Bond Beebe Principal Larry Beebe, CPA sat down with the International Foundation of Employee Benefit Plans to review the basics of payroll auditing.
See more on the International Foundation of Employee Benefit Plans’ Blog.
Posting by Larry Beebe, CPA
A prospective firm should answer this question by stating it constantly considers how to streamline the audit process for its clients. Each year, trustees and the audit firm should review the previous year and discuss how the audit program can be more efficient in the year ahead.
A payroll audit program should not remain the same year after year. It should be constantly evolving program. A frank discussion annually about the strengths and weaknesses of the […]
Posting by Larry Beebe, CPA
The payroll audit firm should have a process identified for scheduling audits. It does not matter whether a supervisor, a clerical employee, or the auditor schedules the audit. What is important is that the person doing the scheduling keep a written diary of all contact with the employer during the scheduling process.
The great majority of employers cooperate with the scheduling process, but a few employers try to avoid scheduling the audit by refusing to commit […]
Posting by Larry Beebe, CPA
A prospective payroll audit firm should answer this question with a question: What do you want us to do? The plan’s response depends on the circumstances. If the deficiencies have been fully identified by the end of the field work, the employer should be notified. On the other hand, if additional work is needed to determine whether more hours are covered by the collective bargaining unit (CBA), then a discussion with the employer may be […]
Posting by Larry Beebe, CPA
A hypothetical example helps illustrate the importance of selecting an appropriate audit cycle for different employers. Let’s say a multiemployer plan has 300 contributing employers and a three-year audit cycle- It scheduled 100 audits each year. For each group of 100 audits, the plan has 30 with no deficiencies and at least 10 with deficiencies of $25,000 or more over the three-year period. Assume that the audit of each employer in the group with no […]
Posting by Larry Beebe, CPA
There is no requirement by the U.S. Department of Labor or any other regulator that all employers be subject to payroll audits over a fixed number of years. If a plan has a small number of employers, auditing each employer within a cycle probably makes sense.
There are good reasons, however, to vary the number of years between payroll audits for a given employer. We will discuss that in our next blog.
For more in this series, […]
Posting by Larry Beebe, CPA
Most plans assign payroll audits to auditors in batches. The audit firm then groups out-of-town audits based on geographic areas- local audits are assigned based on the availability of audit staff. The plan and audit firm should agree on the time allowed to accomplish each batch assigned.
Once audit field work is completed, the goal of the audit firm should be to deliver reports with no findings within a week. Audits that have field work completed […]
Posting by Larry Beebe, CPA
Some payroll audit firms charge low hourly rates, but charge for every hour an auditor spends traveling or doing the audit. Other firms have higher hourly rates, but only charge for time actually doing the audit. When choosing an audit firm, clarify how each firm charges for its time so there is an apples-to-apples comparison.
For more in this series, see:
Question 11: Will we Receive Progress Reports?
Question 10: Do you Change a Flat-Rate Fee […]
Posting by Larry Beebe, CPA
A major problem with a flat-rate audit is that it encourages audits with no findings.
If the auditor receives the same fee regardless of findings, the auditor is unlikely to spend time looking for deficiencies. Instead, a plan may want to put a cap or ceiling on its audit costs. One way to do this is to agree on an hourly rate with a cap on the number of hours for each audit. If the auditor […]
The U.S. court of Appeals for the First Circuit recently ruled that a company was not required to submit a payroll audit by a group of Multiemployer Funds after it notified the Funds in writing that it no longer would bid on union jobs.
The company sent the written notification to the Fund’ ‘collection agent in April, 2007. The Funds requested the payroll audit for the years 2007-2009 claiming that the employer was still subject to the collective bargaining agreement.
The […]
