Audit of the Department of Industrial Accidents Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Department of Industrial Accidents.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor (OSA) has conducted a performance audit of certain activities of the Department of Industrial Accidents (DIA) for the period July 1, 2017 through June 30, 2019.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.

Objective	Conclusion
Does DIA report all fees and penalties and submit continuances to the Workers’ Compensation Advisory Council (WCAC) within the timeframes established by Sections 7F and 11 of Chapter 152 of the General Laws?	No; see Finding 1
Does DIA ensure that cases are adjudicated in accordance with the timeframes established by Sections 10A and 11 of Chapter 152 of the General Laws?	No; see Findings 2, 3a, 3b, 3c, and 3d
Does DIA’s Opioid Alternative Treatment Pathway Program (OATP) fulfill the intended purpose documented on OATP’s website?	Yes
Does DIA administer employee benefits related to flextime in accordance with the Massachusetts Human Resources Division’s “Time and Attendance Policy for 2012 and 2018”?	Yes
Does DIA administer employee benefits related to parking in accordance with the parking guidelines of the Division of Capital Asset Management and Maintenance?	Yes

 

We gained an understanding of internal controls we deemed significant to our audit objectives through inquiries and observations. We evaluated the design of controls over the reporting of fees, penalties, and continuances to WCAC; case processing; OATP; flextime; and parking benefits. In addition, we performed the following procedures to obtain sufficient, appropriate audit evidence to address our audit objectives.

Reporting of Referral Filing Fees, Attorney Fees, Insurer Penalties, and Continuances to WCAC

We examined all the Fiscal Year End Collection and Expenditures Reports filed during the audit period for referral filing fees, and the Case Management System (CMS) Compensation Screen Report for attorney fees and penalties from DIA, and compared these reports to WCAC’s 2018 and 2019 annual reports to determine whether WCAC reported all three types of fees and penalties in its annual reports. We performed an inquiry to request correspondence, reports, and emails from DIA to WCAC that listed fees, penalties, and continuances to determine whether DIA notified WCAC of fees, penalties, and continuances. We examined CMS data to identify instances when penalties should have been charged, compared them to the CMS Compensation Screen Report, and performed an inquiry to request documentation that DIA notified WCAC of the penalties. We also examined DIA’s reconciliations of referral filing fees to the Massachusetts Management Accounting and Reporting System (MMARS) for 2018 and 2019 to determine amounts that should have been reported. Finally, we examined WCAC’s 2018 and 2019 board minutes for discussions regarding referral filing fees, attorney fees, insurer penalties, and continuances.

Adjudication of Cases in Accordance with Required Timeframes

We extracted case data from DIA’s CMS for our audit period. During this period, there were 24,695 claims and 39,496 events.¹¹ (A case can contain one or more claims, and each claim can have one or more events.) We filtered and extracted cases in which at least one of six principal events—conciliation, conference, conference order, appeal to hearing, hearing, and hearing decision—occurred during the audit period. This totaled 26,221 events¹² within the 24,695 claims. Other events sometimes also occur between principal events or at the end of a case (for example, an impartial physician exam might occur between a conference order and hearing); if we encountered one of these other events after a principal event, we used the length of time between the principal event and the other event to determine whether the principal event was completed within the mandated timeframe.

We divided the sample into two populations—events within single-claim cases and events within grouped cases—and performed the following procedures:

• To determine whether four types of event (conferences, conference orders, hearings, and hearing decisions)¹³ were scheduled, and took place, during mandated timeframes, for the 10,114 single-case claims that were heard during our audit period, we filtered for these four types of event. We analyzed 100% of the four types of event (totaling 10,695 events) and calculated the number of days between the first date each event could be scheduled and the date it occurred or was processed, when applicable.
• To determine whether four events (conferences, conference orders, hearings, and hearing decisions) were scheduled and occurred during mandated timeframes, for the 14,581 group-case claims that were heard during our audit period, we filtered for these four types of event (totaling 15,526 events). We separated the population into two groups based on required timeframes.

• The first group was conference orders, which have 7 days to be processed. We selected a statistical random sample of 24 events out of a population of 4,075, with a confidence level of 90%, expected error rate of 0%, and tolerable error rate of 10%. We calculated the number of days between the first date each event could be scheduled and the date it occurred to determine whether each one was completed within the mandated timeframe.
• The second group was conferences, hearings, and hearing decisions, which have 28 days to be scheduled and take place. We used a statistical random sample of 102 events from a population of 11,451, with a confidence level of 95%, expected error rate of 50%, and tolerable error rate of 20%. We calculated the number of days between the first date each event could be scheduled and the date it occurred to determine whether each one was completed within the mandated timeframe.

OATP

To determine whether DIA administered OATP for its intended purpose, we reviewed all applicable program policies and procedures and identified all potential participants for this program. Of the potential participants who had applied and been accepted, we determined how many had successfully completed the program, were still in the program, or had withdrawn from the program.

We determined whether all nine potential participants who were interested in entering OATP had their cases forwarded to the Division of Dispute Resolution with notations that they wanted to enter OATP and that a mediating judge was assigned within 30 days. We also determined whether the parties subsequently had their first meetings in order to complete the agreement to enter OATP.

We examined OATP committee agendas to determine whether informal policies and procedures established for the program were reported to the OATP committee. We also reviewed program updates provided to WCAC to determine whether DIA complied with these informal policies and procedures.

Employee Benefits and Flextime

We requested from DIA management a list of all DIA employees who were on flextime schedules during the audit period and determined that 1 of 191 employees had a flextime schedule. We examined that employee’s personnel file to determine whether the employee had been approved for, and received, a flextime schedule. We did this by determining whether the file included a completed Alternative Work Hours Request Form and Request for Change or Reduction in Scheduled Work Hours Form.

Parking

We queried MMARS data regarding parking lease contracts and property leases for all four properties DIA leased (in Boston, Worcester, Lawrence, and Fall River) to determine whether DIA’s contracts included parking spaces. We reviewed whether the documentation of parking assignments for each employee was in accordance with DIA’s informal policy regarding the Boston contract for its 3 reserved and 12 unreserved parking spaces. We verified DIA’s parking rates with the garage in the property lease agreement. We examined the Internal Revenue Service (IRS) Form W-2 information for all 13 DIA employees who received parking spaces as a fringe benefit from DIA. These 13 employees do not pay for parking because it is included and paid for in the property lease agreement. The IRS and the state Department of Revenue have rules that parking benefits with values above a specific amount, which changes annually, must be reported on Form W-2 as income. Therefore, for these 13 employees, we recalculated this benefit’s value, as reported by DIA to the IRS, as a taxable fringe benefit to determine whether the proper amount was reported.

Data Reliability

DIA uses its CMS to administer claim information and case management. For the CMS, we reviewed certain information system general controls and policies for security management, access controls, and configuration management.

In addition, we selected a sample of 20 claims recorded in the CMS that were created or modified during our audit period and traced scanned documents in the CMS for each claim to supporting hardcopy documentation such as employers’ first reports of injury, employees’ claims, and insurers’ notices of payment. Finally, we conducted walkthroughs of the Office of Claims Administration, Office of Conciliation, and Impartial Scheduling Unit to observe hardcopy records being uploaded to the document management system, case details being entered in the CMS, and case conferences being scheduled. To determine completeness, we compared the 67,737 total first reports of injury and 24,638 claims from CMS to WCAC’s annual reports during the audit period. We also requested DIA’s business continuity plan. Based on the analyses conducted, with the exceptions noted in Finding 3, we determined that the data obtained were sufficiently reliable for the purposes of this audit.

In 2018, OSA performed a data reliability assessment of MMARS that focused on testing selected system controls (access controls, configuration management, contingency planning, and segregation of duties) for the period April 1, 2017 through March 31, 2018. As part of our current audit, we asked DIA management for a list of employees with access to MMARS. However, no DIA employees have access to MMARS; MMARS transactions are handled by state executive offices.

11.     See Appendix D and Appendix E for codes used in the CMS.

12.     The remaining 13,275 events were related to withdrawn or resolved cases.

13.     The dates for conciliation and appeal to hearing do not have mandated timeframes for DIA. We used the dates of the conciliations to calculate the timeframes for the conference dates and the dates of the appeals to hearing to calculate the timeframes for the hearing dates.

Date published:	March 23, 2021