7 ways to eliminate payroll fraud in your company
It’s not just your health and safety officer who needs to pay attention when there’s a medical expense or emergency in the office. Picture this…
Mon, 2012-08-20
We value your privacy
In this issue:
· Has SARS sent YOU a nasty penalty assessment because your provisional taxes were incorrect?
· Here are the 7 internal controls you must implement in your payroll process
· SARS missed the mark by R13 billion this year… And now it’s coming after you!
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From Michelle Govender, Managing Editor, Practical Accountancy Loose Leaf
Dear Reader,
Payroll provides an easy opportunity to defraud your company. Depending on the size of your company and the staff you have on your payroll, fictitious employees could be added to your payroll if you’re not checking your payroll correctly.
Depending on the controls you have for the pay rates, these could be manipulated to increase the gross pay for staff members.
Let me show you how to eliminate payroll fraud in your company…
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Has SARS sent YOU a nasty penalty assessment because your provisional taxes were incorrect?
Picture it: You submitted your provisional taxes before the 31 August deadline.
And you were pretty confident that you had everything right…
But now you’re staring at a nasty letter from SARS, demanding you pay penalties for the errors you made.
You’ll be paying SARS an administrative penalty of up to R4 000! And this penalty amount doubles after 30 days… Plus interest. Oh, and don’t believe for one second that SARS will listen to your excuses… Pay now, argue later, it says.
Find out more here
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Here are the 7 internal controls you must implement in your payroll process
Changes to the payroll system should only be processed by a designated manager. The payroll represents confidential information and is too sensitive to be dealt with by anyone else.
1. New employees should only be taken on to your payroll once a contract has been signed. This means that you should only add employees who you’ve actually met and approved.
2. The contract should be used to add the employee to the payroll system, as proof the person is a new employee. The contract will also confirm their salary amount.
3. The system should be set up in such a way that management authorisation is required to add an employee.
4. Pay slips should be reviewed on a monthly basis. Payroll reports should be signed off as evidence they’ve been checked and approved.
5. Payroll is an expense that doesn’t change much from month-to-month. An excellent control is for management to compare monthly totals to the prior month. Any changes should be investigated.
6. Changes to the payroll (increases, bonuses etc) should also only be made by management.
7. The system may be able to provide a report of changes made to the payroll during the month. If this is possible, the report can also be reviewed to see if unauthorised changes have been made.
Let’s look at an example below…
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SARS missed the mark by R13 billion this year…
And now it’s coming after you!
That means it’s got even greater motivation to come after your business for outstanding taxes.
The best way to protect yourself is to know about the loopholes endorsed by SARS. They’re the best way to legitimately shrink the tax bill!
Meet the ultimate tax bill slasher
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Example
The owner of ABC (Pty) Ltd leaves the payroll processing to a payroll staff member, Mary, to save time.
He leaves the whole process, from drawing up the contract to printing out the pay slips, to the payroll staff. Since the owner isn’t very involved with the payroll system, he doesn’t keep track of the changes made to the system. After a few months, Mary decides to take advantage of his lack of involvement to help herself out of a financial crisis.
She adds a new employee to the system, using her own bank details for the payment. The owner signs the payroll off without being aware that there is a fictitious employee on the payroll.
Use these seven steps above to prevent payroll fraud from happening to you.
Plus don’t forget to answer our survey above as we value your feedback.
Until next time…
Michelle Govender
Managing Editor: Practical Accountancy Loose Leaf
PS. There are more ways to prevent payroll fraud in the Practical Accountancy Loose Leaf. Find out more here.
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