For Immediate Release - August 21, 2014

Bump Issues State Audit of Workers’ Compensation System

BOSTON, MA — State Auditor Suzanne M. Bump today released an audit of the Department of Industrial Accidents Workers’ Compensation System which has brought about changes to improve its insurance assessment review processes.

The Department of Industrial Accidents (DIA) administers and oversees the state’s workers’ compensation system. All private-sector employers operating in Massachusetts are required to carry workers’ compensation insurance and pay for workers compensation benefit claims by individuals through a commercial insurance policy, self-insurance, or membership in a self-insurance group.

Today’s audit, which reviewed the period of July 1, 2010 through September 30, 2012, examined fee collections, claims payments, and internal procedures. From this scope, the audit reported that DIA does not ensure that assessment amounts paid by insurance companies are accurate. Companies calculate their own assessments based on DIA’s formula and the agency’s web-based reporting template does not provide sufficient guidance to ensure accurate calculations. Reviews of assessments conducted by private accounting firms typically take place several years after the submission of payment, which can result in unresolved discrepancies for extended periods of time. A sample review by state auditors of past assessments found more than $200,000 in net underpayments.

The audit also found that DIA performs reviews of self-insurers’ personal injury liabilities annually, instead of semi-annually as required by law.

In response to the audit, DIA has taken steps to address the findings, including: hiring two new internal auditors to improve its review of insurance assessments, initiating improvements to the online reporting template and website, and pursuing a statutory amendment to allow for annual review of self-insurers’ personal injury liabilities. DIA believes annual reviews are sufficient, a better use of resources and minimize duplicative and ineffective burdens on businesses.

The Office of the State Auditor conducts technical and performance assessments of state government’s programs, departments, agencies, authorities, contracts, and vendors. With its reports, the OSA issues recommendations to improve accountability, efficiency, and transparency.