Chicago OIG Recommends Risk Management Program to Address Claims Payouts

The City of Chicago Office of Inspector General (OIG) released an advisory identifying the absence of a comprehensive risk management program in Chicago and highlighting the substantial operational and fiscal benefits of implementing such a program. Based on the limited data available, OIG estimates that in 2013 and 2014 the City paid over $457.8 million in claims including $203.1 million for workers’ compensation, and $146.3 million for police misconduct and other public safety claims.

The advisory follows OIG inquiry into the state of the City’s risk management practices as well as an attempt by the Department of Finance (DOF) to analyze some of the City’s claims. Based on this work OIG’s advisory highlights three concerns for the Mayor’s Office:

1. The City currently lacks the kind of comprehensive risk management program found in comparable cities elsewhere in the United States.
2. Presently, to the extent the City undertakes risk management and claims related activity, responsibility is fragmented—being dispersed principally among DOF, Department of Law (DOL), and the City Council Committee on Finance. Moreover, the capability to address identified risks requires the voluntary cooperation of other City departments.
3. Similarly, the data needed for a comprehensive analysis resides in different forms and at least three separate databases controlled by DOF, DOL, and the Committee on Finance. The lack of complete and accurate claims data, organized through a centralized program, prevents comprehensive analysis.
4. DOF’s limited analysis excluded police misconduct and workers’ compensation claims, both of which are particularly expensive categories. DOF argued that “non-vehicle accident public safety claims” are “unique and dissimilar from claim types that are common across departments.” The Department also faced obstacles in acquiring worker’s compensation data. OIG’s advisory establishes that comprehensive risk management—as described by the Government Finance Officers Association and conducted in other cities—includes analysis of such claims.

Consolidating, refining and augmenting this fractured system will require the Mayor and City Council to centralize and empower a risk management function at a high level of City government. Specifically, OIG suggests that the City create a Chief Risk Officer or equivalent office endowed with sufficient authority and resources to drive a risk management culture City-wide. OIG recommends that the role include robust data analysis, public reporting requirements, routine communication and collaboration with departments, as well as periodic review by City Council.

OIG’s report includes examples of comprehensive risk management in New York City, Los Angeles County, Maricopa County, and the City of Sacramento as well as documentation of OIG’s prior inquiry and DOF’s pilot analysis.

In response to OIG’s advisory the City stated that it would establish a cross-departmental risk management working group, including project management support to address the data concerns outlined in the advisory. The working group will include worker’s compensation claims in its analyses. However, the City states that, “at the outset, police misconduct will be excluded from the scope…In order to avoid pre-supposing the results of the Department of Justice review or duplicating those efforts.”

“Full inhabitation of our fiduciary responsibility to the taxpayers,” said Inspector General Joe Ferguson, “impels the City to move from its historical paradigm of reacting to claims in a fragmented manner as a cost of doing business, to a proactive model. A model that identifies trends and implements operational reforms that reduce the number of events giving rise to claims, such as is now commonplace in comparable municipalities like New York City. The creation of a working group is a good first step. I encourage the Mayor to include in its mission the completion of regular reports to City Council and the public on claims trends, recommendations for corrective actions, and progress towards risk reduction. In addition, police misconduct is a critical and expensive area of risk, and I urge the Mayor to plan for its regular examination and inclusion in the working group.”

Source: City of Chicago OIG