by Benjamin Yount
State auditors are once again criticizing Wisconsin’s Office of the Commissioner of Insurance for millions of dollars in accounting mistakes in the state’s fund for medical malpractice claims.
The Legislative Audit Bureau on Tuesday released a report into the Injured Patients and Families Compensation Fund for the past three years. The audit found several, repeated accounting mistakes that overstated or understated the fund’s finances, including a $60.9 million mistake for the last two years.
“For FY 2019-20, the Amount Representing Interest was overstated by $60.9 million, which resulted in Total Loss Liabilities being understated, and Net Position – Restricted for Injured Patients and Families being overstated by $60.9 million on the Statement of Net Position,” the auditors wrote. “For FY 2020-21, the Change in Amount Representing Interest was overstated by $60.9 million, which resulted in Total Underwriting Expenses being overstated on the Statement of Revenues, Expenses, and Changes in Net Position. And FY 2020-21, the Increase (Decrease) in Loss Liabilities was overstated by $60.9 million on the Statement of Cash Flows.”
This is not the first time that LAB has criticized the Fund’s accounting.
Auditors found similar over-and understatements as well as other accounting mistakes in their reports from 2018-2019 as well.
The Office of the Commissioner of Insurance blamed the $60.9 million in mistakes on a transcription error.
“The error identified by LAB was a transcription error in the actuarial report dated February 10, 2020, and was not detected primarily because the current review process does not require comparisons between years,” OCI responded.
But auditors said a “transcription error” doesn’t account for the breadth and scope of the mistakes they found.
“The error involved more than a transcription error. Fund staff used this incorrect discount factor from the actuarial report and a material misstatement resulted. The material misstatement was corrected after we brought the concern we identified in the actuarial report to the attention of management,” auditors responded.
Sen. Robert Cowles, R-Green Bay, said lawmakers intend to fix the problems at the Office of the Commissioner of Insurance.
“These were not small misstatements reported in the Fund’s financial statements. Accurate financial statements are the basis for competent government decisions. The effect of these errors resulted in the Fund overstating its loss liabilities by $60.9 million on the statement of cash flows in FYs 20 and 21,” Cowles explained. “Further follow-up in fall will better assess the agency’s plan to avoid these problems in the future.”
The audit shows that Wisconsin’s Injured Patients and Families Compensation Fund was worth $1.3 billion as of June 30, 2021. The Fund has paid $944.8 million for 684 claims from its inception in 1975 until June of last year.
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Benjamin Yount is a contributor to The Center Square.
