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What is the risks with regards to personnel in the payroll and personnel function


Unsatisfactory recruitment/retention
Incorrect dismissal
Unauthorised amendments to employee records
Inaccurate/incomplete records


What is the manual controls of personnel in the payroll and personnel function


Requests for appointment/dismissal from section
Requests signed & countersigned
Changes to rates & grades decided by personnel department/wage committee
Changes documented & authorised
All amendments in above promptly committed to sequenced payroll amendment forms, cross referenced to supporting documentation
Sound personnel practices
File for each employee
Clock cards and stationary controls


What is the automated controls of personnel in the payroll and personnel function


Employee masterfile

  • amendments on MAF’s - no verbal instructions
  • MAF pre-printed, sequenced, design principles
  • signed by two senior employees
  • cross referenced to supporting docs
  • restrict write access to master file to specific member
  • masterfile amendments should be automatically sequentially logged, no write access
  • screen aids & program checks - minimum keying in info, drop down list, screen formatting, dialogue, employee number, mandatory fields, dependency check, range/limit checks, field size check, alphanumeric check, no write access to ID, income tax number etc, verification of employee number and minimum entry/minimum keying in info
  • logs reviewed by senior member regularly
  • sequence of logs checked
  • logged amendments should be checked for supporting MAF that is authorised
  • all details correct
  • MAF sequence checked against log

What is the functions of timekeeping


accurate & complete record of valid hours worked
clocking system
hours clocked calculated & totalled before sent to payroll


What is the risks of timekeeping


Invalid hours

Hours incorrectly calculated


What is the manual controls of timekeeping


Entry and exit points - limited, turnstyle, supervised
Clock cards prepared by personnel department in terms of authorised employee list, placed on racks at entry point
At end of wage period, collect all cards and agree number of cards to employee list, calculate ordinary time, calculate overtime, divide into workable batches, complete batch control sheet
Before batch transferred to payroll, section head should check calculations authorise overtime, check & sign batch control sheet
Detail of batch entered into batch register, accompany clock cards to payroll preparation


What is the automated controls of timekeeping


Timekeeping - biometric/electronic access

  • if entry and exit points are not fitted with clock cards, but biometric or electronic access, then it will automatically transfer hours worked to payroll preparation
  • no need for batch controls
  • no conversion of hours into standard and overtime
  • process - employee swipes or presents card to reader, timing device reads the info stored on the chip/magnetic strip, records hours worked, automatically calculates hours worked, sends payroll
  • weakness - could swipe card of absent employee
  • a fingerprint needs to be added to employee masterfile on system
  • access to module recording the data strictly controlled
  • responsibility for capturing data assigned to personnel department
  • program controls prevent biometric data being replaced
  • basic controls around exit/entry should apply
  • supervisors should access info pertaining to employee attendance/follow up on absent employees or late comers

How does approval of hours worked work


Before payroll preparation commences, a schedule of normal and overtime hours for the week should be printed and sent to the foreman for approval
The foreman should
*check the schedule for any incorrect or unusual hours recorded, for example normal hours in excess of 40 hours per week, high overtime hours and low normal hours
*confirm that the overtime hours recorded were authorised prior to being worked and/or that they were actually worked
*confirm that there are hours worked for all employees and that any missing normal hours agree with the attendance reports generated by the access/scanning device
Any alterations to the schedule should be recorded on the schedule with reasons and signed by the foreman. Any changes, for example any increases or decreases in overtime hours which the foreman requires, should be counter-signed by another supervisory level employee


How does entering additional earnings and deductions work


The payroll clerk responsible for preparing the payroll will be responsible for entering these on the employee’s record:
*access to the applicable module will be restricted in the usual manner
*to access a particular employee’s record, a valid employee number will have to be entered
*it is usually unnecessary for the payroll clerk to have to enter each employee’s number, the software will start with the first employee and automatically brings up the next employee’s record as each record is confirmed
On accessing the module, the screen will come up formatted as an employee payment record. This will reveal
*all standing data applicable to the employee
*fields containing year to date earnings including pension fund and medical aid contributions, deductions, net pay
*fields revealing the current period’s normal and overtime hours worked, the company’s contribution to a pension fund or medical aid
*a selection of fields designated in terms of additional categories of amounts to be paid to the employee
There will be no write access to
*the standing data fields
*year to date fields
*some of the fields already populated by the payroll software such as medical aid contributions and deductions, contributions to pension funds
If hours worked have already been approved on the system, there will also be no write access to the current period’s hours worked fields
If these fields need to be altered in terms of the hard copy hours worked schedule:
*there may be limit checks on the normal and overtime fields and
*all changes will be logged and reviewed before the payroll is finally approved
Additional amounts to be paid to an employee should be authorised in writing by appropriate personnel. The same requirements should apply to any additional deductions entered
*screen prompts may alert the payroll clerk to the fact that a particular deduction must be made for a specific employee
As the objective is to ensure that the source data is absolutely correct before processing takes place, a second payroll clerk may check the employee payment records in detail or selectively


How does the processing to create the payroll work


Actual processing will be carried out by the computer without human intervention. The computer will only process the data it is supplied but will do it accurately and completely
Processing will not commence until the employee payment records have been confirmed by the payroll clerk. Even though the input has been subjected to stringent controls, additional programming controls may also be implemented to detect invalid conditions.


How does the approval of payroll work


Once processing is complete, the payroll and a number of supporting schedules will be produced for final checking by the payroll administrator. He will carry out checking procedures such as
*agreeing the number of employees on the payroll to the number of employees on the employee master file
*following up on the run-to-run balancing report
*following up on any exception reports
*reviewing analytical summaries which may have been produced
*reviewing overtime schedules
*reviewing period-to-period reconciliation and agreeing it to supporting documentation
If any errors are detected, they should be followed up
*the payroll administrator should not have write access to the file
*changes should be referred back to the wage clerk for correction
*all changes should be logged
The review process can be on screen or on hard copy documents and additional senior supervisory/management
*once the payroll administrator is satisfied with the payroll file, he will select the approve option and there will be no further write access to the file, and for confidentiality purposes, read access should be given to only those who need it


What is the controls that should be performed during pay-out of wages and unclaimed wages


Wage packets should be made up by two wage department members
On delivery of the payroll and pay packets to a section, the section head should
*agree the number of pay packets to the payroll
*agree control totals
*sign the payroll to acknowledge receipt
The pay packets and payroll should be locked away until payout
The wage payout should be conducted by at least two employees
Employees should
*present identification
*acknowledge receipt of their wage packet by signing the payroll
*count their cash and immediately report any discrepancies to the paymaster. These should be recorded on the payroll
In principle, employees should not be allowed to accept a pay packet on behalf of another employee
At the conclusion of the payout, the paymaster and foreman who have conducted the payout, should
*agree all unclaimed pay packets to the payroll
*identify clearly on the payroll, all employees for whom there is an unclaimed packet
*enter the details of unclaimed wages in an unclaimed wage register
*sign the payroll to acknowledge this control procedure
The unclaimed pay packets and payroll should be retained by the paymaster who should lock them away
When employees wish to collect their unclaimed wages, they must identify themselves to the paymaster and acknowledge receipt of their pay packets by signing the unclaimed wage register
Regular independent reconciliations of unclaimed pay packets on hand and the unclaimed wage register should be performed and the unclaimed wage register reviewed for unusual occurrences
Any wages remaining unclaimed after two weeks, should be banked and a copy of the deposit slip attached to the unclaimed wage register and cross-referenced to the relevant entries


How does payments to employees by EFT work


Access to the bank account on the internet
Approving the payment
Detection of unauthorised payments


How does the salary and wages control account work


Isolation of responsibility to one employee for raising and paying over deductions
A strict monthly schedule for
*posting the entries to raise the liabilities for the deductions
*making the necessary payments on a timeous basis, and conducting
*supervisory checks on the above activities should be prepared
The payroll and return forms should be presented to signatories for their scrutiny before the deduction cheques are signed. They should check the return carefully to see that it has been accurately and properly filled in
Independent timeous scrutiny of the general ledger accounts for deductions to confirm that they are being promptly cleared, should be carried out by the financial accountant


What is the key risks in the payment preparation & pay-out function


Material expense for most entities
Fraud risk-fictious hours/ghost employees
Non-compliance with laws/regulations
Inaccurate calculations of gross/net pay