Audit Division

Audit Summary


Integrated Financial System

Payroll Process

Report  LA02-03

Results in Brief


          Internal controls associated with the state’s new payroll system do not always provide reasonable assurance that transactions are input and processed correctly.  For example, the time recording process is confusing and cumbersome; agency payroll reconciliation is difficult; payroll errors occur; and the system is vulnerable to unauthorized access.  Contributing to these problems is a lack of documented procedures related to the system’s use.  As a result, aspects of the state’s payroll system are inefficient and the cost and complexity of some processes have increased when compared to the previous system.  Internal controls are intended to promote the achievement of management objectives and the minimization of operational problems. The new payroll/personnel system, which involves an initial public investment of over $20 million, should properly reflect these control principles.  Despite this, certain processes and controls in the new system need improvement and should be reevaluated.


Principal Findings


·       The new payroll system uses a new convention that requires the recording of employee time in “hours and minutes”.  This convention is complex to use and interpret and is still misunderstood by many users 1˝ years after implementation. (page 8)

·       The new payroll system uses a weekly timesheet to record employee time rather than the biweekly approach used under the old system.  As a result, the flow of paperwork has increased requiring additional staff time to prepare, review, and process the additional timesheet. (page 13)

·       Reports used for payroll reconciliation under the new system are difficult to understand and use with no written procedures developed to explain their application.  In addition, these reports are insufficient to accomplish the reconciliation process. Consequently, using agencies developed additional sched-ules to accomplish a detailed payroll reconciliation. (page 15)

·       The new payroll system cannot adjust fringe benefit rates when changes occur during a payroll period.  Consequently, rate changes are not always adjusted on their actual effective date.  This routinely generates processing errors that must be corrected, generating additional work for agency and central payroll staff. (page 17)

·       We noted 3 of the 20 timesheets tested were not entered into the payroll system or not entered correctly.  This resulted in errors affecting gross pay, employee withholdings, fringe benefits, and leave accruals.  These errors could have been avoided had controls been in place to ensure timesheets were processed correctly. (page 18)

·       Key system security features outlined in the IFS system design documents have not been implemented.  Consequently, sensitive personnel and payroll information is vulnerable to unauthorized access. (page 19)

·       The implementation of the IFS payroll component has resulted in changes to payroll controls and processes that need to be better documented.  Only a few procedures specific to the handling of payroll transactions in the State of Nevada have been developed.  As a result, agencies have used the system for over 1˝ years with minimal procedural documentation. (page 20)


Integrated Financial System

Payroll Process


Agency Response

to Audit Recommendations



      Number                                                                                                    Accepted   Rejected


               1               Review the “minutes and hours” time recording con-

                             vention and evaluate cost-effective alternatives.                           X                               


            2               Review system alternatives to processing of weekly

                             timesheets.                                                                               X                               


            3               Develop adequate system reports to facilitate

                             payroll reconciliation and conduct appropriate training

                             in their use.                                                                              X                             


            4               Develop written policies and procedures for agencies

                             to use in the reconciliation of payroll expenditures to

                             the state’s financial records.                                                      X                             


            5               Address the system’s capability to apportion payroll

                             changes occurring during a pay period.                                     X                             



            6               Develop policies and procedures, along with adequate

                              training, to assist agencies in the proper completion

                             and processing of timesheets.                                                    X                             


             7               Implement all security features outlined in the system

                              design documents as soon as possible.                                      X                                                                                                                            


            8               Develop written policies and procedures related to

                             the processing of payroll transactions.                                        X                             


                                 TOTALS                                                                               8            0