Audit:  Frequently Asked Questions...

A workers' compensation policy is based on "estimated payrolls" that are provided at the beginning of the policy period.

A worker's compensation audit is the year-end-review of the firms records to verify:

• The operations of the firm and the various types of work performed.

• The actual payroll paid to employees of the firm.

• The amount of money paid to casual labor, if any.

• The amount of money paid to uninsured subcontractors, if any.

After the audit is completed, the collected information is used to calculate the final premium for the policy term. If the audited payrolls are lower than the estimated payrolls, then the excess premium will be returned to the insured. If the audited payrolls are higher than the estimated payrolls, then additional funds will be due to the insurance carrier.

Since audits can bring up many questions, we invite you to contact us to discuss any questions you may have. We'll be happy to assist you.

An audit is performed at the conclusion of a policy term. Normally, a policy is for a term of 1 year. However, if your policy is shorter than the 1 year term, if it was cancelled by you or the carrier, there still would be an audit to determine the actual premium earned. Depending on your premium size and business type, the insurance company may elect to send you a mail audit form, asking that you mail in the records they need to complete the audit. If you have been selected for a mail audit, normally it will be due within 30 days after your expiration. Most policies have physical audits performed on them. The auditor will generally contact you, either just before or within 30 days after your policy expires, to schedule an appointment. The vast majority of audits are performed within 90 days of the policy expiration date. WCA is happy to help complete mail audit forms, schedule audits, prepare audit records, and even meet with an auditor for our customers.

Anyone performing labor/services on behalf of the firm is included on an audit: 1. Owners or Officers who are not either exempt by law or by a filing. 2. Employees 3. Casual Labor 4. Uninsured Subcontractors If a subcontractor does not have their own workers' compensation insurance, or an individual exemption, if they work alone, the entire amount of their pay is included. If the subcontractor can provided itemized invoices for materials, then the cost of such can be deducted from the audit.

Yes. Many times, it is very inconvenient for the business owner to meet with an auditor. Maybe, the insured is a contractor and is out in the field for the better part of the day. Perhaps, the insured is a restaurant or a retail store and subject to customer demand. It may simply be easier for someone other than the insured to act as the audit contact. That could be your accountant or even your insurance agent. You just need to make sure that they have been provided with all of the audit materials that will be necessary to complete the audit. Work Comp Associates, Inc. acts as representatives for insurance audits all the time. Part of the services we provide is to assist you in the preparation of the audit materials, meet with the auditor and then verify that the resulting final audit is in agreement with the records that have been provided.

If you believe your audit is incorrect, you can dispute an audit. The first step is to write to your carrier, within 30 days of receipt of the Premium Audit Notice, and lodge a formal audit dispute. You need to include the policy number, policy period and the reason(s) for your dispute. The next step is to request a copy of the audit worksheets so that you can ascertain where the specific differences are. Work Comp Associates, Inc. will be glad to assist you in this process. If there is still a dispute after carrier review of the additional information and the dispute is based on NCCI's manual rules, your appeal can be made to the NCCI's Dispute Resolution Process.

Employers shall make available all records necessary for the payroll verification audit and permit the auditor to make a physical inspection of the employer’s operation. If the employer fails upon request of the auditor to provide access to the documents specified in this section and the carrier cannot complete the audit as a result, the employer shall pay $500 to the carrier to defray the costs of the audits. (440.381(5)) ​ If an employer fails to provide reasonable access to payroll records for a payroll verification audit, the employer shall pay a premium to the carrier or self-insurer not to exceed three times the most recent estimated annual premium.(440.381(8))

The short answer is "No".

Unless you are a insured with a Professional Employer Organization" (PEO), your carrier is required to perform a premium audit at the end of each policy. Pay As You Go plans can help you to make sure that the premium you pay is very close to the Final Audit Premium due for your payroll, but they are only as good as the payroll figures that you report each month. For example:

• If you include items that you shouldn't report, like premium overtime wages, then you may be paying too much each month - and the audit will make sure you get money back.

• On the other hand, if you neglect to things that you are included in "payroll" under the policy, like payments to casual labor or uninsured subcontractors, then you aren't paying enough and the audit will make sure that you pay the premium that is actually due.

See the pertinent wording in the statute below:

Florida Statute - 440.381 - Payroll Audit Procedures

(3) The Financial Services Commission, in consultation with the department, shall establish by rule minimum requirements for audits of payroll and classifications in order to ensure that the appropriate premium is charged for workers’ compensation coverage. The rules shall ensure that audits performed by both carriers and employers are adequate to provide that all sources of payments to employees, subcontractors, and independent contractors have been reviewed and that the accuracy of classification of employees has been verified. The rules shall provide that employers in all classes other than the construction class be audited not less frequently than biennially and may provide for more frequent audits of employers in specified classifications based on factors such as amount of premium, type of business, loss ratios, or other relevant factors. In no event shall employers in the construction class, generating more than the amount of premium required to be experience rated, be audited less than annually. The annual audits required for construction classes shall consist of physical onsite audits.

In a word, "Yes". Workers' Compensation audits confirm other items in addition to payroll; such as payments to Casual Laborers (day laborers) and Subcontractors.

Further, if you have any officers that are included or rather, have not filed an exemption, then the auditor will also seek to confirm what types of work they performed, even if they were not paid.

So, it is important to work with the auditor to complete the audit, even if you had no payroll.

Yes, it is always recommended to have and provide a copy of your exemption certificate(s) to the auditor. Don't rely on the auditor to lookup the information. We see many errors on audits where the auditor has not confirmed the exemption status. To prevent this:

Have the information there and as part of your audit information package for the auditor.

You can easily access the exemption information online at

https://dwcdataportal.fldfs.com/Exemption.aspx

If you have any questions about your audit, don't hesitate to give us a call. This is part of the service that we provide to our customers. We review each and every one of the audits that come in each year.

The State of Florida passed legislation to assist the carriers in getting the cooperation of insured's with their audits. The provision allows for carriers to bill an audit at three times the estimated annual premium when the employer fails to cooperate or refuses to provide the required audit records.

Long and short, It is a penalty to get the insured to comply. Once an audit is completed, the triple bill will be removed and the policy will be re-billed at the actual payrolls ascertained in the audit.

Florida Statute 440.381, section 8:

"If an employer fails to provide reasonable access to payroll records for a payroll verification audit, the employer shall pay a premium to the carrier or self-insurer not to exceed three times the most recent estimated annual premium."

If you need help with your audit or advice, please give us a call. We would be happy to help you with your audit issues.