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Click Here 39 °F Forecast | Road Cams Friday, January 30, 2004 Today's News | Classifieds | Autos | Homes | Jobs | Tempo | Health | Community | Home Delivery SECTIONS Home Page Local News Sports Business Obituaries Life Opinion - Politics AP News Weather Classified Archives Site Map EXTRA Newspaper in Education Personals Movie Times TV Times E The People CLASSIFIEDS Find a Car Find a Home Find a Job Find a Rental Place an ad eSouthernOregon Automotive Communities Entertainment Publications Recreation Calendar CUSTOMER SERVICE Frequent Questions Advertising Information Home Delivery Employment Contact Us Media Kit Network Affiliate Email Story to a Friend October 12, 2003 County paid a steep price for mistakes By JONEL ALECCIA Mail Tribune A $3.1 million insurance reserve that forced deep cuts in this year’s Jackson County budget was based on bad math and other problems, a new insurance audit shows. Faulty accounting and staff turnover, combined with a rash of "catastrophic" legal settlements and a difficult post-Sept. 11 insurance market, contributed to creation of the largest self-insurance fund reserve in the county’s history. But county officials said Friday that problems revealed in the audit will soon be corrected by revamped practices and hiring of a new risk manager. "I can understand why (taxpayers) would be angry, but at least they’ll know we’re not going to be making these mistakes again and again," said county Commissioner Dave Gilmour. "We’ve set the stage so it won’t happen again." Advertisement None of the $3.1 million will be returned to the general fund budget, however, but will be kept as a reserve, said Dave Kanner, deputy county administrator. Released this week, the audit showed that county staff working without a specialized risk manager used the wrong formulas and figures for data used by an actuary to determine reserve amounts. At the same time, internal managers failed to track individual claims, to consistently bill correct departments and to collect enough money from those departments to cover losses, the report showed. That helped create three consecutive years of deficits of up to nearly $900,000 in the reserve, leaving the county vulnerable to legal liabilities. "We were below where we wanted to be unknowingly," said Debbie Taylor, the county’s internal auditor. The errors compounded an uncertain climate created by two years marked by "catastrophic" legal settlements, those exceeding $100,000. They included the $1.8 million settlement in the death of jail inmate Jeffrey Anderson; a nearly $500,000 settlement for developmentally disabled clients sexually abused by caseworker Robert Forrest Jackson; and $250,000 for five youth shelter victims sexually abused by two supervisors, among others. Another factor was the difficult insurance market that followed the Sept. 11, 2001 terror attacks on the East Coast. Not only was it difficult to find a company to insure the county’s high-risk programs such as the jail and the sheriff’s department, insurance retention fees doubled from $250,000 to $500,000, Kanner said. All told, the errors and the conditions forced county managers to scramble to come up with the $3.1 million recommended self-insurance reserve in this year’s budget. To do so, they snagged $1.4 million from a solid waste fund, nearly $250,000 from a motor pool fund and another nearly $1 million from the general fund. About $500,000 came from individual department budgets. "If we had to charge the entire increases back to the departments, it would be devastating," said Kanner. "You might as well shut down." Instead, the county posted a $3.4 million shortfall in the $53 million general fund, forcing a bumpy budget ride that saw cuts in services from local libraries to the Southern Oregon Historical Society. The shortfall was exacerbated by the county’s citizen budget committee’s insistence on creating a $2 million "rainy day" fund, Kanner said. "If you’d had one or the other, we wouldn’t have had a problem," he said. Several basic accounting errors were revealed by the recent audit, conducted by Taylor. County staff used the wrong formula to calculate reserves, using expected losses rather than the 75 percent cushion — called the "confidence level" — recommended by experts. In addition, staff used incorrect figures that dramatically overestimated expected payroll expenses, overbudgeted workers’ compensation premiums and failed to collect owed repayments from individual departments. Kanner and Taylor attributed the bulk of the errors to the absence of a designated risk manager. The position has been vacant since March 2002 and left unfilled because of budget uncertainty. Complex duties were dispersed throughout the department, Kanner said. "A good risk manager is worth their weight in gold," he said, adding that final candidates are now being considered for the $51,000-a-year post. The most recent report from the county’s actuary, Richard Sherman of Ashland, is much brighter, Kanner said. Fewer legal settlements and a better third-party insurance adjuster contributed to a call for a reserve of about $859,000. That’s enough to maintain a confidence level of 75 to 85 percent, he said. County officials don’t plan to recalculate the entire 2003-2004 budget in the wake of the most recent audit. Instead, they’ll maintain the reserve as a hedge against the future. "The benefits will show up in next year’s budget," Kanner said. "It’s a relief," he added. "We were all expecting to take another huge hit." Reach reporter JoNel Aleccia at 776-4465, or e-mail [email protected] Mail Tribune Home Local News | Sports | Business | Obituaries | Life Opinion - Politics | AP News | Archives | Site Map E Southern Oregon | Classified Copyright © 1997-2004 Mail Tribune. All rights reserved. Privacy Policy | Terms & Conditions Website Feedback 3 WEEKS FREE! ADVERTISERS A D V E R T I S E R S RESOURCES Oregon Road Conditions & Cams SPECIAL SECTIONS Auto Finder Job Finder Home Finder Joy Magazine Homelife Magazine Tempo Readers' Choice Real Estate Showcase Since We Asked Food for Thought Wellness Connection Outdoor Journal Moving to Southern Oregon? Volunteer Opportunities Prime Times