Fla. Auditor General Issues Operational Audit on Fla. Birth-Related Neurological Injury Compensation Association
Here are excerpts:
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SUMMARY
This operational audit of the
Finding 1: NICA did not timely provide its actuarial consultant the
Finding 2: NICA's exclusion of the Interim Executive Director's compensation from NICA's
Finding 3: Analysis of Plan participant survey responses indicated that, while improvements to participant satisfaction were noted from our prior audit survey, NICA could enhance the Benefit Handbook to better specify allowable benefits and better respond to participant complaints.
Information Technology Controls
Finding 4: NICA controls over mobile device text messaging and Apple (R) device iMessages (R) and the retention of text and iMessages in accordance with State law and the State records retention schedule need improvement. A similar finding was noted in our report No. 2022-009.
Finding 5: NICA controls for timely disabling user access privileges to the NICA network domain and the Claims Accounting and Reserves Electronic System (CARES) upon an employee's separation from NICA employment need improvement.
Finding 6: As similarly noted in our report No. 2022-009, certain security controls related to network domain, virtual private network, and CARES user authentication need improvement to ensure the confidentiality, integrity, and availability of NICA data and information technology resources.
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BACKGROUND
State law/1 establishes the Florida Birth-Related Neurological Injury Compensation Plan (Plan) to provide compensation, irrespective of fault, for neurological injury claims related to births occurring on or after
The Plan is governed by a seven-member Board of Directors (Board) appointed by the State's Chief Financial Officer and referred to as the
* Participating physicians.
* Hospitals.
* Casualty insurers.
* Physicians other than participating physicians.
* Parents or legal guardian representatives of injured infants under the Plan.
* Advocacy organizations for children with disabilities.
* The general public.
NICA is not considered a State agency, board, or commission.
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FINDINGS AND RECOMMENDATIONS
PLAN ADMINISTRATION
State law/4 specifies that an administrative law judge (ALJ) with the
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1/ Section 766.303(1), Florida Statutes.
2/ Section 766.302(2), Florida Statutes.
3/ Section 766.315, Florida Statutes.
4/ Section 766.304, Florida Statutes.
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Table 1: Additional Statutorily Authorized Compensation for NICA Participants
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Compensation is not to be provided for expenses related to items or services that the infant has received or is entitled to receive, or expenses for which the infant has received reimbursement, or for which the infant is contractually entitled to receive reimbursement, from any prepaid health plan, health maintenance organization, or other private insuring entity. In addition, compensation is not to be provided for expenses for items or services that the infant has received, or is entitled to receive, or expenses for which the infant has received reimbursement, or for which the infant is entitled to receive reimbursement, under the laws of any state or the Federal Government, except to the extent such exclusion may be prohibited by Federal law./5 According to NICA records, during the period
NICA created a Web-based system, the Claims Accounting and Reserves Electronic System (CARES), to track participant activity, such as ALJ orders, participant contact information, and claims for reimbursement. In addition, NICA utilizes CARES to aggregate participant cost estimates used to produce statutorily required reports.
Finding 1: Claims Estimates and New Claims Threshold Calculation
State law/6 requires NICA to estimate the present value of the total cost of each claim within 60 days after a claim is filed and to revise such estimates quarterly based upon the actual costs incurred and any additional information that becomes available to NICA since the last estimate. If the total of all current
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5/ Section 766.31(b), Florida Statutes.
6/ Section 766.314(9), Florida Statutes.
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estimates, excluding the award of family residential or custodial care,/7 exceeds 80 percent of the funds on hand and the funds that will become available to NICA within the next 12 months (threshold calculation), NICA may not accept any new claims without express authority from the Legislature./8 Additionally, NICA is to notify the Governor, the Speaker of the
To determine whether the total of all current estimates do not exceed 80 percent of funds on hand and funds that will become available,/9 NICA prepares and provides updated quarterly claims cost estimates to an actuarial consultant. To estimate the present value of all filed claims, the actuarial consultant calculates the present value loss and loss adjustment expense (LAE) reserve/10 on filed claims amounts (reserve calculation). The threshold for the suspension of new claims is then determined by comparing 80 percent of total funds on hand and available to the calculated reserve. As NICA had not established a time frame for preparing and submitting quarterly claims cost estimates to the actuarial consultant, we used 30 days from the end of the quarter to provide the actuary sufficient time to make reserve calculations within 3 months of each quarter end.
We inquired of NICA management and reviewed documentation related to NICA's preparation and submission of quarterly claims cost estimates to the actuarial consultant for the period
Our audit also found that, while NICA excluded family residential and custodial care expenses from the reserve calculation in accordance with State law, State law does not appear to provide for family residential and custodial care expenses to not be reimbursed if the new claims threshold is exceeded. Consequently, the basis for excluding such expenses from the reserve calculation is unclear. To assess the potential impact family residential and custodial care expenses would have on NICA's threshold and
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7/ Section 766.302(10), Florida Statutes, defines family residential or custodial care as care normally rendered by trained professional attendants which is beyond the scope of childcare duties, but which is provided by family members. Such care is performed only at the direction and control of a physician when such care is medically necessary, and the award of such care is to be excluded from the present value estimates calculation.
8/ Section 766.314(9)(c), Florida Statutes, provides that NICA may accept any claim if the injury occurred 18 months or more before the effective date of the new claim's suspension.
9/ NICA's funds that will become available include assessments against health care providers and insurance companies, transfers from the
10/ NICA's reserves represent an estimate of the expected lifetime cost of benefits to all children born through a given point in time. The reserves reflect future inflation and include loss reserves, allocated LAE, and unallocated LAE, discounted to present value.
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reserve calculations, we reviewed the actuarial consultant's reserve calculation for the quarter ended
The timely completion of quarterly threshold and reserve calculations are essential to provide assurance that NICA has sufficient funds to pay participants and can accept new claims in accordance with State law. Additionally, consideration of all reimbursable NICA expenses in determining the new claims threshold would provide a more accurate view of the funds available for new claims.
Recommendation: We recommend that NICA management ensure that claims cost estimates are provided to the actuarial consultant within 30 days of each quarter end to allow for the completion of threshold and reserve calculations within 3 months of the quarter end. Additionally, we recommend that the Legislature consider the potential impact of family and residential care expenses on NICA's ability to pay future claims and whether the exclusion of such expenses from the threshold and reserves calculations remains appropriate.
Finding 2: Annual Reports
State law/11 requires NICA to submit on or before
As part of our audit, we reviewed the
In response to our audit inquiry, NICA management indicated that the Interim Executive Director was an independent contractor and not an employee of NICA, similar to expert witnesses and the NICA Medical Director and Investment Consultant. NICA management further indicated that, applying the plain language of the statute, NICA determined that payment to an independent contractor did not fall within the statutory reporting requirements and disclosed as much in the annual report. NICA management contended, had the Legislature intended all payments to its independent contractors be disclosed, it would have stated as much in the law.
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11/ Sections 766.315(7)(b) and 766.315(8)(f), Florida Statutes.
12/ The
13/ Pursuant to the agreement between the Interim Executive Director and NICA, effective
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While we acknowledge the Interim Executive Director's independent contractor status, the Interim Executive Director's agreement specified that she was to perform all such duties which are customarily performed by one holding such positions in other, same, or similar businesses or enterprises as that engaged by NICA to be performed. The agreement further detailed the specific services to be performed, which included, but were not limited to, direction and operation of NICA, organizational review of NICA and its relationship to the families served, its personnel, and its financial position, and other responsibilities as required by the Board of Directors. While it is clear that the Legislature did not intend for independent contractors performing part-time or as-needed work to be included in the annual reporting requirements, it is not clear that the Legislature intended independent contractors performing full-time equivalent responsibilities in NICA's executive leadership to be excluded from annual reporting requirements. It is also clear that the Legislature intended to promote greater transparency and accountability by requiring the reporting of NICA employee compensation and the exclusion of the Executive Director's compensation, based on the nature of the employment arrangement, frustrates that intention.
Recommendation: To further transparency and accountability, we recommend that NICA include in all annual reports information regarding the compensation paid to each NICA employee and all independent contractors performing full-time equivalent responsibilities in NICA's executive leadership.
Finding 3:
To measure the degree of Plan participant satisfaction, in
As summarized in Table 2, we received survey responses from 98 respondents and our analysis of those responses, as well as comparison to the
* While respondents believed that the Handbook was improved, some still noted that the wording was vague in areas related to allowable benefits.
* Respondents' satisfaction with the adequacy of NICA's explanation for the decision to approve or deny participant exception requests increased 18 percent.
* Respondents did not always believe NICA timely and appropriately responded to complaints.
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14/ The Handbook outlines participant rights, allowable expenses, benefit information, and procedures for filing reimbursement claims and benefit disputes.
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Table 2:
Table 3:
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Recommendation: We recommend that NICA management continue efforts to provide quality services to participants, including responses to participant complaints and clear information in the Handbook regarding participant benefits.
INFORMATION TECHNOLOGY CONTROLS
As part of our audit, we evaluated selected NICA information technology (IT) controls, including controls related to mobile devices,15 user access privileges, and user authentication.
Finding 4: Text and Instant Message Controls
State law/16 requires agencies/17 to maintain public records in accordance with the records retention schedule/18 established by the
According to NICA records, as of
Effective controls for enforcing prohibitions on text messaging and iMessage use on NICA Apple devices would help ensure that NICA Apple devices are used in accordance with management's expectations. Absent such controls, or a method to adequately retain text and iMessages, such messages may be sent or received and not be retained in accordance with State law, diminishing transparency and NICA's ability to provide access to public records. A similar finding was noted in our report No. 2022-009 (Finding 6).
Recommendation: We recommend that NICA management enhance mobile device controls to ensure that text and iMessage use is effectively limited or disabled in accordance with established
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15/ Mobile devices are portable devices, such as laptop computers, smartphones, and tablets, that allow storage and transmittal of entity data.
16/ Section 119.021(2)(b), Florida Statutes.
17/ Section 119.011(2), Florida Statues, defines an agency as any state, county, district, authority, or municipal officer, department, division, board, bureau, commission, or other separate unit of government created or established by law.
18/
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policy and text and iMessages sent or received are retained in accordance with State law and the records retention schedule.
Finding 5: NICA IT Access Controls
As part of our audit, we inquired of NICA management, evaluated NICA network domain and CARES access privilege controls, and reviewed NICA records for the six employees with network domain and CARES access privileges who separated from NICA employment during the period
* NICA had not established a formal process for disabling network domain and CARES user access privileges prior to employees' separation dates. Instead, according to NICA management, NICA management used e-mails to communicate network domain user access privilege disablement requests to the contracted Network Administrator for handling and either verbally or via e-mail requested the contracted Network Administrator or NICA System Administrator to disable CARES user access privileges. The absence of a formal process may have contributed to the untimely disablement of user access privileges noted on audit.
* Network domain user access privileges for five of the former employees were disabled 9 to 433 days (an average of 160 days) after the employees' separation dates.
* CARES user access privileges for five of the former employees were disabled 4 to 217 days (an average of 58 days) after the employees' separation dates.
According to NICA management, requests to disable user network domain and CARES access privileges were not timely made due to oversight.
The prompt disabling of network domain and CARES access privileges upon an employee's separation from NICA employment reduces the risk that the access privileges may be misused by the former employee or others.
Recommendation: We recommend that NICA management ensure that network domain and CARES access privileges are promptly disabled after a user separates from NICA employment.
Finding 6: Security Controls - User Authentication
Security controls are intended to protect the confidentiality, integrity, and availability of data and IT resources. Our audit procedures disclosed that certain security controls related to network domain, NICA virtual private network (VPN), and CARES user authentication need improvement. We are not
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19/ Title 45, Section 164.308, Code of Federal Regulations.
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disclosing the specific details of the issues in this report to avoid the possibility of compromising NICA data and related IT resources. However, we have notified appropriate NICA management of the specific issues.
Without appropriate security controls related to network domain, VPN, and CARES user authentication, the risk is increased that the confidentiality, integrity, and availability of NICA data and related IT resources may be compromised. A similar finding related to CARES user authentication was communicated to NICA management in connection with our report No. 2022-009.
Recommendation: We recommend that NICA management improve certain security controls related to network domain, VPN, and CARES user authentication to ensure the confidentiality, integrity, and availability of NICA data and related IT resources.
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PRIOR AUDIT FOLLOW-UP
Except as discussed in the preceding paragraphs, NICA had taken corrective actions for the findings included in our report No. 2022-009.
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OBJECTIVES,
The Auditor General conducts operational audits of governmental entities to provide the Legislature,
We conducted this operational audit from
This operational audit of the
* Evaluate management's performance in establishing and maintaining internal controls, including controls designed to prevent and detect fraud, waste, and abuse, and in administering responsibilities in accordance with applicable laws, administrative rules, contracts, grant agreements, and other guidelines.
* Examine internal controls designed and placed into operation to promote and encourage the achievement of management's control objectives in the categories of compliance, economic and efficient operations, the reliability of records and reports, and the safeguarding of assets, and identify weaknesses in those internal controls.
* Determine whether management had corrected, or was in the process of correcting, all deficiencies disclosed in our report No. 2022-009.
* Identify statutory and fiscal changes that may be recommended to the Legislature pursuant to Section 11.45(7)(h), Florida Statutes.
This audit was designed to identify, for those programs, activities, or functions included within the scope of the audit, deficiencies in internal controls significant to our audit objectives; instances of noncompliance with applicable governing laws, rules, or contracts; and instances of inefficient or ineffective operational policies, procedures, or practices. The focus of this audit was to identify problems so that they may be corrected in such a way as to improve government accountability and efficiency and the stewardship of management. Professional judgment has been used in determining significance and audit risk and in selecting the particular transactions, legal compliance matters, records, and controls considered.
As described in more detail below, for those programs, activities, and functions included within the scope of our audit, our audit work included, but was not limited to, communicating to management and those charged with governance the scope, objectives, timing, overall methodology, and reporting of our audit; obtaining an understanding of the program, activity, or function; identifying and evaluating internal controls significant to our audit objectives; exercising professional judgment in considering significance and audit risk in the design and execution of the research, interviews, tests, analyses, and other procedures included in the audit methodology; obtaining reasonable assurance of the overall sufficiency and appropriateness of the evidence gathered in support of our audit's findings and conclusions; and reporting on the results of the audit as required by governing laws and auditing standards.
Our audit included the selection and examination of transactions and records. Unless otherwise indicated in this report, these transactions and records were not selected with the intent of statistically projecting the results, although we have presented for perspective, where practicable, information concerning relevant population value or size and quantifications relative to the items selected for examination.
An audit by its nature does not include a review of all records and actions of agency management, staff, and vendors, and as a consequence, cannot be relied upon to identify all instances of noncompliance, fraud, waste, abuse, or inefficiency.
In conducting our audit, we:
* Reviewed applicable laws and NICA policies and procedures and interviewed NICA personnel to obtain an understanding of NICA Plan processes and related responsibilities.
* Interviewed NICA management and compared the NICA Benefit Handbook (Handbook) to applicable laws to determine whether the Handbook was designed in a manner that effectively assisted participants when filing claims for reimbursement, informed participants of their rights, and assisted NICA case managers when reviewing participant claims for reimbursement.
* To measure NICA Plan participant satisfaction, sent surveys to the 314 individuals listed as contacts for the 236 participants active in the Plan as of
* From the population of 48 claimant petitions filed with a
* From the population of 12 NICA participant compensation awards executed during the period
* Interviewed NICA management and inspected NICA records for the present value of total claims costs for the quarters ended
* Compared NICA's estimated present value of the total cost of claims for the quarters ended
* From the population of 16,124 participant reimbursement claims paid during the period
* Examined NICA records for the 15 selected participant reimbursement claims to determine whether any potential conflicts of interest between NICA personnel or the NICA Board of Directors (Board) and the participant or contracted service and equipment providers requesting reimbursement were properly disclosed.
* Reviewed NICA correspondence logs for the 15 participants associated with the selected reimbursement claims to determine whether NICA provided accurate information to the participants and did not indicate that statutorily allowable goods or services submitted for reimbursement would be denied.
* Examined NICA records for the 8 survey respondents who indicated that their claims had been denied by NICA and for 11 denied reimbursement claims totaling
* To determine whether NICA established adequate controls to ensure the timely collection and remittance of assessment fees to the Plan and appropriately charged interest for late or unpaid assessment fees, we:
* Analyzed data for the
* Analyzed data for the
* Analyzed data for the
* Interviewed NICA management, inspected NICA participant records, and reviewed DOAH case summaries for the 78 NICA cases with orders issued during the period
* From the population of 1,134 general and administrative expenses, totaling
* Interviewed NICA management and examined NICA records related to NICA's text and instant message and iMessage retention capabilities to determine whether NICA had established adequate controls to retain text and instant messages and iMessages in accordance with State law.
* Obtained an understanding of NICA network domain, virtual private network, and Claims Accounting and Reserves Electronic System information technology (IT) controls, assessed the risks related to those controls, evaluated whether selected general IT controls were in place, and tested the effectiveness of the selected controls.
* Interviewed NICA management and reviewed NICA Board meeting records for meetings held during the period
* From the population of 226 compensable active and 211 compensable deceased participants in the Plan prior to
* Reviewed the
* Inspected documents and records to determine whether NICA provided sufficient information to each parent and legal guardian regarding compensable expenses in accordance with Section 766.315(6), Florida Statutes.
* Communicated on an interim basis with applicable officials to ensure the timely resolution of issues involving controls and noncompliance.
* Performed various other auditing procedures, including analytical procedures, as necessary, to accomplish the objectives of the audit.
* Prepared and submitted for management response the findings and recommendations that are included in this report and which describe the matters requiring corrective actions. Management's response is included in this report under the heading MANAGEMENT'S RESPONSE.
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AUTHORITY
Section 11.45, Florida Statutes, requires that the Auditor General conduct an operational audit of the
Auditor General
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The report is posted at https://flauditor.gov/pages/pdf_files/2024-037.pdf.
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