Posting by Ayisha Henderson

Two commonly performed shortcuts employers apply to remittances are truncating hours or reporting contributions capped weekly using a Gregorian calendar – and they may have a material effect on contributions.  Materiality, however, often depends on the size of the bargaining unit.  Consider the following examples:

1. An employer who truncates hours for a bargaining unit of 10 employees would be less material to an auditor than a bargaining unit of 1,000 employees.
2. Similarly, if an agreement stipulates a weekly cap on contributions, and the employer reports weeks using a Gregorian calendar, the days that start and end each month that are not within full weeks will likely be capped using a daily calculation.  This can easily cause units to be underreported in each month.  Again, this difference may not be material, unless the bargaining unit is significant in size.

A thorough test sample of the audit population will usually indicate how often variances occur and whether or not it’s worth the time to pursue the findings.  However, I am often indecisive on what action should be taken in these cases, especially if it appears that the reporting shortcut is purposely applied by the employer to save on their contribution liability. My dilemma is whether or not the employer’s reporting error is worth the time it would take to pick it up on the audit report.  These types of errors are easy to spot, but extremely time-consuming to pick up.  Depending on the size of the bargaining unit, audit costs may be significantly increased.  Ultimately, I think it should be the Fund’s decision on how this issue should be handled.

As for me, if the employer has a small bargaining unit (less than 100 employees), I usually pick up any variances and advise the employer that they should change their reporting practice.  In the audit report, I note the employer’s erroneous reporting practice and the recommendation for change.

If the employer has a larger bargaining unit (more than 100 employees), I usually contact the Fund to find out if they want me to spend the time picking up the related findings.  The Fund can decide if they want me to spend the time to calculate the contribution variances, or if they want to pursue a different course of action.  Again, I would note the employer’s reporting practice in the audit report along with the recommendation for change.  I would also note the Fund’s response to the issue.