We have completed an annual financial audit of the Department of Employee Trust Funds, as requested by the Department and to fulfill our audit requirements under s.
13.94(1)(dd), Wis. Stats. The audit covered calendar year 2003. The statements and our unqualified opinion on them are included in the Department's recently issued financial report, which provides information on the financial position and activity of various benefit programs available to public employees.
Most of the Department's programs reported positive financial results in 2003. The State's issuance of appropriation bonds at the end of 2003 to finance payment of its liabilities for the Wisconsin Retirement System (WRS) and the Accumulated Sick Leave Conversion Credit program significantly improved the financial position of both of these programs. However, employers have experienced recent increases in WRS contribution rates as a result of investment experience and benefit changes. The maturation of the WRS presents challenges for management of the system in the future.
S225
In 2002, the Department began work on a new benefit payment system. However, after experiencing ongoing difficulties and delays in the project and incurring $3.9 million in costs, the Department terminated contracts for the development of the new system in 2004. Subsequently, it contracted with another consulting firm, at a contract amount of $198,000, to assess the project. Several contributing factors were identified, including inadequate project management by the Department, insufficient technical skills by the project team, and failure by an external project monitoring firm to complete its intended role. In February 2005, the Department contracted with a new firm, at a contract amount of $4.5 million, to implement the new payment system incrementally.
Finally, accompanying this letter is a management letter we provided to the Department, which includes an auditor's report on internal control and compliance, as required by Government Auditing Standards. We did not identify any control or compliance concerns required to be reported under these standards.
We appreciate the courtesy and cooperation extended to us by the Department's staff during our audit.
Sincerely,
JANICE MUELLER
State Auditor
State of Wisconsin
Legislative Audit Bureau
May 17, 2005
The Honorable, The Legislature:
At the request of the Department of Health and Family Services (DHFS), we have completed a financial audit of the Health Insurance Risk-Sharing Plan (HIRSP) for fiscal year (FY) 2003-04. HIRSP provides medical and prescription drug insurance for almost 19,000 policyholders who are unable to obtain coverage in the private market or who lost employer-sponsored group health insurance. We have provided an unqualified opinion on HIRSP's financial statements.
HIRSP's financial position continued to improve during FY 2003-04. After several years of accounting deficits, the program had a positive accounting balance at June 30, 2004. The program's unrestricted net asset balance was $6.8 million on June 30, 2004. Policyholder enrollment continued to increase during our audit period, with an increase of 8.1 percent. However, we note that growth in enrollment has slowed in the first nine months of FY 2004-05.
Net claims costs increased by 21.0 percent during FY 2003-04. In response to increasing program costs, DHFS and HIRSP's Board of Governors increased the usual and customary discounts applied to medical bills. This had the effect of reducing the amount of program costs shared by policyholders, insurers, and health care providers. Further, proposed statutory changes to address a technical issue in HIRSP's statutory funding formula are included in the 2005-07 biennial budget bill, 2005 Assembly Bill 100.
We identified two types of claims errors during our audit. First, pharmacy claims totaling $210,689 were inappropriately paid on behalf of 302 terminated policyholders. DHFS has withheld payment to the former plan administrator for the inappropriate payments. Second, policyholder deductibles were not consistently carried forward between calendar years, as required by statute. As a result, 1,582 policyholders overpaid their deductibles by a total of $327,699. We recommend that DHFS take steps to provide refunds to policyholders who have overpaid their deductibles and ensure that the new plan administrator that began administering HIRSP in April establishes procedures to properly apply deductibles between years.
We appreciate the courtesy and cooperation extended to us by DHFS and the plan administrator for HIRSP. A response from DHFS follows the appendix.
Sincerely,
JANICE MUELLER
State Auditor
State of Wisconsin
Office of the Commissioner of Insurance
May 12, 2005
The Honorable, The Legislature:
In accordance with s.
601.427(9), Wis. Stat., I am pleased to submit this report to the Wisconsin Legislature. This report is to evaluate the impact that
1995 Wisconsin Act 10 has had on the following:
(a) The number of health care providers practicing in
Wisconsin.
(b) The fees that health care providers pay under s.
655.27(3), Wis. Stats.
(c) The premiums that health care providers pay for health care liability insurance.
The evaluation performed included the collection and analysis of statistics regarding the number of health care providers and premiums charged for health care liability insurance. Analysis of these statistics determined the only discernable effect on these areas has been an estimated $89 million reduction in the actuarially determined assessment levels under s.
655.27(3), Wis. Stats., over the last seven years.
The attached report provides information regarding the background of Act 10, the statistics and the analysis performed.
Sincerely,
JORGE GOMEZ
Commissioner
State of Wisconsin
Department of Administration
May 13, 2005
The Honorable, The Legislature:
In compliance with Wisconsin statute 16.548, please find the Wisconsin Office of Federal/State Relations quarterly report to be submitted to the Legislature for the first quarter of 2005. This report provides information on the activities of the office and the status of federal legislation of concern to the state of Wisconsin.
Please contact me if you have any questions about this material.
Sincerely,
MARC MAROTTA
Secretary
State of Wisconsin
Claims Board
May 11, 2005
The Honorable, The Legislature:
Enclosed is the report of the State Claims Board covering the claims heard on April 29, 2005.
The amounts recommended for payment under $5,000 on claims included in this report have, under the provisions of s.
16.007, Stats., been paid directly by the Board.
The Board is preparing the bill(s) on the recommended award(s) over $5,000, if any, and will submit such to the Joint Finance Committee for legislative introduction.
This report is for the information of the Legislature. The Board would appreciate your acceptance and spreading it upon the Journal to inform the members of the Legislature.
Sincerely,
JOHN E. ROTHSCHILD
Secretary
S226
STATE OF WISCONSIN CLAIMS BOARD
The State Claims Board conducted hearings at the State Capitol Building in Madison, Wisconsin, on April 29, 2005, upon the following claims:
Claimant Agency Amount
The following claims were considered and decided without hearings:
Claimant Agency Amount
6.Randy Neu Dept. of Revenue $1,447.79
Randy Neu Dept. of Revenue $2,895.60
Randy Neu Dept. of Revenue $2,034.62
Randy Neu Dept. of Revenue $625.74
Randy Neu Dept. of Revenue $3,076.07
Randy Neu Dept. of Revenue $3,076.07
The Board Finds:
1. Andrea L. Mudrey of Minneapolis, Minnesota and Katherine L. Mudrey of Monroe, Wisconsin each claim $31,919.74 for additional death benefits from the retirement account of their deceased mother. The claimants' mother, Lynn Martinson, was diagnosed with terminal cancer, and was told that she had only a few months to live. She chose to stop working and decided to begin drawing on her Wisconsin Retirement System (WRS) annuity. Ms. Martinson contacted DETF and was provided with various forms and documents explaining the available annuity options. She selected Life with 60 Payments Guaranteed with Accelerated Payments. Ms. Martinson died in May 2001. The claimants believe that the documents provided by DETF did not adequately explain the available options and that, as a result, Ms. Martinson selected an option that, the claimants allege, she would not have selected had she been adequately informed. The claimants appealed to the Employee Trust Funds Board, but withdrew the claim because of the overwhelming hurdle of the doctrine of sovereign immunity. The claimants state that their mother was an educated woman, who would have been able to understand her options had they been clearly presented. The claimants point to DETF publications provided to Ms. Martinson that do not adequately explain the effect that death would have on payments, including the document, Choosing an Annuity Option, which contains tables with final columns that are cut off by the edge of the page. The claimants allege that, given Ms. Martinson's prognosis and her secure financial situation, it made no sense for her to choose accelerated payments because she had no need of the additional funds that option provided. The claimants also point to statements by Ms. Martinson's sister, Nancy Drake, that Ms. Martinson made it clear before her death that it was her desire to assist her daughters financially. Ms. Drake also states that Ms. Martinson was very ill by the time she make her death benefit choice and was no longer in a position to understand the complexities of the options provided to her. In support of Ms. Drake's statement, the claimants provide a letter from Ms. Martinson's physician, indicating that she was taking medication which would have impaired her cognitive function. The claimants state that, although she was assisting her sister with other financial matters, Ms. Drake was unaware that Ms. Martinson was making decisions regarding her WRS annuity. Finally, the claimants state that DETF has since changed its paperwork to make the impact of death on annuity payments more clear. The claimants believe that, given her expressed desire to assist her children financially, Ms. Martinson would have chosen Life with 180 Payments Guaranteed, without Accelerated Payments had she been adequately informed by DETF. The claimants state that this choice would have provided an additional $31,919.74 to each claimant.
The Department of Employee Trust Funds recommends denial of this claim. DETF points to the fact that there is absolutely no dispute that Ms. Martinson did choose the "L60" Accelerated Payments option. DETF states that it has a duty to carry out the clearly expressed wishes of a WRS participant and has no authority to second guess that participant's benefit choice. Although the claimants assert that they withdrew their administrative appeal due to sovereign immunity issues, DETF points to the fact that the department never asserted this defense and believes the appeal was withdrawn due to the claimants' inability to show any entitlement under the law to the benefit they requested. DETF states that the claimants have submitted misleading copies of documents that they allege DETF provided to Ms. Martinson, including one document with half its pages missing. (The missing pages are the ones where the impact that death would have on payments is clearly explained.) The claimants have also submitted an alleged copy of the Choosing an Annuity Option document provided to Ms. Martinson. DETF states that this is clearly not the document provide to Ms. Martinson, but is a printout of a later edition posted on the DETF Web Site. DETF provides a copy of the document actually provided to Ms. Martinson in January 2001, which contains a full version of all pages and tables. DETF points the fact that all of the documents received by Ms. Martinson explain her available options in full, including the impact of death on benefits and also provided information on how to change her benefit choice if she wished to do so. DETF states that the claimants are speculating when alleging what Ms. Martinson would or would not have wished regarding benefit payments to her children, and points to the fact that they have provided no evidence whatsoever that Ms. Martinson discussed her death benefit choice with anyone. DETF also points to the fact that the claimants initially allege that Ms. Martinson would have been able to understand her options if they had been clearly explained, and then later argue that she was mentally incapacitated due to her illness—both of which cannot be true. In closing, DETF reminds the board that it does not have the authority to order any payment from the Public Employee Trust Fund. See 74 Op. Atty. Gen. 193, 196 (1985).
S227
The Board concludes there has been an insufficient showing of negligence on the part of the state, its officers, agents or employees and this claim is neither one for which the state is legally liable nor one which the state should assume and pay based on equitable principles.
2. Patricia Buch and George Wagner, d/b/a Tussie Mussie, Ltd., of Hartford, Wisconsin make three claims in the amounts of $2,902.13, $3,018.81 and $3,094.56 for refund of overpayment of sales and use taxes for the months of September and October in 1999, 2000, and 2001. The claimants state that Ms. Buch, who handled taxes for the business, became seriously ill and because of the burden of her illness, chose the simpler task of simply paying estimated assessments rather than filing sales taxes for the periods in question. The claimants state that, although they realized some overpayment might result from paying the estimates, they had no idea the overpayments were so large until they filed their actual returns. The claimants request refunds of the over paid amounts.
The Department of Revenue recommends denial of these claims. DOR states that the claimants had experience in filing sales tax returns since 1987. DOR states that a history of filing late sales tax returns began in the mid 1990's and continued through 1998. DOR issued estimated assessments in response to the claimants' failure to file sales tax returns for September and October 1999, September and October 2000 and September and October 2001. DOR states that, beginning in 2000, the claimants began to pay the estimated sales tax assessments as issued, rather than file the actual returns. DOR states that the claimants did not file the actual sales tax returns for the assessed periods until January 2004. DOR states that s.
77.59(4)(b), Stats., prohibits the department from refunding the amount collected on an estimated assessment and that pursuant to s.
75.54(4)(b), Stats., the two-year statute of limitations for filing claims for refund has expired.
The Board concludes there has been an insufficient showing of negligence on the part of the state, its officers, agents or employees and this claim is neither one for which the state is legally liable nor one which the state should assume and pay based on equitable principles.
