The definition of a payroll (compliance) audit is to determine through the review of the payroll records that the employer is in compliance with the terms of the Collective Bargaining Agreement with regard to the employer’s contributions to the benefit fund(s) and to ascertain that the contribution reports are correct. In other words, that the correct employees have been reported at the correct time, at the correct rate(s) for the correct number of units (hours/days/weeks/months/wages).

Any gap in compliance on wage entitlements of employees could land a company in trouble. The company may end up having a financial implication or a risk of prosecution or IR issues triggered. Even a small non-compliance could cause significant damage to the reputation of the company.

Who Requires a Payroll (Compliance) Audit? Under the terms of the Employee Retirement Income Security Act of 1974 (ERISA), the trustees have the responsibility to collect the correct contributions. Payroll audits provide assurance that the correct contributions have been made. ERISA also requires an annual audit of the fund by a qualified, independent, certified public accountant. And the Department of Labor (DOL) requires an unqualified opinion unless the plan has obtained a limited scope audit exemption from the DOL. Again, payroll audits provide assurance that correct contributions have been made.

Who Benefits from a Payroll (Compliance) Audit?
Benefits to the Fund

• Proper contributions are received
• Verification of accurate and complete participant records
• Verification of monitoring contribution collections by fund trustees
• Promotes timeliness in recognizing reporting errors
• Avoids Department of Labor problems

Benefits to the Employer

• Proper contributions are made
• Promotes timeliness in recognizing reporting errors