20 September 2021

Public service compo row with Commonwealth leaves ACT exposed, says Auditor-General

| Ian Bushnell
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Auditor-General Michael Harris

Auditor-General Michael Harris says ”the longer the issue remains unresolved the greater the financial risk to the Territory”. Photo: Supplied.

A dispute delaying the transfer of funds from the Commonwealth-run Comcare insurance scheme to the Territory to cover ACT Public Service workers’ compensation claims presents a continuing financial risk to the ACT, according to a new audit report.

In March 2019, the ACT Government took responsibility for its staff”s workers compensation but the audit said that while the rights and obligations of being a self-insured licensee had been transferred from Comcare to the Territory, the financial assets were still at issue.

Auditor-General Michael Harris said the ACT and the Commonwealth remain at odds about the amount that should be transferred and the calculation method, which KPMG has described as ”unusual and creating uncertainty”.

As a result, the Territory does not have sufficient assets in its Public Sector Workers’ Compensation Fund to cover its liabilities.

Although the Fund is able to seek top-ups from ACT Government agencies, the Territory Budget or a Treasurer’s Advance, the continuing uncertainty poses a financial risk to the Territory, the audit found.

”The uncertainty restricts the Territory’s options to manage its workers’ compensation liabilities and the longer the issue remains unresolved the greater the financial risk to the Territory as it has fewer options to manage any potential increases to its workers’ compensation liabilities,” Mr Harris says.

The report says that the Territory is ordinarily required to hold a funding ratio for the Public Sector Workers’ Compensation Fund of 95 per cent of assets to 110 per cent of liabilities but the dispute means it cannot do this.

However, the Safety, Rehabilitation and Compensation Commission has agreed to an exemption of this requirement until 30 June 2021.

The amount in dispute is $304.2 million, which is the estimate of claims liabilities at 1 March 2019 ($359.2 million) less a Comcare payment of $55.0 million.

A government spokesperson said the ACT had been managing this risk since the outset of the workers’ compensation self-insurance project and it continued to work closely with the Safety Rehabilitation and Compensation Commission, Comcare and Commonwealth agencies to finalise the transfer.

This included transitional provisions in the ACT’s self-insurance licence to accommodate the lag time between the liability and asset transfers, and the interim $55 million payment from the Commonwealth at the commencement of the licence.

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”There is no risk to the continuity or quality of services provided to injured workers arising from this issue,” the spokesperson said.

The spokesperson said that when the Territory exited the Comcare premium scheme, its assets exceeded its liabilities, meaning the Territory had paid more in premiums than Comcare had spent on claims.

”The Territory’s preferred method for calculating the asset transfer calls for a refund of those historic premiums paid to Comcare plus interest, less claim payments already made,” the spokesperson said.

”This would result in the excess premiums that have been paid for the purpose of managing workers compensation claims being returned to the ACT so that they can be used for that intended purpose.

”A payment based on an actuarial assessment of the liabilities would result in some part of those excess historic premiums being retained by Comcare and presumably used to service Commonwealth workers’ compensation claim management costs.”

The sticking point is that the ACT believes the Commonwealth method would result in the Territory cross-subsidising Commonwealth agency workers’ compensation claim management costs/liabilities, and result in a higher cost to the ACT Budget.

Overall, the audit found that the Chief Minister, Treasury and Economic Development Directorate had implemented effective governance arrangements for the Territory’s transition to self-insurance and the transfer of claims data, as well as for the management and oversight of the Public Sector Workers’ Compensation Fund, and compliance requirements.

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