Written by Phil Vivirito
Bond Beebe   
P: 301.272.6090  E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Having electronic records sent to your office either works wonderfully or is a complete bust.  An Excel file that you can verify contains all the payroll information you require will be the most efficient way for you to complete the audit in your own office.  However, once you start getting into file formats that are difficult to manipulate, reports that do not provide all the information you require or reports that are incomplete or sketchy – you will have a problem.  The time it takes to review this type of information and the back and forth with the employer to obtain the report you need usually delays the completion of the audit and just adds time.  Your total time may even become greater than the expense of a site visit!

If the employer cannot provide the pay records you require for a timely and efficient audit completion, I recommend foregoing having records sent and instead plan the site visit to the employer.  Another option to consider is what I call a hybrid-site visit, which is a site visit that includes using electronic records in your office.  For a very large employer, going on site, then testing and determining what type of electronic report will work for you, may be the optimal solution.

Written by Phil Vivirito
Bond Beebe   
P: 301.272.6090  E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

An employer may also send you an electronic copy of one of their payroll reports that are provided by their payroll processor company.  This may not work for you at all.  You may be sent a report that shows wages and deductions, but you need hours.  Handle this on a case by case basis.  If you cannot get a report to suit your needs, having an employer send this type of report will waste your time.  You should be specific in what you need ahead of time, and if the employer’s electronic reports from their payroll company do not fit your needs, then a site visit may be required.

Written by Phil Vivirito
Bond Beebe   
P: 301.272.6090  E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Some employers will customize a payroll report for you.  They may be able to provide it as a text file, and Excel file, or as a PDF.  It is important that you are clear and precise in what information you require in this report.  You as the auditor must tell the employer what should be in it.  I have seen instances where employers omit pay codes or individuals from these reports because they feel that those pay codes or individuals should not be reported.  The rule of thumb when using a custom report should be that all wages are included (even if you are auditing hours) for each employee.  Then request W-2s for some or all of the employees and reconcile the gross wages on the custom report to the W-2 for some employees.  If you cannot reconcile them, there may be pay codes omitted.

Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

A U.S. District Court in Northern Indiana rejected claims by Carpenter’s Employee Benefit Funds to hold the President of a bankrupt company liable for unpaid contributions.

The court explained that the Funds were required to show that “the corporate form was so ignored, controlled or manipulated that…the misuse of the corporate form would constitute fraud or promote injustice.”
In considering whether to impose individual liability, the BNA Pension and Benefits Reporter in its June 22, 2010 issue stated that “courts consider factors including undercapitalization, lack of corporate records, shareholders’ fraudulent representations, use of the corporation to promote illegal activities of fraud, the payment of individual debts, commingling of assets and the failure to observe corporate formalities.

The court concluded that there was no evidence in this case that the employer should have been personally responsible.

Written By Phil Vivirito
Bond Beebe
P: 301.272.6090 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Usually receiving payroll records in a PDF format has the same flexibility as having a hard copy.  I have seen auditors print out the PDF records and simply use the hard copy!

As a useful measure, request that the employer make the PDF file searchable.  You can use the search function to navigate around the file.  You may also inquire if the employer can change the sort order of the records to make it easier for your use.  For example if the payroll is in clock number order, ask for it to be resorted to alpha order.  Lastly, become familiar with using a PDF and understand its capabilities, such as highlighting, adding text and adding tick marks.

Written by Phil Vivirito
Bond Beebe   
P: 301.272.6090  E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

If the employer is running you an electronic report from their payroll, ensure you ask the following few, but very important, questions:

Is this the entire payroll?  The employer may be producing a query just for your audit and exclude certain job classes or only include employees that they are reporting.  The employer may forget about terminated employees and only include currently active ones.

Are all pay types or pay codes included?  The employer may believe that certain hours do not have to be reported and take them out of the report.  Or, the employer may inadvertently leave a code out.  You should ask for W-2’s to test for these problems.

What are the pay periods?  Make sure you know what week ending dates are being used for the report.  Do these periods match the contribution week ending periods?

How will the report be provided and in what format?  Will it be emailed to you or copied to a CD?  Will it be in Excel, a text file, or a PDF?  If you can, you should request the format and mode that will work best for you.

Written By Phil Vivirito
Bond Beebe
P: 301.272.6090 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

You have called an employer to schedule a payroll audit and the employer states ‘I’ll save you the trip; I can easily send you the payroll in an electronic format.’ Thinking about the travel expense savings you happily say yes. So now you await the records arrival and make your plan for doing the audit in your office. When the records do arrive they are usually in one of the following formats: PDF, a custom report run by the employer, or a report directly from the employer’s payroll processor such as ADP.

But is it really that simple? Did you ask the employer the right questions about these records? Did you know what format the records will be in? And was the whole process really worth it?

Over the next few blogs we will look at the possible answers to these questions by discussing the following:
1. What questions should you ask the employer?
2. How to use PDF records.
3. How to use the custom report.
4. How to use the payroll processor report.
5. Was it worthwhile to have the records sent?

Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Unsafe Conditions

In very rare instances, the payroll auditor may be faced with one of the following:

1. Unsafe physical environment in the area inside the employer’s premises.
2. Unsafe physical environment in the area surrounding the employer’s premises.
3. Sexual suggestions or threats.
4. Threats of physical violence.
5. Display of weapon by the employer.

In any instance where the auditor feels threatened, he/she should immediately remove himself/herself from the employer’s premises.  The conditions encountered by the auditor should be provided to the plans attorney.  Often, the payroll audit can be rescheduled to a safe location such as the employer’s attorney or accountant’s office.

The auditor can help insure his/her safety if the home office always knows where you are and by insuring that adequate transportation is available to leave if necessary.

I once did a payroll audit in a very unsafe area of the Bronx.  A cab took me there.  When I got done with the audit, I did not have the phone number of a car service to pick me up, and no cab would come to that location.  The employer refused assistance.  I might still be there if one of the employees working there hearing of my dilemma said he would take me to LaGuardia on his way home.  Ultimately, it was my own fault.  I did not take preventative action to insure my own safety.

Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Insufficient Work Space

Sometimes an employer representative thinks the auditor will go away faster if he/she is given inadequate working space, or if the space is deliberately hot or cold.  When I suspect an employer is doing this, it backfires on the employer.  I am suspicious that the employer is hiding something and I work harder than ever to find deficiencies.

If inadequate work space is provided, the auditor should do two things.  The first thing is to complain to the employer.  If the problems are fixed quickly, the auditor can proceed with the job.  If the problems are not fixed or inadequately fixed, the auditor should draft a narrative describing the deficiencies and the action or lack of action taken by the auditor to fix the problems.  In those rare instances where legal action has to be taken to collect deficiencies found as a result of the audit, the fund attorney may be able to use that narrative to advantage in pursuing the delinquency.

One time an employer put me in a room next to a construction site where there was jack hammering all day long.  I complained to no avail.  I stuck it out and, with the help of Advil, was able to complete the job and I found a sizeable deficiency. 

Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Does Not Allow the Auditor to Stay When He/She Leaves

You are at the employer’s office doing your payroll audit.  It is 3:00 PM and you estimate that if you hustle, you can get done by 6:00 PM.  The employer representative says that he/she has to leave at 4:00 PM and you will have to leave then as well.

You should inform the employer representative that you still have about 3 hours of work to do and you were unaware until that moment that you could not stay to complete the job.  Tell the employer representative that you do not need his/her presence and ask to stay until you are done.  If that doesn’t work, ask if you can take the relevant records back to the hotel with you (if this is an out of town engagement) and that you will return them in the morning.

If you are still refused, you should leave when requested and make arrangements to come back when you can.  If the plan has a clause that assesses an employer the cost of an audit when deficiencies are found, you should point that out to the employer representative and tell him/her (politely) that not allowing you to stay and finish will escalate the cost of the audit and the will cost the employer more in the long term.