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MANATEE COUNTY CLERK OF THE
CIRCUIT COURT
INTERNAL AUDIT DEPARTMENT
EMPLOYEE HEALTH BENEFITS DIVISION
LIFE INSURANCE - CLAIMS PAYMENT
PROCESS
A U D I T R E P O R T
TABLE OF CONTENTS
I. INTERNAL
AUDIT REPORT
A. Background; Purpose/Objectives
.........................................................................2
B. Scope; Methodology; Irregularities,
Abuse, or Illegal Acts; Test
of Compliance
..
.....................
..
.3
C.
Statement of
Internal Control Structure
..3 - 4
D.
Management
Team and Management Action Plan
.
4
E. Management Summary..................................................................
..
..4
- 5
F. Audit Report Authorization...........................................
........
...
5
G. Areas of Improvement and Managements Action Plan...........
....
..6
- 7
MANATEE COUNTY CLERK OF THE
CIRCUIT COURT
INTERNAL AUDIT DEPARTMENT
EMPLOYEE HEALTH BENEFITS DIVISION
LIFE INSURANCE - CLAIMS PAYMENT
PROCESS
The Internal Audit Department conducted an audit of
the life insurance claims payment process under the Employee Health
Benefits Division for the audit period January 1, 1999 through February
29, 2000. The audit was performed in accordance with
Generally Accepted Governmental Auditing Standards,
issued by the Comptroller General of the United States; and the Standards for the Professional Practice of
Internal Auditing, issued by the Institute of Internal Auditors.
BACKGROUND:
Standard Insurance Company of Portland, Oregon provides
group life insurance to Manatee County Government. The life insurance benefit program includes
core life, dependent life and additional life benefits. Core life insurance is provided to all eligible
government employees. Group
life members may elect dependent life and additional life coverage through
contributory premiums.
PURPOSE/OBJECTIVE:
The audit purpose / objectives included, but were not
limited to, the following:
Ψ
Determine what life insurance
claims were filed with the Standard Insurance Company and whether the
claims were paid in accordance with the policy.
Ψ
Determine whether the Standard
Life Insurance Company requires new evidence of insurability for employees
to maintain their existing levels of insurance coverage for core and
additional life insurance.
Ψ
Determine whether the Standard
Life Insurance contract/policy was competitively bid and whether the
Board of County Commissioners approved the contract/policy.
SCOPE:
The scope of the audit included
an evaluation of the life insurance claims filed with the Standard Insurance
Company from the inception of the policy on 1/1/99 through 2/29/00.
The scope of the audit included
examining evidence supporting that life insurance claim payments were
made in compliance with the Group Life Insurance Policy.
METHODOLOGY:
Internal control evaluations were accomplished by flow
charting the key operations of this specified area, discussions with
management and staff, observations, and analytical and substantive testing
of individual internal controls. Risk
analysis was used to establish priorities of audit objectives.
IRREGULARITIES,
ABUSE, OR ILLEGAL ACTS:
No indications of irregularities, abuse, or illegal
acts were discovered during the audit for the period ending February
29, 2000 in the audit of the Life Insurance Claims Process.
TEST OF COMPLIANCE:
Internal Audit tested compliance of the Standard Insurance
Company Policy with the life insurance claims filed in order to obtain
an understanding of internal controls and to assess control risk. Tests
performed were limited to the specific areas included in the Purpose/Objective
section of this report and appeared to provide sufficient evidence to
support an opinion on compliance and internal controls for the areas
tested.
Except as noted in our audit report, tested items were
in compliance with Florida Statute 112.08, the Standard Group Life Insurance
Policy, and departmental policies.
STATEMENT
ON INTERNAL CONTROL STRUCTURE:
In planning and performing the audit of life insurance
claims payment under the Employee Health Benefits Division for the period
ending February 29, 2000, the internal control structure was considered
in order to determine the auditing procedures for the purpose of this
report. As a result, we noted
in the audit report matters involving the internal control structure
and its operations that are considered reportable conditions under standards
established by the U.S. General Accounting Office, Government Auditing Standards. Reportable
conditions involve matters relating to deficiencies in the design or
operation of the internal control structure, that in our judgment, could
adversely affect the organization's ability to record, process, summarize
and report on data consistent with managements intentions.
Our consideration of the internal control structure
would not necessarily disclose all matters in the internal control structure
that might be reportable conditions, as defined above. In addition, because of the inherent limitations
in any internal control structure, deficiencies in the design or operation
of the internal control structure may exist and not be detected. We believe the conditions identified in our
audit report constitute reportable conditions as previously defined.
MANAGEMENT TEAM AND MANAGEMENT
ACTION PLAN:
A Management Action Plan will be used for each Area of Improvement reported. Management Action Plans are corrective actions with implementation dates developed in cooperation with the Departments Management Team and the Internal Audit Department. The Management Team includes the Financial Management Department Director and the Employee Health Benefits Manager.
MANAGEMENT
SUMMARY:
The Employee Health Benefit Manager
is adept at negotiating contracts and is constantly monitoring the insurance
industry to ensure Manatee County employees are offered the best policies
and reasonable prices. We found
the Division's files to be complete and county records to be adequate
for determining the proper amount of life insurance benefits to be paid
for employees' claims. We verified
that employees' elections of additional life insurance under past providers
are being honored in claim payments with the current provider of life
insurance. The claim payments process appears to generally
function properly and we noted the following areas where we believe
improvements can be made.
·
The County's
life insurance plan was properly bid to obtain competition, however
the Board of County Commissioners did not approve the execution of the
negotiated policy. The Management Team through its Management Action
Plan will present to the Board of County Commissioners the Standard
Life Insurance Group Policy for proper approval. (See Area for Improvement
#1 on page 6.)
·
Standard Life
Insurance Group Policy pays claim benefits based on forms completed
by the Employee Health Benefits Division.
Division employees have not been adequately trained on how to
complete these claims forms and one claim was underpaid by $13,000. This underpayment was corrected during the
audit. It was also noted that
employees have not been adequately informed that life insurance benefits
are paid on their current wages at time of death. One case was noted
where an employee reduced his work schedule prior to his death, which
resulted in a reduction of benefits paid.
The Management Team through its Management Action Plan will provide
training to their employees regarding the accurate completion of the
claim forms, and will issue a bulletin to all employees to clarify life
insurance coverage. (See Area for Improvement
#2 on page 6.)
We appreciate the efforts of Employee
Health Benefits Divisions management in timely addressing the issues
raised during the audit and aggressively seeking solutions to these
matters. We believe through
the implementation of the Management Action Plans included in this report,
controls will be strengthened, improving accountability. We commend
the Employee Health Benefit Division for providing a valuable service
to Manatee County employees.
AUDIT REPORT
AUTHORIZATION:
This audit report has been reviewed and authorized
by:
____________________________________ ___________________________________
Richard
J. Orienti, CIA, CFE
R. B. "Chips"
Shore
Director of Internal Audit
Clerk of the Circuit Court and Comptroller
AREA
FOR IMPROVEMENT #1
Subject: Life Insurance Policy Approval
The County's life insurance plan was properly bid to obtain competition.
An insurance company was selected and the Board of County Commissioners
authorized negotiating with the company by executing an Application
of Insurance on October 6, 1999. The Board of County Commissioners' authorization
for execution of the agreement was required but not obtained after the
life insurance plan was negotiated by Employee Health Benefits management.
It is important that individual Board members be given the opportunity
to review and approve or disapprove final terms and conditions negotiated
for County insurance plans.
Management
Action Plan:
Ψ
The Standard Life Insurance
Group Policy will be presented to the Board of County Commissioners
for the required authorized execution of the agreement June 30, 2000.
AREA
FOR IMPROVEMENT #2
Subject:
Claims processing
The Employee Health Benefits Division is contractually
responsible for completing insurance company claim forms for life insurance
claims filed on behalf of County employees. The Division has not provided adequate training to their employees
on how to complete these claim forms. As a result, auditors discovered an underpayment of $13,000 on one
claim that was subsequently corrected and resubmitted to the insurance
company.
A review of the policy revealed that employee's
benefits are based on the employees' wages, which is based on the employee's
work schedule. It does not appear
that this information has been effectively communicated to employees
who mistakenly believe that benefits are based on their salary as of
a fixed date. While the actual
policy provision results in increased benefits to the majority of the
claims paid, the amount of life insurance coverage is reduced for employees
who reduce their work schedule prior to death.
AREA FOR IMPROVEMENT
#2
.
.
Continued
Management
Action Plan:
Ψ
Management will provide training
to their employees regarding the accurate completion of the Life Insurance
Benefits Application forms by May 31, 2000.
Ψ
The Employee Health Benefits
Division will issue a bulletin to all employees to clarify life insurance
coverage. The bulletin will
be distributed with the new enrollment packages in October 2000.
Ψ
Management has resubmitted
the claim to the Standard Life Insurance Company for the additional
$13,000 claim benefit that was underpaid.
Management will follow-up to ensure the clam is paid.
