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Nonprofit 101: Payroll

Internal controls safeguard organizations from fraud temptations. Payroll policies don’t just protect from fraud, they prevent errors that would cost hours of time to correct if not discovered early. The following are four suggestions for a payroll policy:

  1. Maintain employee data and processing separately – A payroll clerk should not have access to pay rates or the ability to add employees to the payroll software. System restrictions, such as in QuickBooks, should limit pay changes to HR or the controller.
  2. Review payroll reports prior to processing – Whether in-house or a service, an independent review of payroll can identify abnormalities prior to processing.
  3. Reconcile quarterly 941s to general ledger activity – When preparing the Form 941, comparing the numbers ensures accuracy.
  4. Independently reconcile the payroll register to cash transactions – A payroll clerk should not prepare the bank reconciliation for the payroll account. An independent review should match the payroll reports with the bank statement.

Learn more about payroll and internal controls for nonprofit organizations at our upcoming Taco Tuesday event in Dallas on September 22ndFor more information and to register, click here.