A settlement with an uninsured employer following an injury that left a worker paralyzed may have cost the state nearly $900,000.
That allegation is just one of several issues raised by a state Auditor’s report of the state Treasurer’s office.
The report issued on May 30 for the fiscal year 2005 made nine recommendations, four of which were aimed at the Second Injury Fund.
The fund is a state-sponsored pool of money that pays workers compensation claims when a company is unable to do so. The state, however, is obligated to take every reasonable measure to recover payouts from employers.
In its review of those payments, the auditor’s faulted a $70,000 settlement with Nau Excavating, located in Stamford. The claim actually cost the state $934,475.
The case involved an uninsured employer who employed “an illegal alien from Guatemala” whose injury on the job resulted in paraplegia.
The Workers’ Compensation Commissioner approved the settlement after Second Injury Fund officials, overseen by the state Treasurer, had actively negotiated it. But the state auditors objected that the Treasurer’s office has no authority to negotiate settlements, and shouldn’t have been trying to do so. Instead, the Treasurer’s office should simply have sued to collect as much as possible.
Diane Weaver Dunne, director of communications for the Treasurer’s office, said the auditor’s report and the Treasurer’s office were “in dispute” over the findings.
Treasurer Denise Nappier said that the Workers’ Compensation Commissioner “directed the Second Injury Fund to informally discuss the collection of funds from the uninsured employer” and “to conduct an exploratory discussion.”
“The Treasurer’s office works with the Workers’ Compensation Commissioner to get the best business settlement for the state,” said Nappier. “Ultimately, approval of the settlement rests with the Workers’ Compensation Commissioner.”
Yet the auditors argue that the “statement that the Fund did not negotiate the terms of this agreement with the uninsured employer is not accurate.”
“We know that the employer offered $35,000, which was refused, and the settlement was made at $70,000,” said Robert Jaekle, one of the auditors. “I don’t know how you get from $35,000 to $70,000 without some discussions being had.”
“Clearly the statutes authorize the state the ability to legally recover payments but it does not provide an ability to negotiate a settlement,” said Jaekle. “Obviously this is an ongoing concern.”
Other Issues
The auditors also warned that the Second Injury Fund needs better financial controls. They cited a case in which an injured worker was overpaid by $2,069. They recommended the Treasurer “improve controls” over the processing of settlements to avoid late payment penalties. The Second Injury Fund was penalized $10,796 as a result of two late claim payments in the fiscal year 2005.
But it was not just the Second Injury Fund that was dinged for poor cash oversight. Other areas of the Treasurer’s office were also found lacking.
For example, two of the recommendations were aimed at the Cash Management Division for its inability to cancel checks or reconcile state cash accounts in a “timely manner.”
In particular, 48 checks issued by the Treasurer’s Unclaimed Property Division, totaling $104,344, were canceled by the Comptroller’s Accounts Payable Division. But the 48 checks were already cashed. The auditors recommended that the “most efficient manner of check verification” should be employed as well as establishing “internal control procedures for check cancellation.”
The final recommendation from the report was for the treasurer’s office to “improve contract management procedures” and “not agree” to pay vendors until a contract is in place.
That recommendation was made because the Treasurer continued to pay an investment management firm, even after that firm’s contract had expired.
Though no longer a vendor for the state by June 2005, the company received roughly $143,000 in fees that it wasn’t entitled to, because its investments didn’t provide the minimum rate of return demanded of such advisers. The company asserted it was no longer bound by that minimum because it wasn’t operating under a signed agreement.
The Treasurer’s office said it has since solicited the assistance of the Office of the Attorney General, and that the policy now is to have all vendors under a written contract.
