A Review of the South Carolina Workers Compensation Commission. Published November 2010 S.C. Legislative Audit Council

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1 A Review of the South Carolina Workers Compensation Commission Published November 2010 S.C. Legislative Audit Council 1

2 Why Did We Audit Workers Comp? Members of the General Assembly requested the Legislative Audit Council (LAC) to conduct an audit of the S.C. Workers Compensation Commission (Commission). The requestors concerns were the Commission s operations, systems, and management practices. Reform a few years earlier. 2

3 Our five-member public council voted for us to conduct a strictly compliance audit. 3

4 Objective #1 Review a sample of contested cases to determine if the agency is ensuring that required forms are filed with the correct information for hearings and what types of benefits are sought by injured workers. 4

5 What Did We Find? We reviewed a sample of contested and appealed case files to determine if they were complete and if they were processed in compliance with state laws and regulations. Overall, we did not identify significant issues with these files. 5

6 Objective #2 Determine the Commission s compliance with approving attorney fees and costs. 6

7 Finding For all files in our sample, we verified that the attorney fees charged were within the required amount. We found that all attorney fee petitions were submitted and approved properly. 7

8 Objective #3 Review a sample of cases which had informal conference settlement agreements to determine if the forms filed were consistent with previous filings and contained the proper information, and to review the outcomes of those cases. 8

9 What We Found We reviewed a statistically valid sample of informal conference files over a two-year period. While most files had all the legally required documentation, the documentation in the files could be improved. The files did not contain sufficient information to assess compliance with Commission standards regarding the claims mediator s proposed settlement. 9

10 Objective #4 Review the Commission s current process of hearing informal conferences and making award determinations. 10

11 Finding The four designated claims mediators handled informal conferences differently. All claimants were not consistently notified of all of these rights: Right to a Formal Hearing Payment of Medical Expenses Mileage Reimbursement Tax Free Benefits One-Year Period for Additional Claims 11

12 We found that improvements could be made in the informal conference process that would help ensure the quality and consistency of the conferences for the parties involved. We recommended the Commission develop guidelines for conducting informal conferences to include what should be considered in determining proposed settlements and what information should always be given. 12

13 We also recommended that the Commission train its claims mediators on the established guidelines. Also, the Commission should require claims mediators to complete an agency checklist for each settlement to ensure the parties are notified of all of their rights during the informal conferences. 13

14 Lastly, we recommended that the Commission s claims mediators should document what information was considered for the proposed settlement. 14

15 Objective #5 Obtain agency statistics regarding the administration of workers compensation claims, including wait time for hearings to be scheduled. 15

16 What We Reviewed In our report, we offered a lot of background information about what exactly the Workers Compensation Commission does. We focused on: Who is required to have workers compensation coverage? What happens when an employee is injured on the job? What benefits are covered under workers compensation? What changes did the 2007 reform cause? What recent changes has the Commission made? 16

17 To answer the question in the objective.. According to Commission statistics, the wait time for hearings had decreased from FY to FY The number of days from the last request for a hearing to the actual hearing date decreased from approximately four months to three months, which includes the required 30- day period of notification of the parties. The wait time for appeals decreased too. 17

18 Objective #6 Examine the Commission s efforts to prevent employer workers compensation fraud. 18

19 What We Found The Commission uses data from our state s Department of Employment and Workforce to determine which employers fall into the required category of having workers compensation insurance. The compliance division looks up these employers to see if there is coverage. If not, compliance officers contact these identified employers to notify them of non-compliance and encourage them to become compliant. 19

20 We Also Found The Commission reported collecting $446,702 in fines to uninsured employers for FY There were a lot of uninsured employers in South Carolina identified through this process more than the current staff could investigate. 20

21 Unbelievably, We Recommended. That the Commission add an additional compliance officer position to increase fine collections and bring more uninsured employers into compliance. 21

22 Objective #7 Review the Commission s current procedures for referring injured workers to the S.C. Vocational Rehabilitation Department. 22

23 Finding and Recommendation The Commission could improve its efforts to refer claimants needing vocational counseling, evaluation, training, or placement to the S.C. Vocational Rehabilitation Department. 23

24 It Was Odd That A Vocational Rehabilitation employee from Richland County was allowed access to the Commission s records to identify claimants in that one county for possible services at Vocational Rehabilitation. 24

25 So We Recommended That The Commission implement a formal policy for referring claimants (from all 46 counties) to Voc Rehab. The Commission and the Vocational Rehabilitation Department develop a memorandum of understanding regarding referrals. 25

26 In Addition to Those Objectives, We Found Other Interesting Things The Commission had received funding for an ombudsman and public affairs employee. When the employee serving in that capacity separated from the agency, the Commission determined that, due to budget constraints, it would not be prudent to fill that position. The Executive Director said he would handle those duties. We determined that the General Assembly had specifically funded that position and the agency needed to have a designated person to handle inquiries of injured workers and employers. 26

27 This Is My Favorite As are many states, South Carolina state government has been going through horrible budget times. The Commission was evidently looking for ways to ensure that its fine collections stayed at the agency. During a Commission meeting, there was discussion about how to ensure that the General Assembly did not take away the fine monies collected by the Commission. 27

28 So The full Commission voted unanimously to defer the collection of fines for the months of May and June until July 1, 2010 (the new fiscal year). We interviewed staff and found that the Commission continued to assess and collect fines, but held all checks to deposit after July 1,

29 They Had How Much? The Commission had assessed fines against South Carolina employers and carriers and collected checks totaling more than $244,000, but didn t deposit them. That s a violation of state law. We notified management on June 9, The next day, we were notified that the agency would immediately cease the practice of holding checks and begin processing all checks for deposit that were being held. 29

30 Of Course We reviewed the documentation of deposits and found that $244,000 in checks had been deposited within three working days of our notification to the agency. 30

31 If You Want a Copy of This Report or Others Our website is Reports are listed by agency name or by year of publication. 31

32 If You Have Any Questions of Me Feel free to me at Or call at (803)

33 Thanks! 33