1. WESTERN PA CHAPTER OF THE AMERICAN PAYROLL ASSOCIATION – NOVEMBER 4, 2015 Risk Management for Payroll

2. Western PA Chapter of the American Payroll Association Page 2 Leading Practices in Payroll Establish Discipline and Manage Expectations Enforce Accountability Be Transparent Avoid Manual Processes (Effectively Use Technology) Reconcile, Balance and Audit Stay Up-to-Date Benchmark

3. Western PA Chapter of the American Payroll Association Page 3 Leading Practices in Payroll, Continued Performing your own assessment Understand the process to be improved Research leading/best practices Select organization for analysis Collect data Identify barriers to change Drive change within your company

4. Western PA Chapter of the American Payroll Association Page 4 Understanding Risk Management What is Risk What is internal control The Risk Management process Identifying Risks Risk Appetite Likelihood Impact How Controls are tested

5. Western PA Chapter of the American Payroll Association Page 5 Common Payroll Risks Issuance of unauthorized payroll and transactions Nonexistent employees Terminated employees Incorrect/inaccurate disbursements (overpayments) Excess time/untimely processing/delayed payments Misstatement of payroll and payroll tax accounts Payroll theft Loss of sensitive payroll information Fines, lawsuits and penalties

6. Western PA Chapter of the American Payroll Association Page 6 Common Payroll Internal Controls Segregation of Duties Human Resources Recording Time Worked Preparing Payroll Paying Employees and Payroll Taxes Security of Assets Review and Reconciliation

7. Western PA Chapter of the American Payroll Association Page 7 Common IT Controls Access (Physical & Logical) Change control and management Security administration Data backup and recovery Security and Privacy Application Controls Input Process Output

8. Western PA Chapter of the American Payroll Association Page 8 Audit Benefits Audits can re-affirm the existing payroll process and adequacy of internal controls. (Assurance) Audits 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).

9. Western PA Chapter of the American Payroll Association Page 9 Roles and Responsibilities What 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.

10. Western PA Chapter of the American Payroll Association Page 10 Internal Control Assessment Questions 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?

11. Western PA Chapter of the American Payroll Association Page 11 Internal Control Assessment, Continued Questions to Consider Does 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?

12. Questions?