Internal Controls Practices

Payroll

UCD is the largest employer in Yolo County, with an average monthly payroll of over $140 million. UCD supports a staff of almost 20,000 full-time equivalent employees. Follow these internal control practices to make sure you handle payroll actions appropriately.

Learn best practices if you prepare or approve personnel actions, account for payroll costs, or distribute checks to employees.

Separation of duties

A major step you can take to ensure proper payroll processing is to have different people performing key payroll duties. Employees should not process or approve actions affecting their own pay.

  • Best practice is to have different people:

    • Prepare and update online payroll and personnel data

    • Approve online payroll actions

    • Review monthly payroll expense reports

    • Review and reconcile financial records on a monthly basis

    • Distribute the payroll

  • Potential consequences if duties are not separated:

    • Unauthorized payments made to non-existent employees

    • Unauthorized payroll transactions processed

    • Improper changes made to payroll files, personnel documents

    • Misappropriation of funds

    • Overpayments resulting in UCD loss of funding to terminated employees

Accountability, authorization, and approval

When you authorize, review, and ensure that payroll entries and personnel actions follow policy, you are adhering to accountability principles. Maintain data confidentiality by giving payroll and personnel access only to authorized individuals.

  • Best practices:

    • Periodically review and update signature authorizations/delegations.

    • Obtain pre-approval for changes made to timekeeping records.

    • Review attendance records for accuracy and compliance to policy.

    • Reconcile ledgers monthly for accuracy of recorded transactions.

  • Potential consequences if accountability does not exist:

    • Unauthorized, unnecessary, or fraudulent payments

    • Unauthorized payments made to non-existent employees

    • Improper charges to incorrect account/ funds

    • Inaccurate entries made to payroll, personnel, and financial records

    • Inability to provide paycheck on payday

Security of assets

It's important to protect employee resources. Secure payroll checks and Surepay statements in a safe location, and restrict access to personnel records to designated employees who need the information to fulfill their job functions.

  • Best practices:

    • Request proof of identity prior to distributing payroll.

    • Notify payees of unclaimed checks or Surepay statements.

    • Return unclaimed checks to the Payroll office.

    • Keep private and sensitive information secured.

  • Potential consequences if your assets have not been secured:

    • Lost or stolen checks

    • Violate privacy laws

    • Sensitive or private employee information jeopardized

Review and reconciliation

On average, payroll costs will represent the largest cost component of your department budget. Monthly reconciliation activities ensure that you're paying the right people at the correct rates.

  • Best practices:

    • Review and audit monthly payroll costing reports.

    • Compare actual payroll costs to estimated costs to discover any variances.

    • Perform monthly reconciliations of operating ledgers to ensure accuracy and timeliness of expenses.

  • Potential consequences if review and reconciliation is not performed:

    • Improper charges made to department budgets

    • Payments made to non-existing employees

    • Disallowances resulting from costs charged to incorrect accounts, funds, or awards

    • Duplicate payments made

    • Inaccurate recording of payment type distorts employee data

    • Financial records misstated


Resources

For more information, please see:

For questions on how to process payroll, contact Payroll.  For questions on internal control practices, contact Controls & Accountability.

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Supplemental content

Controls & Accountability