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Audit Uncovers Serious Problems at California’s Workers’ Comp Fund

December 13, 2007
A “top-down” audit of California’s State Compensation Insurance Fund released Tuesday, December 11, reveals “serious structural and operational issues,” including hundreds of millions of dollars spent on vendors without adequate controls.

Among other problems, SCIF, California’s largest workers’ compensation insurer, paid $19.5 million in penalties from January to July because of late payments for medical and indemnity bills, according to the audit released by California Insurance Commissioner Steve Poizner.

SCIF has also spent $321 million on 200 information technology vendors since 2004 without adequate internal controls or even background checks on the legitimacy of the consultants, the audit found.

One vendor working for SCIF as an insurance lobbyist was convicted of a felony in 2003. In addition, SCIF’s business practices allowed additional payments to vendors that were outside an approved budgetary process, the audit found.

SCIF also owns more than 2,000 vehicles and has 8,000 employees. Despite significant acquisition and maintenance costs, SCIF has not performed an audit of fleet management since 2003.

But the insurance commissioner indicated that SCIF has been aware of the problems and he expects the insurer will continue to make necessary reforms.

Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.