A new report from Connecticut state auditors said the state’s Workers’ Compensation Commission (WCC) improperly charged $450,000 to workers’ comp insurers and self-insured employers last fiscal year to recoup the money transferred to the state’s general fund.
The report was published Tuesday by Connecticut’s Office of the Auditors of Public Accounts.
In 2012, Connecticut’s General Assembly approved Section 17 of Public Act 12-1, which allowed the transfer of $450,000 from the Workers’ Compensation Administration Fund to the state’s general fund for the fiscal year ending in June 2013. Subsequently, WCC built a $450,000 charge into its annual assessment against insurers in order to recoup the money that was transferred to the state’s general fund.
Because of this additional amount, insurers last year appear to have been assessed “at a slightly higher rate” than the amount considered to be sufficient to meet WCC’s budgeted operating expenses, the report said. The rate did not exceed the statutory four percent maximum.
WCC’s operating expenses are financed by annual assessments made against workers’ comp insurers and self-insured employers in the state. WCC calculates the annual assessment based on information such as the prior year’s fund balance and expenditure amounts, the current year’s approved budget and the total paid losses of insurers.
WCC’s decision to add $450,000 to last year’s assessment did not have “express legislative authority,” according to the report.
However, the report also noted that WCC sought guidance from the state’s Office of Policy and Management, which approved including the amount in the assessment.
“Our review of the commission’s annual assessment calculation for the 2013-2014 fiscal year disclosed that the commission included the $450,000 transferred from the Workers’ Compensation Fund to the General Fund,” the auditors’ report stated. “However, a fund balance transfer of that nature would not normally be regarded as a direct or indirect operating expense of WCC.”
The report recommended that WCC “should not include funds transferred out of the Workers’ Compensation Administration Fund as operating expenses when calculating the annual assessment rate without clear legislative authority to recoup such amounts and should strengthen internal controls over the calculation.”
However, WCC said it respectfully disagrees with the auditors’ findings. “In order for the Workers’ Compensation Commission to fulfill our fiduciary responsibility and account for all funds received and disbursed from the Workers’ Compensation Administration Fund and to ensure that there will be sufficient funds to meet the cash flow needs of the agency for the first six months of the year, the $450,000 transfer was included in the assessment calculation,” WCC said in its written response to the Office of the Auditors of Public Accounts.
WCC said the Workers’ Compensation Administration Fund has no corresponding receivable for the $450,000 and there is no expectation that this money will be returned to the fund.
“Unspent budgeted funds from the current year are returned to the Workers’ Compensation Administration Fund and any amount that is in excess of one half of the year’s expenditures will be applied as a credit toward next year’s assessment,” WCC said.
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