As I sat discussing my services with a representative for the insurance industry, the question arose – “Do you do mock audits? Many fleets ask us for mock audits.” A pause …. “Yes, I can do an audit. But I am not convinced of the value for the client. It is not what I would propose if asked.” An eyebrow raised. “Ok, look”, I continued, “the audit is designed to identify if you meet the MTO (or FMCSA) minimum performance criteria. It reviews records, compares performance against a standard and assigns a score. Score above the minimum, you pass. Score below the minimum, you fail. I am not a fan of “meeting the minimum”. We need to appreciate that while being a “C student” may be adequate to see a person elected to the Office of President of the United States, it won’t protect anyone in the District Courts of the United States – or Canada’s equivalent.
My audits look to the carrier’s processes, and the component items in full. To identify where the carrier’s processes are not meeting the entirety of the requirements. We identify the root cause of this failure; then implement a solution (this could be process or application driven, or more often than not a combination of both).
My goal in doing a carrier audit goes beyond the facility audit. For most carriers, a facility audit will only arise as a result of a few situations:
- failure to address problematic inspections and / or over the road citations;
- a series of complaints from the public;
- a critical event (usually an accident with a catastrophic outcome – death, mass destruction of property etc.)
So let’s review the value of a mock audit in light of these triggers:
Scenario 1 – citations arising from moving violations covered under the highway regulations, and / or vehicle inspections: you don’t need a mock audit – you have a problem. And you know the symptoms. Parse the info, identify the root cause(s). Implement the program, processes and training to address the issue. Set a goal, and monitor; continue to improve the process, training and management until you realise your goal. Then maintain and set progressively higher targets that realise the financial sweet spot (maximum ROI). Mock audit value add = 0
Scenario 2 - a series of complaints from the public has triggered an audit. A single complaint will not result in an audit. So either the public is calling you directly to share their opinion, or you received a letter from the regulatory agency informing you of the issue: if you haven’t acted on them to root out the cause, a mock audit will do nothing. Again, client value = 0
Scenario 3 – your company has been involved in a catastrophic accident – someone died, or the damage was significant, possibly in the media. The problem is, audits are backwards looking. What you do now won’t protect you from what is coming. We may be able to do some form and manner organising, some collection of existing materials that are not necessarily filed correctly, but we can’t make historical record better than it is. Mock audit value = 0.
Here’s the thing: despite the power of the regulatory agency(ies) to enact financial and operational penalties, they (in the event the accident was in another jurisdiction, such as the US – where both your home jurisdiction and the FMCSA will be coming) present a relatively low organisational risk. It’s the lawyers for the third party that represent the company killer risk. These lawyers have budgets far greater than the regulatory agencies. They have their sights set on much larger prizes than the regulatory agencies. They are targeting transgressions infinitesimally smaller in scope than the regulatory audit. The lawyers want the full value of your insurance policy. And if the insurance isn’t enough, or they find for punitive damages that insurance does not protect, limited liability may not end before it has wiped out your personal balance sheet. These legal specialists know how to take advantage of statutes of limitations (see my article on spoliation), missing documentation and the inevitable human error. The courts, the judges, the juries and the media hold carriers to a higher standard – and seek to find anything less than perfection as a doorway to crushing financial penalties and reputation-destroying headlines. The victim of these events is their opponent - you.
So, yes, I will do a mock audit if that is what the client wants. But I prefer to conduct a protective audit. To review how your records stand under the scrutiny of a legal challenge. Where are the openings; what is the cause for them; how do we close them, and through procedures and applications, keep them closed? The records that are sufficient for a regulatory audit often provide a feast for lawyers who can use a single missing document or certification as an opening to negligent training, hiring or certification charge. That may be all they need.
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MTO Carrier Audit information page Link