What internal controls are needed for payroll?
According to Price Waterhouse’s booklet, Effective Internal Accounting Control for Nonprofit Organizations: A Guide for Directors and Management, the objective of internal controls for payroll are to ensure that payroll disbursements are made only upon proper authorization to bona fide employees, that payroll disbursements are properly recorded and that related legal requirements (such as payroll tax deposits) are complied with. Each employee should have a payroll/personnel file, containing updated salary, benefits, employment status, and withholding information, as well as beginning date of employment and termination date, when applicable. A personnel manual should describe the organization’s policies, established by the board, regarding vacations, holidays and sick leave. Records should be kept for each employee to ensure that these policies are being followed. Accountants recommend that the organization retains these records for six to seven years after the employee has been termina
