Formatting Tips and Considerations for Writing up the Payroll Audit

Posting by Kurt Needles, CPA

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.

Suggestions for the Format

Almost all payroll systems need the hours keyed by month, so provide results in a monthly format.  We show name, SSN, hours reported, hours worked and the hours over or under reported.  Each month is a separate sheet of paper.  In this manner, if you show nothing more than Joe Smith with 65 hours for March, and he was already reported for 50 hours, the clerk may become confused.  The clerk may not know whether to remove 15 hours or add 15 hours, and in actuality you want them to add 65 to the 50 for a total of 115 hours.  The clerks are usually very conscientious and hard working, but lower paid staff, so be considerate and make their job a little easier.  A good working relationship between your payroll audit staff and the TPA’s control clerks pays dividends, I promise.

We write up the over reported hours on one schedule and under reported hours on another. What we turn in are basically two complete audits, with one showing over reported, one showing under reported.  We have been doing this for about 20 years.  It started when an attorney assigned to collect one of our “netted” payroll audits asked if we, the audit firm, made the fiduciary decision to grant the employer credit for the over reported hours.   I was young, but not stupid, and ever since we have been separating them.  Now all attorneys appreciate the format.

If you perform the write up of the dollars due as an administrative convenience:  document, document, document.  Make sure you have the correct rates and formulas for LDs and interest.  We make sure our permanent file contains the delinquency procedures and/or the applicable section of the Trust documents along with the current CBA.  If the CBA and Trust documents differ, the Trust would rule, (but you may have a bear of a time getting a judge to go along with you).  NEVER use as documentation the word of the attorney on the LD or interest rate.  If the rate is challenged in court, the attorney becomes a witness.  Not a good thing.

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