Reduce fraud with payroll and timekeeping controls

Almost inevitably, a new year brings new goals. We check the status of current goals and jot reminders to work toward others at a later date. As public sector administrators draft that goal list, consider including one to review your organization’s internal payroll and timekeeping controls. While we would like to trust our coworkers, the reality is the public sector is second only to the banking and financial services industry for the likelihood of fraud to take place. Further, more than 50 percent of employees who conduct fraud have more than five years’ tenure with the organization.[1] Implementing or updating payroll and timekeeping controls are a low-to-no cost way to reduce your organization’s exposure to fraud.

Reaffirm internal controls with managers

Managers are one of the best resources to mitigate timesheet fraud since they have the closest interaction with employees. While everyone is meeting to discuss rule change implications for your organization, utilize the time to reaffirm the need for timekeeping internal controls and highlight the associated risks if not met.

• Emphasize the importance of closely reviewing timesheets. Timesheet approval is only effective if properly executed.
• Managers should personally deliver the approved timesheets to payroll if paper timesheets are used. Even the helpful employee who offers to drop off the sheets with payroll should be politely declined. Allowing an employee access to the approved timesheets negates the control  in place with the signature approval.
• Require approvers to cross out blank lines or highlight the last entry of timesheets. This prevents an employee from adding additional time after the timesheet is approved.
• Review security measures for password protection if you use an electronic or web-based time entry system. A supervisor who saves passwords on a spreadsheet on the shared-drive (or shares the spreadsheet with their administrative assistant) does not have a secure password.

Updates for administration

In addition to the front-line process improvements managers can implement, public sector organizations should take a high-level look at their system processes or create additional checks to make payroll and timekeeping controls more consistent.

• Routinely prepare exception reports listing overtime that exceeds your policy (i.e. a policy that overtime pay cannot exceed 25 percent of base pay), and verify the appropriate approvals were obtained if you use an electronic timekeeping system.