The Injured Patients and Families Compensation Fund insures health care providers in Wisconsin against medical malpractice claims exceeding the primary malpractice insurance thresholds set by state statutes.
Wisconsin’s Legislative Audit Bureau provided unmodified opinions on the Fund’s financial statements for the years ended June 30, 2024, June 30, 2023, and June 30, 2022. (An unmodified opinion indicates that audit evidence supports the conclusion that the financial statements fairly represent the entity’s financial activity in accordance with generally accepted accounting principles).
There were some troubling findings. In a letter to the co-Chairs of the Legislative Audit Committee, State Auditor Joe Chrisman wrote, “In January 2023, OCI implemented a new computer system by contracting with a service organization to host and maintain the system. OCI uses the computer system to track medical malpractice claims and to maintain the accounts of participating health care providers. We report a significant deficiency in internal control related to the new computer system.”
The 2021-23 Biennial Budget Act, provided OCI with $9.0 million for the purchase and initial maintenance costs of the cloud-based Oracle Insurance Policy Administration System (OIPA) computer system to replace the department’s old computer system
Among the deficiencies discovered by the LAB:
“OCI implemented the OIPA system by contracting with a service organization to host and maintain the system. Weaknesses in the service organization’s internal controls could affect the Fund. However, OCI did not gain assurances that the internal controls at the service organization were operating effectively. Such assurances could be gained through a service organization audit, which includes a report on the service organization’s internal controls by an independent auditor. We identified a significant deficiency in internal control over financial reporting related to the service organization audit report for the OIPA system”
But that was not all.
“We also identified three other items of interest including noncompliance with a Board of Governors’ policy requiring an actuarial audit, the calculation of the Fund’s minimum net position level, and continued improvement in the Fund’s financial reporting process,” Chrisman wrote
The audit noted: “During our current audit, we also identified financial reporting errors…. In addition, we identified several amounts on the cash flow statements did not agree with the supporting documentation. Although the errors we identified were not significant, the number of errors indicate OCI should continue to evaluate and take additional steps to improve its process for preparing and reviewing the financial statements.”
The LAB’s audit report also includes the Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters.
The Fund is managed by a Board of Governors and administered by the Office of the Commissioner of Insurance (OCI). The LAB conducted a statutorily-required financial audit of the Fund, examining its financial statements in accordance with applicable government auditing standards, issuing an auditor’s opinion, evaluating internal controls, and offering recommendations for improvements.
The Wisconsin Legislative Audit Bureau (LAB) is a nonpartisan agency that conducts financial audits and program evaluations to ensure efficient and effective state government operations. Led by the State Auditor, the LAB reviews state agency finances, compliance, and performance, issuing reports with recommendations for improvement. Its work, guided by state statutes, supports legislative oversight and includes managing a hotline for reporting fraud and mismanagement.
