Workers Compensation - Excel by h7T7NEN


									AuditNet has developed Fraud Audit Control Testing (FACT) spreadsheets that
identify potential fraud schemes, associated red flags, questions to ask and
procedures for the auditor to follow in order to comply with SAS 99 as well as IIA
Standard 2120.A2. As detailed below the auditor needs to begin by assessing where
fraud may occur (identify potential schemes). After gathering that information the
next step is identifying and documenting the red flags for each scheme. After
completing that step the auditor needs to address the necessary steps or
procedures to take to assess and respond to these risks. In most cases this will
involve the use of data analytics combined with auditor intuition, skills and
experience. This spreadsheet is part of the AuditNet Fraud Audit Library providing
auditors with a set of comprehensive resources, tools and information to help meet
needs in this critical area.

Overview of Fraud Detection Process during normal audit

1. Assessing Risks of Fraud and Corruption on an entity wide basis

2. Identifying Red Flags in a particular high risk areas

3. Responding to the results of the assessment

4. Going Beyond Red Flags – Further Examination

5. Documenting Consideration of Fraud and Corruption

6. Communicating/Reporting
1.1 Discussing on how and where the entity might be susceptible to fraud and
1.2 Obtaining the information needed to identify fraud and corruption risks
1.3 Identifying Potential Fraud and Corruption Risks
1.4. Assessing the Identified risks after taking into account an evaluation of the
entity’s programs and controls to deter fraud and corruption
1.5. Identify Potential High Risk Areas
Fraud Area: Workers Compensation

                      Fraud Scheme                                    Red Flags

         A red flag is a warning or a sense that
         something isn’t right with a claim and
         should lead one to take a closer look.
         The lists below will help employers know
         what to look for when identifying
         possible fraudulent behaviors.
         Identification of any one of the following
         red flags does not mean that fraud

                                                      Number of days worked and amount of
         Injured worker claim fraud                   salary inconsistent with occupation;
                                                      Injured worker disputes average weekly
                                                      wage due to additional income (i.e., per
                                                      diem and/or 1099 income);
                                                      Cross-outs, white-outs and erasures on

                                                      Injured worker files for benefits in a state
                                                      other than principle location of the alleged
                                                      industrial injury or occupational disease;
                                                      Injured worker-listed occupation is
                                                      inconsistent with employer’s stated
                                                      Injured worker address is different than
                                                      principle location of employer other than
                                                      border states;
                                                      Injured worker cannot be reached
                                                      because he or she is never home or is
                                                      reportedly sleeping and cannot be
                                                      Injured worker is seen with calluses on
                                                      hands, grease under fingernails;
                                                      Injured worker moves out of state or
                                                      country shortly after filing claim;
                                                      Accident/incident occurs immediately prior
                                                      to strike, layoff, plant closing, job
                                                      termination or job completion;
                                                      Injured worker is in line for early
                                                      Injured worker refuses (or delays multiple
                                                      times) diagnostic procedures to confirm
                             Conflicting descriptions of the
                             accident/incident between employer’s
                             report and initial medical evaluation;
                             Injury is not consistent with nature of
                             Date, time and place of accident is
                             Injured worker cannot recall specific
                             details about the injury

                             Report of injury not timely and immediate;
                             No witnesses to accident;
                             Tips from coworkers.

                             Injured worker does not recall having
Health-care provider fraud   received the billed service;

                             Provider’s medical reports read almost
                             identically even though they are for
                             different patients with different conditions;
                             Much higher health-care costs than
                             expected for the allowed injury type;

                             Frequency of treatments or duration of
                             treatment period is greater than expected
                             for allowed injury type, especially for older
                             (non-catastrophic) claims;
                             Frequent billing in older (non-catastrophic
                             injury) claims;

                             Larger volume of prescription drugs billed
                             than expected for the allowed injury type;

                             Billing for treatment on consecutive dates
                             of service for minor allowed conditions;
                             No change in treatment regimen or no
                             measurable improvement after an
                             extended period;
                             Same doctor(s) and attorney(s) are
                             repeatedly associated with the same
                             questionable claims;
                             Unexplained sudden increase in a
                             provider’s billing and payment levels;
                             Provider services are billed (for non-
                             emergency care) for dates of service on
                             weekends or holidays or on dates when
                             the patient was hospitalized;
                             Provider bills for dates of service within
                             time periods for which the provider had
                             previously billed and received payment;
                 Provider bills for dates of service after the
                 effective date for change of physician of
                 Managed care organization knowingly
                 participates in schemes intended to cause
                 BWC to pay monies that it otherwise
                 would not pay;
                 Medical documentation does not support
                 service billed and/or is inconsistent with
                 the services billed;
                 Frequent delays in the submission of
                 requested records;
                 Great distances between the provider and
                 injured worker;
                 Submission of bills with non-industrial
                 diagnosis codes. Bills resubmitted with
                 codes changed to an allowed diagnosis;

                 Billed procedures are inconsistent with
                 allowed conditions or industrial conditions;
                 Billed procedures are identified by
                 American Medical Association as being for
                 “one or more areas” billed with multiple
                 units of service;
                 Billed procedures are for evaluation and
                 management codes only;
                 Provider is actively billing multiple claims
                 for an injured worker;
                 Day or date of service is inconsistent with
                 the type of provider;
                 Provider billed for services that were not
                 likely to have been performed.

                 Business displays or presents a Certificate
                 of Coverage that contains inaccurate data,
Employer fraud   such as an implausible period of coverage;
                 Cross-outs, white-outs and/or erasures on
                 documents, such as the Application for
                 Workers’ Compensation Coverage or
                 Payroll Report
                 Business name is not consistent with type
                 of work being performed;
                 Number of employees, classifications and
                 payroll are inconsistent;
                 Certificates of Coverage issued exceed
                 anticipated exposure;
                 New business with significant or multiple
                 state exposures;
                 Significant deposit premium made to avoid
                 interim audits;
Business discourages employees from
filing valid workers’ compensation claims;

Employees report that the business may
be shifting the costs from an employee’s
non-work-related health problem to a
workers’ compensation claim;

Business requires newly-hired employees
to complete 1099 forms, asserting
themselves to be independent contractors;
Business reports significant payroll
decreases, even though revenues remain
stable or increase (suggesting under-
reporting of payroll);

Principal business location is a post office
box, suite number, or room number.
Control Objective   Audit Procedures   Initials
WP    Follow Up Testing Area
        Audit Objectives

        Determine the adequacy of internal controls for administration of
        workers compensation to prevent payment of unauthorized worker
        compensation claims, to promote timely and accurate record keeping,
        and to resolve any reconciling items timely and appropriately.

        Determine management reporting of workers compensation information
        is complete and provides sufficient information to allow city
        management to establish reserves, monitor liabilities, and track losses
        to prevent or minimize recurrence by establishing appropriate safety


A.      Preliminary Survey
        Contact Director of Human Resources, and inform him of the audit.
        Also notify Benefits Administrator; (nursing facility) Administrator; and
      1 Risk Manager at (nursing facility).

        Interview key personnel to learn how they administer the workers comp
        program. Document the results of the findings. Also obtain copies of
        any forms or documents, as well as written County policies regarding
      2 workers comp.

        Obtain the latest workers comp regulations from key personnel or a
      3 third party. Note significant areas pertinent to the audit.

        Interview any other County officials as necessary for information on the
      4 workers comp program.

B.      Risk Assessment
        Prepare risk assessment using information obtained during the
      1 Preliminary Survey.

      2 Prepare PAC's resulting from risk assessment.

      3 Complete audit program.

      4 Conduct entrance conference.


A.      Internal Controls
      1 Test 1 - Workers' Comp Checking Account
         Determine if the controls over the workers' comp checking account are
         adequate. The account is in the County's name.

       2 Test 2 - Filing of Incident Reports
         Determine whether information is correctly entered from incident reports
         in the FRI system.

       3 Test 3 - Medical Claim Payments
         Determine if medical claim forms and incident reports are on file for
i)       medical bills paid.

         Determine how the status of medical bills once they are submitted for
ii)      payment are monitored.

       4 Test 4 - Indemnity Payments
         Determine whether indemnity checks are for correct amount and only
i)       go to those individuals qualified to receive them.

         Determine if controls are adequate over the procedures of receiving non-
         (nursing facility) indemnity checks and depositing them in the Revenue
ii)      Division.

         Determine whether indemnity checks sent to the County are being
iii)     properly reconciled to the monthly report.

         Research how the benefits manager can be notified when an employee
iv)      returns to work after being out on workers' comp.

B.       Compliance
       1 Test 2 - Filing of Incident Reports
         Determine whether the employee and supervisor sign incident reports
         before they go to the benefits/risk manager.

       2 Test 3 - Medical Claim Payments
         Determine whether employees on workers' comp are going to panel
i)       doctors for the 1st 90 days.

ii)      Determine whether medical bills are paid within 30 days of receipt.

         Determine whether medical providers are making reports to the
iii)     employer within 10 days of the beginning of treatment.

       3 Test 4 - Indemnity Payments
         Verify that indemnity checks are issued within 21 days from the date of
i)       the incident.

         Determine whether there is a doctor's release on file for employees that
ii)      returned to work.
       4 Test 6 - Administrative Compliance
         Determine whether the list of panel doctors is posted at each County
i)       worksite.

         Determine whether there is written documentation that new employees
ii)      were made aware of workers' comp rights and responsibilities.

         Determine whether the County is filing their annual application to the
         State because they are self-insured, and whether they are submitting
iii)     proof of an accident prevention program.

         Determine whether there is a notice posted at each County worksite
         stating who claims must be sent to and that employers must be made
iv)      aware of all injuries

C.       Economy and Efficiency
       1 Test 5 - Economy and Efficiency Areas
         Determine if incident reports reach the benefits/risk manager timely,
i)       and if not, why.

         Determine if it would be feasible to keep incident reports at (nursing
ii)      facility) in a separate file, not in their personnel file.

         Determine whether workers' comp costs and claims have increased or
iii)     decreased over the past several years.

         Research information for back to work programs, specifically for the
iv)      Prison and Public Works.

v)       Determine whether medical bills can be transferred electronically.


A.       Draft Report
       1 Summarize PAC's and prepare draft report.

       2 Distribute and discuss the draft with appropriate personnel.

B.       Final Report
       1 Distribute final report to appropriate parties.
Audit Procedures
Fraud Questionnaire for:
                                          Auditor    WP
                    Question   Yes   No   Initials   REF
Follow Up Testing Area
Finding Ref #   Control Testing   Finding
Management Response & Treatment

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