Auditor seeks answers on WSI surplus

BISMARCK -- A consulting firm has been asked to find out exactly what led to Workforce Safety and Insurance's large surplus, a state audit manager said Wednesday.

BISMARCK -- A consulting firm has been asked to find out exactly what led to Workforce Safety and Insurance's large surplus, a state audit manager said Wednesday.

Gordy Smith of the State Auditor's Office said BDMP of Portland, Maine, is doing this year's biennial performance evaluation of WSI. A final report is expected by mid-September.

In the early- to mid-1990s, WSI, then known as the Workers Compensation Bureau, had an unfunded liability of more than $200 million. By the time the independent 11-member board took over the agency in mid 1997, that had been reversed and there was a small surplus, Smith said.

"We know that number is enormous (now)," he said. Depending on who interprets the fund surplus, it is between $87 million and $148 million.

"We've asked them to analyze...what factors led to that," he said. Champions of the agency, including legislators, have long credited the law they passed in 1997 that created an independent board to govern the agency.


But Smith said other things such as actuarial changes, the agency's fortuitous investment decisions several years ago or changes in law may have played a part.

"I don't think you can give the board all the credit, but they deserve some of that," he said.

Smith partially credits former Gov. Ed Schafer's steps in the early 1990s to turn the agency around. The Legislature changed many laws in 1993, '95 and '97 that reduced benefits to injured workers.

Smith made his comments to reporters after a presentation to the WSI Board's Audit Committee Wednesday.

He told the committee that the Auditor's Office's follow-up review to a 2006 performance audit will also be done in September. The performance audit recommended 60 changes in management and practices at WSI and led to criminal charges against a former executive director, Sandy Blunt, and the WSI fraud unit chief. All charges were eventually dismissed.

Smith told reporters the performance audit follow-up is being harmed by lack of cooperation from a New York consultant, Henry Neal Conolly, who studied WSI's management and personnel practices earlier this year.

"I don't believe we've seen the cooperation we would have liked," Smith said.

The 2006 audit covers some of the same issues and reached similar conclusions as Conolly. Smith said Conolly signed a contract to make his work product available but has since resisted.


The interim WSI executive director, Bruce Furness, told reporters Wednesday he thought Conolly had satisfied Smith's demands and if that's not the case "they need to tell us." Smith and Furness talked after the meeting adjourned.

Conolly could not immediately be reached for comment. An Internet search for phone numbers for him was unsuccessful.

Janell Cole works for Forum Communications Co., which owns The Dickinson Press.

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