Review of the Reasonableness of Balances in Georgia's Self-Insurance Funds

EXECUTIVE SUMMARY:

The objective of our review was to determine the reasonableness of the June 30, 1996 reserve balance for each of the five funds. Our review of Georgia's Self-Insurance Funds included the: Authorities Liability Fund, Employees Liability Fund, Tort Liability Fund, Workers Compensation Fund and Unemployment Compensation Fund.

Two of the five funds (Workers Compensation and Unemployment Compensation) did not hold excess reserve balances as of June 30, 1996. However, the three liability funds (Authorities, Employees and Tort) had excess reserve balances totaling $62 million ($5.3 million Federal share) as of June 30, 1996.

The excess reserve balances occurred because the: (1) funds' loss experiences were better than expected; (2) State failed to use discounted present value for reserve estimates; and (3) State chose a higher than expected level of claims to set reserves.

We recommend the State repay the $5.3 million Federal share of excess reserve balances. This repayment may be accomplished either by a direct payment from the State to the Division of Cost Allocation or through a reduction in future billings.

The State generally agreed with our finding that three of the self-insurance funds contained excess reserves as of June 30, 1996, but disagrees with the dollar amounts and with some of our recommendations for correction.