This section contains guidelines for State
Departments and agencies to strengthen and improve the
effectiveness of existing time-attendance and payroll
procedures and controls. It is applicable to all employees
coming under Section 26 of the Civil Service Law-Rules
Essential principles of good
internal control are presented. These principles are general
in nature an must be embodied in all time-attendance and
payroll systems. In addition, specific requirement of
the Comptroller are presented for immediate implementation
when current practice is not in compliance.
The Comptrollers authority
for prescribing accounting systems is derived from Section
112 of the State Finance Law.
STATUTORY REQUIREMENT FOR SALARY PAYMENTS
Salary payments to State employees
are governed by law and related rules and regulations.
The statutes governing wage and salary payments are contained
in the Civil Service Law and the State Finance Law, which
require compliance in three basic areas:
1. Certification of Payrolls
2. Budgetary Control
3. Determination of Salaries and Wages
Certification of Payrolls
Section 100 of the Civil Service
Law provides that the Department of Civil Service must
have certified that "...the persons named (on a payroll)
are employed in their respective positions in accordance
with the law" prior to an officer "...approving
or paying any salary or compensation." The only exception
is for temporary laborers and requires the appointing
officer to certify that these employees are employed in
accordance with law. In such cases the Department of Civil
Service will receive a certified payroll within two calendar
In order for any regular officer
or employee to receive salary or compensation, Section
44 of the Finance Law requires either a certification
of approval by the Director of the Budget or express authorization
of the Legislature.
Determination of Salaries
The final determination of the
amount of compensation due an employee is the responsibility
of the Comptroller who, under Sections 109 and 111 of
the State Finance Law, audits all payments. Payroll entries
found upon audit by the State Comptroller to be improper
must be corrected. Each agency should exercise care to
ensure that all requirements have been met before placing
an employee on the payroll.
PRINCIPLES OF INTERNAL CONTROL
The payroll procedure involves
(1) authorization of payroll additions and changes, (2)
maintenance of time-attendance and accrual records, (3)
payroll preparations and (4) distribution of paychecks.
Effective internal control must be embodied in all steps
of the payroll system. Control elements included staff
competence and integrity, independence of their assigned
functions and their understanding of the procedures. A
current agency procedures manual is useful for promoting
competence and knowledge of the system. This manual should
contain directives from the Office of the State Comptroller
(OSC), the department of Civil Service, and the agency.
In addition, adequate filing and retention procedures
are necessary to facilitate ready reference and to maintain
records for later review and audit.
Independence of Assigned
A key principle of internal
control is to ensure that one person does not have
un-checked access to an entire processing cycle. Therefore,
in payroll and time-keeping cycle a system of checks and
balances should be established so that one person does
not exercise control over all or a substantial part of
A primary supervisory function
is to ensure adequate and timely reporting of employee
attendance. Properly performed, this practice will prevent
or detect abuses.
Daily Recording of Time
and Attendance Records
All employees are required to
maintain daily time records showing actual hours worked.
However, the appointing authority may exempt employees
from keeping such records. Those employees exempted shall
maintain a daily record of absences and time and leave
credits earned and used.
Complete and Accurate
Each department and agency is
required to maintain complete and accurate records of
employee attendance and leave accruals. This will provide
a basis for internal review and audit evidence of the
controls in effect.
TIME-ATTENDANCE AND ACCRUAL RECORDS PREPARATION
Each employee is required to
maintain a daily record of time worked or, if exempted
from time reporting, of absences. Time records must be
kept on a daily basis.
Accurate recording of time-attendance
and leave accruals is essential. It serves as the determinant
of regular and overtime (if applicable) pay, payroll disputes
and to establish the validity of disability claims.
Effective timekeeping also serves
to document charges for reimbursement from other governmental
bodies, as in federally-aided projects, research grants,
Time records for hourly employees
must contain the details necessary to establish "Total
time." the accumulation of time data for these employees
may be somewhat complicated if they fall into the laborer
or skilled worker category where work locations frequently
change. Individual time records must be combined to obtain
the "total time" worked. Erroneous or incomplete
entries on the records can cause delays or errors in pay.
Employees Away from Official
When an employees duty
assignments require him to work at locations away from
his official office, he is still required to maintain
complete and accurate time-attendance and accrual records.
The employees supervisor should be aware of the
employees work location and be able to contact the
employee by phone. The supervisor at the temporary location
will approve the employees record of hours worked
and send it directly to the employees permanent
location supervisor. This will provide adequate reporting
control and facilitate computing the employees total
Individual Employed By
One Agency But Working At Another
The following requirements apply
to situations involving an individual employed by (on
the payroll of) one agency, but temporarily on assignment
to and working for another agency at another location.
In such cases the employing agency should require the
agency at which the individual works to provide time and
attendance documentation sufficient to certify each payroll
for this individual. The time and attendance documentation
should be essentially the same as that maintained by the
employing agency for its other employees. (For purposes
of this sub-section, Agency means any department,
board, bureau, commission, division, office , council,
institution, or committee in the executive, legislative
or judicial branches of State government.)
CERTIFICATION OF TIME AND ACCRUAL RECORDS
The supervisor is responsible
for certifying the accuracy of the total time for each
employee and the current period accrual activity before
submitting the record to the time section of the personnel
office. The unit will adjust the payroll for lost time
and keep the employees official accrued leave record.
TIME-ATTENDANCE AND ACCRUAL RECORDS VERIFICATION
In order for any payroll procedure
to be successful, it must be done honestly and accurately.
The procedures described in this chapter are designed
so that the work of one employee checks the accuracy of
work performed by other employees. Certain additional
operations should be performed by each agency in order
to verify the honestly and accuracy of the payroll system
and the reports generated. These consist of tests of clerical
accuracy and of factual reporting.
Clerical Accuracy Verification
The time section has responsibility
for verifying the clerical accuracy of the total hours
and accrual charges and credits shown for each employee
on the summary reports. This is done by tracing from hours
worked and leave credits earned and charges. This is done
by tracing from hours worked and leave credits earned
and charged. If a formal, written procedure is adopted
by the agency, this may be done on a test basis. When
this option is taken, the tests performed should be documented
so that the testing procedure can be periodically re-evaluated
and its effectiveness determined.
The time section is responsible
for the maintenance of the official leave accrual records
for each employee on the payroll. After posting the time
charged to each leave category, and the time earned, the
time section will compare the unused leave available per
the official records to that recorded on the employee-prepared
leave summary. If any differences are noted the employee
should be notified through his unit supervisor. A list
of corrections made to the employees accrual records
should be kept by the time sections and should be compared
to the records submitted for the next period to ascertain
that the corrections were properly recorded by the employee.
The time sections should ensure
that leave accruals are not credited to an employee in
excess of the maximum allowable.
Annually, each employee should
be formally advised of the leave accruals to his credit
on the official records, unless union contract requires
more frequent notifications.
Verification of Data
Periodic floor checks should
be made to determine if all employees who reported for
work are actually working. This is done by examining the
daily attendance records and observing that the employees
indicated as present are at their work locations. This
should be done by the unit supervisors on a regular basis,
and by the personnel office periodically as an additional
verification. Employees who are not required to report
actual hours worked do not sign in or punch cards.
Supervisors should maintain a record of absences for each
such employee to verify the employees time and accrual
Any error found should be reported
to the unit having the authority to enforce immediate
correction of the time-keeping procedures. Adequate follow-up
procedures should be performed to insure that abuses,
if any, do not recur.
PREPARATION OF PAYROLLS
Personnel Office Responsibilities
The personnel office is responsible
for initiating all payroll changes. It will maintain a
record of any changes to be made in each payroll period.
This includes the total hours to be paid as well as new
employees, terminated employees, lost time adjustments,
The personnel office must ensure
that each payroll transaction is properly documented.
This includes letters of resignation, retirement notices,
death notices, etc.
Procedures to process and document
resignations should be established to ensure timely deletion
of such persons from the payroll.
The personnel office should
confirm the beginning date of service for new employees
by requiring them to sign in at the personnel office that
first day they report to work. For units with distant
work location, new employees can sign a statement of availability
which, after supervisory approval, should be sent to the
The signing in of a new employee
provides the documentation necessary for the personnel
office to initiate an authorization to add the employee
to the agencys payroll and should be kept in the
employees personnel file.
Payroll Office Responsibilities
The payroll office is responsible
for the preparation of the payroll and input documents
for submission to OSC. Payroll changes are to be processed
only upon written authorization by a personnel representative.
Deviations from Standard
In isolated instances when payments
are made from funds in the sold custody of the agency,
the entire payroll process, including check preparation
and disbursement, is completed by the agency itself. Many
public authorities perform their payroll function in this
manner. In these cases, methods employed in the payroll
process should conform to these guidelines insofar as
controls and internal checks are concerned. Payments are
subject to audit by OSC.
In addition to the checks and
balances to be built into the system of payroll preparation,
certain additional tests should be performed and documentation
of such tests should be held for audit.
Independent checks over personnel
and payroll changes should be made to ensure that reports
of authorized payroll changes should be made to ensure
that reports of authorized payroll changes heave been
acted upon promptly. These tests should be performed by
the agencys internal auditor or by business office
personnel not otherwise connected with the payroll process.
Payroll transactions should
be compared with underlying documentation (e.g. original
attendance records and appointment and termination date
records in the employees personnel file). Tests
should be made to verify charges to:
1. Employee name and position number
2. Location of assignment
3. Initial rate of pay
4. Date of reporting to work (evidenced by employees
first day sign-in)
5. Increases or decreases in rate of pay
When an employee is removed
from the payroll, a letter of resignation, retirement
notice or death notice should be placed in the employees
personnel file to support the date of termination.
When payroll deductions are
initiated by the agency, supporting employee authorizations
should be on file.
Timekeeping is the phase of
a payroll operation which creates the basis for the calculations
of the amounts to be paid to employees. Since timekeeping
is almost entirely the function of the unit where the
employee works (the operating unit), the internal auditor
and the personnel office should determine the effectiveness
of the timekeeping operations by occasionally visiting
operating units to:
a. Observe that employees time at work is promptly
and accurately recorded in the records.
b. Verify that all employee absences are duly reported.
c. Make floor checks during working hours to establish
that employees who are reported as working are actually
on the job.
This control procedure
should be employed at least once a year and as often as
necessary to assure the internal auditor and the personnel
office that the regulations are being followed.
The Comptrollers Rules
and Regulations require that "State departments,
institutions, and other agencies shall maintain adequate
time and personnel records in support of payrolls for
inspection by the Comptroller." Time and personnel
records are to be kept for the periods of time as specified
by the State Archives.
All records used in the payroll
process should be filed in an orderly manner by the unit
working with the documents. This will facilitate the handling
of inquiries regarding payrolls as well as satisfy the
requirements of the State Comptrollers Rules and
Examples of the types of items
to be in the files are:
a. Copies of personnel forms initiating payroll actions.
b. Current list of employees having insufficient leave
credits to cover possible time lost.
c. Copies of statements concerning extended sick leave
absences and the duration of time on half-pay or no
d. Copies of resignations submitted in advance.
e. Copies of anticipated retirement notices.
f. Termination dates of temporary employees.
g. Other actions and information affecting specific
DISTRIBUTION OF PAYROLL CHECKS
Pay checks should normally be
distributed by a responsible business office employee
who is not otherwise connected with any of the steps of
payroll preparation. This would satisfy the internal control
requirement that employees responsible for processing
payroll information not have access to the pay checks.
In small agencies, employees
can be required to call for their checks at a central
location. In other agencies where the large number of
employees and the physical spread of the work locations
preclude central distribution, checks should be given
out at the work station by someone who is not responsible
for time and attendance reporting.
If the organization operates
on a mutli-shift basis, payout from a central location
may be impractical. Under such circumstances the checks
must be delivered at the place and time the employee is
on duty. The paymaster should preferably be someone outside
the operating unit who is not otherwise connected with
any of the steps in the payroll process. When this is
not practical, the unit supervisor may act as paymaster.
Since the supervisor is also responsible for reporting
the employees time, it is essential that the personnel
office make periodic floor checks and observe the distribution
Distribution of Lump Sum
An employee leaving State service
may be entitled to a lump sum payment for unused vacation
credits. Such a payment would normally be made on a separate
check. In such cases, special care must be taken by the
The lump sum check must be given
or mailed to the ex-employee by a business office employee.
In no event should the employees former supervisor
be given the lump sum check.
The payroll office should verify,
by examination of daily attendance records, that the leave
accrual for which such lump sum payment is being made
Undelivered Payroll Checks
Instances may occur when a payroll
check cannot be delivered to an employee. In all cases,
the check should be held by the business or finance office
for safekeeping. Checks still unclaimed at the end of
thirty days must be returned to the Office of the State
Employee not entitled
to a full check
The personnel office is responsible
for instruction the business office in writing, to withhold
the salary check of any employee who is not entitled to
the entire check.
An employee may not be entitled
to the full amount of the check for any of the following
a. Resignation before the close of the payroll period
for which payment is being made, but subsequent to the
preparation of the check.
b. Error in payroll computation.
c. Absence during the payroll period covered by the
check, without having sufficient accumulated leave credits
to cover the absence.