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 and Regulations.

     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.

STATUTORY AUTHORITY

     The Comptroller’s 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 months.

     Budgetary Control

     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 and Wages

     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 Functions

     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 the process.

     Adequate Supervision

     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 Records

     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, etc.

     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 Office

     When an employee’s 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 employee’s supervisor should be aware of the employee’s work location and be able to contact the employee by phone. The supervisor at the temporary location will approve the employee’s record of hours worked and send it directly to the employee’s permanent location supervisor. This will provide adequate reporting control and facilitate computing the employee’s total time worked.

     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 employee’s 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 employee’s 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 employee’s time and accrual records.

     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, etc.

     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 personnel office.

     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 agency’s payroll and should be kept in the employee’s 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 Payrolls

     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.

     Personnel Records

     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 agency’s 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 employee’s 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 employee’s 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 employee’s personnel file to support the date of termination.

     When payroll deductions are initiated by the agency, supporting employee authorizations should be on file.

     Operating Records

     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.

RECORD MAINTENANCE

     The Comptroller’s 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 Comptroller’s Rules and Regulations.

     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 pay.

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 payrolls

DISTRIBUTION OF PAYROLL CHECKS

     General Distribution 

     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 employee’s time, it is essential that the personnel office make periodic floor checks and observe the distribution of paychecks.

     Distribution of Lump Sum Checks

     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 business office.

     The lump sum check must be given or mailed to the ex-employee by a business office employee. In no event should the employee’s 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 is proper.

     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 Comptroller.

     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 reasons:

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.