Written by Kurt Needles
Needles & Associates
P: 303.430.4225 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

There are times when a payroll auditor in the field needs to decide to stay and review the records received, or leave the company. The best action may be to get kicked out, but it’s a tough judgment call.

The situation occurs when the auditor has correctly followed all the pre-visit procedures. The auditor communicated lists of records needed, time period, purpose and time of visit. When showing up at the company, he/she is only given the payroll for the “union” employees. When the auditor asks for the entire payroll they are told one of the following stories: “That’s all my boss told me that you can see.”; “You have no legal right to see any other information.”; or, “They did not know that you needed to see it all and therefore they did not have the records available.”

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

On September 15 and 16 in Atlantic City, New Jersey, the International Foundation of Employee Benefit Plans (IFEBP) will present the Collection Procedures Institute, filled with seminars, workshops and forums geared toward collections policies and procedures.  Phil Vivirito and I will be conducting a class entitled “Efficient Payroll Auditing” which will outline payroll audit programs, range of audit services, controlling audit costs, the future of payroll audits, and more.  Andy Staab, who also serves on this blog’s editorial board, will be presenting a seminar and conducting a workshop as well.  We hope to gather a lot of payroll auditing stories that we can share with you on this site in the immediate future.

For more details about the Collection Procedures Institute, visit the IFEBP site.

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

To prepare for the payroll audit, a brief list of questions may be e-mailed, faxed, or mailed to the employer. The auditor usually informs the employer when scheduling the audit and requests that the employer e-mail or fax back the completed questionnaire. This pre-audit questionnaire contains questions that would be common for any audit, such as: how many people are on the payroll, and has the same person been preparing the remittance reports for the entire audit period.

The pre-audit questionnaire becomes a very useful tool in helping the payroll auditor plan the audit when simple yet specific questions relating to the fund’s rules are asked (e.g., When do contributions begin for new employees?). For example, if contributions are due from the date of hire and the employer answers “after thirty days” on the questionnaire, the auditor already knows where a problem exists. Questions dealing with vacations, holiday pay, overtime, and capping hours can help the auditor pinpoint the potential problem areas before going out into the field. See an example of a pre-audit questionnaire linked below.

• Pre-Audit Questionnaire (PDF)
• Pre-Audit Questionnaire (DOC)
  

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

There were two cases reported in the IFEBP’s June 2008 Legal Legislative Reporter dealing with employer contribution issues.  In one case, the court ordered a company to make contributions on behalf non-union employees.  The work was covered by a Project Stabilization Agreement (PSA) and the courts ruled that workers covered by the PSA had to be reported even if they were non-union employees.

The second case involved a trust agreement which calls for the discretionary imposition of an “exit contribution” by a withdrawing employer, even if the employer had no withdrawal liability.  The court dismissed a motion by the employer for summary judgment and has permitted further discovery as to whether an “exit contribution” should be allowed.
For more details on these cases, see the June 2008 edition of the IFEBP’s Legal Legislative Reporter.

Written by Ron Chandler
Miller Kaplan Arase & Co., LLP
P: 818.769.2010 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

From time to time, we find that the collective bargaining agreements we audit are deficient as to defining or explaining specifically how, when or which hours or other methods of contribution are to be made for health and welfare and pension benefits.  Several years ago, we made some Local Unions aware of these deficiencies, and found that subsequent agreements had specific language clearing up any ambiguities from the prior contract.

Lesson learned:  Do not hesitate to recommend to a union that some contract language be changed if it is not clear.  It can only benefit the union members and possibly avoid problems or misunderstandings in the future.

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

Many plans have payroll audit cycles.  The most popular is the three year cycle in which each employer is audited once every three years.  As the cycle goes on, some employers may have audit findings every three years, and some may be in compliance for six or even nine years.  At the point of the third or fourth cycle, it may be time for a variation on the three year cycle.  Employers that have been in compliance for two or more audit cycles can be put on a six year rotation, while those that have findings are kept on the three year rotation.  Those employers on the six year rotation can be audited for the most recent three year period and expanded for the full six years if there are significant findings.  Keeping a good database will make it easy for the plan’s auditor to track the audits and determine which employers go on a three year or six year rotation.

Written by Kurt Needles
Needles & Associates
P: 303.430.4225 E:  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Writing up the Payroll Audit

I have seen many different formats used by CPAs to transmit the results of the audit to the TPA.  I had an administrator corner me before a Trustee’s meeting and tell me point blank that they do not want payroll audits performed because each one takes hours and hours of administrative time to key into the system.  Needless to say, I assured him that our format is TPA-friendly.  Within the year, the TPA got us hired on three more funds where we were not the annual auditors.

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Written by Ron Chandler
Miller Kaplan Arase & Co., LLP

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

As we stated in the concluding chapter of our book, we would eventually like to publish a second edition. In order to do that, we need your tips and stories. Any advice you could give to payroll auditors and/or trustees, and any stories about what happened to you as a payroll auditor would be greatly appreciated. Please send them in reply to this blog posting, or you may e-mail them to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Written by Kurt Needles
Needles & Associates
P: 303.430.4225 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

I summarized the payroll audits that our firm performed during the years 2001-2005. The analysis can be found on this Web site in the Articles section. I separated the audits into two categories: routine audits, and audits of employers who were delinquent. I believe that the figures presented in this report show that a payroll audit program can be financially successful – even for routine audits. Has your experience been similar? Let us know!