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An independent audit of workers’ compensation funds administered by the District’s Department of Employment Services has resulted in restoration of $5.4 million that officials had improperly diverted to the city budget for other purposes.The audit, conducted by accounting firm F.S. Taylor and Associates and completed in January, covers fiscal years 2007 to 2011, a period during which DOES neglected to complete a single annual audit. Missing audits for fiscal years 2012 through 2014 are underway and should be completed by June 30, according to the Office of the Chief Financial Officer. The restored funds were provided through a transfer from the city contingency reserve to DOES, an OCFO spokesman said.The workers’ comp program is set up to cover medical and rehabilitation costs and long-term disability benefits resulting from workplace injuries. Employers pay for the program through annual assessments paid into two separate accounts: The “Special Fund” provides benefits in cases of uninsured employers or pre-existing disabilities. The “Administration Fund” covers the costs of running the program.Last July, following a six-month investigation, Washington City Paper reported that District officials had been diverting millions of dollars in unspent funds for years into the general budget. D.C. law says “all moneys and funds” in the Special and Administrative Funds “shall be held in trust by the Mayor,” and that such funds should not be used for any other purposes. Just as shocking were revelations that DOES hadn’t completed an independent audit of the workers’ comp program since 2006, as required by law. At-Large Councilmember Vincent Orange, who chairs the Committee on Business, Consumer, and Regulatory Affairs, held an oversight hearing last September, in part to get to the bottom of the funds transfers. Officials from the Gray administration admitted that, in 2011 and 2012, they transferred $37.9 million from workers’ comp to the city’s general budget—$13.4 million of which they already had restored. At the time, Mayor Vince Gray‘s budget director said the city did not intend to restore the balance of $24.5 million.Chief Financial Officer Jeffrey DeWitt testified at the hearing that the financial maneuvers were part of recession-era budget shuffles that predated his tenure, and promised to ensure a thorough accounting of the matter. Auditors then found “material weakness” in financial compliance and “significant deficiency” in internal financial controls dating to before Gray took office. They identified improper transfers and recommended the city return $5,414,630 to the workers’ comp funds in fiscal year 2015. City officials agreed with the auditors and returned the funds in April.The workers’ comp funds fiasco came on the heels of revelations, uncovered by this reporter in February, that DOES had allowed a disbarred, unlicensed lawyer to serve as an administrative law judge for 16 years, and suffered from a lack of consistent leadership, attrition of qualified judges, and a backlog of injured workers’ claims. At the September hearing, injured employees, advocacy groups, and lawyers for employees and employers complained of delays in issuing decisions and inconsistent application of the law, in addition to the diversion of funds.Acting Director Thomas Luparello pledged to address shortcomings with the workers’ comp program and proposed that workers’ comp judges be required to show certification on an annual basis that they are members in good standing of a state bar. In December, the D.C. Council unanimously approved legislation, introduced by Orange, requiring all attorneys, hearing officers, and administrative law judges who perform legal duties for the District government to file an annual “Certificate of Good Standing” with the Board of Ethics and Government Accountability.Deborah A. Carroll, former interim director and past administrator for the D.C. Department of Human Services Economic Security Administration, now heads DOES.On Friday, Orange said he is waiting for the 2012-2014 audit to see if more funds should be restored to the workers’ comp program. He credited the City Paper‘s coverage for sparking action by his committee, and he thanked DOES and the OCFO for responding to the concerns voiced at the hearing. “We need to stay on these issues and be more aggressive in our oversight,” Orange said.
Photo by Darrow Montgomery