Watershed Claims Review - March 2011

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Watershed Claims Review Audit

Released March 2011

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We undertook this audit because our December 2007 performance audit, Automated Meter Reading Program, identified potential liability related to open meter boxes with lids that were missing, broken, or were ill-fitted. The Department of Law and City Council approve claims on a case-by-case basis. A systematic review of the number and magnitude of claims could help the city better manage risks.

The city paid $11 million between January 2006 and June 2010 to settle injury and damage claims made against the Department of Watershed Management. We were unable to evaluate the severity and frequency of different types of claims because the law department has not consistently recorded the cause of damage leading to the claim, or the settlement amount for each claim in its electronic files.  While the city code establishes a risk management function responsible for minimizing loss exposure, the city’s recently hired risk manager has focused primarily on workplace safety, worker’s compensation and insurance, and contract review, and has yet to establish a risk management program that includes analysis of third-party claims.  Effective risk management requires complete and reliable loss data, including frequency, severity, cause, and financial consequences. The law department compiles data that would be useful to identify and evaluate loss exposure, but until recently the law department did not provide the information to risk management or any city department.