Internal Controls Related to Payroll
Michael V. McKee, University Controller
Segregation of duties is a basic, key internal control that is used to ensure that errors or irregularities are prevented or detected on a timely basis. It means that no single individual should have control over two or more phases of a transaction or operation. Instead, there is a crosscheck of duties.
Segregation of payroll duties is extremely important because payroll represents a major process and supports the University’s largest operational disbursement. Please review security role assignments and job duties of employees with payroll responsibilities to determine there are no role conflicts and duties are properly segregated. For example, proper segregation of duties would not allow the employees that have the ability to approve job actions, approve and record time in the time and labor module to also have access to payroll checks. Direct deposit of wages into a bank account instead of issuing a paycheck is the recommended practice. However, if a check is issued, access should be limited to someone who does not have UF_EPAF Level 1 Approver (which replaced UF_HR Level 1 Approver ) or UF_TL Approver roles.
In those instances where duties cannot be fully segregated or where role conflicts cannot be avoided, compensating controls must be established. Compensating controls are additional procedures designed to reduce the risk of errors or irregularities. An example of a compensating control is the independent documented review of the payroll list, commonly referred to as a pay list, which is a critical payroll report produced each pay period, available through myUFL Enterprise Reporting.
Review of the preliminary and final pay lists is the primary internal control to ensure that payroll is calculated, recorded, and disbursed accurately for services performed at the University of Florida. Unit administrators should review time recorded in a timely manner and resolve errors prior to approval of payable time. Review of the preliminary pay lists will verify that errors have been resolved and reduce the need for issuance of emergency checks. Review of the final pay lists will also ensure that only active employees are receiving pay and the amount paid is for the proper number of hours at the correct rate of pay. Recommended best practice is to retain the final pay lists, with evidence of approval, in the unit.