SPOKANE, Wash. –A recent accountability audit by The Office of the Washington State Auditor revealed significant issues within the Department of Labor regarding improper worker compensation payouts totaling millions of dollars.
The accountability audit identifies areas where the risk of fraud, abuse, or noncompliance is highest. The report found that the Department of Labor did not “have adequate controls over disbursements to medical providers for services provided to injured workers.”
This led to what the audit refers to as “improper payments” amounting to millions.
Jim Brownell, Assistant Director of State Audit, says it might have been a citizen tip that led auditors to examine this area of the department’s operations.
“These particular audit findings were unique, they weren’t repeats from previous years,” Brownell said.
The audit revealed that the department paid $1,155,741 in bills that were noncompliant with Washington State standards. For a bill to be compliant, it must be submitted or rebilled within one year, and adjustments to bills must be received within 90 days of billing. The report noted that in 62% of the cases reviewed, bills were autopaid without meeting these requirements.
The report said outdated software that does not automatically flag late payments was part of the reason 31 of the 50 cases reviewed were not paid correctly.
Additionally, the audit uncovered several duplicate payments due to human error. In 2021, the department paid nearly $1.4 million in duplicate bills, and in 2024, this figure rose to $2.79 million.
But these cases selected for review were judgmental, which means that it’s not possible to expand the results.
“In this particular audit, we did not use statistical ballot samples, so we are not able with precision to predict other errors in the sample,” stated Brownell.
Washington State has the fourth-largest worker compensation program in the nation, paying out approximately $6.6 billion annually and handling about 114,000 cases each fiscal year. The audit sample size was only 50 cases over two years, representing just 0.02% of total cases between 2022 and 2024.
The auditor’s office used a judgmental sample, selecting cases based on specific criteria.
“When you take something judgmentally, there is some bias, and when I say bias in terms of auditing, that means we believe there is something risky or higher risk about the nature of the transactions that we chose to audit,” Brownell said.
When issues are identified in an accountability audit, the auditing body typically provides solutions.
“That’s a really important part of the audit process,” Brownell said.
The audit report for the Department of Labor suggested developing internal controls to prevent automatic payments on noncompliant bills and recommended consulting with an assistant attorney general to recover the $5 million in lost funds.
The Department of Labor responded in the report, stating they had plans to upgrade their system to flag problematic payments.
They also wrote that they have already recaptured at least $2.7 million overpaid through duplicate payments and plan to consult with the assistant attorney general regarding the recovery of improper payments.
We reached out to the Department of Labor for comment, they provided the following statement:
“We appreciate the work of the State Auditor’s Office and take all audit findings seriously. Audits give us an important opportunity to strengthen our systems and improve the way we serve the people of Washington.
We’re preparing a formal corrective action plan outlining the steps we’ll take to address the recommendations. While some of the work was already underway—including getting money back where the agency had overpaid providers—the audit helped clarify where we can get better. As the audit report states, we’ve already recovered more than $3.6 million in overpayments and are working to recover the remaining dollars.
Under the plan, we’ll tighten internal controls to ensure proper payment and compliance with timely filing requirements. We will also recover overpayments.
We’re committed to accountability and continuous improvement. With these new steps, we will deliver even better, more reliable service for providers, injured workers, and the public.”
