audit package preparation: best practices for a positive audit experience myra cars - applied...
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Audit Package Preparation: Best Practices for a Positive
Audit Experience
Myra Cars - Applied Materials, Inc.Bonnie Corley - OFCCPLinda Grossman - ConsultantMonty Peralta - Synopsys, Inc.Joanne Snow - JSA Consulting, Inc.Eleanor Sue - Sun Microsystems, Inc.
Silicon Valley Industry Liaison Group Presents:
Best Practice # 1
Don’t panic, but don’t ignore the 30-day notice
Alert CEO’s office now re possibility of audit Take notes of OFCCP phone calls Prepare and submit the best possible package. If package will be late, call OFCCP a week before due
date If you are non-responsive, OFCCP will send
a show-cause notice Keep current
Best Practice #2
Make contact and establish a good working relationship with the Compliance Officer at the very beginning
Establish the Relationship
Establish the relationship with OFCCP
Set and confirm expectations
Follow-up
Establish the Relationship
Call the contact person named at the end of the letter
Confirm he or she is your contact person
Make sure you are talking about the same site
Establish you are his or her contact person
Set and Confirm Expectations
Submittal is due 30 days from the receipt of the letter Confirm when they expect the package
Confirm the address where the package is to be sent
Follow Up
Follow up agreements with an email or letter.
Once package is sent, follow up with your contact that they received the package.
Let your contact know you are available to answer any questions they may have about your submittal.
Best Practice # 3
Understand what you are submitting and own it Company’s responsibility Work closely with the person who prepares the AAP to
understand the data Few surprises if you know what you are sending Be the expert
Best Practice #4
Be thorough and complete Read the scheduling letter carefully, and organize
complete answers to each of the requests on the itemized list
Submit the desk audit package with a cover letter explaining what you are providing to make the review as simple and easy as possible
Best Practice #5
Prepare and explain your applicant, hire, promotion and termination data How you do this can make the difference between an
on-site review and closure at desk audit
Personnel Activity
Scheduling letter requires: “Data on your employment activity (applicants, hires,
promotions and terminations) for the preceding AAP year. ... These data shall be presented either by job group or by job title.”
Personnel Activity
Regulations require: Analysis of your selection process, including whether selection process eliminates a
significantly higher percentage of minorities or women than non-minorities or men.
Analyzing Personnel Activity
Complying with the regulations usually requires Adverse Impact Analyses--a comparison of the rate of selection. [OFCCP calls this Impact Ratio Analysis (IRA).] An IRA below 80% is considered Adverse Impact Adverse Impact does not automatically mean there is
discrimination. It is simply an indicator there could be a problem.
Adverse Impact Analysis
10 female engineer hires 100 female engineer applicants
IRA = ____________________________
80 male engineer hires 400 male engineer applicants
IRA = 10% 0.50 = 50% = Adverse Impact20%
Example:
Choices for Audit Submission
How will you submit the requested personnel activity data?
Do you send: summaries by job group? summaries by job title?
Choices for Audit Submission
How will you submit the requested personnel activity data?
Do you send: summaries only? summaries along with your complete adverse impact
analyses? summaries, but adverse impact analyses only where
IRAs are statistically significant (Two
Standard Deviations or Fisher's Exact)?
Choices for Audit Submission
Do you send: adverse impact analyses for total minorities or minority
subgroups? explanations of significant adverse impact? explanations of all adverse impact? no explanations?
Choices for Audit Submission
Suggestions: Always know what you're sending Know what it means Evaluate whether displaying data in a different manner
clarifies apparent "problem areas” If there's even a hint of a problem, explain it up front in
writing and when you deliver the package to assigned compliance officer
Choices for Audit SubmissionExample: (Displaying the data by Job Group)
10 minority engineer promotions 100 minority engineers in feeder Job Group
IRA = ____________________________
80 Anglo engineer promotions 400 Anglo engineers in feeder Job Group
IRA = 10% 0.50 = 50% = Adverse Impact 20%
Choices for Audit SubmissionExample: (Displaying the data by title)
10 minorities promoted to Sr. Software Engineers 30 minority entry-level Software EngineersIRA = __________________________________________
80 Anglos promoted to Sr. Software Engineers 200 Anglo entry-level Software Engineers
IRA = 33% 0.83 = 83% = no Adverse Impact 40%
How to Decide
Summaries by job group? Possibly in a very small company with few
personnel actions Summaries by job title?
Then must provide baseline data by job title Summaries only?
Possibly in a very small company with few personnel actions
How to Decide
Summaries along with your complete adverse impact analyses? Probably
Summaries, but adverse impact analyses only where IRAs are statistically significant (two standard deviations or Fisher's Exact)? Recommend giving all IRAs or no IRAs Including relevant tests of statistical
significance a good idea
What to Explain
Depends on the situation Explanations of significant adverse impact Explanations of all adverse impact No explanations
What to Explain
Examples of possible causes of adverse impact to be discussed: Hiring unusual specialties (e.g., MDs with electrical
engineering degrees plus 3-5 years business experience)
Lay-off based on elimination of business unit, company-wide ranking, etc.
Interns returning to college (in future exclude "contract employees" from AAP)
What to Explain
Examples of possible causes (cont’d): Competitive promotions only (provide any written
materials explaining program & "applicant" data as baseline)
In-line promotions based on years of education or experience completed (provide written materials and actual baseline data)
Best Practice #6
Analyze and understand what the compensation data mean Review your compensation data regularly - not just at
OFFCP audit time. For regular internal audit purposes as well as for the
the Desk Audit, look at compensation the same way the agency does and go a step further.
Remember Attorney-client privilege when conducting internal audits on sensitive data.
Scheduling Letter: Item #11
Even if you don’t use this compensation report internally, prepare the annualized compensation report as directed in Item #11 of the Scheduling Letter
Even though a third party may have created the report, understand what you are submitting before sending it in
Item # 11, Example
Male Female Minorities African
Americans
Asian
Americans
Hispanic
Americans
210/
16,527,580
40/
2,480,610
100/
6,643,010
10/
787,490
80/
5,130,640
10/
724,880
Caucasians
150/
12,365,180
Item #11, What Does it Mean?
Average
Salary Men
Average
Salary Women
Average
Salary
Minorities
Average
Salary
Caucasians
78,702.76 62,015.25 66,430 82,435
Statistical Tests
Let the experts and/or the software do it If you use them, understand what the data show Examples of statistical tests:
t-Test and Rank Sum Multiple Regression Analysis
Cohort Salary Analysis
This is an easy test anyone can perform internally using Excel software
It makes good business sense as well as good EEO sense
It is recommended that it be conducted by job title and, if appropriate, by organizational unit – particularly if different organizations pay differently because of non-discriminatory factors
Cohort Salary Analysis (cont.)
Employee
Name or ID #
Job Title Salary Gender Ethnicity Date of Hire
Location of Work Site
Department Supervisor Date Entering Job Title
College
Degrees
Years of
Experience in Job
Perform. Rating
Cohort Salary Analysis (cont.)
Sort by Job Title and, then, by Salary - low to high
Highlight individuals who appear lower- paid and, then, move on to determining Equal Pay Act reasons for the low salaries
Examples: Merit, Seniority, Quality/Quantity of Work and Geographic location of the job
Cohort Salary Analysis (cont.)
Salary Gender Ethnicity Date of Hire Location of
Work Site
55,224 F H 2/13/1998 Chicago
58,488 F A 1/2/2002 California
64,000 F W 12/1/2001 California
68,950 M A 4/19/1996 Washington DC
71,195 M W 7/19/2002 California
From the Department of Labor
Dol.gov/esa/regs/compliance/ofccp/compdata.htm Wage differentials are not discriminatory or
unlawful when based on neutral job-related factors Analysis of comp data is a useful tool to ensure
fairness in compensation Problems, where identified, can be corrected Analysis may be conducted without “expert” or
outside assistance
From the Department of Labor (cont.)
The OFCCP strongly encourages Federal contractors to conduct analyses of their compensation systems in accordance with the self-audit responsibilities under E.O. 11246, in order to eliminate or prevent discriminatory policies and practices in this very important aspect of employment
From your HR Department
We want to attract and retain the best qualified people
We want this to be a great place to work for those people
We want our good employees to refer other highly talented people for employment
Conclusion
We may be on the same page in intent even if not always in method or conclusion
If we can do our homework, document our good efforts, and communicate with the other, maybe we can reach the same conclusion (i.e. “fair compensation practices”)
Best Practice #7
Go the extra mile Company information Good faith efforts Postings Tabs, binders, colors Detailed cover letter Hand deliver, if reasonable Others?
Best Practice #8
Be certain to explain unusual business activity (conditions)
For example Company is facing bankruptcy, Closed a product line and laid off all those employees Acquired another company
Discuss this in the narrative and let the auditor know as well
Best Practice #9
Carefully review and analyze all data submitted for six-month update
If you are more than six months into the new plan year, follow the instructions in the Itemized Listing B You will need updated reports on your progress
towards goals in your current AAP and personnel activity for the most recent six months
Possible Other Factors
Review carefully all the differences in summary data between the plan documents and the current data
Explain significant differences - not only in terms of personnel activity, but also in terms of changes made to reporting methodologies, job groups, etc.
Other Factors (cont.)
Were there changes in your organizational structure, job groups, organizations included in the plan?
Are all job titles resident in the same job groups as in the Plan at the beginning of the year?
Are there other changes that may make review of your updated data confusing?
If the answer is “Yes”
Explain the differences and try to compare apples with apples, or. . .
Simply clarify the reason for changes In any event, it is recommended that you NOT
submit the results without clarifying changes that have occurred that affect the updated reports
Best Practice #10
Formulate goals for individual minority groups as well as total minorities - even if you don’t submit these analyses with the plan documents for Desk Audit Many attorneys advise against their clients submitting
goals for individual minority groups There are differing views
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