The Payroll Book

CHAPTER 15Payroll Security and Internal Controls

An embezzlement of $50 million makes the news. What we don't see or hear about are all the small embezzlements and losses in small companies around the country on a daily basis.

Security is about managing both internal and external threats. In reality, the threats to the integrity of your payroll system are far more likely to be internal than external. We all see the articles about a million identities stolen. It makes great news. Let's go through payroll from beginning to end, and touch on some of the security problems in the following areas:

• Manuals and procedures
• Hiring
• Time collection
• Payroll calculation
• Identity theft
• Check and other fraud
• Tax filing and deposit errors and problems
• Internal controls

MANUALS AND PROCEDURES

Probably the most important thing you can do in providing security is to write everything down. By having a procedure manual, everything you want to do to insure the security of your system is in one place and can be followed to the letter. In addition, new people will have all the experience of the people that came before them. No institutional knowledge will get lost when someone quits or retires. Without this, everything is helter-skelter, and things that are important will be missed.

A good procedure manual is, however, not static. It changes and is updated on an ongoing basis. There are always going to be changes. Sometimes things come out wrong. You will figure out why and put a procedure in place ...