Preparing For Your Audit

When an employer first purchases a workers' compensation policy, the premium is largely based on payroll estimates and employee job classifications. As changes occur throughout the policy period, payroll, sales and operations fluctuate, resulting in the overpayment or underpayment of premium. A premium audit is a standard insurance practice that reviews documentation about these changes and ensures the premium paid for the period is based on actual business exposures. The New York Compensation Insurance Rating Board (NYCIRB) requires an annual audit of any policyholder with an annual premium of $5,000 or more.

Policyholders that receive a NYSIF audit notice may schedule or reschedule an audit by using our Premium Audit Scheduling System (PASS). PASS enables policyholders or their representatives to choose the date, time or location of a premium audit appointment. The system eliminates most instances where customers have to wait for business hours to contact NYSIF to schedule or reschedule an audit.

Workers' compensation policyholders or their representatives can also conveniently and securely upload financial records in lieu of an on-premise audit or to resolve an audit issue. The new process securely delivers your audit documents to the appropriate NYSIF auditor. You will need your policy number and your audit number or appointment ID to get started. You can find that number on your audit letter from NYSIF.

Your NYSIF policy (Part 4, Sections G and H) requires you to keep all business records related to your policy and allow NYSIF to examine these records, the contents of which remain confidential.

If participating in an on-site audit, someone with knowledge of your business operations must be present at the audit to answer questions regarding duties of all employees and other issues that may arise. Advise your auditor if the location of necessary records is different than the audit location on your notice.

NYSIF auditors determine:

  • The total amount of payroll subject to a premium charge
  • Applicable classification codes for your business and employees
  • Division of payroll for each classification
  • The accuracy of classification codes and other records to help achieve the lowest possible premium for your policy

Required Records

Please make a complete set of the following required records available:

  • Payroll records (showing totals and division of payroll by type of work performed)
  • Checkbook
  • Cash book (disbursements and receipts)
  • General ledger
  • Contracts (construction)
  • Tax returns including quarterly payroll taxes
  • Original certificates of insurance for covered subcontractors

Our auditor will determine the best records from the list above to use as a primary source to obtain gross payroll amounts. Payroll tax forms (941, NYS-45, NYS-45ATT, W-2 and W-3) are used to verify the payroll recorded in the primary records. In addition, the auditor examines the cash book, checkbook, daybook with cash expenses and general ledger to determine remuneration that is not reflected in payroll records. The auditor also uses forms 1120, 1065, 1040, 990, 1099 and 1096 to verify records used as the principal source.

The auditor may examine contracts, bills and invoices to determine and verify the nature of work done by the policyholder or its subcontractors. Premium charges for employees of uninsured subcontractors are the policyholder's responsibility. See Subcontractor Coverage for more information.

We encourage you to register for a NYSIF online customer account, where you can access previous audits, exit interview forms and audit worksheets.  More information can be found in our Audit Document Retrieval User Guide.

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