Chapter 13Human Resource Business Process

CHAPTER 13HUMAN RESOURCE BUSINESS PROCESS

(THE PAYROLL PROCESS)

AFTER STUDYING THIS CHAPTER YOU SHOULD BE ABLE TO:

1. IDENTIFY THE MAJOR ACTIVITIES OF THE

HUMAN RESOURCE BUSINESS PROCESS

2. EXPLAIN HOW EMPLOYEES ARE HIRED, ASSIGNED DUTIES, AND PAID

3. ****DESCRIBE THE FLOW OF TRANSACTIONS THROUGH THE HUMAN RESOURCE PROCESS

4. ****SPECIFY THE PRINCIPAL MASTER AND TRANSACTION FILES IN THE HUMAN RESOURCE PROCESS AND EXPLAIN THEIR CONTENT AND USE

5. ****IDENTIFY THE PRINCIPAL DOCUMENTS AND REPORTS IN THE HUMAN RESOURCE PROCESS

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THEHUMAN RESOURCE PROCESS IS

CONCERNED WITH THE PROCUREMENT OF EMPLOYEE RESOURCES BY THE ORGANIZATION -

INCLUDESACCOUNTS PAYABLE

PERSONNEL

PAYROLL

CASH DISBURSEMENT

COST ACCOUNTING

APPLICATIONS

INCLUDES COST ACCOUNTING - INTERFACES WITH PRODUCTION (INVENTORY) PROCESS

CASH DISBURSEMENTS - INTERFACES WITH THE FINANCING PROCESS

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DATA STORAGE, INPUTS, AND OUTPUTS IN THE HUMAN RESOURCE PROCESS

MASTER FILES

1. EMPLOYEE MASTER FILE

.EMPLOYEES= WAGE RATES AND SALARIES

.DATA ON MARITAL STATUS AND NUMBER OF DEPENDENTS--A PAY RATE FILE MAY BE USED HERE ALSO

.DATA ON ACCRUED EARNINGS, DEDUCTIONS, FRINGE BENEFITS

.EACH RECORD CORRESPONDS TO AN EMPLOYEE

.TERMINATIONS HANDLED AT YEAR END TO RETAIN INFO NEEDED FOR TAX PURPOSES

.ORDERED ON EMPLOYEE#, WHICH MAY BE SS#

2. ADDITIONAL MASTER FILE MAY BE USED TO HOLD TAX INFORMATION, TAX TABLE FILE (A REFERENCE FILE)

3. GENERAL LEDGER MASTER FILE--FOR POSTING OF GENERAL LEDGER ACCOUNTS

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TRANSACTION FILES

1. PAYROLL TRANSACTION FILE

.DATA ON EMPLOYEES' SERVICES

.COMPUTED TAX WITHHOLDINGS AND OTHER DEDUCTIONS WRITTEN TO RECORDS IN THIS FILE PRIOR TO PREPARATION OF CHECKS

.MAIN PURPOSE TO ACCUMULATE DATA ON HOURS WORKED AND OTHER INFO NEEDED TO PREPARE THE PAYROLL

.PAYROLL TRANSACTION FILE IS POSTED TO ....?

PAYROLL DATA INTERFACES WITH THE INVENTORY (CONVERSION) PROCESS

2. GENERAL LEDGER TRANSACTION FILE

INPUT DOCUMENTS

1. TIME CARDS, SHEETS, TICKETS OR COMMISSION VOUCHERS

document services provided by employees

provide a basis for the payment of wages, salaries, or

sales commissions

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OUTPUT DOCUMENTS

1. PAYROLL CHECKS

drawn on organization's bank account to disburse cash to employees

2. TAX FORMS, SUCH AS W-2s

REPORTS

1. PAYROLL REGISTER

2. DEDUCTIONS AND WITHHOLDINGS JOURNAL

3. QUARTERLY AND ANNUAL PAYROLL TAX RETURNS

4. LABOR DISTRIBUTION REPORT

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MAJOR RISKS IN THE HUMAN RESOURCES PROCESS

1. Risks concerning procurement of employee services

.wages paid for unauthorized work

.time cards and/or pay checks to fictitious employees

.wages/benefits to employees who have been terminated

.errors in pay rates or calculations - under vs. over stated

.improper accrual of sick leave, vacation, pension

.expense incorrectly classified or charged to wrong period

.intentional overstatement of employee earnings - kickback scheme

.deductions/withholdings not recorded but charged to employee

2. Risks concerning disbursement of cash

.duplicate payments

.checks made out to or sent to wrong payee

.check signature forged - or void notation erased

.improper or illegal check requests or payments

.cash disbursements incorrectly recorded or not recorded

.disbursement and distribution of checks occur in different periods

.check is made out to unauthorized individual

.manipulation of bank reconciliation to offset misappropriations against old outstanding checks

CONTROLS

1. ORGANIZATIONAL CONTROLS

segregation of duties in payroll

.segregation maintained between

(1) hiring and setting wage rates

(2) collection and approval of time cards

(3) preparation of paychecks

(4) distribution of paychecks

signing paychecks should be separated from (3)

if number of employees is too small to achieve proper segregation of duties......

use imprest fund

2. Program and Data Access Controls

user identification codes

passwords - levels of access

file and record locks

designated terminal access

data read-write privilege

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3. Authorization Controls

to ensure that input data are authorized

proper authorization for capturing and approving employee time data for disbursing cash.

authority to validate employee services -

time data capture and approval resides with

employee's immediate supervisor

overtime or special time rates

exception reports of rejected transactions

authority to disburse cash -

lies with payroll dept. for payroll disbursements

treasurer has ultimate responsibility

check signing machine & signature plates

locked

4. Data Verification Controls

reasonableness checks - pay rates and hours

positive / negative quantities

supervisory approval is mandatory on all exception items

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5. Processing Controls

a. batch controls

record counts

control totals

cross footings

hash totals

extend throughout processing

b. prenumbered documents - ensure that all processing is complete

Use prenumbered checks

inventory boxes of blank checks

control check inventory

6. File Controls

protect data from loss, damage, improper processing

ensure that correct master or table files are used

file maintenance

7. Output Controls

output from system is complete, accurate, appropriately used

check register

payroll register

check forms

bank reconciliation independent of check printing

and signing

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