Internal Controls Overview

Personnel/Payroll

This information applies if a department prepares or approves personnel actions, or accounts for payroll costs.

Segregation of Duties - Different people should perform key payroll duties. Employees should not process or approve actions affecting their own pay.

Suggested Practices - Have Different Individuals

• Prepare and update online payroll and personnel data
• Approve online payroll actions
• Review monthly payroll expense reports
• Review and reconcile financial records monthly
• Distribute the payroll

Potential Consequences of Not Segregating Duties

• Unauthorized payments to non-existent employees
• Unauthorized payroll transactions processed
• Improper changes to payroll fines and personnel documents
• Misappropriation of funds
• Overpayments

Accountability, Authorization and Approval - Authorize, review and ensure payroll and personnel actions comply with policy. Maintain data confidentiality by limiting access to authorized personnel.

Suggested Practices

• Periodically review and update signature authorizations
• Ensure policies are followed when changes are made to timekeeping records
• Review attendance records for accuracy and compliance with policy
• Reconcile official records for accuracy of recorded transactions

Potential Consequences If Accountability Does Not Exist

• Unauthorized, unnecessary or fraudulent payments
• Unauthorized payments to non-existent employees
• Charges recorded in incorrect accounts
• Inaccurate entries made to payroll, personnel and financial records
• Inability to provide paycheck on payday

Security of Assets - Protect employee resources. Checks and payroll advices should be properly stored, and access to personnel records should be restricted to only those employees who need the information to fulfill their job responsibilities.

Suggested Practices

• Request proof of identity when appropriate
• Keep private and sensitive information secured

Potential Consequences If Assets Are Not Adequately Secured

• Lost or stolen checks
• Violate privacy laws
• Sensitive and private employee information is jeopardized

Review and Reconciliation - Ensures that you are paying the right people at the correct rate.

Suggested Practices

• Review and audit payroll logs
• Compare actual payroll costs to estimated payroll costs
• Periodically reconcile official records to ensure recorded expenses are accurate and timely

Potential Consequences If No Review And Reconciliation

• Improper charges to department budgets
• Payments to non-existent employees
• Disallowances resulting from costs charged to incorrect account/fund
• Duplicate payments made
• Employee data is misstated
• Financial records are misstated