Auditor uncovers weaknesses in state’s workers’ compensation office

Creative Commons photo

Creative Commons photo

Ninety-nine thumbs, 574 lower backs, three big toes. Fifty-nine falling or flying objects, 72 respiratory disorders, 315 lacerations. Those are just a few figures from an unofficial roster of injuries suffered by state employees on the job in the past five years.

$40 million. That’s an estimate of how much the state will pay in workers’ compensation claims for the same period.

All those numbers could be lower, says State Auditor Doug Hoffer. He recently turned his sights on the Office of State Employee Workers’ Compensation and Injury Prevention, which manages workers’ compensation for state employees and also recommends ways to make them safer.

Looking at 124 cases — a representative sample of 4,825 workplace injury “incidents” among state employees from 2008 through 2012 — Hoffer said he was most surprised by two findings: That not all of the incidents are being reviewed, and that a significant number of safety recommendations are never adopted.

Citing limitations of time and staffing, plus some work already underway to address known problems, WCP manager Lisa DeForge indicated to auditors that not all of their findings were a surprise. Other issues behind the audit conclusions, however, were news to her, she said.

Vermont State Auditor Doug Hoffer.

Vermont State Auditor Doug Hoffer.

The audit calculated that within the five-year period studied, 4,825 incidents generated an estimated $40 million in workers’ compensation claims. (That figure includes roughly $27.3 million already paid out, plus $12 million for claims whose payment periods are expected to last longer.) Not all incidents result in a workers’ compensation claim.

Hoffer did not set out to investigate the claims, themselves. Rather, his office wanted to identify trends in workers’ compensation claims, evaluate WCP’s efforts to prevent worker injury, and assess whether departments with a high amount of workers’ compensation claims have implemented WCP’s recommended safety measures.

Hoffer said there were no tips or suspicions afoot in state employee workers’ compensation. He simply recalled improvements made in the city of Burlington when a new employee took over injury prevention, and he wondered what improvements the state could undertake.

To save the state money — and to save state employees and their families “the physical, financial, and emotional hardship associated with workplace injuries” — the audit makes several recommendations: boost WCP staffing, tighten data management practices, improve follow-through and coordination with affected departments and possibly charge departments more or less for workers’ compensation insurance premiums depending on whether they follow WCP and other recommended safety practices.

It’s important to note that WCP’s role in promoting best practices is distinct from that of Vermont’s Occupational Safety and Health Administration (VOSHA), which enforces regulations on workplace health and safety for employees in both the private and public sectors. The audit focused only on the WCP office, which has no enforcement authority.

Response

Hoffer said he was pleased by the responsiveness of DeForge and her staff. “It was a cordial and productive process,” he said.

DeForge’s official response to the audit made clear that some of Hoffer’s recommendations were already on her radar, as reflected in a 2012 strategic plan.

“While the initial dates and timelines established in that plan need to be updated,” she wrote, “the work is underway and the detailed plan will be formally presented to the Secretary of Administration later this month to request official approval to move ahead.”

DeForge’s letter states her office can implement safety improvements without additional funding. Hoffer confirmed that she immediately fixed certain problems she had not been aware of before the audit.

Among the six state organizations that comprise the vast majority of workplace injuries, only the Secretary of Transportation and the Administrator of the Vermont Veterans’ Home provided formal response letters when invited by the auditor’s office. Both expressed their commitment to improving safety protocols.

The departments of Buildings and General Services, Corrections, Mental Health (which ran the now-defunct Vermont State Hospital) and Public Safety declined to add their comments to the audit records.

Deputy Secretary of Administration Michael Clasen, to whose office the audit recommendations were directed, said they appreciated the report and the effort Hoffer’s team put into it.

“We didn’t disagree with their findings and recommendations,” Clasen said. “We’ll take those into consideration when managing the programs … to the degree we can implement them.”

Safety reviews

The audit uncovered that about one in five incidents do not get reviewed by WCP, even though Department of Labor guidelines call for all to be evaluated. With only two safety prevention auditors, the audit notes, WCP is hard-pressed to review the roughly 1,000 incident reports filed each year.

But of the incidents that are reviewed, some deviate from protocol, and not all the reports end up in the hands of the people who can make the recommended safety improvements, the report said.

It turns out that reviews are sent to the Human Resources contacts for each department, not directly to the departments in which the incidents originated.

“If HR were copied, or were one of two or three parties to receive the reports, that would make sense,” Hoffer said. “I certainly hope (WCP) will work on that, because it’s easily fixed and doesn’t cost any money.”

Speaking by phone Wednesday afternoon, DeForge said she intended to make that change, but hadn’t decided yet who the proper recipients would be.

“What I think is needed is to escalate it to a high level, at the department head or agency head level,” she said. “That way we know upper management is accountable for receiving it.”

She indicated that before the audit report, her office was not aware that human resources personnel were not always forwarding the safety reviews to the proper authorities within the respective departments.

Additionally, the audit found that WCP did not adhere to draft protocols from 2011, which require follow-up on the recommended safety improvements.

“WCP did not always send out recommendation follow-up letters, the departments often did not respond when the letter was sent, WCP did not track whether departments were responsive to its requests, and WCP did not have a mechanism in place to calculate the percentage of recommendations that had been implemented,” the audit reads.

Database weaknesses

Although Hoffer had hoped to analyze claims from a bird’s-eye view to look for trends, problems with the claims management system did not permit that objective.

Data fields that characterized incidents were too full of errors for auditors to feel that the data was reliable. “These errors were exacerbated by the lack of up-to-date policies and procedures related to claims processing,” the report states.

Also concerning were security weaknesses in the claims database.

“Almost a quarter of the users were given unfettered access … to add, delete, or change data,” the report says. Without oversight mechanisms in place to compensate for that freedom of access, the audit found “a high risk that the data could be subject to unauthorized alteration.”

DeForge immediately limited access for users who didn’t need to get into the entire database, Hoffer said. He recommended that oversight protocols be developed for those who must have it.

DeForge said she is now reviewing bids for a new claims management system that will make customized access and better data management protocols easier to implement.

Other limitations

Regarding the audit’s suggestion to factor best practices into the cost of workers’ compensation insurance, DeForge shared a word of caution: “One thing you have to be careful of is that you’re not encouraging under-reporting.”

The current process used to set premiums already does do a certain amount of penalizing and incentivizing, however.

“The Office of Risk Management manager calculates premiums based on an allocation method that takes into account departmental exposure and experience factors,” according to an explanatory note in the audit.

One detail that emerged from Hoffer’s research struck him as odd: The state employees’ workers’ compensation fund is permitted to spend no more than 6 percent of its annual assessment on prevention programs and actuarial analysis.

“They’re nowhere near that cap yet because they’re understaffed,” Hoffer said. Nonetheless, he wondered, “Why on earth would you tell the department it can’t spend more than a certain percentage?”

He pointed out that actuarial services, crucial to the WCP’s accounting, are expensive. The cap therefore further limits what DeForge’s office can spend not just on staffing her own prevention officers, but also on training for departments with high rates of workers’ compensation claims.

DeForge welcomed the recommendations in the audit, Hoffer underscored. Many managers can grow defensive when their offices go under the microscope, he acknowledged, but the WCP staff was clear in their intention to prioritize their work based on the audit recommendations.

“The ball is really in the court of the administration and Legislature at this time,” Hoffer said. And he knows that new funding is hard to come by.

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Hilary Niles

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