Cal. Code Regs. tit. 8, § 10107 – Notice of Audit; Claim File Selection; Production of Claim Files; Auditing Procedure.

(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. (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
  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. (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:
  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;
  2. (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;
  3. (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.
  Population
  Sample Size
  5 or
  less all
  6-10
  1 less than total
  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):
(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
6 or less
all
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 claim files selected for audit available at the audit site at the time of audit commencement. If claim files are maintained in an electronic or other non-paper storage medium, the claims administrator shall, upon request, provide to the Audit Unit direct computer access to electronic claim files and/or 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.

Note: Authority cited: Sections 59, 129.5, 133 and 5307.3, Labor Code. Reference: Sections 11180, 11180.5, 11181 and 11182, Government Code; and Sections 111, 124, 129, 129.5, 3751 and 3752, Labor Code.

History

1. Repealer and new section filed 1-28-94; operative 1-28-94. Submitted to OAL for printing only pursuant to Government Code section 11351 (Register 94, No. 4). For prior history, see Register 90, No. 4.

2. New subsections (c)-(e), subsection relettering, amendment of newly designated subsection (g) and amendment of Note filed 10-26-98; operative 11-25-98 (Register 98, No. 44).