THE CONTROLLER'S REPORT

March2012 Ci? article. Deadline Nearly Here affect plan advisors rather than plan sponsors,
for New 401k Plan Disclosure Rules (www.iofm controllers should:
.com/article/view/deadline-nearly-here-for-new1. Take steps to make sure their plan advi40 lk-plan-disclosure-rules).
sors meet the new DoL criteria in terms of their
fiduciary
process and service models.
For further strategies, see February 2012
Mercer Insights paper (which includes data on
plan fee trends): 10 Ideas to ConsiderIs Your
DC Plan As Successful As It Can Be? (www
.mercer.com/articles/us-dc-10-ideas-to-consider-in-2012)

2. Minimize sponsor fiduciary responsibility under ERISA by partnering with plan

advisors who are expert and accountable fiduciaries with a strong and documented track
record.

3. Consider retaining an ERISA expert as a

IOFM resource: Cost Control: The 12 Most
named
"managingfiduciary"for plan investments
Effective Ways to Control the Costs of 401 k Plans
and administration.
(www.iofm.com/resource/view/cost-control-the4. Proactively evaluate whether existing plan
n-most-effective-ways-to-control-the-costs-ofservice and fee arrangements are reasonable.
40 Ik-plans).
5. Change the arrangements, replace the plan
provider, or report the provider to regulators if
In addition, in May 2012 DoL will issue a new
service and fee arrangements are judged to be
definition of a "fiduciary investment advisor,"
unreasonable.
significantly expanding the range of activities
related to providing advice that could result in The key point for controllers to keep in mind is
fiduciary status.
that, under the new ERISA 408(b) (2) rules taking
effect July 1, plan sponsors are required to act to
This will be the first change in the definiavoidfiduciaryriskand cannot simply delegate
tion since 1975. Within those 37 years, DoL
this
responsibility to experts. Plan sponsors and
emphasizes, the US retirement plan landscape
has changed radically, with a wholesale shift to their investment-management fiduciaries must
defined contribution plans (mostly 40Iks) from "form a reasonable belief" that the plan provider has made all the appropriate disclosures.
defined benefit pension plans.
This is a significantly higher standard for plan
5 Actions Controllers Should Take
fiduciaries to meet than existed prior to the rule
Q
While this change in definition will directly change.
Fiduciary Responsibility Redefined

10 Solutions and Best Practices

to Combat Payroll Fraud
For many companies, payroll is the largest single
expense area, which means it's also subject to significant risk of fraud. In fact, payroll fraud is the
leading category of occupational fraud, accounting for 17 percent of fraudulent disbursements
experienced by US companies (T&E fraud places
a distant second).
According to the Association of Certified
Fraud Examiners (ACFE), payroll fraud costs
MAY 2012

US businesses an average of $72,000 per case.

Moreover, uncovering and successfully proving
this type of fraud is typically not easy.
Contrary to what some controllers may
believe, outsourcing the function to a payroll
service provider does not automatically protect
you from payroll fraud, since the provider has
little way of knowing if a new employee is real or
CONTINUED ON PAGE 10

www.iofm.com/controller

THE CONTROLLER S REPORT

10 Solutions

time sheets and transfer labor hours in real time.

CONTINUED FROM PAGE 7

To learn more about such solutions, controllers can view a Local Vendor Directory
(www.resourcenation.com/business/time-andattendance-systems) or Time and Attendance
Buyer's Guide (www.resourcenation.com/buyersguides/buyer-guide-time-and-attendancesystems).

fictitious, whether a wage rate is too high, or if

hours submitted were actually worked.
5 Solutions
Fortunately, there are several newer technologies that companies can utilize to mitigate or even
ehminate payroll fraud, including:
1. Direct Deposit and Pay Cards. Not only is
this more convenient for employees, it eliminates
the use of checks that can be stolen or altered.
2. Time card software packages. These economical time clocks are about the size of typical
credit card verification machines, just as the cards
employees slide through them to clock in and out
resemble credit or debit cards.
3. Biometrie time clocks. More expensive
than time card software, such solutions offer a
significant ROI over time. They eliminate the
practice of one employee punching in for an absent co-worker ("Buddy punching") by "reading"
an actual finger or hand "print." The expense of
cards is also eliminatedincluding replacement
of lost cards.
4. Web-based computer log in stations. Since
employees log in on their own computer, using
a static IP address, it's easy to record and access
data on attendance and hours.
5. Interactive voice response (IVR) systems.
Companies with employees working from remote
offices or on the road call in on a cell phone or
landline to "clock in." Employees can even submit

5 Best Practices
It's also a good idea for controllers to regularly
review payroll best practices in order to limit
fraud, including:
1. Ensure real segregation of duties exists. No
single employee should have overlapping responsibilities for recording, approval, and payment
within the payroll function.
2. Restrict data access to sensitive payroll
information.
3. Perform bank reconciliations (completed
by an individual unassociated with the payroll
function). Compare the bank statement's list of
checks cashed to the company's internal records to
ensure checks and the books have not been altered
to disguise checkamounts. Compare actualpayroll
costs to estimated costs to discover variances.
4. Add security features to check stock ("Void"
logo, microprinting, holograms, etc.).
5. Set up an ACH debit filter with your bank
to ensure only authorized entities have access to
your corporate bank account.
Q

Process Improvements + Automation

= Faster, Enhanced Order-to-Cash Cycle
Pressure to speed up and enhance the orderto-cash (O2C) cycle remains relentless. Drivers
include the need to reduce costs, gain continuous
visibility into customerfinancialhealth, improve
cash flow forecasting, and respond to ongoing
customer requests to credit and AR for longer
payment terms.
10

www.iofm.com/controller

How can controllers respond to this challenge?

A wealth of insights are contained in Aberdeen
Group's just-released study. The Order-to-Cash
Cycle: Enhancing Performance with Process Au-

tomation, based on a survey of 140 companies

in May/June 2011. To order the full report: www
.aberdeen.com.
AMY 2012

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