Notice of Audit; Claim File Selection; Production of Claim Files; Auditing Procedure. 8 CCR § 10107

(a) Once a subject has been selected for an audit, the Audit Unit shall serve a Notice of Audit on the claims administrator. The Notice shall inform the administrator of its selection for audit, and shall include a request to provide the Audit Unit with a claim log or logs. The audit subject shall provide two copies of the specified claim log(s) within fourteen days of the date of the receipt of the Notice. The Audit Unit may select any or all claim files for audit. (b) The Audit Unit shall send the audit subject a Notice of Audit Commencement identifying the files to be audited, except that no notice need be given to audit claim files which are the subject of inquiries or complaints. The audit shall commence no less than fourteen days from the date the Notice was sent, unless the audit subject agrees to earlier commencement.(c) The Audit Unit shall randomly select separate samples of indemnity, denied, and medical-only files from two years' of the audit subject's claim logs, except that if the earliest of the last two completed years has already been the subject of an audit, claims will be randomly selected from only the last completed year. (1) The total number of indemnity files randomly selected for audit will be determined based on the following table: Population Sample Size 8 or less all 9 - 15 1 less than total 9 - 15 1 less than total 16 - 19 2 less than total 20 - 23 3 less than total 24 - 27 4 less than total 28 - 30 5 less than total 31 - 33 6 less than total 34 - 36 7 less than total 37 - 38 8 less than total 39 - 41 9 less than total 42 32 43 - 44 33 45 34 46 - 47 35 48 - 49 36 50 - 51 37 52 - 53 38 54 - 55 39 56 - 57 40 58 - 59 41 60 - 61 42 62 - 63 43 64 - 65 44 66 - 67 45 68 - 70 46 71 - 72 47 73 - 74 48 75 - 77 49 78 - 79 50 80 - 82 51 83 - 84 52 85 - 87 53 88 - 89 54 90 - 92 55 93 - 95 56 96 - 98 57 99 - 101 58 102 - 104 59 105 - 107 60 108 - 110 61 111 - 114 62 115 - 117 63 118 - 120 64 121 - 124 65 125 - 128 66 129 - 131 67 132 - 135 68 136 - 139 69 140 - 143 70 144 - 148 71 149 - 152 72 153 - 156 73 157 - 161 74 162 - 166 75 167 - 171 76 172 - 176 77 177 - 181 78 182 - 187 79 188 - 192 80 193 - 198 81 199 - 204 82 205 - 210 83 211 - 217 84 218 - 223 85 224 - 230 86 231 - 238 87 239 - 245 88 246 - 253 89 254 - 261 90 262 - 270 91 271 - 279 92 280 - 288 93 289 - 298 94 299 - 308 95 309 - 319 96 320 - 330 97 331 - 342 98 343 - 354 99 355 - 367 100 368 - 381 101 382 - 396 102 397 - 411 103 412 - 427 104 428 - 444 105 445 - 463 106 464 - 482 107 483 - 503 108 504 - 525 109 526 - 549 110 550 - 575 111 576 - 603 112 604 - 633 113 634 - 665 114 666 - 700 115 701 - 739 116 740 - 781 117 782 - 827 118 828 - 879 119 880 - 936 120 937 - 1,000 121 1,001 - 1,072 122 1,073 - 1,154 123 1,155 - 1,248 124 1,249 - 1,356 125 1,357 - 1,483 126 1,484 - 1,633 127 1,634 - 1,814 128 1,815 - 2,036 129 2,037 - 2,315 130 2,316 - 2,677 131 2,678 - 3,163 132 3,164 - 3,852 133 3,853 - 4,904 134 4,905 - 6,710 135 6,711 - 10,530 136 10,531 - 23,993 137 23,994 + 138 (2) In conducting the audit, the Audit Unit shall calculate the frequency of files with violations as percentages of the files with exposure for violations after the following number of randomly selected indemnity files are audited: Population Sample Size 5 or less all 11 - 13 2 less than total 14 - 16 3 less than total 17 - 18 4 less than total 19 - 20 5 less than total 21 - 23 6 less than total 24 17 25 - 26 18 27 - 29 19 30 - 31 20 32 - 33 21 34 - 36 22 37 - 39 23 40 - 41 24 42 - 44 25 45 - 48 26 49 - 51 27 52 - 55 28 56 - 58 29 59 - 62 30 63 - 67 31 68 - 72 32 73 - 77 33 78 - 82 34 83 - 88 35 89 - 95 36 96 - 102 37 103 - 110 38 111 - 119 39 120 - 128 40 129 - 139 41 140 - 151 42 152 - 164 43 165 - 179 44 180 - 197 45 198 - 217 46 218 - 241 47 242 - 269 48 270 - 304 49 305 - 346 50 347 - 399 51 400 - 468 52 469 - 562 53 563 - 696 54 697 - 905 55 906 - 1,272 56 1,273 - 2,091 57 2,092 - 5,530 58 5,531 + 59 If any of the following criteria are met after auditing the sample size as set forth in this subsection (c)(2), the Audit Unit will proceed to audit the remaining number of randomly selected indemnity files selected for audit pursuant to subsection (c)(1): (i) The number of randomly selected audited files with violations involving the failure to pay indemnity exceeds 20% of those files in which indemnity is accrued and payable and the average amount of unpaid indemnity exceeds $200.00 per file in which indemnity is accrued and payable; (ii) The numbers of randomly selected files with violations involving the late first payments of temporary disability indemnity, permanent disability indemnity, vocational rehabilitation maintenance allowance, late subsequent indemnity payments, and late payments of death benefits, as mitigated for frequency under Section 10111.1(e)(3)(i) through (v), exceeds 30% of the files in which those indemnity payments have been made; (iii) The number of randomly selected audited files with violations involving the failure to issue benefit notices, as assessed under Section 10111.1(a)(7)(ii) of these regulations, exceeds 30% of those files in which there is a requirement to issue those notices. The determination of whether or not to audit the number of files selected pursuant to subsection (c)(1) of this section shall not be the subject of appeal, and no preliminary report of findings will be issued to the audit subject before the determination is made. (d) The total numbers of denied files and medical-only files randomly selected for audit will be determined based on the following table: Population Sample Size 7 - 10 1 less than total 11 - 14 2 less than total 15 - 17 3 less than total 18 14 19 - 20 15 21 16 22 - 23 17 24 - 25 18 26 - 27 19 28 - 29 20 30 - 31 21 32 - 33 22 34 - 36 23 37 - 38 24 39 - 41 25 42 - 43 26 44 - 46 27 47 - 49 28 50 - 52 29 53 - 55 30 56 - 59 31 60 - 63 32 64 - 67 33 68 - 71 34 72 - 75 35 76 - 80 36 81 - 85 37 86 - 90 38 91 - 96 39 97 - 102 40 103 - 109 41 110 - 116 42 117 - 124 43 125 - 132 44 133 - 141 45 142 - 151 46 152 - 163 47 164 - 175 48 176 - 189 49 190 - 205 50 206 - 222 51 223- 242 52 243 - 265 53 266 - 292 54 293 - 323 55 324 - 360 56 361 - 405 57 406 - 461 58 462 - 531 59 532 - 623 60 624 - 749 61 750 - 931 62 932 - 1,217 63 1,218 - 1,731 64 1,732 - 2,934 65 2,935 - 8,990 66 8,991 + 67 (e) In addition to randomly selected indemnity, denied, and medical-only files, the Audit Unit may also select for audit any or all files for which the Division of Workers' Compensation has received complaints within the past three years. (f) The audit subject shall pay all expenses of an audit of an adjusting location outside the State of California, including per diem, travel expense, and compensated overtime of audit personnel. (g) The audit subject shall make each of the files selected for audit available at the audit site at the time of audit commencement. If files are maintained in an electronic or other non-paper storage medium, the claims administrator shall, upon request, produce legible printed paper copies of the claim files, including all records of compensation payments. (h) The Audit Unit shall have discretion to audit files in addition to those identified with the Notice of Audit Commencement. The audit subject shall make each of the additional files selected for audit available at the audit site within 14 days of receipt of written notice identifying the additional files. (i) The audit subject shall provide the auditor(s) an adequate, safe, and healthful work space during the audit, which allows the auditors a reasonable degree of privacy. If this work space is not provided, the Audit Unit may require the audit subject to deliver the files to the nearest Audit Unit office for completion of the audit. (j) The Audit Unit may obtain and retain copies of documentation or information from claim files to support the assessment of penalties. (k) The audit subject shall have the opportunity to discuss preliminary findings and provide additional information at a post-audit conference. (l) The Audit Unit may at any time request additional information or documentation in order to complete its audit. Such information may include documentation that, as specified by Labor Code Sections 3751(a) and 3752, compensation has not been reduced or affected by any insurance, contribution, or other benefit due to or received by or from the employee. The audit subject shall provide any requested documentation or other information within thirty days from the Audit Unit's request, unless the Audit Unit extends the time for good cause. (m) The Audit Unit shall issue a report of audit findings which may include, but is not limited to, the following: one or more requests for additional documentation or compliance, Notices of Intention to Issue Notice of Compensation Due, Preliminary Notices of Penalty Assessments, Notices of Compensation Due, or Notices of Penalty Assessments. If any additional requested documentation is not provided within thirty days of receipt of the report, additional audit penalties may be assessed under Section 10111.1(d)(2) of these Regulations.