HomeMy WebLinkAbout2122-17 Vacation and Sick Leave (Final 12-9-22)Vacation and Sick Leave #21/22-17 December 2022
Vacation and Sick Leave
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Deschutes County,
Oregon
The Office of County Internal Audit
David Givans, CPA, CIA – County Internal Auditor
Aaron Kay – Performance Auditor
internal.audit@deschutescounty.gov
Audit committee:
Daryl Parrish, Chair - Public Member
Jodi Burch - Public Member
Joe Healy - Public Member
Scott Reich - Public Member
Summer Sears - Public Member
Stan Turel - Public Member
Patti Adair, County Commissioner
Charles Fadeley, Justice of the Peace
Lee Randall, Facilities Director Take survey by
clicking HERE
Recommendations
10
Vacation and Sick Leave #21/22-17 December 2022
TABLE OF
CONTENTS:
HIGHLIGHTS
1. BACKGROUND
1.1. Background on the Audit .……………………………….……….………….…………… 1
1.2. Background on Vacation and Sick Leave ………………………………….……. 1-5
2. FINDINGS and OBSERVATIONS
2.1. NOVAtime System ….………………………..………………………………………….. 6-10
2.2. Policy Compliance ………………………………………………………………..……. 11-16
2.3. Analyses of Vacation and Sick Leave
2.3.1. County Vacation and Sick Leave Balances ………………………….. 17-18
2.3.2. County Employee Average Available Balance …………………….. 19-20
2.3.3. County Average Leave Balances per Employee ……….…………. 20-26
2.3.4. County Average Accrual and Usage per Employee …………….. 26-30
2.3.5. County Employee Optional Cash Out …………………………………. 30-32
3. MANAGEMENT RESPONSES
3.1. Human Resources Department .…………………………..……………..……. 33-35
3.2. Finance Department …………………………………………………………………. 35-37
3.3. Administration ………………………………………………………………………..… 37-39
A. APPENDIX A: OBJECTIVES, SCOPE, AND METHODOLOGY
i. Objectives and Scope ….……..………….…………….………………………………... 39
ii. Methodology …………………………………….………….……………………….……….. 40
Vacation and Sick Leave #21/22-17 December 2022
HIGHLIGHTS
Why this audit was
performed:
A review of employee
vacation and sick leave
time to inform County
policy.
What was
recommended:
Recommendations
include:
• configuring the system
to not allow for negative
balance adjustments;
• exploring the cost-
benefit of additional
reporting services;
• establishing secondary
review processes for
balance limit
calculations and
adjustments;
• revising County policies
and CBA contract
language to align with
practice; and
• adjusting the cash out
policies to address
constructive receipt.
Vacation and Sick Leave
The focus of the review was on analysis of vacation and sick leave information contained
within the NOVAtime (timesheet) and Munis (accounting/ human resources) systems.
Computerized procedures can be used to extract employee timesheet information and
relevant employee data from County systems. This allows the linkage of leave information
and employee information, such as identifying employee leave balances with length of
County service. Limitations within NOVAtime system reporting prevented analysis of data
prior to Fiscal Year 2021-2022.
What was found
Overall, the County’s internal and management controls over the employee leave operation
are effective and working as intended.
The audit identified the following areas for further improvement, including
• The NOVAtime system allows for leave adjustments to create negative balances.
• Data could be used more effectively for decision-making.
• Differences exist between NOVAtime and Munis database information.
• Vacation and sick leave balances for separated employees are a potential risk.
• Vacation and sick leave maximum balances are inconsistently enforced.
• Employees are not using sufficient vacation leave as directed by policy.
• County policy for leave accrual timing not in conformance with Oregon law.
• County policy and CBAs need to be updated to match current practice for maximum
vacation and sick leave timing.
• Cash out election provisions of time management leave may accelerate employee
taxable income.
A number of other analyses were performed but did not yield any recommendations.
Deschutes County Internal Audit
Vacation and Sick Leave #21/22-17 December 2022
Page 1
1.1 BACKGROUND ON THE AUDIT
1.
Introduction
Audit Authority:
The Deschutes County Audit Committee authorized the review of vacation and sick leave
(computerized procedures) in the Internal Audit Program Work Plan for 2022-2023. Computerized
procedures can be utilized to extract relevant data from County systems. Audit objectives, scope,
and methodology can be found in Appendix A.
This Vacation and Sick Leave report assesses the portion of leave provided to employees as a benefit
of employment. Through discussion with management, these types of leave have received no formal
review and could benefit from an assessment. In the context of employee leave, the analysis of
vacation and sick leave sets the stage for additional work in assessing leave provided in lieu of
overtime wages (compensatory time).
1.2 BACKGROUND ON VACATION AND SICK LEAVE
The County’s workforce is the human capital of the organization and its key resource in pursuing and
achieving its goal of enhancing the lives of citizens by delivering quality services in a cost-effective
manner. Managing staff availability and absences through designated processes and technological
resources is essential in ensuring organizational goals are continually met. The County uses
NOVAtime Time Management Online (NOVAtime) for its employee timekeeping and time
management system. It is the responsibility of all employees to record accurately time and
attendance. Department heads and supervisors are responsible for ensuring all time is reported
accurately by employees in NOVAtime.
Due to the complexity of employee leaves, the County has individually categorized within NOVAtime
all leave of absence types to correctly track and account for these benefits of employment.
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Table I
Categories of leave
provided to
employees as a
benefit.
Highlighted
categories were
included in the
audit.
Under County policy and collective bargaining agreements (CBA), employees are eligible for various
paid leaves of absence depending on factors, such as job classification, legal requirements, and
union representation. The County has contracts with:
• American Federation of State, County, and Municipal Employees (AFSCME);
• 9-1-1 Employees Association;
• Deschutes County Sheriff Employees Association (DCSEA);
• International Union of Operating Engineers (IUOE);
• Federation of Oregon Parole and Probation Officers (FOPPO); and
• Deschutes County District Attorneys’ Association (DCDAA).
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Table II
Categorization of
leave types based
on CBA or County
policy; number of
employees within
each group on June
30, 2022.
Vacation and sick leave rules vary between CBAs and County policy for non-represented employees.
The focus of the audit was on the Time Management Leave Program (TML), which incorporates both
vacation and sick leave for most County employees, as well as traditional vacation and sick leave
offered under some CBAs. DCSEA represented employees’ traditional vacation and sick leave
includes additional time in lieu of holidays, which is applied at a monthly rate of 8.66 hours. 9-1-1
and some AFSCME represented employees also have leave time in lieu of holidays, however the
hours were not included in this audit as they are accounted for outside of vacation and sick leave.
TML program Traditional vacation and sick leave program
(total number of employees in each group)
AFSCME (509) DCSEA (175)
Non-Represented (258) IUOE employees opting to not participate in TML1 (5)
IUOE employees opting in to TML or hired after July
1, 2016 (60)
9-1-1 Employees Assoc. (34)
FOPPO (23)
DCDAA (19)
For the purposes of this report, the Time Management Leave Program, traditional vacation, and sick
leave will be referred to as vacation and sick leave collectively. Employees accrue vacation and sick
leave hours at the beginning of the month and hours are available for use within the month. Any
unused hours carry over to the next month building a vacation and sick leave balance. Employees
are encouraged to maintain a reasonable leave balance in the event of an illness.
1 The TML program was optional for all IUOE represented employees hired prior to July 1,2006.
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Graph I
Trend of
Compensated
Leave Liability
Balances FY18-
FY22.
County Financial Information
Employees can accumulate earned but unused vacation and sick leave, as well as compensatory time
within County policy. Accumulated unused leave represents a financial liability for the County. The
liability is actualized either through usage, an annual cash out option, pre-retirement cash out
option, or payout upon separation. Sick leave is not paid upon separation except as applicable, based
on CBA guidelines. Accumulated leave is converted from accrued hours to a monetary equivalent as
part of each fiscal year closing procedures and reported for financial statement purposes as a
compensated leave liability.
Compensated leave
liabilities have
remained relatively
steady, averaging $10.3
million dollars over the
last five years.
Department/Office Financial Information
The County budgets and incurs costs for normal employee vacation and sick leave usage within its
regular employee labor expense. Departments/offices budget for payouts upon separation and
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Graph II
Trend of payouts
and cash outs of
vacation and sick
leave in millions
with Budget to
Actual FY18-FY22
employee cash out options as an additional expense within their overall personnel costs. Based on
preliminary financial figures, the County as a whole under budgeted these events by 63% in Fiscal
Year 2022 ($1.13 million budgeted to $1.78 million actual). However, these deficits can be offset
through salary and vacancy savings.
Vacation and sick
leave payouts/ cash
outs accounted for
only 1.3% of the
approximately $141
million in the
County’s overall
personnel costs in
Fiscal Year 2022.
2.
Findings and
Observations
The audit included limited procedures to understand the systems of internal control around
vacation and sick Leave. No significant deficiencies were found in this audit. A significant deficiency is
defined as an internal control deficiency that could adversely affect the entity’s ability to initiate,
record, process, and report financial data consistent with the assertions of management in the
financial statements. The findings noted were primarily compliance and efficiency matters.
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,
Vacation and Sick Leave #21/22-17 December 2022
Page 6
procedures and practices which 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.
Overall, the County’s internal and management controls over the employee leave processes are
effective and working as intended. The following observations are noted to help further improve and
inform the policies, procedures, and controls put into place.
2.1 NOVATIME SYSTEM
The NOVAtime system creates a situation where some employees are advanced
leave they do not have.
Employees who have exhausted their vacation and sick leave and enter a leave without pay status
accrue leave on a prorated basis. The NOVAtime system automatically applies a full monthly accrual
on the first of each month to these employees. The full monthly accrual is then paid to the employee
during timesheet preparation. The employee on leave without pay should not receive their full
accrual, so an adjustment is required. The adjustment reverses the full accrual and applies any
prorated hours after the pay period has ended but cannot address the hours paid from the leave
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Table III
Example of system
operation relating
to leave without
pay employees.
balance. This situation originating from NOVAtime creates a negative leave balance.
Simplified example
LEAVE WITHOUT PAY EMPLOYEE Month 1 Month 2 Month 3
Beginning Bank 0 -14 -14
NOVAtime applies 14-hour monthly accrual on the 1st +14 +14 +14
Leave paid - Hours taken by the system -14 0 0
Adjustment for leave without pay (-14 hours reversed) -14 -14 -14
Totals -14 -14 -14*
*Note - Leave without pay employee “owes” hours upon returning to work
Negative balances in a payroll system could represent an overpayment or usage of hours in excess of
accrual. The County leave policies do not allow for usage after leave hours are exhausted.
107 employees were subject to negative leave balances in Fiscal Year 2022, totaling over 2,500
negative leave hours. Leave hours paid to the employees after the system applies the monthly
accrual are an unearned benefit. Adjustments after leave has been paid to the employees creates an
undue hardship for those who are on leave without pay for consecutive months, i.e., maternity leave.
The employee returning from leave without pay faces a deficit in leave and is unable to use vacation
and sick leave until a positive balance is achieved.
Additionally, this situation occurred with one separating employee and resulted in an overpayment
of vacation and sick leave of more than $1,300 gross pay. The overpayment could not be recovered.
The configuration of the NOVAtime system reflects County policy for leave accrual timing on the first
of each month. Payroll staff make manual calculations and necessary adjustments in the beginning
of the following month after payroll has processed. This results in paying the unearned accrued leave
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The US
Government
Accountability
Office (GAO)
provides
information for
developing an
internal control
system in what is
referred to as “The
Green Book”.
and creates the negative leave balances. Moving these adjustments before payroll processing might
help the system operate better.
It is recommended the NOVAtime system be configured to not allow for negative balance
adjustments or alternative methods should be explored.
Data could be used more effectively for decision-making.
NOVAtime data reporting of vacation and sick leave is limited due to date range constraints placed
on reporting periods. Of the eight reports available through NOVAtime related to vacation and sick
leave:
• Three will only provide current or prior year data.
o Data size is so large for one report it fails to process.
o Others took between 20-60 minutes to complete.
• Five reports are limited to one-month durations.
o Data providing information on usage must be limited to 400 employees in each request,
resulting in the need for 72 (seventy-two) individual requests to obtain one year's worth
of County data.
Management reporting provides current and accurate data of progress towards organizational goals.
GAO’s Green Book 16.08 2 relating to performing monitoring activities for controls states,
“Management retains responsibility for monitoring the effectiveness of internal control over the
assigned processes performed by service organizations.”
Limitations on the accessibility of data hamper effective trending and analyses of data.
NOVAtime does not allow for direct access to the County’s data. Access to data is provided through
2 GAO’s Green Book – GAO-14-704G Federal Internal Control Standards Pg. 66
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“Test accounts
serve a very
valuable function,
especially as
organizations
prepare to move a
new app or version
from test to
production.3”
NOVAtime system reports. NOVAtime provides additional reporting options, but the County has not
explored additional services since contracted. Expanded reporting options from what is currently
available would carry additional costs.
It is recommended the County explore the cost-benefit of additional NOVAtime data reporting
services.
The existence of test employee accounts within the production system is not
aligned with best practices.
NOVAtime has five test employee accounts used for training employees and/or supervisors, as well
as accruals testing, in the production system. The test accounts contain nearly 2,800 hours of
vacation and sick leave combined.
Best practices 3 in the information technology field are to only allow test accounts in a separate test
environment in order to protect the integrity of the production system. Production system data must
be a reliable source of information.
Introduction of test employee accounts could impact the production environment. Reports
generated from the production system would also include these test accounts.
NOVAtime offers no test environment and has denied County requests to provide one. The County
has no option but to continue using these test accounts for the current purpose.
It is recommended the County continue to explore solutions to transition test employee accounts
outside of the production environment.
3 Cloud Security Alliance Industry Insights by Merritt Maximi “Test Accounts: Another Compliance Risk”
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Diagram I
Noted employee
record differences
between systems,
including
overlapping
differences.
Differences exist between NOVAtime and Munis database information.
Of the 1,154 NOVAtime employee records, the system information differs from
Munis employee records for the correct CBA in 20 records and job class in 12
records. Four of the identified records had both CBA and job classification
differences.
GAO’s Green Book 13.05 4 relating to information and communication defines
quality information as “appropriate, current, complete, accurate, accessible, and
provided on a timely basis.”
Incorrect categorization of employee information that determines an employee’s available leave
could lead to incorrect application of accrual rates. A recently promoted County employee
maintained their prior job classification rate because updates were not applied in NOVAtime.
Upon employee position changes, Human Resources notifies Payroll of the employee’s updated job
classification and CBA status, if applicable. There is no system in place to ensure the updates are
completed and the employee information matches in both databases.
It is recommended Payroll develop a system to ensure NOVAtime and Munis employee information
are in sync and correct.
4 GAO’s Green Book – GAO-14-704G Federal Internal Control Standards Pg. 60
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2.2 POLICY COMPLIANCE
Vacation and sick leave balances for separated employees are a potential risk.
186 separated employees were found having a combined vacation and sick leave balance of over
10,200 hours. All separated employees were fully paid out upon separation. In over 100 of the cases,
the NOVAtime system automatically applied accruals after separation.
GAO’s Green Book 10.03 5 provides an example of internal control activities as “management designs
control activities so that all transactions are completely and accurately recorded.”
In the absence of oversight, separated employee balances could be transferred without detection.
Hours associated with separated employees provides opportunity for misuse/ misallocation as they
do not belong to an active employee and would not be missed. Additionally, in the case a separated
employee regains active status, hours may supplement new leave bank activity or be paid out a
second time.
It appears prior payroll staff did not establish a practice of clearing balances from NOVAtime as
employees separated from service. Most of the identified separations with large balances occurred in
2018. Additionally, the NOVAtime system is incorrectly applying monthly accrual rates on recently
separated employees. The NOVAtime vendor has been notified of this issue and agrees it should not
occur but has not provided any correction for this system flaw.
It is recommended Payroll eliminate retained balances from all separated employees and continue
to work with the vendor on a solution to discontinue system generated leave time for separated
employees.
5 GAO’s Green Book – GAO-14-704G Federal Internal Control Standards Pg. 45
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Maximum
limit
calculations are
generally
calculated at twice
the annual leave
accumulation.
Vacation and sick leave maximum balances are inconsistently enforced.
On March 31st, 2021, thirty-five employees were subject to vacation and sick leave hour adjustments
for County maximum accrual limits. Hours over the maximum are moved to a sick leave bank. The
following inconsistencies were identified:
• Five additional employees received no adjustment while exceeding maximum limits.
• Two employees’ adjustments were miscalculated.
• Two employees received adjustments despite having enough usage to be below maximum
limits.
• One employee received a positive adjustment, providing them with additional hours of leave.
Employees are restricted in the amount of earned leave they can accumulate, depending on which
CBA or County policy is applicable. March 31st calculations are based on length of service and CBA/
policy rules. Transfer of hours over allowed limits to a sick leave bank occurs May 1st.
Inequitable treatment of County policy erodes a workplace culture of consistency. Employees may
perceive favoritism is being shown and could affect employee morale.
Human Resources performs the calculations and notifies Payroll to make the adjustments, but
calculations and adjustments receive no secondary review for accuracy.
It is recommended Human Resources and Payroll establish secondary review processes for
employee leave balance limit calculations and adjustments.
Employees are not using sufficient vacation leave as directed by policy.
Thirteen employees did not take the required amount of vacation leave within 2021, however all
identified employees used some vacation leave during the year.
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Regardless of applicable CBA or County policy, all employees are required to take a minimum
amount of vacation leave within the calendar year. During the first five years of employment,
employees are required to take 40 hours of vacation per year. Employees with more than five years
of employment are required to take 80 hours of vacation leave per year.
A 2015 article 6 combining 20 cohort studies worldwide concluded employees who are overworked
have a higher risk of stroke and coronary heart disease. Employees who fail to meet the usage
requirements are ineligible for the cash out options offered by the County.
It is recommended the County develop a process to support supervisors in monitoring employees’
use of vacation leave in compliance with policy.
County policy for leave accrual timing not in conformance with Oregon law.
County policy HR-16 contains “Leave earned during the month cannot be used until the first day of
the following month.” This statement conflicts with the Oregon Paid Sick Time Law by limiting access
to earned leave until the following month.
The Oregon Paid Sick Time Law requires all employees to have access to in-month accruals of
vacation and sick leave.
An inconsistent policy statement on the availability of leave hours can cause confusion for all non-
represented employees and supervisors within the County, possibly restricting allowable usage for
affected employees.
6 Lancet August 20, 2015 – “Long working hours and risk of coronary heart disease and stroke: a systematic review and meta-analysis of published and
unpublished data for 603,838 individuals”
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Oregon legislative action resulting in the Oregon Paid Sick Time Law became effective Jan.1, 2018.
County policy HR-16 was last updated July 1, 2012. Existing policies should have been updated to
ensure legal requirements are met.
It is recommended the County revise leave policy HR-16 to be in conformance with State law.
County policies and CBAs need to be updated to match current practice for
maximum vacation and sick leave timing.
The March 31st deadline for vacation and sick leave maximum limits is indicated in County policy HR-
16 and most CBAs. The exception is the Deschutes County Sheriff’s Employees Association who uses
April 1st. County practice has been to provide employees until May 1st to use accrued leave or utilize
cash out options in April to remain under the maximum. This additional time is not stipulated in any
CBA or policy.
Employees are restricted in the amount of earned leave they can accumulate, depending on which
CBA or County policy is applicable. The cash out option available in April allows employees the
opportunity to reduce accumulated leave while gaining extra income.
According to a 2020 survey by Gartner 7, a research and consulting firm, employees value vacation
and sick leave benefits behind only base pay as the most important. If applied as written, the County
policy and CBAs would limit the options for employees to manage their leave.
The existing practice has been traced back to at least 2001, which pre-dates both the current policy
and union contracts.
It is recommended the County update policy and CBA contract language to align with practice.
7 Gartner Insights by Mary Baker March 10,2020 - “Know Which Benefits Your Employees Care About”
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Cash out election provisions of time management leave may accelerate
employee taxable income.
The provisions in most of the County’s policies regarding elective cashing out of banked time
management leave include some restrictions. These restrictions generally include:
a) At least one year of continuous employment;
b) Must have at minimum 12 months of earned time management leave;
c) Must have used the requisite amount of leave for their position;
d) An election must be received to convert part of their bank into cash.
It is not clear the current program sufficiently addresses “constructive receipt” and could result in
additional taxable income to employees who are offered the option. “Constructive receipt” is a tax
timing issue to indicate when employees are constructively paid.
The County (depending on years of services and the restrictions above) allows some portion of
banked leave hours to be cashed out. Cash out hours vary by employee but are usually 40 or 80
hours. In addition, the County allows employees within close proximity of retirement to cash out 200
hours at any time.
The IRS has issued guidance regarding how employees are given cash out choices and the
restrictions. The IRS has taken the position that if an employee has the option to cash out banked
leave, the employee is in “constructive receipt” of the banked leave at the time that the employee
could receive the cash – even if the employee doesn’t cash out – and, therefore, the value of the
leave should be included in the employee’s taxable income. This creates a potential timing issue
between when hours are taxed and when hours are used.
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There are some IRS letter rulings 8 that give an indication of the IRS’s stance on these matters and
indicate some approaches where constructive receipt can be avoided. One approach was to have
employees elect before the beginning of the year whether they will cash out or rollover their accruing
leave at the end of the next year. The change in approach is to have an election made for future
earned leave and not banked leave.
The County needs to be prepared to either manage the related tax issues (and explain them to
employees) or update the plan approach to cash out that might be more acceptable to the IRS.
The effect is that all employees identified who can make a cash out election may be subject to
accelerated taxable income. This, essentially, removes the control over taxability from the hands of
employees. If the County fails to appropriately report this as taxable income, they may be subject to
additional taxes and penalties.
It is recommended for the County to consider adjustments to the leave cash out policies to further
address constructive receipt.
8 Letter rulings are limited opinions provided by the IRS for specific situations and these rulings should not be used or cited as precedent.
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2.3 ANALYSES OF VACATION AND SICK LEAVE
Chart I
Composition of
employees by
overtime eligibility;
distribution of
vacation and sick
leave balances by
overtime eligibility.
A number of analyses were performed which did not yield any specific findings, but can be used to
better inform County management and employees on the operation of vacation and sick leave
management. Analyses included overall County information, as well as demographic information,
such as employee age, length of service, gender identity, and ethnic identity.
Deschutes County Employee Information:
Deschutes County employees' monthly leave balances for vacation and sick leave averaged 263
hours or the equivalent of 32 days based on an eight hour work day. Charts and graphics in the
following analysis which refer to days of leave were calculated on an eight hour work day for
consistency. Many departments, offices, and functions may work a variety of hourly schedules over
eight hours.
2.3.1 – COUNTY VACATION AND SICK LEAVE BALANCES (in total):
1) by Overtime Eligibility:
County employee’s job classification
determines whether the employee is
eligible for overtime under applicable
wage and hour laws. These
determinations can be distinguished as
exempt from overtime or non-exempt
from overtime. This is often referred
to as hourly or salaried employees,
although these categorizations are
not absolute.
The total vacation and sick
leave balances reflect the
County’s distribution closely.
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Page 18
Chart II
Compositions of
Deschutes County
population;
Deschutes County
employees by
gender identity;
and employees
total balances of
vacation and sick
leave by gender
identity.
Chart III
Composition of
County employees
by gender identity
and overtime
eligibility.
2) by Gender Identity:
County employees who have self-identified as women account for nearly 55% of the workforce as
compared with a near perfect split for the County population as a whole. Employees who self-
identified as nonbinary accounted for a small percentage of County employees and were not
included to maintain their anonymity.
Vacation and sick leave balance
composition were not reflected in the
gender identity distribution of County
employees. Smaller balances were
accumulated by women despite being
the majority of the workforce.
3) by Overtime Eligibility and Gender Identity
The amount of
representation in each
gender identity within the
overtime eligibility
categories is not enough
of a factor to explain the
large disparity in balances.
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Page 19
Chart IV
Composition of
employees based
on average
monthly vacation
and sick leave
available in Fiscal
Year 2022.
Chart V
Composition of
employees with
less than 10 days
monthly vacation
and sick leave
available on
average in Fiscal
Year 2022.
Graph III
Composition of
employees based
on average
monthly vacation
and sick leave
available in Fiscal
Year 2022 by
overtime eligibility.
2.3.2 – COUNTY EMPLOYEE AVERAGE AVAILABLE BALANCES (in days):
Closer examination of the 27% of employees with
less than 10 days of leave available monthly
reveals nearly half at less than 5 days of leave.
These employees are at the highest risk of
exhausting their leave balances and moving into a
leave without pay status.
1) by Overtime Eligibility (in percentages):
27% of County
employees have
less than 10 days
of leave available
monthly.
0-5 days 5-10 days
18% of County non-
exempt employees
have less than 10
days of leave
available monthly.
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 20
Graph IV
Composition of
employees based
on average
monthly vacation
and sick leave
available in Fiscal
Year 2022 by
gender identity.
Graph V
Average days of
vacation and sick
leave balances per
employee in Fiscal
Year 2022 by
department/office.
2) by Gender Identity (in percentages):
2.3.3 – COUNTY AVERAGE LEAVE BALANCES PER EMPLOYEE:
1) by Department/Office (in
days):
Deschutes County
organizational structure has
many departments, offices,
and functions, making it
difficult to categorize.
Departments/offices with
similar locations and functions
were combined for simplicity.
County Average
is 32 days of
vacation and
sick leave
Avg
20% of County
female employees
have less than 10
days of leave
available monthly.
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 21
Graph VI
Average days of
vacation and sick
leave balances per
employee in Fiscal
Year 2022 by
representation.
Chart VI
Average days of
vacation and sick
leave balances per
employee by
overtime eligibility.
Chart VII
Average days of
vacation and sick
leave per
employee by
gender identity.
2) by CBA/ Non-Represented (in days):
Vacation and sick leave rules vary between
CBAs and County policy for non-
represented employees leading to variety
within average days of vacation and sick
leave. DCSEA represented employees’
vacation and sick leave includes additional
time in lieu of holidays which is applied at
a monthly rate of 8.66 hours.
3) by Overtime Eligibility (in days):
Employees who are exempt from overtime tend to carry higher balances than their non-
exempt counterparts.
4) by Gender Identity (in days):
The imbalance in hours can also be observed in the average days available to each gender
identity. Men have nearly twice the number of days available on average than their
counterparts.
Avg
Avg
Avg
Legend
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 22
Chart VIII
Average days of
leave per
employee by
overtime eligibility
and gender
identity.
Graph VII
Average days of
vacation and sick
leave balances per
employee by age
group.
5) by Overtime Eligibility and Gender Identity (in days):
Chart VII from the previous page can be disaggregated further to provide a comparison of
each gender identity within the eligibility groups.
6) by Age Group (in days):
Employee leave balances grow expectedly with age groups and begin to fall as the number of
employees within the older age groups decreases. The average age for County employees is
44 years.
Avg
Avg
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 23
Graph VIII
Average days of
vacation and sick
leave balances by
age group and
overtime eligibility.
Graph IX
Average days of
vacation and sick
leave balances by
age group and
gender identity.
7) by Age Group and Overtime Eligibility (in days):
8) by Age Group and Gender Identity (in days):
Gender identity leave imbalances can be seen within age groups when disaggregated. The
imbalance is at its greatest rate for the 30–39-year-old range at 2.2:1.
Avg
There were no
overtime exempt
employees within the
70-79 age group.
Avg
Legend
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 24
Graph X
Average days of
vacation and sick
leave balances per
employee by
length of
employment.
Graph XI
Average days of
vacation and sick
leave balances per
employee by
length of
employment and
overtime eligibility.
9) by Length of Service (in days):
Employee leave balances grow expectedly with longevity of employment. Leave hour accrual
increases at a higher rate based on months of service with the County. The average length of
service was 8.3 years.
10) by Length of Service and Overtime Eligibility (in days):
Avg
Avg
The average days of
vacation and sick leave
are identical for
employees with 5- 10
years of service.
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 25
Graph XII
Average days of
vacation and sick
leave balances per
employee by
length of
employment and
gender identity.
Graph XIII
Average days of
vacation and sick
leave balances per
employee within
identified ethnic
group.
11) by Length of Service and Gender Identity (in days):
Gender identity imbalances continue to be observed within the service length grouping,
although men in the 15-20 year of service have an unexplained balance dip.
12) by Ethnic Identity (in days; total number of employees included in each group):
Deschutes County Human Resources collects the employee ethnic identity from the initial
application for employment. Prospective employees are also provided the option to choose
biracial or to not identify ethnicity. Groups which had less than ten employees were combined
to protect the anonymity of the individuals. These groups included employees who identified
as Pacific Islander and African American.
Avg
Avg
Legend
The Deschutes County
population is 86.2% white,
which is reflected in the
makeup of the County’s
employees working in Fiscal
Year 2022 at 88.6%.
Vacation and Sick Leave #21/22-17 December 2022
Page 26
Graph XIV
Average length of
service in years
per employee
within identified
ethnic group.
13) by Ethnic Identity and Length of Service (in years):
The higher average days of leave seen
in Graph XIII within each ethnic group
are a direct correlation to the average
length of service in years for each
group.
2.3.4 – COUNTY AVERAGE ACCRUAL AND USAGE PER EMPLOYEE:
Deschutes County employees accrued vacation and sick leave at an average of 226 hours for Fiscal
Year 2022 or the equivalent of 28 days based on an eight hour work day. Employees used an
average of 182 hours for Fiscal Year 2022 or the equivalent of 23 days. Charts and graphics in the
following analysis which refer to days of leave were calculated on an eight hour work day for
consistency. Many departments, offices, and functions may work a variety of hourly schedules over
eight hours.
1) by Department/Office (in days):
Again, Departments/Offices with similar locations and functions were combined for simplicity
in the following graph. County average of accrual and usage per employee is shown at the top
of the graph. The order of the departments/offices was maintained from Graph V for
consistency and comparison of average accrual and usage impact on vacation and sick leave
balances.
Vacation and Sick Leave #21/22-17 December 2022
Page 27
Graph XV
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
department/office.
Legend
Although the Fair and Expo
average accrual is less than
the County average, their low
average usage translates to
the higher average leave
balances seen in Graph V.
Accrued 99
Used 99
Justice Court averaged
higher usage than accruals
for Fiscal Year 2022.
Vacation and Sick Leave #21/22-17 December 2022
Page 28
Graph XVI
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
representation.
Graph XVII
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
overtime eligibility.
Graph XVIII
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
gender identity.
2) by CBA/ Non-Represented (in days):
3) by Overtime Eligibility (in days):
4) by Gender Identity (in days):
DCSEA represented
employees’ vacation and sick
leave includes additional
time in lieu of holidays
equating to 13 days of
accrued time.
As shown in Chart I, non-
exempt employees make
up 61% of the County
workforce.
Legend
Accrued 99
Used 99
Vacation and Sick Leave #21/22-17 December 2022
Page 29
Graph XIX
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
age group.
Graph XX
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
length of service.
5) by Age Group (in days):
6) by Length of Service (in days):
Legend
Accrued 99
Used 99
Employees in the 20-29
age group saved more
vacation and sick leave
than the other age groups
on average in Fiscal Year
2022.
Employees with
more than 30 years
of service used as
many days as were
accrued on average
in Fiscal Year 2022.
Vacation and Sick Leave #21/22-17 December 2022
Page 30
Graph XXI
Average days of
accrual and usage
per employee in
Fiscal Year 2022 by
ethnic group.
7) by Ethnic Identity (in days):
2.3.5 – COUNTY EMPLOYEE OPTIONAL CASH OUT:
County employees are offered optional usage programs consisting of pre-retirement cash outs and
annual cash outs which convert vacation and sick leave hours into additional pay. Pre-retirement
cash outs are for employee within three year of retirement. Annual cash out options occur in April
for most, except DCSEA represented employees who have the option in October. Rules surrounding
the amount of hours subject to cash out, eligibility requirements, and limitations vary by CBAs and
County policy for non-represented employees.
Pre-Retirement Election:
1) by CBA/Non-Represented, Gender Identity, and Overtime Eligibility (total number of
employees included in each group):
Fourteen (14) employees opted to use the pre-retirement cash out option in Fiscal Year 2022.
Total hours converted to pay equates to 53 weeks of vacation and sick leave.
Employees in the
Combined Group (Pacific
Islander and African
American) had the largest
margin between usage
and accrual on average in
Fiscal Year 2022.
Legend
Accrued 99
Used 99
Vacation and Sick Leave #21/22-17 December 2022
Page 31
Diagram II
Demographic
information of
employees
participating in the
pre-retirement
cash out option for
Fiscal Year 2022.
Graph XXII
Total weeks of
vacation and sick
leave cashed out
in Fiscal Year 2022
by
department/office.
Non-Represented (11):
AFSCME (2): 9-1-1Emp. Assoc. (1):
Annual Cash Out Election:
1) by Department/Office (in weeks):
Departments/offices budget for payouts of employee cash out options as an additional
expense within their overall personnel costs. Total hours converted to pay are shown as weeks
of vacation and sick leave. The order of the departments/offices was maintained from Graph
VII for consistency.
Legend
72 Sheriff’s Office
employees participated in
the annual cash out
option in Fiscal Year 2022.
This was nearly 3 times
the next highest
department/office.
Vacation and Sick Leave #21/22-17 December 2022
Page 32
Graph XXIII
Total weeks of
vacation and sick
leave cashed out
in Fiscal Year 2022
by representation.
Chart IX
Total weeks of
vacation and sick
leave cashed out
in Fiscal Year 2022
by overtime
eligibility.
Chart X
Total weeks of
vacation and sick
leave cashed out
in Fiscal Year 2022
by gender identity.
2) by CBA/Non-Represented (in weeks):
3) by Overtime Eligibility (in weeks):
4) by Gender Identity (in weeks):
DCSEA represented
employees forfeit
vacation leave greater
than 360 hours on April
1st each year. The annual
cash out option is one
method to reduce hours
under the maximum.
Legend
Legend
Vacation and Sick Leave #21/22-17 December 2022
Page 33
3. Management responses
Human
Resources
Department
Kathleen Hinman,
Human Resources
Director
Date: December 7, 2022
To: Aaron Kay, Performance Auditor
From: Kathleen Hinman, Human Resources Director
Re: Human Resource’s Response to Audit Report #2122-17 Vacation and Sick Leave
Thank you for the opportunity to review and comment on your report, Vacation and Sick Leave
Report #2122-17 (the Audit). Human Resources values your review and the perspective it provides management as work to
evaluate and refine our practices and systems now and into the future.
HR appreciates the attention the Audit brings in its broad analyses of overall County information as well as including
demographic information such as employee age, length of service, gender identity, and ethnic identity. These analyses will
help in providing perspective when we review paid time off benefits.
Below are responses to the Audit recommendations.
1) Recommendation: The NOVAtime system be configured to not allow for negative balance adjustments or
alternative methods should be explored.
Defer to Payroll for general application. In situations when the County has advanced knowledge that an employee is, or
will be, on leave and will exhaust their paid leave accruals, HR is supportive of the County exploring alternative methods
so that timely adjustments to monthly accruals may occur to avoid resulting in a negative balance.
2) Recommendation: The County explore the cost-benefit of additional NOVAtime data reporting services.
Agree. HR would like the review to include other time and attendance systems as well and not be limited to additional
NOVAtime services. Specifically, systems that integrate with the County’s Finance and Human Resources system Tyler
ERP should be considered. A time and attendance system that integrates with Tyler ERP which would improve reporting,
Vacation and Sick Leave #21/22-17 December 2022
Page 34
Human
Resources
Department
(continued)
processing, and data management as well as enhance user experience by having accruals available in Employee Self
Service.
3) Recommendation: The County continue to explore solutions to transition test employee accounts outside of the
production environment. Defer to Finance.
4) Recommendation: Payroll develop a system to ensure NOVAtime and Munis employee information are in sync
and correct.
Defer to Finance.
5) Recommendation: Payroll eliminate retained balances from all separated employees and continue to work with
the vendor on a solution to discontinue system generated leave time for separated employees.
Defer to Finance.
6) Recommendation: Human Resources and Payroll establish secondary review processes for employee leave
balance limit calculations and adjustments.
Agree. HR will conduct a secondary review of the completed list of employee leave hours to be sold, transferred, and
forfeited prior to submitting to payroll to make the adjustments. Estimated completion date is April 30, 2023.
7) Recommendation: The County develop a process to support supervisors in monitor employees’ use of vacation
leave in compliance with policy.
Agree. The County has a policy covering expectations for employee’s use of vacation leave. It is a supervisor’s
responsibility to hold their employees accountable to all policies, including this one. Human Resources will update the
attendance expectations in the employee performance evaluation form to include this review. This will prompt
supervisors to review all aspects of an employee’s attendance and use of leave with respect to County policies.
8) Recommendation: The County revise leave policy HR-16 to be in conformance with State law.
Agree. HR has drafted an Oregon Paid Sick Time (OPST) Policy which will be ready for consideration soon. Additionally,
HR will update HR-16 to comply with the OPST law and will present for consideration in coordination with the OPST
policy. Estimated completion date is March 1, 2023.
9) Recommendation: The County update policy and CBA contract language to align with practice.
Agree. HR will engage with unions, as each CBA is bargained, to align CBA language with practice. Estimated completion
date for the County policy update is July 1, 2023 and CBAs will be updated as they expire and require renewal.
Vacation and Sick Leave #21/22-17 December 2022
Page 35
Human
Resources
Department
(continued)
Finance
Department
Robert Tintle,
Chief Financial
Officer
10) Recommendation: The County to consider adjustments to the leave cash out policies to further address
constructive receipt.
Agree. Human Resources is working with Finance and Legal on understanding the impact of constructive receipt, if any,
on County policies and practices. We have already consulted with outside legal and benefit consultants, and timing is
dependent on consultant and staff availability.
Date: December 7, 2022
To: Aaron Kay, Performance Auditor
From: Robert Tintle, Chief Financial Officer
Re: Finance’s Response to Audit Report #21/22-17 Vacation and Sick Leave
Thank you for the internal audit of the vacation and sick leave information contained within the NOVAtime (timesheet) and
Munis (accounting/ human resources) systems. I appreciate your effort in this area as we work together to refine and advance
our automated systems.
Below are responses to the internal audit recommendations.
1) Recommendation: The NOVAtime system be configured to not allow for negative balance adjustments or
alternative methods should be explored.
Agree. The NOVAtime system is already configured to not allow for negative balances based on employee usage.
Negative balances are the result of manual correcting adjustments processed by payroll staff since the monthly accrual
is front-loaded at the beginning of the month for use by the employee prior to it being earned. As noted in the report,
only one employee was overpaid due to negative accrual adjustments. This one-time and rare occurrence was due to an
oversight when the final paycheck was calculated. Typical controls include a review of accruals and hours paid. Finance
will enhance the review and monitoring of timesheets and final paycheck calculations and consider any alternative
methods related to negative balances.
Vacation and Sick Leave #21/22-17 December 2022
Page 36
Finance
Department
(Continued)
2) Recommendation: The County explore the cost-benefit of additional NOVAtime data reporting services.
Agree. Exploring the cost-benefit of additional NOVAtime reporting services could be beneficial to the County. Being able
to pull large amounts of data much quicker, would result in time savings for payroll staff. This would also eliminate the
significant slowdown of the NOVAtime system which occurs currently when large reports are being processed. Payroll
will explore this further after the pay period alignment project is completed in calendar year 2023.
3) Recommendation: The County continue to explore solutions to transition test employee accounts outside of the
production environment.
Agree. Finance will continue to work with the vendor and explore other solutions to transition test employee accounts
outside of the production environment.
4) Recommendation: Payroll develop a system to ensure NOVAtime and Munis employee information are in sync
and correct.
Agree. Payroll will develop periodic reports that will compare Munis information and NOVAtime profile information to
ensure employees’ information is up-to-date and accurate in NOVAtime. Estimated completion date, March 31, 2023.
5) Recommendation: Payroll eliminate retained balances from all separated employees and continue to work with
the vendor on a solution to discontinue system generated leave time for separated employees.
Agree. This is already a practice. Off-cycle payroll review already includes a secondary review of TML balances being
cleared out. It is a system issue that TML system accruals randomly reappear. Payroll has been working with NOVAtime
since implementation to find a solution. Payroll will continue to work with the vendor for a solution to this system issue.
6) Recommendation: Human Resources and Payroll establish secondary review processes for employee leave
balance limit calculations and adjustments.
Agree. Payroll will create reports to reconcile leave balances annually after the TML sell backs and TML to sick banks
transfers have been entered in May. Estimated completion date is June 15, 2023.
7) Recommendation: The County develop a process to support supervisors in monitoring employees’ use of
vacation leave in compliance with policy.
Defer to Human Resources.
8) Recommendation: The County revise leave policy HR-16 to be in conformance with State law.
Defer to Human Resources.
Vacation and Sick Leave #21/22-17 December 2022
Page 37
Finance
Department
(Continued)
Administration
Nick Lelack,
County
Administrator
9) Recommendation: The County update policy and CBA contract language to align with practice.
Defer to Human Resources.
10) Recommendation: The County to consider adjustments to the leave cash out policies to further address
constructive receipt.
Agree. Finance, Human Resources and Legal have already consulted with outside legal and benefit consultants on a plan
to address any potential constructive receipt issues. The first phase will identify and qualify any constructive receipt
issues and, if needed, design a structure going forward. While the exact costs are unknown at this time, it will require a
significant investment in outside consultants to review current policies and develop recommendations. Timing will
depend upon the availability of consultants.
Date: December 6, 2022
To: Aaron Kay, Performance Auditor
From: Nick Lelack, County Administrator
Subject: Response to Vacation and Sick Leave Audit
________________________________________________________________________________________________________
Thank you for the detailed review of vacation and sick leave information. We appreciate your work on
this important topic. Please see Administration’s responses to specific findings below:
Recommendation #1 - The NOVAtime system be configured to not allow for negative balance
adjustments or alternative methods should be explored.
We defer to Finance, as this is a technical recommendation.
Recommendation #2 - Explore the cost-benefit of additional NOVAtime data reporting services.
We support Finance exploring the cost of additional data reporting services. Payroll will explore this
Vacation and Sick Leave #21/22-17 December 2022
Page 38
Administration
(Continued)
further after the pay period alignment project is completed in 2023.
Recommendation #3 - Continue to explore solutions to transition test employee accounts outside of the production
environment. We defer to Finance, as this is a technical recommendation.
Recommendation #4 - Payroll develop a system to ensure NOVAtime and Munis employee
information are in sync and correct.
We agree with this recommendation. Finance has estimated that this will be complete by March 31,
2023.
Recommendation #5 - Eliminate retained balances from all separated employees and continue
to work with the vendor on a solution to discontinue system generated leave time for separated
employees.
We agree with this recommendation. This is already a practice. A system issue is causing accruals to reappear.
Finance will continue to work with the vendor on this issue.
Recommendation #6 - Human Resources and Payroll establish secondary review processes for
employee leave balance limit calculations and adjustments.
We agree with this recommendation. Finance and HR estimate they will be able to complete this by June
15, 2023.
Recommendation #7 - The County develop a process to support supervisors in monitoring employees’ use of
vacation leave in compliance with policy.
We believe this review should occur by supervisors. We will review this recommendation with
Department Heads at our next Department Head meeting.
Recommendation #8 - Revise leave policy HR-16 to be in conformance with State law.
We agree with this recommendation. HR has drafted an Oregon Paid Sick Time (OPST) Policy for
consideration. HR will update HR-16 to comply with the OPST law and will present for consideration in
coordination with the OPST law. Estimated completion date is March 1, 2023.
Recommendation #9 - Update policy and CBA contract language to align with practice.
We agree with this recommendation. We will engage in this process during future contract negotiations
with each union to align CBA language with practice. Estimated completion date for the County policy
Vacation and Sick Leave #21/22-17 December 2022
Page 39
Administration
(Continued)
update is July 1, 2023 and CBAs will be updated as they expire and require renewal.
Recommendation #10 - The County to consider adjustments to the leave cash out policies to
further address constructive receipt.
Finance, Human Resources and Legal have already consulted with outside legal and benefit consultants
on a plan to address any potential constructive receipt issues. The first phase will identify and qualify
any constructive receipt issues and, if needed, design a structure going forward. While the exact costs
are unknown at this time, it will require a significant investment in outside consultants to review current
policies.
i. OBJECTIVES and SCOPE
Appendix A:
Objective,
Scope, and
Methodology
“Audit
objectives” define
the goals of the
audit.
Objectives included:
Based on audit scope, work plan and further discussions with County management, the objectives
developed were limited to include:
1) Analysis and assessment of employee leave time to inform County policy and procedures.
a) Usage in comparison to budgeted department/office costs.
2) Identify opportunities to improve and make more efficient.
3) Be aware of any issues with compliance with federal and state regulations and requirements, as
may be applicable.
Scope and timing:
The audit commenced in June 2022 and extended into November 2022. The focus of the review was
on personnel data and information maintained by County information technology, fiscal, and HR
departments, as of June 2022, relevant to these objectives. We reviewed any historical information
to support the conclusions as necessary. The scope of the audit did not include all aspects of
internal controls employed and was limited to hours classified as vacation and sick leave.
Vacation and Sick Leave #21/22-17 December 2022
Page 40
ii. METHODOLOGY
“Audit procedures
are created to
address the audit
objectives”
Audit procedures included:
• Interviews of selected departmental management and staff knowledgeable of the various
processes covered to support the audit objectives.
• Review applicable collective bargaining agreements, County policies and procedures for
compliance requirements.
• Evaluation of the reliability of data provided from the NOVAtime Time Management Online
system. During the evaluation, it was found certain limitations of the data reporting
prevented the audit from analysis of data prior to Fiscal Year 2021-22.
• Detailed tests and analysis of available data to support the audit objectives including the
following:
o evaluation of leave balances effect on department/office budget
o operation of leave activity including manual adjustments
o compliance with collective bargaining agreements and County policy
o employee options within collective bargaining agreements and County policy
o selected categories for the purpose of informing policy
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.)
The County Internal Auditor was created by the Deschutes County Code as an independent office
conducting performance audits to provide information and recommendations for improvement.
Vacation and Sick Leave #21/22-17 December 2022
Page 41
{End of Report}
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