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Audits help ensure that insurance premiums are aligned with the businesses and activities they are designed to cover. Your policy was written based on estimates at policy inception, and as businesses change, policies need to change with them. Audits are performed after your policy has expired to determine the actual audited exposure for that specific period of time.

The information obtained from the audit accurately reflects the actual state of your business during the policy period, allowing your carrier to properly adjust the premium for your policy. State regulations and policy type, are just a few factors that require audits.

At the end of the insured's policy term, an auditor or audit professional will contact them to complete either a workers' compensation or general liability audit, or both. The auditor will provide a detailed letter to the insured providing a required list of records needed to complete the audit. An auditor will review the audit documentation, complete a business operations interview, classify duties of employees, subcontractors if applicable, and ask for additional documentation if necessary.

1. Employee names
2. Description of duties performed by employees (This could be different than their job title)
3. State of Employment if different than state the policy is contained
4. Total Gross Wages per employee

If your company pays any of the following wages, please ensure they are clearly shown on the payroll report provided:

1. Total Overtime Wages
2. Total Double Time Wages
3. Total Severance
4. Total Tips

Other Information Required (Subcontractors / Casual Labor):

1. Profit and Loss report
2. Vendor Payment report
3. Certificates of Insurance if applicable
4. Description of work performed for casual laborer, non-FICA labor, or subcontractor
5. Total cost of hire or amount paid during the audit period
6. Most recently completed tax return

The auditor will review the employer / employee relationship and payment process to each type of labor you hire. A full or part-time laborer who is paid via check or cash and was hired to perform part or an entire job should carry valid General Liability and / or Workers' Compensation coverage or prove that they are an independent contractor.

Payments made to subcontractors that operate as sole proprietors without employees can be excluded. However, it is ultimately your responsibility to provide reasonable proof to Michigan Millers that the subcontractor is a sole proprietor without employees. It is essential that you obtain all the documentation at the time that they are hired as it can be very difficult to obtain this information when they no longer work for your company.

The basis of the records needed to complete a workers' compensation or general liability audit are listed below. There are several other documents that could be requested that are not listed. To save listing every potential document, we have shown the most common reports needed to complete the audit. Questions, contact the audit department for clarification or assistance.

Payroll Premium Basis

1. Payroll Report
2. Federal 941 Quarterly Report
3. State Unemployment Report. Ex: UIA in Michigan, NYS-45 in New York
4. Profit and Loss Report
5. Vendor Report
6. General Ledger
7. Income Statement
8. Certificates of Insurance – Subcontractors

Sales Premium Basis

1. Profit and Loss
2. Sales Journal
3. Income Statement
4. State Sales Tax Reports

1. Physical Audit – An auditor will work to schedule an in-person appointment with the insured or authorized representative to review audit documentation, obtain business operations interview, and classify employees. A detailed audit request will be provided to the insured providing a list of required documentation required for the audit.
2. Remote Physical – An auditor will contact the insured to provide a detailed request of records that are required to complete the audit. The insured will remit all documentation either through the mail, email, fax or our secure portal. A detailed audit request will be provided to the insured providing a list of required documentation required for the audit.
3. Online Audit – An email will be sent to the insured providing them a passcode and pin to gain access to the online audit portal. Insured's can input their information and securely attach necessary documentation.

Audits are selected according to specific ordering guidelines.

If questions or concerns have arisen regarding your recently completed audit, first either contact your agent or the audit department to obtain a copy of the audit results.

The agent or insured can request a copy of their final audit by contacting the audit department at Michigan Millers at audit@mimillers.com. Please include the policy number and insured name in the subject line of the email.

After the audit has been reviewed and if a specific concern has been identified, please complete our Premium Audit Dispute Form (PDF), attach the necessary documentation to support the dispute or revision, and remit via email.

Please ensure that the form is dated and signed by the insured or authorized representative of the insured, this cannot be the agent.

The auditor will need to review records depending on the type of coverage being audited. These records could include payroll reports, overtime earnings, State unemployment reports, certificates of insurance, profit and loss, general ledger, and other records at time of audit. The more organized audit file will result in faster completion of the audit and less questions from the auditor for clarification.

Assign a representative of the company who is qualified to discuss payroll reports, financial documents, business operations, and the day-to-day duties of the employees and owners of the business.

At any point during the audit process, please do not hesitate to contact the audit department at Michigan Millers to assist with any questions or concerns. The audit process is very simple and should not be stressful or overwhelming for the insured. The audit team at Michigan Millers will assist the insured, agent, and accountant with their questions regarding the audit process.

At the end of the audit process, review the information discussed with your auditor. This is called an Exit Interview. Take a moment to recap the information that was discussed to ensure an accurate representation of what was provided during the audit interview and process.

Questions arise during the audit process. Please contact the audit department at audit@mimillers.com or contact the auditor directly with any questions or concerns that could arise during the audit process. Taking a quick moment and contacting the audit department or auditor could significantly reduce stress about the need to reschedule or what records to remit. Don’t struggle through the process, please contact our audit team and let us assist.

Please refer to the audit request letter for the policy period dates of the audit. Please ensure the dates that are being audited are reflected on your payroll report. For example, The policy period for your audit is July 14, 2024, to July 14, 2025. Each state allows the carrier to adjust the policy period by 15 days to the start or end of a month or quarter. For the example provided above, the insured would provide a payroll report for July 1, 2024, to June 30, 2025. The second date is altered as at 11:59 p.m. on June 30, 2025, the insured’s policy cancels and re-instates at 12:01 a.m. on July 1, 2025.

• An audit revision is an adjustment being made to the audit. Examples for a revision are an insured is complying with a nonproductive audit, classification of employee, certificates of insurance are being provided for an uninsured subcontractor(s), or additional information is being provided.

• State guidelines dictate the degree of action for a non-productive audit course. Depending on state guidelines, one or more of the following actions could occur.
• 25% surcharge applied to audit
• Underwriting action
• Non-renewal of policy

• Yes. Premium audits are conducted for the period of time that coverage was provided for your business. The audit will encompass only that period of time which is subject to premium adjustment.

• Billing cannot he held until the revision is received in writing and an Audit reviewer confirms that a revision will be done. If the policy is already in a non-pay cancel status, no holds can be placed. Audit suggests that the insured contact the Finance Department at Finance@mimillers.com or (517) 371-7774 to obtain a payment plan.

• Billing will not be placed on hold until the dispute form has been recovered, signed & dated. All applicable documents received, and an auditor confirms a revision needs to occur.
• Audit suggests the agent or insured contact the finance department to secure a payment plan.

• These types of payments are part of the employee’s remuneration per NCCI Basic Manual Rule B.1.c and per several independent state bureaus which define bonuses, vacation, sick, and holiday pay as includable remuneration. There are exceptions to this rule in certain states. Your auditor will ensure that all the state-specific deductions are applied when performing your audit.

• Gross payroll includes regular pay, overtime, tips, gratuities, bonuses, PTO, vacation, sick pay, all pre-tax items such as 401(k), Sec. 125 Cafeteria Plans, and other pre-tax insurance and investment plans, housing allowance or fair market value for housing provided, and full officer compensation.

• If your payroll report doesn’t match your policy term, you can round the payroll report to the first of the month.
• Example, if your policy period is 06/15 to 06/15, you can provide payroll for 07/01 to 06/30
• It is acceptable to deviate payroll from the policy period by 30 days in Michigan and 15 days in New York for the audit

• The following verification records will be required:
• For a Sole Proprietor, the Profit or Loss (Form 1040) Schedule C pages 1 and 2
• For a Partnership, U.S. Partnership Return of Income (Form 1065) Page 1 and 1125-A
• For a Corporation, U.S. Corporation Income Tax Return (Form 1120) Page 1 and 1125-A

• Gross sales include the revenue for all goods or products sold, manufactured, or distributed, certain operations performed, and item rental. There are available deductions from gross sales, which include sales tax, returns and allowances, certain finance charges, and shipping or freight assuming those are shown as separate line items charges on billing invoices to customers.

• No. General Liability and Liquor Liability are separate and distinct coverages. The General Liability policy covers exposures inherent within the operation only, such as slips and falls and the exposure of someone claiming sickness or injury from the consumption of all products sold, including alcoholic beverages. Liquor Liability provides protection for the insured should they be brought into a lawsuit arising from the sale of alcoholic beverages.

• Changing your legal entity status during the policy term may impact your coverage and / or premium under the Workers' Compensation Law in your state.
• Advise your agent or producer or our company representative immediately if you change your legal entity status, or if the ownership of your business changes.

• If the subcontractor has no employees, some states do not require Workers' Compensation coverage. However, the auditor needs to determine if an employer-employee relationship exists between the insured and subcontractor.
• If an employer-employee relationship exists, the insured may be liable for any claims the individual may file. Each state has different requirements to determine independent status. A general liability insurance certificate does not replace Workers' Compensation coverage.

• The requirements regarding premium audits have changed drastically in the past few years. Financials and necessary to the audit process as they contain information vital to accurately assessing the business being audited. A financial report such as a profit and loss statement or an income statement helps to summarize the various types of accounts in the general ledger. These documents help your auditor to more efficiently identify the accounts that may contain subcontract, contract or casual labor without having to review the general ledger in its entirety. It also assists the auditor in verifying the total payroll when leased payroll is utilized.

• The documentation ensures that we review all the records needed to perform a comprehensive, quality audit in accordance with the National Council on Compensation Insurance (NCCI) and state-specific guidelines. Basis of premium varies by policy, so there is a wide variety of records that auditors use to determine the correct exposures. Your auditor will request documentation needed to apply all payroll and sales exclusions that are allowed following manual rules for each state. Providing records that allow for these exclusions will help reduce your exposures.

• If you are a contactor, or use subcontractors, you must obtain Workers' Compensation and General Liability certificates of insurance for all subcontractors hired during the policy period. If the subcontractor does not provide you with a certificate of insurance, showing coverage during your entire policy period, they may be treated as your employee and a premium may be charged for them.
• Uninsured subcontractors covered under the principal contractor’s policy are classified on the basis of the classifications that would apply if the work were performed by the principal’s own employees.

• They expose your business to insurance claims or lawsuits arising out of the work performed by the subcontractor on your behalf.
• Your insurance cost can go up in three ways:
• Increased premiums due to a WC or GL audit that identifies uninsured subcontractors.
• Increased premiums due to a WC or GL claim involving uninsured subcontractors.
• Impaired marketability of your company to prospective insurance carriers or higher pricing due to added exposure to loss.
• Unsafe subcontractors can expose you to Occupational Safety and Health Administration (OSHA) violations and heavy fines.
• Your ability to competitively bid jobs could be affected due to your increased costs.
• The reputation of your business can suffer when you use uninsured subcontractors, and something goes wrong.

• A valid Certificate of Insurance identifies the existence of a Workers' Compensation and / or General Liability policy, the insurance carrier providing the coverage, policy number, and policy term (dates of coverage), who is insured (the independent contractor / subcontractor) and the certificate holder (your company).

• Although the subcontractor provides their own General Liability insurance, the insured subcontractor classification protects the insured from “vicarious liability” which may arise out of acts performed by the subcontractor such as, the torts of the subcontractor, the negligent hiring of incompetent subcontractors and / or the subcontractor that does not have adequate coverage limits. Therefore, a charge is developed for this exposure.

• Certificates of Workers' Compensation insurance and General Liability insurance need to be obtained for every subcontractor you hire during your policy period, and those policies need to reflect coverage during your policy period. If they are not obtained, the subcontractor and their employees may be treated as your employees for premium calculations.

• If you have been enrolled in an Owner Controlled Insurance Program (OCIP) / Contractor Controlled Insurance Program (CCIP), we will need the payroll associated with these jobs, segmented out from the rest of your payroll in order to exclude those amounts from the final premium calculation. Please separately show payroll for employees who performed work on the OCIP / CCIP covered project, and include gross wages, and any allowable deductions. A Certification of Coverage from the OCIP / CCIP administrator needs to be provided showing the project name, owner or general contractor, OCIP / CCIP insurance carrier, policy number and effective dates for Workers’ Compensation coverage.

• This will depend on how complete of information we receive from the business. We look to the business owner to provide information for each officer, partner, or LLC member, they believe can be excluded or included on the Workers’ Compensation policy. In addition, due to some state law requirements, we will need to know the ownership percentage(s), job duties, and any salary / compensation for each of them. They will be excluded based on state rules, and how they are reflected on the policy. If they are covered by the policy, their payroll will be included under the class code that represents their job duties. If no payroll is provided, the included officer, partner, or LLC member, will be included at the state determined minimum officer payroll amount. If their payroll exceeds the state maximum payroll, then that officer’s payroll will be capped at that state maximum.

The payroll summary (PDF) provides the employees names, hours worked, total gross pay, payroll deductions, overtime wages, and other detailed information required to complete your audit.

The profit and loss report (PDF) provides vital information needed to accurately assess your business that is being audited. This statement assists your auditor in more efficiently identifying the accounts that may contain subcontract, contract or casual labor without the need for the general ledger. This report also provides information regarding leased labor.

Transaction By Detail Report (PDF) – If your business uses a large amount of subcontractors, casual labor or non-FICA labor, this report will provide a summarized total of cost of hire for subcontractors. This report within QuickBooks is very similar to a traditional general ledger report.

Audit Dispute Form (PDF)

Sole Proprietor Subcontractor Without Employees Form (PDF)