ACL Success Story – Insurance – Accident Fund Insurance of America

2011-04-01

Accident Fund Insurance of America

“ACL has greatly enhanced the efficiency, quality, and consistency of our audit process. We can analyze and test entire data populations instead of relying on data sampling. By acquiring deeper levels of technical and business process knowledge, the internal auditor has also become a more valuable commodity to our organization.”

Thomas Mackie, Principal Audit Consultant, Accident Fund Insurance of America

The Michigan-based Accident Fund Insurance Company of America, enjoys enviable market growth, which presents ongoing challenges to maintaining effective controls within an expanding business infrastructure, including those related to vendor management, regulatory compliance, and data quality. For more than ten years, the Internal Audit department has used ACL Audit Analytics software to recover and manage costs, identify potential duplicate payments, and continuously audit business processes. With ACL, Accident Fund has saved hundreds of thousands of dollars, strengthened internal controls, and developed innovative quality assurance programs. The organisation uses ACL solutions to analyse data for both formal audits and special projects involving a wide range of business units, including Claims, Finance, Information Technology, Third-Party Administration, Actuarial, Legal, and Finance.

The Need for Better Data Access and Quality

From an audit perspective, Accident Fund needs reliable data access and analysis capabilities to effectively manage financial and operational risk. Appropriate product pricing and adequate reserve projections are critical to the organisation’s long-term success. High-quality internal data is essential, since customer-facing applications present nearly real-time data that can expose errors and compromise the company’s reputation.

Regulatory compliance (including SOX and emerging data risk regulations) adds additional costs and presents management challenges, as does the company’s high internal growth rate. This rapid growth also can strain the business infrastructure, which must support the integration of new staff positions and tactical project requirements for timely and accurate information.

In addition, ACL solutions play a key role in actively investigating and managing vendor data processing issues, which left unchecked, can present significant risks both to the business and to Accident Fund customers.

Accident Fund looks to Corporate Audit and Advisory Services department (CAAS) to provide business units with the analytic tools and processes to produce the information necessary to take action and improve customer service measurement metrics.

Repeatable Audit Processes

Over the past ten years, CAAS has used ACL software as a key element in more than 45 formal audits and developed a library of over 200 scripts to support repeated audit testing. These scripts analyse data for 29 business functions and produce reports used during formal audits and special projects, as well as satisfying requests from business units and external auditors. In the first six months alone, CAAS assisted the Claims department in saving £141,000 in averted duplicate payments. In the second year, the department recovered more than £152,000 by closing system control gaps to reduce instances of overpayments and other unnecessary costs.

The Accident Fund Claims department continuously audits claims transactions by running a daily batch consisting of nearly 30 ACL analytic tests. Users can adjust detailed parameters to isolate errors and suspicious transactions to identify instances of duplicate payments and other issues. The program takes only minutes to run, with some processes importing and analysing hundreds of thousands of lines of data. The scripts are easily saved, shared, and distributed to other business units.

ACL technology was also instrumental in helping the company resolve a data reconciliation issue between Accident Fund and two of its data processing suppliers. CAAS identified a large dollar variance between the vendors’ claim payments value and the amount identified by internal Accident Fund systems. The company created a special Paid Loss Reconciliation Team, which used ACL to conduct full transaction comparisons between vendor system payment files and internal data warehouse payment files. These reports provided the detailed information necessary to identify and resolve the root causes of the variance.

In early 2005, Accident Fund incorporated the use of ACL software into its Data Quality Program to help ensure that data brought into the enterprise data warehouse meets high quality standards and supports ongoing data monitoring processes. The team develops best practices, defines control standards, and implements tracking systems to uphold the quality of data entering and leaving the enterprise data warehouse – a fundamental requirement to ensure the organisation can have confidence when relying on this central source of business intelligence.

ACL is a vital tool for both company-wide business units and for CAAS , which has delivered greater organisational value through its enhanced technical and business process knowledge.

Accident Fund Insurance Company of America’s CAAS employs ACL technology within its formal audits and special projects to:

• Save money lost through control gaps and errors, including nearly £303,000 in duplicate payments, overpayments, and cost avoidances within the first 18 months of use
• Quickly test full data populations instead of conducting time-consuming and inefficient random sampling procedures
• Provide fast, complete answers to external audit requests and lower both external audit and internal IT costs
• Conduct batch and interactive data analyses in more than 45 formal audits over five years, which identify data abnormalities, processing issues, internal software deficiencies, and vendor data processing errors
• Perform ongoing data monitoring in multiple business units
• Automate and streamline audit testing in nearly 30 company business functions, drawing on a library of more than 200 ACL scripts; this enables staff to save time and rerun common tests instead of requesting new IT programs
• Resolve dollar variance issues and develop cost-effective methods to ensure internal data quality
• Enhance the role of Internal Audit through deeper business and technical process knowledge

Why ACL?

We selected ACL years ago as a result of its ease of use. We continue to use ACL because of the innovation to the product by the Company and its staff. We found that the staff are knowledgeable and make the tool relevant for us as auditors.

Outlook

We continue to increase the use of ACL. In fact, ACL is standard step in very audit we do. Our approach here is integrated auditing; therefore, we need a reliable tool to do this. In addition, we have deployed ACL to the business units for continuous monitoring of key transactions and data elements.