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Auditor: State's Legal Expense Fund fails to ID costs

Auditor: State's Legal Expense Fund fails to ID costs

September 19th, 2017 by Bob Watson in Missouri News

Missouri's Legal Expense Fund paid out more than $79 million over a six-year period, State Auditor Nicole Galloway reported Monday, and consistently pays out more than lawmakers included in the state budget for those payments.

Add to that another $36 million-plus in payments made directly by the Conservation and Transportation Departments and by some state universities, the auditor said, and the state's total claims were more than $115 million in the six-year period.

The Legal Expense Fund, generally known as the LEF, is the state's account used to make court-ordered payments after a lawsuit, or to pay amounts agreed to in settling a lawsuit.

The numbers Galloway used in her report don't include court orders that have been appealed and, therefore, aren't final and haven't been paid yet.

The claims for damages generally are filed against the state for actions of its "employees, agencies (or) contracted physicians, for the condition of state property (or) other litigation costs," the audit explained, noting the claims "often relate to motor vehicle accidents, injuries sustained on state property, medical malpractice, employment discrimination, or other matter (and) soften involve lawsuits filed in state or federal court."

The 17-page audit reported the fund paid out over $17 million more than the amount lawmakers had included in the budget for the 2016-17 business year that ended June 30.

Galloway's report acknowledges the fund's payments vary from year to year and involve numerous state agencies and different kinds of claims, "primarily related to large case settlements."

But, the report says, "The fund volatility and case variability necessitate good tracking and monitoring systems" — which, the report notes, the state hasn't had.

"Systems in place to track LEF activity are insufficient to adequately monitor fund activity for administrative purposes," Galloway's staff wrote in the audit, "or to adequately estimate fund activity for budgetary purposes. As a result, LEF activity is not sufficiently tracked to provide adequate oversight throughout state government and the fund is not accurately or effectively budgeted."

In a response to the auditor's findings, Attorney General Josh Hawley's staff wrote: "Upon assuming office, (Hawley) took new and significant steps to make the Legal Expense Fund transparent and accessible not just to the General Assembly and the OARM (Office of Administration's Risk Management Unit), but to every citizen.

"Attorney General Hawley directed, for the first time in the Office's history, that every settlement and judgment from the Legal Expense Fund, and all costs associated with those settlements and judgments, be made available to both the General Assembly and the public on a monthly basis."

In its separate response, the OA Risk Management Unit told the auditors: "Given the wide fluctuation of historical outcomes in cases of a similar type as noted in the audit, predicting 'unexpected' litigation results to minimize the state's future litigation risks could prove challenging."

In her news release announcing the findings, Galloway said: "A culture of workplace discrimination does not pop up overnight, but the current system makes it hard to track and then address these types of problems. With proper tools in place, the state would have the ability to identify and intervene, instead of blindly shelling out millions in taxpayer dollars and allowing inappropriate conduct to continue."

Galloway began the audit — part of her "Budget Integrity Series" — after several media reports last winter about "a series of sexual harassment and discrimination claims involving Department of Corrections employees."

She said the audit released Monday "examined $4.2 million in Department of Corrections legal expenses, 75 percent of which involved claims of employment discrimination."