How to prepare for a physical audit

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You may be contacted by the Premium Audit Department for an appointment to conduct a physical audit.   This section contains information to help you prepare for a physical audit.

Records commonly used at audit

To determine the appropriate classification(s) and the correct reportable payroll, various business records will be requested. The following business records are commonly reviewed during an audit:

• General ledger/chart of accounts
• Payroll journals
• Cash disbursement journal
• Individual earning records/time cards
• Overtime wages summarized by classification
• Check register/canceled checks/bank statements
• List of clerical employees
• Contractors/subcontractors records
• Job cost records/contracts/work invoices showing type of work
• Employer's Quarterly Federal Tax Return Form 941 or 943 reports
• State Employer's Quarterly Unemployment Insurance Tax reports
• Federal 1099, W2, and W3 transmittals
• Certificate of Workers Compensation Insurance for all subcontractors
• Benefit Plan information, i.e. cafeteria or 401(k) plans
• Other miscellaneous business records

If your business uses a computerized record keeping system, our auditors may be able to guide you through retrieving reports and data for the workers compensation audit.  For information or assistance call us at 208-332-2150 or send an e-mail to

Requesting Certificates of Insurance from subcontractors

The State Insurance Fund can only honor requests from a policyholder or their agent of record to issue a Certificate of Insurance.  If you have a subcontractor doing work for you, you should always ask them to provide a Certificate of Insurance.  If we insure the subcontractor, and they request us to issue a certificate, we will mail or fax it directly to the certificate holder (the business the certificate is issued to).  We will also endeavor to notify certificate holders if the policy cancels.

Gross payroll

Gross payroll is the amount of payroll prior to any deductions.  This includes deductions made for benefit plans such as a 401(k) or cafeteria-style plans which may reduce the employee's taxable income.  Payroll for workers compensation purposes may not be the same as payroll reported for tax purposes.

Examples of items commonly included in gross payroll include:

• Wages
• Salary
• Bonuses
• Vacation pay
• Commission
• Profit sharing
• Payment for piece work
• Substitutes for money which may include:
  • Goods
  • Board and lodging
  • Working out a debt
  • The reasonable cash value of any non-cash item used as payment of wages

Common items not included as gross payroll are:

• Tips
• Severance pay

The inclusions and exclusions listed here are the most common but the list is not all inclusive.  If you have a specific question about what to include or exclude as gross payroll, call the Premium Audit Department at 208-332-2150.

Organize your payroll records

   If you maintain accurate and detailed records you may be able to take advantage of available credits and reduce your insurance cost.

Payroll records used for an audit should be organized to clearly show payroll by:

• Policy period
• Classification code (List each type of job separately, i.e. clerical, sales, etc.)
• Separating overtime pay from regular pay

Complete and accurate records

Accurate records that are complete and well organized make the audit process much easier. The auditor can quickly find what they need and will thus require less of your time for questions and/or clarifications.

Be available for questions

The owner of the business should be available to meet with the auditor to answer questions and review the results of the audit. If the owner is not available, the auditor will need to meet with someone who has a thorough knowledge of the business operations.

The auditor is also available to answer any questions you may have about the audit process.

Audit results

After an audit, you will receive a statement and a letter explaining any payroll differences that may have been found during the audit process. In some scenarios, an audit representative will call you to review the audit results. If you have additional information that may alter the results of the audit, or if you have questions about the audit, please call the Premium Audit Department at 208-332-2150.

If you do not agree with the audit results, please send a detailed written explanation within 30 days to: