You never think it will happen to you until you receive the phone call or letter from a government investigator that your company is being audited. Companies small to large are subject to government audits on several fronts. Companies must comply with tax, overtime, employee benefits and OSHA laws just to name a few. I was a government regulator with the U.S. Department of Labor enforcing employee benefit laws for ten years. Here are eight good things you should know and do if your company is audited by a federal or state government agency.
- Do not panic. Most government agencies have a voluntary compliance first approach. They want you to correct wrongs, make restitution, and comply prospectively. They do not automatically levy penalties and fines on your company or put you in jail.
- Do not be impatient with or rude to the investigator. Be courteous, responsive, and cooperative with the investigator. If you or your attorney are a jerk to the investigator, that investigator will work all the harder to find violations of law, seek the largest correction possible and likely seek fines or penalties.
- Produce only the information the investigator asks for. Do not say or produce anything more or less. Producing extra information can open the door for the investigator to look into things that the investigator had not thought of or were really not necessary.
Produce the information the investigator requests on or before deadlines. Produce the information in an organized and intuitive manner. For example, group documents in folders by subject matter. Again, cooperation and making the investigator’s job easier tends to shrink the target on your back.
- Consider hiring qualified legal counsel. The benefits of counsel can be: (i) your counsel will often be able to negotiate down restitution or penalty amounts; (ii) acting as gatekeeper of information produced and disclosed; and (iii) the person to communicate with the investigator. Your attorney can handle much of the stress of the investigation so you can focus on your company. Inform your attorney of any potential violation you believe the investigator could find. You attorney can form a strategy to bring you into compliance.
- Most government agencies have policies to not disclose why your company is being investigated. You will not know whether an employee filed a complaint, the agency targeted you based on your reported data, or whether the audit is routine. While tempting, do not go on a witch hunt among your employees.
- The investigation is going to cost your company extra money and lost time. Just accept this fact. However, the investigation will cause you to review your policies and procedures and become more efficient. You may find issues or avert problems that could have been costly.
- If the investigator legitimately finds you out of compliance, implement corrective procedures immediately and inform the investigator of the corrections. There is often less motivation to fine an employer who is taking action to comply prospectively.
If handled well, your company can come out of the compliance audit stronger and more efficient than before. While it is debatable how much government regulation is necessary, some regulation produces an efficient market economy. It disposes of bad players and creates a more trusting public to consume the goods and services you produce.