14 KEYS TO SURVIVING A GOVERNMENT

AUDIT OR INSPECTION

prepared by:  Independent Business Association (www.ibaw.net)

 

Almost every business will be audited or inspected by one or more government agencies over the course of a year.  IBA members often call in a panic asking, “An inspector is here or an auditor is coming, what should I do?”  Below are IBA’s 14 key recommendations to making the best of a government inspection or audit.

 

1.   PREPARE YOURSELF FOR AN INSPECTION OR AUDIT BEFORE IT HAPPENS  Inspections are going to occur in most small businesses, so plan for them.  First, educate your key staff and other workers about company policies dealing with inspections.  In almost every case, the business owner has the right to be present or have a representative present at the time the inspection is being conducted.  If you are not there, who is your representative?  If you do not have a representative or that representative is not at your business when an inspector or auditor arrives, your staff should inform the inspector or auditor that no employer representative is available at that time and to get the inspector’s phone number and the employer will call and arrange an inspection or audit time.  Do not abuse this and be sure to be prompt in calling and setting a time for the inspection or audit to occur.  All workers should be instructed to tell anyone not connected with the company to leave if they are on company facilities not open to the public.  This includes inspectors as the employer has liability if a member of the public is somehow injured when wandering around company facilities.

 

      Prepare your workers.  They must know the basics if asked by an inspector, which is often done.  Where are the fire extinguishers, where is the first-aid kit, where are the MDSD's, is that (pointing) material hazardous and if so, what do you do to protect yourself from exposure to it, and what do you do if there is a fire?  These are all common questions that may be asked of any employee.  They must be prepared to answer them, but not provide additional unrequested information.

 

2.   KNOW THE REGULATIONS THAT APPLY TO YOUR BUSINESS  YOU need to know the basics of the regulations that apply to your business.  For most small businesses with employees, you have 58 sets of regulations administered by 28 different federal, state and local agencies to comply with.  For a list, CLICK HERE.  YOU should know the basics of each one of them.  It is very important that you know the basics and are in compliance with the basics when you are inspected or audited.  NOT being in compliance with the basics is a tip-off to an inspector that there are a large number of likely violations at your facility.  Complying with the basics shows the inspector that you are making a good faith effort to comply and often reduces the size of any fines that may be imposed.  Also, complying with the basics helps if you decide to appeal a citation in the future by showing a good faith effort to comply.

 

3.       HAVE YOUR PAPERWORK AND RECORDS IN ORDER  Most inspections and audits require the business owner to have certain records.  Keep your records in good order at all times.  Don’t let them get sloppy or behind.  Trying to put together records prior to an inspection or audit is extremely difficult and often results in discrepancies and incomplete data.  For example, signed time cards from employees are critical to many types of audits.  Gaps or incomplete records are very difficult to put together just before an audit.  The same goes for other tax and financial records.  Resale certificates for sales taxes and invoices for purchases including equipment and supplies are also required for an audit or you may be assessed for back taxes you cannot prove you have previously paid.  For inspections like safety and health inspections, training records, illness and injury records, etc., which are required of most employers need to be kept on an ongoing basis.

 

      ALSO, don’t forget the written plan requirements like an accident prevention plan, hazards communication plan, emergency response plan etc.  These must be prepared and kept up-to-date in preparation for an inspection.

 

4.   TAKE ADVANTAGE OF “TECHNICAL ASSISTANCE” VISITS WHENEVER POSSIBLE  Many state agencies have “technical assistance” programs to assist businesses in voluntarily complying with various state regulations.  In most cases, these “technical assistance” visits are free and the person who conducts a “technical assistance visit” is prohibited from issuing citations unless they discover a serious safety and health hazard or serious environmental hazard.  For a list of these “technical assistance” services from various state agencies, CLICK HERE.

 

5.   FIND OUT WHAT THE INSPECTOR OR AUDITOR WANTS TO LOOK AT BEFORE THE AUDIT OR INSPECTION BEGINS  In almost every case, you have a right to know what the inspector or auditor is inspecting or auditing for.  In most cases, it is a general compliance inspection or audit.  In some cases it is an inspection based on an employee or some other person’s complaint in which case the inspection or audit should be more limited.  You should clearly ask what the inspector or auditor is inspecting or auditing so you can prepare access to the appropriate records.

 

      Most auditors will send a letter in advance advising you of the purpose of the audit and identifying the records they will want to review.

 

      BE CAREFUL - sometimes an environmental inspector will ask to take a soil, air or water sample very innocently to help them determine something about the air or water quality in the area.  DO NOT give an inspector approval to take such a sample without first consulting a qualified attorney.  They can only take a sample in most cases if they have probable cause that your facility is emitting a particular substance.  YOU should require them to show you proof of their “probable cause” before they take any samples and consult with your attorney first.  If they ultimately do take a sample, you should have a qualified testing lab technician on site to take a sample at the same time and at the same place that they do.

 

6.   KNOW YOUR RIGHTS AND USE THEM APPROPRIATELY  YOU do have rights during an inspection or audit.  One of your primary rights is to be present or have a representative present.   Most inspectors and auditors have broad authority to inspect or audit.  In some cases, you can demand they get an inspection warrant before they conduct an inspection.  But, in most cases, this will just encourage them to look more closely for violations and make them think you have something to hide.  If samples of, say, water, air or soils are taken, you have a right to take a sample of the same materials at the same time and place as the inspector takes his or her sample(s), but you must provide you own sampling containers or apparatus.  We suggest that you call in a qualified testing lab to take samples at the same time and same place as an inspector does to protect your rights.  You have the right to a written report of the inspector’s or auditor’s findings.  In almost every case, you have the right to appeal the findings of an inspector or auditor (more later).

 

7.   WHERE TO BEGIN AN INSPECTION OR AUDIT   Have a private location for the inspector or auditor to go when they first arrive.  It may be the owner’s office, or a private office near where they entered your facility and where they cannot see or hear the operations of the business.  Maybe, at someone’s desk that can be made available when an inspector or auditor arrives.  We recommend you not lead them through your facility to some back office so that they can observe your operations prior to your having an opening interview with them.  The person who greets the inspector or auditor when they first arrive should lead them promptly to that private location and advise the inspector or auditor that the worker will notify the employer of their arrival and the employer will see the inspector or auditor in just a few minutes.  The owner or owner’s representative should meet with the inspector or auditor within 5 minutes of their arriving.

 

Some suggest, particularly for auditors, you provide them a very cramped and uncomfortable room.  Going out of your way to provide an uncomfortable room will often become apparent and can backfire.  We do suggest you provide the basics but little to no frills.  Having a great view may encourage an auditor to stay longer.

 

      Finally, if this is an inspection, the person who greets the inspector should then notify key staff that the inspector has arrived and the key staff should notify the rest of the workers so that last minute preparations can take place like cleaning up scraps, spills, and making sure all safety equipment is in proper order.

 

8.   OPENING INTERVIEW  YOU should conduct an opening interview with the inspector or auditor.  This is a good time to check their identification just to assure yourself they are really an authorized inspector or auditor.  Next, ask them to review the way they will conduct the inspection or audit.  If you will have them work in a different location, this is a good time to take them to that location (again, we suggest this not be a back room where they must walk through your operations to access it).

 

      For safety and health inspections, the inspector may ask for an employee to go along with him/her while he/she conducts the inspection.   You will not be allowed to choose the employee.

 

9.   PROVIDE THE INFORMATION THE INSPECTOR OR AUDITOR REQUESTS   Be prepared to provide them the information or records they want.  IBA suggests that if you provide a set of records and the auditor or inspector asks for some other records, to ask if they are finished with the first records you gave them so that you can re-file them.

 

      DO NOT provide records that have not specifically been requested by the inspector or auditor.

 

10.  CONDUCT YOURSELF IN A BUSINESSLIKE MANNER  YOU and all of your staff should conduct yourself in a polite and businesslike manner.  Conversation should always be courteous.  All management and workers must be clear not to provide any information about the company or its operation unless specifically asked by the inspector or auditor.  Talking about the weather or the sports scores is safe.  If the inspector or auditor does ask a question, the response should be directly to the question asked and nothing further.

 

      DO NOT volunteer any unrequested information!

 

      If you end up with a real problem with an inspector or auditor where he or she is not working with you in a businesslike manner, feel free at any time to ask for the name and phone number of their supervisor.  If the problem continues or worsens, ask the inspector or auditor to stop the inspection until you speak with their supervisor.  Then take the inspector or auditor back to the same place you first met with him or her and call their supervisor and attempt to resolve the problem.

 

11.  STICK WITH THE INSPECTOR OR AUDITOR AND MAKE THEM OBSERVE ALL SAFETY REQUIREMENTS The owner or his or her representative should stay with an inspector during all of the inspection, or with an auditor if he or she leaves their designated work location.  The owner or the owner’s representative should take notes during the inspection of statements made by the inspector, responses of employees, tests conducted, etc.

 

      Don’t let inspectors or auditors just wander around.  One IBA member let an auditor wander through his facility and ended up with a multi-thousand dollar tax assessment on a piece of equipment the auditor observed during his wanderings.

 

      If certain safety equipment is required in areas of your facility, do not let the inspector enter those areas without that safety equipment.  The inspector, in most cases, must provide his or her own safety equipment like steel toed shoes, hardhat, earplugs, etc.  The employer or his/her representative must wear the same type of safety equipment.

 

12.  ASK THE INSPECTOR OR AUDITOR QUESTIONS IF THEY IDENTIFY A VIOLATION TO CLARIFY WHAT THE VIOLATION IS  If the inspector or auditor identifies a potential violation, ask the inspector or auditor about it.  If you see him or her start jotting down a lengthy note, ask him or her, “Do you see something I can help you with or do you have a question about something?”

 

13.   DO AN EXIT INTERVIEW BEFORE THE INSPECTOR OR AUDITOR LEAVES  Before the inspector or auditor leaves, hold an exit interview with him or her.  Start off with something like, “We should be in pretty good shape, right?”  Let the inspector or auditor respond.   Take notes of all of the areas he or she has concerns about.  Then, clarify with the inspector or auditor what will happen next and when and how you will hear from him or her, or his or her agency next.

 

      If you have serious concerns about some findings or how the inspection or audit was conducted, ask the inspector or auditor for his or her supervisor’s name and phone number.

 

14.  EXERCISE YOUR APPEAL RIGHTS WHEN APPROPRIATE YOU have appeal rights for almost any inspection or audit.  In most cases, you have 30 days from receiving a written citation to appeal it (some may be less then 30 days).  Read the appeal procedures on the citation or audit results you receive, and do NOT miss your right of appeal if you have concerns about a citation or audit.  Once the time to file your appeal has run out, you lose your appeal rights.  Remember, you can always drop an appeal, but if you miss filing an appeal on a timely basis, you lose your right of appeal.

 

      In most cases, you have an informal appeal to the inspector’s or auditor’s supervisor.  This is often a good opportunity to quickly solve a problem without amassing large legal costs, etc.  BUT, don’t miss filing your appeal because you are involved in an informal appeal to the inspector’s or auditor’s supervisor.  ALWAYS protect your appeal rights by filing an appeal within the time limits allowed.