Audits Target W. Va. Workers Comp Writer BrickSreet’s Transition Spending

West Virginia egislators fielded two audits this week questioning $3.5 million spent by the state workers’ compensation program before it became the BrickStreet Mutual Insurance Co. last year.

But BrickStreet officials said much of the scrutinized expenditures show that the state underestimated the cost of spinning West Virginia’s sole provider of workplace injury benefits off into the private sector.

Legislative auditors cited about $200,000 worth of meals, hospitality events and office furniture. The items were billed to the then-public program’s operating account, instead of to a $35 million fund created to cover transition costs.

The report lists 432 “hospitality occurrences” between mid-2004, when officials began discussing privatization informally, and January 2006 when BrickStreet spun off.

Legislative Auditor Aaron Allred said at least $60,000 can be explained by several large worker training sessions and by the regular meetings of the pre-BrickStreet program’s board of managers.

But Allred singled out a half-dozen dinners or buffet events at the state’s pricier restaurants, questioning how they benefited the state.

“This is not an audit of BrickStreet. This is an audit of tax dollars spent by state employees,” Allred told lawmakers at a joint interim session meeting. “Quite frankly, we found the hospitality expenditures to be excessive.”

BrickStreet officials cite the 2005 legislation privatizing workers’ compensation to explain much of the operation fund spending.

“We were always of the belief that there was this other source of funding that we could tap,” Vice President T. J. Obrokta said.

The state insurance commissioner, meanwhile, has focused on $3.3 million in other operating fund spending during the transition period, on such costs as consultants, a new computer system and reserve insurance.

President and CEO Greg Burton said that some of the spending may have been mistakenly billed to the wrong account. BrickStreet continues to talk with the insurance commissioner’s office to determine how much, if any, of the $3.3 million must be repaid.

“The business community is going to understand that there is a settling-up process,” Burton said.

With 38,000 policyholders, BrickStreet will remain the state’s only provider of workers’ compensation insurance until the market opens to competitors on July 1, 2008.

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On the Net:

Legislative auditor:
http://www.legis.state.wv.us/Joint/PERD/reports.cfm