Evaluation of Internal Control of Payroll System in
Hospital
Melanthon Rumapea, Natalia Bagariang, Dimita Hemalli
Premasari Purba, Jamaluddin, Eviyanti Novita Purba, Dompak
Pasaribu
Universitas Methodist Indonesia
Medan, Indonesia
melanthonrumapea@methodist.ac.id
Abstract—The purpose of this study was to determine the
evaluation of internal control and payroll accounting systems
in hospital. In this research, the authors used a descriptive
method of analyzing and collecting internal controls in the
payroll accounting system in using primary data such as
interviews with parties company and secondary like
organizational structure. Data collection techniques were
carried out using observation, interviews, and literature
techniques. From the results of the study it can be concluded
that the honorarium employee payroll system already running
well can be seen from the flowchart which explains the
separation of functions from the staffing department that
makes payroll, the finance department checks the payroll and
then gets to the Treasurer who directly distributes employee
costs and then does the payment process and the accounting
department verifies the cash proof transaction out and take
notes in journals and ledgers in order to be able to account for
any payroll transactions made for honorary employees.
Keywords—Internal Control, Payroll Accounting System,
Supporting Decision.
I. INTRODUCTION
The compensation received by employees from the
company is salary, which is a reward given to employees in
return for contributions made to the company. For the
implementation of good salary payments, companies need to
implement internal control and accounting systems. Internal
control is a monitoring process that makes it easy for
management to know the actions are taken and how they are
corrected if the implementation is not in accordance with the
plans that have been implemented. The overall activities of
the company in achieving corporate goals should be
implemented effectively and efficiently but not rarely arise
various problems in the payment of salaries and fraud in the
registration to attend an employee that may affect the results
of the employee's performance. Managers who are in control
of a modern company must be able to control the company
and in carrying out their duties the leader is always faced
with company problems such as problems related to the
procedures for determining the amount of salary and
payment.
The payroll system aims to adequacy and coverage
which following functions: store information employee,
print payslips for each month, create and maintain a record
containing all necessary records of employee and increase
efficiency and effectiveness[1]. The upgrade was jointly run
by the city government’s Human Resource Management
Office and the Electronic Data Processing (EDP) Office.
Aside from cutting manpower downtime, it makes
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Edison Sagala
Universitas Negeri Medan
Medan, Indonesia
edisonsagaladosen@gmail.com
timekeeping and payroll preparation simpler, systematic and
more accurate. It also provides an additional way to identify,
discipline and fires habitual later-comers, absentees and
ghost employees. with the use of a biometric fingerprint
scanner in the attendance system of the organization which
is also connected to the payroll system. and the result saves
time in lining up[2].
Information technology has changed the way
organizations conduct business and it has become
imperative to make effective and timely decisions that can
be verified. In particular, real-time systems for health care
need new techniques of continuous auditing to ensure they
are being used and working properly. Traditional auditing
methods carried out on long term schedules are incapable of
supporting real-time systems to make timely and informed
decisions[3]. According to Yang et al. to ensure the
reliability of financial reporting, internal control
mechanisms must be built into the information system [4].
Quality of Accounting Information System was explained
by internal control and top management support only 60%
respectively. There were 40% of factors unexplained[5].
II. LITERATURE REVIEW
A. Internal Control
Internal control is used as a mechanism to protect the
organization from risk or to minimize the impact of the risk
if the risk occurs[6]. Moeller defines internal control as a
process designed by boards of directors, management and
other personnel to purpose the effectiveness and efficiency of
the operations, reliability of financial reporting and
compliance with applicable laws and regulations[7]. This
similarly argued by [8-11]. Moeller argued the internal
control of AIS including in the component of control
activities. The effectiveness of control activities is the most
important component of the COSO internal control
framework[12]. Control activities are actions taken through
policies and procedures to reduce risks for the purposes of
achievement. In this study, there undertaken to provide
confidence in financial reporting reliability. The information
system controls consisted of general controls and application
controls [7-13].
General controls include software controls, physical
hardware controls, computer operations controls, data
security controls, controls over the implementation of system
processes, and administrative controls. Application controls
include input, process and output controls [10].
 2019 International Conference of Computer Science and Information Technology (ICoSNIKOM)
B. Payroll Accounting System
Consider using a selection of the following controls for
nearly all payroll systems, irrespective of how timekeeping
information is accumulated or how employees are paid:
Audit, Change authorization, Change tracking log., Error-
checking reports, Expense trend lines, Issue payment report
to supervisors, Restrict access to records., Separation of
duties[14-15]
The following list of possible controls address such
issues as missing timesheets, incorrect time worked, and
incorrect pay calculations. They are: Automated timekeeping
systems, Calculation verification, Hours worked verification,
Match payroll register to supporting documents., Match time
cards to employee list, Overtime worked verification., Pay
change approval[14-15].
When you pay employees with checks, several controls
are needed to mitigate the risks of fraud and various errors.
Key controls are: Update signature authorizations., Hand
checks to employees., Lock up undistributed paychecks.,
Match addresses., Payroll checking account[14]. In these
cases, we may be able to safely eliminate a few controls,
knowing that other controls will still mitigate the risk of loss.
III. METHOD
The location of the study was carried out at General
Hospital Medan. The data type used is Primary data is data
obtained directly from the company through technical
interviews, for instance interviewing the part of Treasury and
Personnel. And secondary data, related to the research topic.
In this study the research variables needed and
operational definitions, namely the Accounting System,
Internal Control, Salary and decision making. The
accounting system is a means used to obtain information by
collecting employee data such as attendance cards, payroll,
and payroll checks and then save the data . Data collection
techniques used were interview, documentation and library
techniques. The data analysis technique used in this research
is descriptive method: Descriptive method that is, the method
of analysis by collecting data relating to the application of
internal control and payroll accounting systems as a decision
support tool at General Hospital Medan. The data is
classified processed and analyzed to obtain internal control
of the payroll system.
IV. RESULT AND DISCUSSION
Internal control is a control that greatly helps leaders in
an organization in carrying out its duties so that it has an
important role for the government, which as a whole aims to
prevent and avoid mistakes, cheating, fraud, and other
manipulations at the General Hospital, Medan.
A. Organization Structure
The organizational structure applied by General Hospital
Medan in accordance with the (SK) of the Director regarding
the description of the duties and authority of all sub-sections
and other functions contained in the organizational structure
of the hospital, all hospital employees can find out how the
procedures in carrying out organizational relationships
between subdivisions with one another or functions with one
another, which is included in the form of internal control that
has been implemented by hospital management. In this case,
the payment of employee salaries, the hospital that works the
same as the Bank Sumut Medan as a place to store the assets
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in question is the salary of employees of Medan Hospital. Of
course, this is very good control, because the level of
security of a bank is guaranteed. But there are still
shortcomings, one of which is in General Hospital Medan,
the function of making a salary list is still under the function
of PEMKO Medan. so that each salary processing system for
hospital employees through the Medan PEMKO system
means indirect salary costs or the so-called honorary
spending costs incurred by the budget ceiling.
B. Authorization System
Authorization authority system payroll in hospital done
quite well because:
• Every person whose name is listed in the d lists are
salary already has a letter the appointment decision as
an employee signed by the Hospital Director as the
user of the budget (PA).
• Every salary change has been based on the decision
letter of the head of finance.
• Every deduction for salary other than employee
income tax is based on the deduction letter and
verified by the staffing bag.
• Overtime orders are verified by the section head for
each field.
• Proof of cash out for salary payments verified by the
accounting function.
C. Recording Procedure
In the hospital's payroll system, the recording procedure
has been assessed as good.
D. Healthy Practices
This hospital payroll system, healthy practices have been
carried out well by each section and function that is directly
related to the payroll system, namely:
• Making the salary list verified by the accounting
function.
• The calculation of employee income tax is reconciled
with employee income records.
• Employee income records are archived by the salary
register function.
E. Employees
The quality payroll system at hospital has been
considered quite good because employees experience
education and training.
F. Application of Internal Control
Based on payroll internal control, the author will
elaborate on payroll internal control that exists at Hospital.
This can be indicated by the implementation of internal
control elements within the company which can be described
as follows:
Environmental Control
• Integrity and Ethical Values, written regulations are
applied, among others, regarding hours of work and
hours of work to go home so that employees who
work at the General Hospital in Medan can carry out
performance activities. Information for weeks/time
off some employees will get a certain day off because
 2019 International Conference of Computer Science and Information Technology (ICoSNIKOM)
General Hospital Medan is a company engaged in
public health services automatically hospitals may not
be direct without workers so there is a regulation to
regulate employees for vacation time by making shift
lists for Honorary employees.
• Commitment regarding Compensation of employees
already has employees who are competent in their
part which are supported by the educational
background and responsibilities of the employee's
functions.
• Organizational Structure has an organizational
structure that reflects the line of authority and
responsibility that exists in achieving company goals.
The organizational structure is composed of Directors
who oversee several departments. Deputy Director for
General Administration is assisted by the Personnel
Subdivision, Administrative Subdivision and Head of
Finance. This is also supported by the organizational
structure and job description which shows that the
description of the delegation of authority is clear and
firm so that it can simplify the reporting process and
clarify the level of leadership.
• Giving of authority and responsibility. At Medan
Hospital the authority and responsibility can be seen
from the issuance of SK (Decree) to each employee
after the SK is issued then every employee can
exercise their authority and responsibilities.
Risk Assessment To avoid risk assessment in salary
management, Hospital applies an accounting system using a
payroll application that can minimize errors that occur.
Control Activities
• Review of the performance in control activities to
review the performance of employees is done by
looking at the attendance or the card is present hours
of work of employees who have been signed by every
employee in the respective chambers.
• Processing information required information Director
as the lead entity of a unit, is information that is
relevant, reliable and accurate obtained from each
department work, for example, part of accounting and
finance, information departments of the two
components that will be greatly needed by the
Director.
• Separation of duties and responsibilities that can be
seen from the organizational structure. separation of
duties and responsibilities is very important because it
is a part of directing duties and responsibilities that
must be performed.
Information and Communication The information and
communication system is sufficient so that the Director gets
relevant, timely and accurate information. This is evidenced
by their use of aids in the form of a computer so as to
facilitate internal and external users to make decisions on
transactions payroll.
Supervisor Hospital a special program is held to conduct
continuous supervision of payroll activities. And periodic
evaluations of internal control are carried out so that if there
are weaknesses or errors in payroll activities can be
anticipated immediately.
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In the accounting internal control in Hospital use a
computer system to oversee the payroll data would then use
password , limit the database to each piece and do backups
of data by periodically to anticipate the loss of data
G. Employee Payroll Accounting System
From the results of the research conducted in the field
and after being compared with the theories studied, the
authors make some evaluations as follows:
• Documents used by hospitals quite effective in
supporting decision-making payroll. This can be seen
by the presence of hands-on documents by officials
who have the authority in their section. For example
in the payroll that is authorized from the human
resources section regarding the truth of the payroll.
The documents used include a letter of appointment
of employees, list of employee salaries, hours of work
cards, a recapitulation of payroll, attendance list or
attendance list.
• Notes Accounting who used accounting records used
by the company is sufficiently effective to support
decision making payroll.
H. Salary Procedure
The procedures that make up the payroll system at
Medan Hospital are also in support of salary decision
making. This can be seen as follows:
• Procedure Recording Time. Every employee honoree
will fill out and sign the attendance list that provides
every room and use a fingerprint while however for
temporary employee attendance is not very effective
because the salaries are not determined by the present
hour but working salary per month and do not
perform the pieces on each employee who was not
present for work
• Procedure for distributing salary costs The
distribution of salaries is given to each part that
enjoys the benefits of labor. This is very good to be
carried out in order to better control.
• Procedure of payment still use the payroll system is
directly given by the treasurer salary but before that
happens the payment transaction financial accounting
simultaneously given to the recording manually into
the books as a material proof and can also be
regarded as internal control party accounting in order
to be accountable to the Head of Finance after the
process was happening then continue the process to
obtain a signature of approval to the District Finance
the funds for payment of salaries of Honorary
implemented by using a transaction directly were
given to employees.
V. CONCLUSIONS
Overall, the results of research on internal control and
the employee's payroll and wage accounting system at
hospitals are sufficient to be used as a decision-making tool
for salaries and wages. It can be concluded as follows:
• Employee salary is given through the Bank Sumut
transfer system to employee accounts
• Honorary employee payroll system is running well
can be seen which explains the separation of
 2019 International Conference of Computer Science and Information Technology (ICoSNIKOM)
functions from the Division of Making a payroll, the
Finance Department checks the payroll and is given
to the Treasurer who directly distributes costs to the
workforce and then the payment process and the
accounting department do verification of cash proof
transactions out and record it in journals and ledgers
in order to be able to account for any payroll
transactions made to honorary employees.
• The accounting system applied has been running
well, it can be seen from the accounting records used
are journals and ledgers, where the records in
journals are more complete and more detailed
because they are based on the order of transaction
date and then use the general ledger to summarize
each Honorary payroll transaction
• Internal control elements have been implemented in
which there are 5 components of internal control
namely the control environment, risk assessment,
control activities, information and communication
and the last is the supervision of the purpose of all of
which is to improve internal control within the
hospital itself.
• The organizational structure of the Hospital as a
whole has described a good separation of functions.
• Decision making from the information obtained is
information about internal control and accounting
systems applied in operational activities, whether it
has been going well with the aim of being able to
protect the payroll process of honorary employees.
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