PI-23. PAYROLL CONTROLS ABOUT THE INDICATOR
ABOUT THE INDICATOR
This indicator is concerned with the payroll for public servants only: how it is managed, how changes are handled, and how consistency with personnel records management is achieved. Wages for casual labor and discretionary allowances that do not form part of the payroll system are included in the assessment of nonsalary internal controls, PI-25. This indicator contains the following four dimensions and uses the M1 (WL) method for aggregating dimension scores:
- Dimension 23.1. Integration of payroll and personnel records
- Dimension 23.2. Management of payroll changes
- Dimension 23.3. Internal control of payroll
- Dimension 23.4. Payroll audit
IMPACT ON BUDGETARY OUTCOMES
The wage bill is usually one of the biggest items of government expenditure. It may be susceptible to weak controls and hence corruption. Payroll controls affect fiscal discipline by ensuring that the expenditures on payroll are contained in accordance with the laws and authorized allocations established by the country. Weak payroll controls can result in unintended expansion of payroll costs or unmet obligations to employees. These in turn result in lower allocative efficiency and demotivation of staff with wider implications for the quality of services
and incentives for unauthorized behaviors by staff to compensate for weaknesses in the payroll system.
INDICATOR MEASUREMENT GUIDANCE
23:1. For the purpose of this indicator, the payroll for civil servants covers both permanent and nonpermanent staff. Assessors should note that different segments of the public service may be covered by different payrolls. Every important payroll should be mentioned in the PEFA report narrative and assessed in the scoring of this indicator.
23:2. If payroll management involves a large number of significant entities or is highly decentralized, complete information on government’s payroll controls may be impractical to collect. Assessors may consider using a sampling methodology.
Assessors should then explain the reason for the use of sampling and justify the sampling approach they adopt. It would be preferable that assessors and government agree on the sampling approach.
In case of disagreement, differences of views can be accommodated in an annex as explained in the Framework under Part 3: The PEFA report, paragraph4.
Dimension 23.1. Integration of payroll and personnel records
DIMENSION MEASUREMENT GUIDANCE
23.1:1. This dimension assesses the degree of integration between personnel, payroll, and budget data. The payroll should be underpinned by a personnel database that provides a list of staff to be
Dimension 23.1. Scoring
| Score | Minimum requirements for scores |
|---|---|
| A |
Approved staff list, personnel database, and payroll are directly linked to ensure budget control, data consistency, and monthly reconciliation. |
| B |
The payroll is supported by full documentation for all changes made to personnel records each month and checked against the previous month’s payroll data. Staff hiring and promotion is controlled by a list of approved staff positions. |
| C |
Reconciliation of the payroll with personnel records takes place at least every six months. Staff hiring and promotion is checked against the approved budget prior to authorization. |
| D | Performance is less than required for a C score. |
| PEFA Handbook Volume 1: The PEFA Assessment Process – Planning, Managing and Using PEFA
