State Compensation Mutual Insurance Fund financial-compliance audit for the fiscal year ended ...

50 Pages·1992·0.98 MB·English

by  Montana. Legislature. Office of the Legislative Auditor

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368.41
L72SCM
1992
V/lllCC of the Legislative Auditor
State of Montana
Report to the Legislature
Financial-Compliance Audit
January 1993
For the Fiscal Year Ended June 30, 1992
State Compensation Mutual
Insurance Fund
This report contains six recommendations. Major issues
addressed in the report include:
Increasing audits of employer payroll.
* Implementing managed care.
> Financing past claims liabilities.
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MONTANA STATE LIBRARy
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Direct comments/inquiries to:
Office of the Legislative Auditor
Room
135, State Capitol
92-30 Helena, Montana 59620
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MontanaStaleLibrary
3 0864 1003 7261 7
FINANCIAL-COMPLIANCE AUDITS
Financial-compliance audits are conducted by the Office ofthe Legislative Auditor to deter-
mine ifan agency'sfinancial operationsare properlyconducted, the financial reportsare pre-
sented fairly, and the agency has complied with applicable laws and regulations which could
have asignificant financial impact. In performing the audit work, the audit staffuses stand-
ards set forthby theAmerican InstituteofCertified Public Accountants andthe UnitedStates
General Accounting Office. Financial-compliance auditstaffmembers hold degrees with an
emphasis in accounting. Most staff members hold Certified Public Accountant (CPA)
certificates.
The Single Audit Act of 1984 and OMB Circular A-128 require the auditor to issue certain
financial, internal control, and compliance reports regarding the state's federal financial
assistance programs, including all findings of noncompliance and questioned costs. This
individual agency audit report is not intended to comply with the Single Audit Act of 1984
or OMB Circular A-128 and is therefore not intended for distribution to federal grantor
agencies. The Office of the Legislative Auditor issues a statewide biennial Single Audit
Reportwhichcomplies withthe reportingrequirements listedabove. TheSingleAuditReport
for the two fiscal years ended June 30, 1991 has been issued. Copies of the Single Audit
Report can be obtained by contacting:
Office of the Legislative Auditor
Room 135, State Capitol
MT
Helena, 59620
MEMBERS OF THE LEGISLATIVE AUDIT COMMITTEE
Senator Greg Jergeson, Chairman RepresentativeJohnCobb, ViceChairman
Senator Eve Franklin Representative Larry Grinde
Senator Lorents Grosfield Representative Mike Kadas
Senator Tom Keating Representative Robert Pavlovich
STATE OF MONTANA
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STATE CAPITOL
HELENA, MONTANA 59620
406/444-3122
DEPUTY LEGISLATIVEAUDITORS:
MARYBRYSON
Operationsand EDPAudit
LEGISLATIVEAUDITOR: JAMESGILLETT
SCOTTA.SEACAT Financial-ComplianceAudit
LEGALCOUNSEL: JIM PELLEGRINI
JOHNW. NORTHEY January 1993 PerformanceAudit
To the Legislative Audit Committee
of the Montana State Legislature:
This is our financial-compliance audit report on the State Compensation
Mutual Insurance Fund, Department of Administration, for fiscal year 1991-92.
We performed this annual audit of the state fund in compliance with section 39-
71-2361, MCA. The report contains recommendations concerning state fund
operations and compliance with state laws and policies.
The written responses to audit recommendations are included at the end of
the audit report. We thank the state fund president and his staff for their coopera-
tion and assistance throughout the audit.
Respectfully submitted
Scott A. Seacat
Legislative Auditor
Digitized by the Internet Archive
in 2011 with funding from
IVIontana State Library
http://www.archive.org/details/statecompensatio1992mont
Office of the Legislative Auditor
Financial-Compliance Audit
For the Fiscal Year Ended June 30, 1992
State Compensation Mutual
Insurance Fund
Members of the audit staff involved in this audit were: Mark C. Barry,
John Fine, Glenn Jorgenson, D.J. Kimball, and Lorry Parriman.

Table of Contents
List of Tables ii
Appointed and Administrative Officials iii
Summary of Recommendations v
Introduction Introduction 1
Actuarial Soundness 2
Financing Past Claims Liability 3
Prior Audit Prior Audit Recommendations 5
Recommendations
Findings and Employer Payroll Report Reviews 6
Recommendations
Managed Care 7
Benefits and Wage Loss 9
Accounting Issues 11
Recording Revenue 11
Expenditure Accruals 12
Electronic Data Processing Disaster Recovery 12
Disclosure Issue Administrative Cost Allocation 14
Independent Auditor's Summary of Independent Auditor's Report A-2
&
Report Agency
Financial Statements Independent Auditor's Report A-3
Balance Sheet as of June 30, 1992 A-4
Statement of Revenues, Expenses, and
Changes in Retained Earnings for the
Fiscal Year Ended June 30, 1992 A-5
Statement of Cash Flows for the
Fiscal Year Ended June 30, 1992 A-6
Notes to the Financial Statements A-9
Agen<7 Response State Compensation Mutual Insurance Fund B-3
Page
i
List of Tables
Table 1 Premium Revenue Increase 3
Table 2 Projected Claims Costs for Fiscal Year
1990-91 Accidents (in thousands) 8
Page
ii
Appointed and Administrative Officials
State Compensation Board Members Term
Mutual Insurance Fund
Board ofDirectors and James T. Harrison, Chairman Helena April 1993
Executive Officers Les Hirsch Miles City April 1995
Robert Holman Kalispell April 1995
Robert S. Short Great Falls April 1993
Clyde B. Smith Kalispell April 1993
Patrick Sweeney, President
James Murphy, Executive Vice President
John King, Vice President, Underwriting Department
Don MacMillan, Vice President, Benefits Department
Carla Smith, Vice President, Administrative and Finance
Department
Nancy Butler, General Counsel
Page
iii
Page iv