A) Employee compensation – SEGREGATION OF DUTIES1) Are responsibilities for supervision and time-keeping functions adequately segregated from personnel, payroll processing, disbursement, and general ledger functions? 2) Are responsibilities for the payroll processing function adequately segregated from the general ledger function? 3) Is payroll distribution supervised by employees, as follows: a) Who are not responsible for hiring or firing employees? b) Who do not approve time reports? c) Who take no part in payroll preparation? 4) Are responsibilities for initiating payments under employee benefit plans adequately segregated from accounting and general ledger functions? 5) Is reconciliation of the payroll fund or bank account done regularly by employees independent of all other payroll transaction processing activities? 6) If EDP is used, is the principle of segregation of duties maintained in processing activities? B) PROCEDURAL CONTROLS1) Do personnel procedures and controls include the following? a) Properly authorizing, approving, and documenting all changes in employment (additions and terminations), salary and wage rates, and payroll deductions? b) Promptly reporting notices of additions, separations, and changes in salaries, wages, and deductions to the payroll processing function? c) Maintaining appropriate payroll records for accumulated employee benefits (vacation, pension data, sick leave, etc.)? d) Interviewing, by the personnel department, of terminating employees, as a check on departure and as a final review of any termination settlement? e) Written personnel policies? f) Establishing controls to ensure payroll costs charged to grants are in compliance with grant agreements? g) Ensuring payroll and personnel policies governing compensation are in accordance with the requirements of grant agreements? h) Determining wages are at or above the federal minimum wage? 2) Do supervision/time-keeping procedures and controls include the following? a) Review and approval, by the employee’s supervisor, of hours worked, overtime hours, and other special benefits? b) Procedures for time keeping and attendance records? c) Review for completeness and for the employee’s supervisor’s approval of time cards or other time reports? d) Punching of time cards, if used, only by the employees to whom they are issued? e) Placing the time clock in a position where it can be observed by a supervisor? f) Procedures for authorizing, approving, and recording vacations, holidays, and sick leave and for approving and controlling compensatory time? 3) Do payroll processing procedures and controls include the following? a) Controls over payroll preparation? b) Approval and documentation of changes to the EDP master payroll file? c) Limiting access to the EDP master payroll file to employees who are authorized to make changes? d) Review and approval of completed payroll registers before disbursements are made? e) Review of documents supporting employee benefit payments (such as accumulated vacation or sick leave) before disbursements are made? f) Review for reasonableness of comparisons (reconciliations) of gross pay for current to prior period payrolls by a knowledgeable person not otherwise involved in payroll processing? g) Review of the payroll (examination of authorizations for changes noted on reconciliations) by an employee not involved in its preparation? h) Balancing the distribution of dollars and hours of gross pay with payroll registers and review by someone independent, but knowledgeable of this area? i) Including in the review a comparison to amounts appropriated and budgeted? j) Prohibiting payroll advances to officials and employees, or subjecting them to appropriate review? 4) Do payroll disbursement procedures and controls include the following? a) Strong encouragement for all employees to receive payroll disbursement through “direct deposit” to their bank account? b) Keeping the signature plates and use of the payroll check-signing machines under control of the official whose name appears on the signature plate, or under control of an employee to whom that responsibility has been delegated? c) Maintaining a log to reconcile the counter on the check-signing machine with the number of checks issued in each payroll disbursement? d) Maintaining a separate payroll fund, or an imprest-basis payroll bank account? e) Regularly reconciling the payroll fund or bank account? f) Comparing, by someone independent of the payroll department, payroll check endorsements, on a test basis, with signatures on file? g) If payment is made in cash, requiring signed receipts; and having someone independent of the payroll department compare the signed receipts, on a test basis, with signatures on file? h) Controlling the supply of unused payroll checks? i) Requiring employees to provide identification before being given checks or pay envelopes? j) Prohibiting employees from accepting another’s pay? k) Returning unclaimed wages to a custodian independent of the payroll department? l) Having employees who distribute checks or pay envelopes make a report of unclaimed wages directly to the accounting department? m) Making payments of unclaimed wages at a later date, only upon presentation of appropriate evidence of employment and with approval by an officer or employee who is not responsible for payroll preparation or time reporting? n) Comparing W-2 forms to payroll records and mail by employees not otherwise involved in the payroll process? o) Procedures for investigating returned W-2 forms? p) Periodic distribution of payroll checks by the internal auditors, to ascertain employees exist for all checks prepared? 5) Do general ledger procedures and controls include the following? a) Adequate account coding procedures for classification of employee compensation and benefit costs, so such costs are recorded in the proper general ledger account? b) Proper recording or disclosure of accrued liabilities for unpaid employee compensation and benefit costs? |