I had a good time in Savannah as I was there for the Driving Force CPA Conference. And we just finished an hour and a half workshop, which was great talking about how to resolve lawsuits.

I thought today that we would talk a little bit about compliance and how you start a compliance program. So I had a large dealer group call me and asked me that question. So let me just give it to you in detail here. And I hope this is super helpful to you, because I get asked this question a lot.

So the first thing is that no matter whether you’re one store, or 50 stores, it’s really all the same. It’s just done on a different scale. So the first thing to do is to commit to compliance through a compliance charter. And if you have any questions about where compliance starters, I’m happy to send you on, just reach out to me.

But essentially, a compliance Charter is a document that signed by your Board of Directors. And what it says is that you’re appointing a compliance officer. So you appoint one person is that compliance officer, and then they’re responsible for the governance the risk and compliance for the entire dealership or dealership group. So but you’re putting it in writing in case a regulator ever comes to examine your Compliance Management System, or CMS, that’s a document that you’ll need to show them that you’ve committed in writing, to make sure that you have a compliance program, it’s a robust one, and that you’re committed to it.

So the first thing to do is to sign that compliance Charter, the second thing to do is to appoint somebody as the compliance officer. So who is going to be in charge of that compliance program, and that person has to report directly to the board or directly to the owner or owners, and the the compliance officer should also be able to have the responsibility to carry out those tasks. So you can’t have a compliance officer who doesn’t have the authority to get anything done.

So once you have this compliance officer, the way to start a compliance program is simply taking the first step, and starting, and when I say you start, you start with one one, law one rule one regulation. And you examine that the compliance officer to see how the dealership is handling that one particular function. So when I spoke to the group of CPAs, this morning, the Driving Force CPAs, I toughed on the IRS 8300 Cash reporting rule, because I find that so many dealerships are not doing this, right. And here’s what I mean.

So, if you can talk to your cashier and find out if this is being done, right, it’s a five minute conversation. So you go to the cashier, and you say, tell me, if I hand you a personal check, how do you receipt that and they’re gonna say, personal check, they’re gonna go in and say, here’s our receipt it say, Well, if I give you a cashier’s check, how do you receive that, if it’s, if it’s receded as the same way that a personal check is done, then you know that 8300 compliance is not being handled in a robust and proper way, because the only way for the accounting office to check to see if there is compliant if there is auditing, and if you aren’t checking behind the billing department and checking to make sure that not more than $10,000 of cash has come in, either in one transaction or two within a 12 month period, is to check the accounting records and run reports to make sure that those receipts show up.

So if the receipts are showing up all under “check,” you’re not going to be able to differentiate between whether it’s a traveler’s check, cashier’s check or a personal check. And as you know, from an 8300 perspective, it’s important to designate the differences. So let’s say you take this as your first compliance piece, you go check a number of deals, you find out what’s being done wrong, then you document it, then you report it to the owner. So they know that it’s not being done right. You retrain everybody, so remediating correct, and then document and advise, and by doing that you’re fulfilling your function as a compliance officer. So you do that if you’ve got 45 stores, they don’t necessarily have to be full time compliance clerk at each of the stores. So you start by implementing this one policy, and one person at each of those stores has to be responsible for that. If you don’t have a compliance clerk at each of your locations, then in my estimation, then you don’t have a compliance program. Because if there’s no auditing going on, then there is no compliance work going on. Because compliance is made of both the check in the having the policy and then rechecking the policy. So no matter whether how many stores you have, if you’ve got 50 stores, or 45, stores, you need a clerk at each of those checking on this, and then reporting back to whoever the compliance manager is.

Now, there are a lot of ways to do that, you can check, you can do that by Excel spreadsheet, you can do it by email, but somehow that information has to be collated so that it’s cohesive. And you can tell what’s going on in the entire organization. And so if you don’t want to use an Excel spreadsheet for this, project management software is another option, like Monday or Smartsheet. Then there is what’s called governance risk and compliance software, or GRC software. Governance, risk, and compliance software centralizes this function into one place, so that all of the different locations reporting in or reporting into the same place. So you don’t have spreadsheets going back and forth. And it’s really easy to handle to handle compliance. So that’s how you start.

The second month, you get another policy, the third month, another one, but at the fourth month, another one. But as you’re doing each of these, you’ve got to make sure that when you’re in the fourth or the fifth or the sixth month, that the compliance clerk at that location is still checking on month one, month two, month three and month four. So over a period of time, you will quickly get your hands around all that there is to do and to know about what’s going on at the different locations. And it’s important to look at all of the compliance obligations, federal state, and your website, for example. Most dealership websites are not compliant. So there are advertising violations, and therefore there’s a potentiality for a class action suit.

Class action liability starts when you’ve made the same mistake over and over and over. And a plaintiff lawyer can sue you on behalf of all of the people with whom you’ve made that mistake. And a lot of insurance policies don’t necessarily cover some of the perils that can happen to you.  For example, Truth in Lending and Truth in Leasing mistakes are typically covered, but they have a cap on the amount of coverage. Some insurance companies have a cap of a million dollars. So, you want to check your insurance policies to determine if you have Truth In Lending and Truth in Leasing coverage.

And that’s how you start a program. So not as complex as, as you may think. But again, the most important part is that you’re starting and that you’re you’re routinely doing these compliance activities.   If a regulator comes in, or a lawyer sues you, you’re going to point out your compliance activities and argue that this is a “one off” type of situation.

Please reach out if you have any questions.

Thanks for seeing thanks for a Better Vantage Point.

And today my vantage point it’s a beautiful Savannah. By the way, if you haven’t been to Savannah, I highly recommend it. It’s it’s like if New Orleans and Charleston had a baby. That would be Savannah. Cheers.