November 4 2015 Risk Management for Payroll Leading Practices in Payroll Establish Discipline and Manage Expectations Enforce Accountability Be Transparent Avoid Manual Processes Effectively Use Technology ID: 565655
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WESTERN PA CHAPTER OF THE AMERICAN PAYROLL ASSOCIATION
– November 4, 2015
Risk Management for PayrollSlide2
Leading Practices in Payroll
Establish Discipline and Manage ExpectationsEnforce Accountability
Be TransparentAvoid Manual Processes (Effectively Use Technology)Reconcile, Balance and Audit
Stay Up-to-DateBenchmarkSlide3
Leading Practices in Payroll, Continued
Performing your own assessmentUnderstand the process to be improved
Research leading/best practicesSelect organization for analysisCollect dataIdentify barriers to change
Drive change within your companySlide4
Understanding Risk Management
What is RiskWhat is internal control
The Risk Management processIdentifying RisksRisk AppetiteLikelihood
Impact
How Controls are testedSlide5
Common Payroll Risks
Issuance of unauthorized payroll and transactionsNonexistent employees
Terminated employeesIncorrect/inaccurate disbursements (overpayments)Excess time/untimely processing/delayed payments
Misstatement of payroll and payroll tax accountsPayroll theft
Loss of sensitive payroll information
Fines, lawsuits and penaltiesSlide6
Common Payroll Internal Controls
Segregation of DutiesHuman Resources
Recording Time WorkedPreparing PayrollPaying Employees and Payroll TaxesSecurity of Assets
Review and ReconciliationSlide7
Common IT Controls
Access (Physical & Logical)Change control and management
Security administrationData backup and recoverySecurity and PrivacyApplication Controls
Input
Process
OutputSlide8
Audit Benefits
Audits can re-affirm the existing payroll process and adequacy of internal controls. (Assurance)A
udits can identify gaps to providing adequate controls in the payroll process.Audits reinforce payroll’s role in safeguarding the company’s assets. Compliance requirements can reinforce need to have consistent and compliant processes and policies.
Audits can identify and recommend improvements for operating efficiencies and effectiveness.
Audit can be an ally (Lends Creditability).Slide9
Roles and ResponsibilitiesWhat role can the payroll department perform?
Develop process workflow for each function in the payroll process.
Create and update written documentation for each step in the payroll process.Audit record-keeping and retention procedures to verify records and access.
Identify and correct gaps and risks that could lead to control and security issues and communicate them to management.
Develop methods of measurement of correcting gaps and risks.
Document
the design, evaluation, and testing of internal controls to be used in management
certification (Sarbanes-Oxley Process).
Even if elements of your payroll function/process is outsourced this does not
remove the company’s responsibility to ensure providers’ internal controls
are adequately implemented and operating effectively.Slide10
Internal Control AssessmentQuestions to Consider
Does the department have an up-to-date organizational chart that depicts the responsibilities and reporting relationships of each employee?
Have written department specific policies and procedures been developed for conducting the business and financial operations?Are there current job descriptions for all staff members?Is there timely communication of updates and reminders of policies and procedures?Does management monitor and review leave and payroll records to ensure compliance with company policy and accuracy of information?
Are your employees knowledgeable about relevant policies and procedures for payroll and human resources?
Are timecards signed/approved by an employee’s supervisor, or designated individual by the department, who has specific knowledge regarding the hours worked by the employee?Slide11
Internal Control Assessment, Continued
Questions to ConsiderDoes the department keep records of any variable hours worked?Are your payroll and human resources files kept secure and confidential?
How are you protecting your employee’s personal and confidential information (social security numbers, name, address, Date of Birth, etc.) which is paper based and electronic format?How do you handle requests for employee information and how is it communicated?Is there assigned responsibility for timely submission of new hire documentation, terminated employee documentation, changes to an employee’s file, and other payroll and human resources documents?Slide12
Questions?