Sunday, July 26, 2009

Payroll Master File Fraud

Payroll fraud has been a common fraud for many years and continues to be so. One area of the payroll system susceptible to fraud is the payroll master file. Issues in relation to the payroll master file include the following:

  • Unauthorised changes being made to a persons pay classification, pay rates, allowances paid.
  • Adding an additional person on the payroll – ghost employee.
  • Not removing an employee who no longer works for the organisation from the payroll.
  • Unauthorised changing of bank account details.

So how do we go about making it difficult for someone to commit fraud using the payroll master file? The following are examples of controls that will help reduce the likelihood of fraud occurring:

  • Develop an exception report that details any changes made to the payroll at each pay run. The report should be forwarded to someone not in the payroll section and any changes that do not appear reasonable should be investigated.
  • The person who has authority to make changes to the payroll master files does not have authority to process the regular payroll or have access to this section of the payroll function.
  • Develop a report that shows any duplicate payments to one employee or one bank account. Again, this report should be forwarded to someone not in the payroll section and anything listed on the report should be investigated.
  • HR should, on a periodic basis review the payroll for any names of employees that are no longer in the employ of the organisation.

1 comment:

  1. Now why didn't I know about this blog?

    I had a client where 13 people knew the super-user password to the timesheets application - which fed timesheet data to the payroll program. It had just happened that way over time as people got lax.

    Needless to say everyone took advantage of the opportunity to their benefit...

    Thanks: Micheal Axelsen