The Importance of Internal Controls Over Labor Costs | PNWC’s Government Contracting Update

Over the past two days, we’ve discussed the concept of division of duties (also called segregation of duties) as a component of internal controls over labor costs. We discussed the importance of the division of duties between those who review and approve employee time charges and those who prepare the payroll. We discussed the importance of the division of duties between those who review and approve employee time charges and those who are responsible for meeting budgets. The basic premise for internal controls is to reduce the chance that irregularities will occur. If you’re a regular reader of this blog, you know that we comment on the results of fraud investigations quite often. And one thing that many of these fraud cases have in common is that the companies (or the Government organization) either lacked basic internal control systems, had internal controls in name only (they were not in compliance with the controls they had established), were ineffective for what they were intended to accomplish, or were easily circumvented.

Source: PNWC’s Government Contracting Update: The Importance of Internal Controls Over Labor Costs