(Springfield, IL) – April 9, 2011. Illinois’ battered and much maligned workers compensation system took another hit in a new audit released this week by the state auditor general, revealing workers comp liabilities last year were off by $63 million due to “significant errors” in miscalculations and liability underestimates.
“The Department’s year-end financial reporting in accordance with generally accepted accounting principles to the Office of the State Comptroller contained significant errors in the determination of certain year-end account balances …,” wrote Illinois Auditor General Bill Holland.
In a new audit released on April 7 by Holland, state auditors discovered that the Illinois Department of Central Management Services, which oversees the workers comp system, underestimated fiscal year 2010 liabilities by $41,074 million, $33.363 million in the General Revenue Fund and $8.341 million in the state Road Fund.
“During the auditor’s testing of the workers’ compensation liability, the auditors noted the Department did not have a formal evaluation or estimation process for claims (injuries having occurred prior to year-end) which were pending or were considered to be in the process of being awarded,” wrote Holland.
At June 30, 2010 CMS reported a total of 226 unsettled claims which are likely to result in an award.
Holland offered CMS a fairly simple solution to get its estimates under control.
“If the Department determines it is probable that a liability has occurred and an amount can be reasonably estimated, such amount should be accrued as of the financial statement date,” Holland wrote.
In addition to the $41 million liability underestimates, auditors also discovered a $22 million “calculation” errors. The CMS error underestimated the General Revenue Fund liability by $17.790 million and the Road Fund by $4.447 million.
You get the impression that CMS is managing the money on the back of a cocktail napkin.