Preparing for an Audit
A premium audit is a routine, yet essential event in the life of your clients’ workers’ compensation insurance policy. All insurers are required to audit their policyholders. During a fast-paced business year, policyholders may not always be aware of how some changes have affected their policy. A review of a business helps us verify current information and make accurate calculations.
Aim for Accuracy and Stay in Touch
With adequate preparation, policyholders can help reduce the amount of time and material required during an audit. Implementing a few basic organizational and communication practices during the year can make the difference in expediting the auditing process:
- Report payroll accurately throughout the policy year, using correct amounts and classifications; be sure to check math calculations.
- Inform State Fund during the policy year if operations change or if new employees are hired who perform different tasks.
- Maintain clear, accessible records, including payroll earned under endorsements for a waiver of subrogation or an Owner Controlled Insurance Policy (OCIP).
Gather Written Records
Compile in advance the types of records normally requested during an audit. Important records include:
- Certificates of insurance for all independent contractors
- 1099s issued
- Names and job duties of employees
- State Quarterly Wage and Withholding Reports (DE 6 forms)
- Payroll journals
- State Fund payroll reports for the coverage period being audited
While the information needed for each audit may differ, an auditor may ask to make the following records available as well:
- Payroll registers, time books, time cards, check registers, check stubs, and checkbooks
- Cash disbursement journals, cash books, and petty cash books
- General or subsidiary ledgers, job cost records, bonus ledgers, and commission ledgers
- Profit-sharing reports, prevailing-wage determination sheets, and federal and state tax forms
Help available
State Fund provides a number of ways to help clarify the audit process:
- Our brochure entitled "Audit Questions & Answers" contains several tips to help clarify the auditing process. Online versions are available in English/Spanish.
- Our policyholders can also call our Customer Service Center toll-free to obtain answers or referrals for any additional audit questions, or to order free, color-print versions of our audit brochure.
Remember that an audit is routine, and presents an opportunity to discuss any questions or concerns one may have about workers’ compensation or their policy.
*Special Notice for All Construction Industry Employers*
