LAB: UW System overpaid health premiums, pensions

MADISON, Wis. (AP) -- The University of Wisconsin System overpaid for health insurance premiums and pension contributions by nearly $33 million over the last two years, including $8 million for more than 900 employees who had already left their jobs, according to a report released Thursday.

The Legislative Audit Bureau's findings prompted state lawmakers to call for a deeper review of UW System's payroll and benefit protocols.

"This is a $32 million error," said Rep. Samantha Kerkman, R-Powers Lake, co-chairwoman of the Legislture's audit committee. "My initial response was I'm shocked. I'm really disappointed."

The bureau's report stems from a review of the state's financial statements for the year that ended June 30. It said the UW System overpaid on employee health insurance premiums by an estimated $15.4 million between May 2011 and September 2012. About $8 million of that went toward premiums for 924 employees who no longer worked for the system.

The system makes health premium payments to the state Department of Employee Trust Funds, which passes the money on to insurance providers. Auditors determined system employees failed to reconcile the system's payroll and benefits database with ETF's database to reflect the workers who had left their positions. Without those updates, ETF continued to funnel system dollars toward the former workers' premiums.

The report said system officials are reviewing what might have led to the rest of the overpayments.

The system has recouped only about $228,000 of the $15.4 million from its health insurance providers. Provisions in the state's contracts with its health insurance providers will likely limit the system's ability to recover all the money, the report said.

UW System managers told auditors they have updated the ETF database, eliminating the problem. They have requested credit for the overpayments and are reviewing other employee benefit programs to ensure all the data reconciles, the report said.

"We have taken steps to prevent this from happening again," system spokesman David Giroux said in an email.

Auditors also found the system made $17.5 million in overpayments to the Wisconsin Retirement System in 2011 for pension contributions. The report attributed the overpayments to manual mistakes in calculating contributions in April, May and July of 2011. ETF credited the system for the overpayments, the report said.

Auditors also examined the system's payroll and benefit software program, which tracks information for all staff and students. State lawmakers were skeptical about the multimillion-dollar program during its implementation after previous efforts to upgrade the software failed.

A review of program security at three institutions revealed about 20 users could make unauthorized changes to add workers and generate paychecks, suggesting broader security problems that could lead to unauthorized payouts, the report said.

The system also has delayed a security review it had expected to complete by this past summer, the report found.

UW System employees started using the software in April 2011. The report said system managers told auditors more users had access they didn't need for their jobs because the system spent the last fiscal year stabilizing the software. They said they're evaluating removing employees' ability to make changes to the software and plan to begin their security review early this year.