Audit finds 31 issues at insurance office
Superintendent of Insurance welcomes review of operations
Thirty-one findings or problem areas have been identified relating to “all aspects” of the financial operation of the Office of the Superintendent of Insurance, according to a summary released Wednesday from the Office of the State Auditor.
State Superintendent of Insurance John Franchini, who last year asked state Auditor Tim Keller for the “down deep audit into our department,” said Wednesday the findings, in effect, were welcome.
He said he and Keller have been discussing those findings for the past month.
The OSI is a relatively new office and the software system being used had been in place for 17 years, Franchini said, noting that in 2013 his office replaced what
had been the insurance division of the state Public Regulation Commission.
“We never felt comfortable with the IDEAL software because it was old, was always being repaired and it required us to bring in technicians from the outside,” he said. Particularly problematic was that the software failed to “total and balance correctly,” he added.
“We are now in the process of converting to a very modern system, so I thought this was the time to get the state auditor involved to find out all the things we needed to update and correct,” he said.
While the OSI paid $30,000 for the additional audit work, the new software, which cost $8.8 million to develop, is being shared free of charge by the National Association of Insurance Commissioners, of which the OSI is a member.
Keller, in his statement, said the audit highlights areas where “safeguards of public funds are not adequate or existing rules aren’t being enforced.” These critical areas concern the collection and administration of hundreds of millions of tax dollars each year.
“They need to be addressed for the financial health of our state. We appreciate management’s request for additional audit work this year and hope the findings will help them right the ship,” he said.
Specifically, the audit raised concerns that:
The Patient Compensation Fund, which collects money for medical malpractice claims had a deficit at the end of fiscal year 2016 of $35 million. According to Franchini, this was caused by having to pay out a number of large malpractice claims over the last several years.
OSI had “no cash controls, and checks coming in the door were not logged or receipted,” affecting more than $300 million in deposits for the fiscal year.
OSI did not have controls in place to safeguard assets and prevent or detect fraud or errors in payroll, expense reimbursements, vehicle usage, procurement, trust deposits records and work-from-home policies.
“I wanted this audit,” Franchini said. “It’s a good thing. We’ll learn from it and have a better agency.”