultant will complete a review of existing policies and procedures applicable to
administering compensation. This review may impact our current compensation
procedures and policies. Modifications to procedures will be evaluated,
implemented, and documented after the Salary and Equity study is complete.
Modifications to policies and Personnel Rules will be evaluated to proposed to the
Board of County Commissioners.
Human Resources has communicated about the equity review process with
County Leadership and will continue to communicate with departments and
offices about the process to ensure there is a uniform understanding and
implementation of the process within the organization.
Thank you again for your analysis and the observations and findings contained in this
audit.
Wage Equity: Equal Pay Analysis Planned—Audit #23/24-5
March 2024
Deschutes County Office of the Internal Auditor Page 19 of 21
5. Appendix A: Objective, Scope, and Methodology
The Office of Internal Audit was created by the Deschutes County
Code as an independent office conducting performance audits to
provide information and recommendations for improvement.
The Deschutes County Audit Committee authorized the review of
wage equity in the Internal Audit Work Plan for 2023-2024.
Audit findings result from incidents of non-compliance with
stated procedures and/or departures from prudent operation.
The findings are, by nature, subjective. The audit disclosed certain
policies, procedures and practices that could be improved. The
audit was neither designed nor intended to be a detailed study of
every relevant system, procedure, or transaction. Accordingly, the
opportunities for improvement presented in the report may not
be all-inclusive of areas where improvement may be needed and
does not replace efforts needed to design an effective system of
internal control.
Management has responsibility for the system of internal
controls, including monitoring internal controls on an ongoing
basis to ensure any weaknesses or non-compliance are promptly
identified and corrected. Internal controls provide reasonable but
not absolute assurance that an organization’s goals and
objectives will be achieved.
Objectives and Scope
Objectives included determining whether:
1. Gender and race disparities in wages exist at an
organizational level. (Not for individual employees.)
2. The County has procedures in place to prevent disparities.
3. The County tracks and reports wage demographics.
“Audit objectives”
define the goals of
the audit.
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Deschutes County Office of the Internal Auditor Page 20 of 21
4. The County has clear policies to prevent disparities.
The scope of our review depended on data sources.
• Annual compensation was based on the calendar year
2022.
• Hourly wage was based on active employees on September
13, 2023, the day auditors ran the report.
• Starting step included employees hired between June 12,
2020, and September 13, 2023. The starting date was
based on a date when a glitch was fixed in the financial
system which caused it to overwrite data.
• Equity Reviews included all revies conducted between
August 15, 2018, when the process began and October 18,
2023, when auditors received the files.
Methodology
Audit procedures included:
• Interviewing Human Resources staff involved in Equity
Reviews and data management.
• Interviewing a random sample of county employees, some of
whom were hired within the past few years and some who
were involved in hiring. The sample of employees included 26
people out of a population of 440. The sample of hiring
supervisors included 20 out of a population of 110. We coded
interviews to draw qualitative conclusions. Because the
sample was random and representative, results can be
extrapolated to the population.
• Reviewing data from the County financial system to determine
whether there were gender or race disparities in overall
compensation, hourly wage, and starting step. We used T-tests
to determine whether the differences in means were
statistically significant.
Audit procedures are
created to address
the audit objectives.
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Deschutes County Office of the Internal Auditor Page 21 of 21
• Reviewing Equity Reviews. We reviewed a sample of 20
reviews from a population of 227. Because the sample was
random and representative results can be extrapolated to the
population.
• Reviewing laws, research, Deschutes County rules and
procedures, and best practices related to wage equity.
• We discovered an internal control issue that was not material
and was not significant to the objectives of this audit. We
communicated the issue to Human Resources management.
We conducted this performance audit in accordance with
generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.
(2018 Revision of Government Auditing Standards, issued
by the Comptroller General of the United States.)
Wage Equity: Equal Pay Analysis Planned—Audit #23/24-5
March 2024
Deschutes County Office of the Internal Auditor
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