Auditor: Denver workers’ comp program still not fully accounting for costs | Colorado Politics

Nearly two years after Denver Auditor Timothy M. O’Brien’s office recommended improvements to the city’s workers’ compensation program, a follow-up report last week found some reporting processes and system improvements are still a work in progress. Auditors first examined the city’s self-insured and self-administered workers’ compensation program in October 2018. […]

Nearly two years after Denver Auditor Timothy M. O’Brien’s office recommended improvements to the city’s workers’ compensation program, a follow-up report last week found some reporting processes and system improvements are still a work in progress.

Auditors first examined the city’s self-insured and self-administered workers’ compensation program in October 2018. The prior year, Denver’s Risk Management Office processed 927 claims worth $6.8 million. Among the findings of the audit, there was uncertainty about whether the compensation fund complied with financial accounting standards, a lack of updated protocols and a need to accept electronic fund transfers.

“The workers’ compensation unit still does not calculate and report out on total program cost, which limits the city’s opportunity to track and evaluate the program,” O’Brien’s office warned in the follow-up report.

More than a year since the targeted May 2019 implementation date, the follow-up report found the Risk Management Office was not fully accounting for salary continuation payments in the event of worker injury, meaning “the total program costs and liability of the fund remain understated.”

There was also no implementation of a strategic plan, a review of performance metrics, or more formalized processes to prevent supervisors from filing late reports. 

While O’Brien’s office recommended the Risk Management Office improve its workers’ compensation system and the city entered into a contract in 2019 with a vendor, the city terminated the contract after 10 months upon determination that the new system was inadequate. Consequently, the old claims processing system is still in use.

The city disagreed with one of the original audit recommendations: slightly increase the level of the reserves to an 80% confidence level for funding future claims.

“To arbitrarily report and fund a greater amount distorts the Fund’s status,” countered the Risk Management Office. “As the audit points out, the number of claims dropped by 10.5% year over year in 2017 and the dollar amount of claims have decreased by 40% in 2017 from 2015. These decreases occurred while Full Time Equivalent employees increased by 7% (11,300). Stranding dollars arbitrarily that could otherwise be used on efforts to prevent and reduce injuries would seem to be contrary to the best interest of the WC mission.”

On the positive side, the workers’ compensation unit implemented a new procedure for review of injured workers with multiple claims. The unit and the Controller’s Office also considered the auditors’ recommendation of switching indemnity payments to the payroll system from the accounts payable system, but determined it to be impractical. Finally, the unit concluded that continued use of paper checks was preferable for recipients to electronic transfers.

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