Finding Text
Approval of Payroll Reports:
Condition―One of the City’s key controls over payroll is for the Chief Financial Officer (CFO) to review the
payroll bank transfer against the payroll register to ensure what was drawn from the bank matches the
payroll reports for each pay period and to sign the reports to document this review and approval. During
our testing of payroll controls we noted 17 pay periods for which there was no signature on the payroll
reports documenting this review took place. 16 of these pay periods were the first 16 pay periods of the
fiscal year, corresponding to the period of time when the CFO position was vacant. The 17th pay period
was the final pay period of the fiscal year.
Effect―Although we did not note any actual discrepancies between these reports, a lack of a review of
payroll disbursements could result in erroneous or fraudulent payments that are not prevented or
detected and corrected on a timely basis.
Since this process is also significant to the single audit major program, this finding is applied to internal
control over compliance for the major program, under the Uniform Guidance, as well as internal control
over financial reporting in accordance with Government Auditing Standards.
Recommendation―We recommend that the payroll approval process be followed for all pay periods and
that contingencies be established to determine a backup reviewer for payroll in the event that the CFO is
unavailable to review a particular pay period.