Victorian WorkCover Authority --- "The WorkCover audit program" [1997] LawIJV 2; (1997) 71(1) The Law Institute Journal 5

• The Work Cover audit program

The Work Cover audit program

The audit program conducted by the Victorian Work- Cover Authority is proving to be very successful in tightening employer compliance with premium payments and in increasing employer understanding of rateable remuneration.

Unfortunately, the success of the program was lost in the article "Dealing with a Work- Cover premium audit" by Geoff Mann and Chris Cusack (November 1996 Journal). While the article is helpful in giving employers directions on how to prepare for an audit, several incorrect or misleading statements require clarification or rebuttal.

More than 12,000 audits for 1993194 have been performed, not 10,000, with results significantly different from those claimed in the article: 50 percent of employers were found to have complied correctly with their premium liability; 30 percent were found to have underpaid premium by at least $16 million; and 20 percent were found to have overpaid premium by about $3 million.

The audit revealed that under declaration of remuneration was mainly caused by clerical error (37 percent of cases); failure to include payments to contractors (22 percent); and failure to include non-exempt FBT (8 percent). Failure to include directors' fees (3 percent); failure to include allowances (3 percent); and failure to include payments to a central redundancy fund (2 percent) were other notable, although minor, categories.

Overpayment of premium was largely due to employers incorrectly including apprentice or approved trainee remuneration, termination payments and WorkCover payments. For the latest information employers should consult the publication What is Remuneration? (available from their WorkCover insurer or WorkCover Publications, tel [phone]). This publication is updated annually.

As far as the actual conduct of the program is concerned, the article presents several inaccuracies or unjust criticisms:

• Where a refund to an employer is identified, the employer can choose to receive a refund or an account credit, arranged through the employer's WorkCover insurer. It is wrong to suggest that there are any limitations on this being paid to an employer.
• The Authority has consulted extensively with the accounting community to make the standardised questionnaire adopted for the 1994195 audit as simple as possible. There are no "representations by professional bodies" to the Authority - an indication that the new format is proving acceptable.
• Auditors' requests for profit and loss statements, balance sheets and tax returns are essential to a proper audit. They are necessary to identify whether expenses which should have been declared as remuneration have actually been declared, and whether allowable exemptions have been included.
• The Authority believes that the possibility of detecting offences such as fraud would be lost if it did not authorise a re-audit where different facts are identified.
• In discussing key issues in audits, the authors state that the WorkCover premiums order classification 16185T for head offices has been withdrawn as a result of the audits. This is misleading. The audits have only identified that a particular classification is not correct for a workplace. It is not the Authority's view, as the authors state, that employers with workplaces all engaged in the same predominant activity should have the administration workplace classified to the same industry. The Authority looks at the employer's activity at a workplace and classifies appropriately, according to the premiums order. It is the premiums order, not the Authority's view, which determines such a classification.

In the same part of the article, when dealing with contractors, the statement about unincorporated owner-drivers is incorrect. The principal hiring an owner-driver currently includes as remuneration a calculated figure based on TWU award rates.

Finally, the information in the section on preparing for and managing the audit process is reasonable, but contains one harmful piece of advice. The authors advise that "all reasonable requests for information should be complied with". An employer must comply with all requests. Unfortunately, the employer's and the Authority's definitions of reasonable do not always concur. The Authority is proceeding with prosecution of employers for failing to comply with requests for information during the audit process.