Multiple Injury Trust Fund basic financial statements

              C 4200.3 M961i 2008-2009
c.1
MULTIPLE INJURY TRUST FUND
Basic Financial Statements
December 31, 2009 and 2008
(With Independent Auditors' Report Thereon)
MULTIPLE INJURY TRUST FUND
Table of Contents
December 31, 2009 and 2008
Required Supplementary Information:
Management's Discussion and Analysis (Unaudited) I-VI
Independent Auditors' Report 1
Basic Financial Statements:
Government- Wide Financial Statements:
Statements of Net Deficit 3
Statements of Activities 4
Fund Financial Statements:
Balance Sheets - Governmental Funds 5
Statements of Revenues, Expenditures and Changes in Fund Balances (Deficit)-
Governmental Funds 6
Reconciliation of Statements of Revenues, Expenditures and Changes in Fund
Balances (Deficit) of Govemmental Funds to Statements of Activities 7
Notes to Basic Financial Statements 8
Report on Internal Control over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards 17
MANAGEMENT'S DISCUSSION AND ANALYSIS (UNAUDITED)
As management of the Multiple Injury Trust Fund (MITF), we offer readers of the MITF financial statements this
overview and analysis of the financial activities for the fiscal years ended December 31,2009 and 2008.
Financial Highlights
• At December 31,2009, MITF's liabilities exceeded its assets by $125.1 million. At December 31, 2008,
MITF's liabilities exceeded its assets by $113.6 million. The 2009 year-end net deficit increased by
$11.5 million. The 2008 year-end net deficit decreased $31.0 million from the previous year-end.
• On April 28, 2008, the Workers' Compensation Court of the State of Oklahoma acknowledged a
settlement agreement entered into by the parties of the Pilkington case. The terms of the settlement
required MITF, in 2008, to pay approximately $16,015,000 in claims to members of the class action,
attorney fees and administrative costs. The settlement required qualified claimants to file a claim no later
than September 1, 2008 to receive payment. Any unclaimed settlement amounts would revert back to
MITF. At December 31, 2008, MITF had paid out approximately $10,600,000 in settlement funds
representing all qualified claims, attorney fees and administrative costs to date. Additional claims
totaling approximately $260,000 remain outstanding at December 31, 2009 and December 31, 2008
pending further consideration by the Workers' Compensation Court. As a result, MITF recorded a gain
in the government-wide statement of activities of approximately $26.4 million, for the year ended
December 31,2008.
• During fiscal year 2009, MITF had revenue of $21.6 million, which consisted of $21.3 million from its
apportionment from the Oklahoma Tax Commission (OTC) and $0.3 million from interest income.
During fiscal year 2008, MITF had revenue of $46.6 million, which consisted of $18.8 million from its
apportionment from the OTC, $1.4 million from interest income, and $26.4 million from the gain on
settlement of the Pilkington case. The $24.9 million decrease in 2009 revenue from 2008 was primarily
due to the Pilkington settlement in 2008. Interest income decreased by $1.1 million due to the $20
million decrease in cash used to reduce the note payable to CompSource. The $2.6 million increase of
OTC apportionment was mainly due to the overall increase in the amount of premium assessments.
• At December 31, 2009 long-term liabilities of $101.4 million related to court awarded claims payable
which comprised 72% of the total liabilities. At December 31, 2008, long-term liabilities of $87.0
million related to court awarded claims payable, which comprised 69% of the total liabilities. In October
2008, MITF paid down its note to CompSource by approximately an additional $20 million.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the MITF's basic financial statements.
MITF's basic financial statements are comprised of three components: 1) government-wide financial statements,
2) fund financial statements, and 3) notes to the financial statements.
Government- Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the MITF's
finances in a manner similar to a private-sector business.
The statements of net deficit present information on all of MITF's assets and liabilities, with the difference
between the two reported as a net deficit. Over time, increases or decreases in net assets may serve as a useful
indicator of whether the financial position ofMITF is expanding or contracting.
The statements of activities present information showing how MITF's net deficit changed during the most recent
fiscal year. All changes in net deficit are reported as soon as the underlying event giving rise to the change
occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in these
statements for some items that will only result in cash flows in future periods.
Fund Financial Statements
Governmental funds are used to account for essentially the same functions reported as governmental activities in
the government-wide financial statements. However, unlike the government-wide financial statements,
governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well
as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in
evaluating a government's near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is
useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, readers may better understand
the long-term impact of the government's near-term financing decisions. Both the governmental fund balance
sheets and the governmental fund statements of revenues, expenditures, and changes in fund balances (deficit)
provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
MITF maintains two individual governmental funds. Information is presented separately in the governmental
fund balance sheets and in the governmental fund statements of revenues, expenditures, and changes in fund
balances (deficit) for the special revenue fund and the debt service fund, both of which are considered to be major
funds.
The special revenue fund accounts for all financial resources of MITF, except for those related to the debt. The
debt service fund accounts for the proceeds and payments for principal and interest related to the notes payable to
CompSource Oklahoma (CompSource). CompSource provides workers' compensation insurance for all
Oklahoma employers and is a component unit ofthe State of Oklahoma.
Notes to Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the basic
financial statements.
11
Government-Wide Financial Analysis
MITF's net deficit at December 31, 2009 and 2008 are reported as follows:
Assets 2009 2008
Cash and cash equivalents $ 10,132,438 7,007,784
Receivable from Oklahoma Tax Cormnission 4,506,552 4,315,065
Interest receivable 30,375 27,345
Fixed assets net of depreciation 163,301 262,054
Total assets 14,832,666 11,612,248
Liabilities
Payable to CompSource Oklahoma 120,078 64,361
Accrued leave obligation 63,776 59,720
Accrued interest payable on past awards 260,000 260,000
Accrued interest payable 0 n notes payable 423,984 485,755
Notes payable:
Payable within one year 1,261,426 1,135,683
Payable after ore year 22,966,223 24,227,649
Permanent partial orders payable:
Payable within one year 845,963 503,115
Payable after one year 198,345 77,609
Permanent total orders payable:
Payable within one year 12,670,184 11,520,280
Payable after one year 101,167,795 86,891,403
Total liabilities 139,977,774 125,225,575
Net Deficit
Total net deficit $ (125,145,108) (113,613,327)
MITF's changes in net deficit for the years ended December 31,2009 and 2008 are reported as follows:
2009 2008 Program expenses:
Court awards, net of reductions s 30,133,819 11,531,280
Medical and claimant travel 316,629 189,858
Interest on rotes payable 1,727,275 2,960,253
Operating, general, and administrative 992,600 875,569
Total program expenses 33,170,323 15,556,960
General revenues:
Apportionment from Oklahoma Tax
Commission 21,340,977 18,758,506
Total general revenues 21,340,977 18,758,506
Other revenues:
Gain on settlement of interest payable on past awards 26,439,920
Interest income 297,565 1,383,659
Total other revenues 297,565 27,823,579
Decrease (increase) in net deficit (11,531,781) 31,025,125
Net deficit, beginning of year (113,613,327) (144,638,452)
Net deficit, end of year s (125,145,108) (113,613,327)
111
Fund Financial Analysis
MITF's special revenue fund balances at December 31,2009 and 2008 are reported as follows:
Assets 2009 2008
Cash and cash equivalents $ 10,132,438 7,007,784
Receivable from Oklahoma Tax Commission 4,506,552 4,315,065
Interest receivable 30,375 27,345
Total assets 14,669,365 11,350,194
liabilities and Fund Balance
Payable to CompSource Oklahoma 120,078 64,361
Accrued leave obligation 63,776 59,720
Accrued interest payable on past awards 260,000 260,000
Permanent partial orders payable 845,963 503,115
Total liabilities 1,289,817 887,196
Total fund balance 13,379,548 10,462,998
Total liabilities and fund balance $ 14,669,365 11,350,194
MITF's special revenue fund changes in fund balance for the years ended December 31, 2009 and 2008 are reported as
follows:
Revenues 2009 2008
$ 21,340,977 18,758,506
297,565 1,383,659
21,638,542 20,142,165
14,586,787 17,981,545
316,629 189,858
2,800 307,593
891,047 830,031
15,797,263 19,309,027
5,841,279 833,138
Apportionment from Oklahoma Tax Commission
Interest income
Total revenues
Expenditures
Court awards
Medical and claimant travel
Capital outlay
Operating, general, and administrative less depreciation
Total expenditures
Excess of revenues over expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Reduction in interest on past awards due to unclaimed
settlement benefits
Total other financing sources (uses)
Net change in fund balances
(2,924,729) (24,051,958)
5,165,540
(2,924,729) (18,886,418)
2,916,550 (18,053,280)
10,462,998 28,516,278
$ 13,379,548 10,462,998
Fund Balance
Fund balances, beginning of the year
Fund balances, end of the year
IV
MITF's debt service fund deficit at December 31, 2009 and 2008 are reported as follows:
Assets 2009
Total assets $
liabilities and Fund Deficit
Accrued interest payable 423,984
Total liabilities 423,984
Total fund deficit (423,984)
Total liabilities and fund deficit $
2008
485,755
485,755
(485,755)
MITF's debt service fund changes in fund deficit for the years ended December 31,2009 and 2008 are reported as
follows:
Revenues 2009 2008
Total revenues $
Expenditures
Principal on notes payable
Interest on notes payable
Total expenditures
1,135,683 20,770,124
1,727;275 2,960,253
2,862,958 23,730,377
(2,862,958) (23,730,377)
2,924,729 24,051,958
2,924,729 24,051,958
61,771 321,581
(485,755) (807,336)
(423,984) (485,755)
Excess of revenues under
expenditures
Other Financing Sources
Transfers in
Transfers out
Total other financing sources
Net change in fund deficit
Fund Deficit
Fund deficit, beginning ofthe year
Fund deficit, end of the year $ ======:::::::!:===
Total governmental funds assets at December 31, 2009 of $14.7 million increased $3.3 million from the previous
year-end due primarily to the apportionment from the Oklahoma Tax Commission exceeding cash disbursements
relating to court awards and notes payable. Total governmental funds assets at December 31, 2008 of $11.4
million decreased $33.7 million from the previous year-end due primarily to payment of an additional $20.0
million on the note payable to CompSource and payment of $10.6 in settlement funds related to the Pilkington
litigation. Total governmental funds liabilities at December 31, 2009 of $1.7 million increased $.3 million due to
increases in accounts payable and the current portion of permanent partial awards from the prior year. Total
governmental funds liabilities at December 31, 2008 of $1.4 million decreased by $15.9 million primarily due to
the $15.8 million reduction of the interest payable on past awards from previous year.
The special revenue fund balance for the years 2009 and 2008 was $13.4 million and $10.5 million, respectively.
The fund balance increase in 2009 from 2008 of $2.9 million is primarily due to the apportionment from the
Oklahoma Tax Commission exceeding cash disbursements relating to court awards and notes payable. The fund
v
balance decrease in 2008 from 2007 of $18.1 million is primarily due to the $20,000,000 paydown of the note
payable to CompSource.
The debt service fund deficit for the years 2009 and 2008 was $423,984 and $485,755, respectively. The
fluctuations in the deficit reflect the difference between payments made to CompSource on the outstanding
liability as discussed in the debt administration section and transfers from the special revenue fund.
CompSource is required by state statute to provide management service as well as act as a payment agent for all
nonclaim activities of MITF. Therefore, MITF does not adopt an annual appropriated budget for its special
revenue fund.
Debt Administration
At December 31,2009 and 2008, MITF had $139,110,000 and $124,356,000, respectively, of notes and orders
payable. Of this amount, $24,228,000 and $25,363,000 are notes payable to CompSource at December 31,2009
and 2008, respectively, with the remainder relating to orders payable at a future date.
2009 2008
Notes payable $ 24,227,649 $ 25,363,332
Permanent partial orders 1,044,308 580,724
Permanent total orders 113,837,979 98,411,683
Total $ 139,109,936 $ 124,355,739
At December 31,2009, MITF's debt payable increased $14,754,000 primarily due to an increase in orders. At
December 31, 2008, MITF's debt payable decreased by $27,375,000, from the previous year-end due to
additional reduction to notes payable of $20,000,000.
On May 30, 2000, CompSource and MITF entered into a loan agreement to provide payment to five thousand
plus disabled Oklahoma workers who had been waiting on permanent partial benefits for nearly six years. This
loan of $38 million succeeded in paying delinquent awards and slowing accrued interest, but it did not eliminate
the years of debt incurred by MITF as a result of inadequate funding. CompSource advanced an additional $11.2
million in loans through December 31, 2001 because MITF's revenue was insufficient to meet its current
obligations. Since that time, the revenue stream of MITF has been sufficient, and no additional loans from
CompSource have been required. MITF made a $20.0 million principal payment in 2008.
Contacting MITF's Financial Management
This financial report is designed to provide interested parties with a general overview of MITF's finances and to
demonstrate MITF's accountability for the money it receives. If you have questions about this report or need
additional financial information, contact the Multiple Injury Trust Fund, P.O. Box 528801, Oklahoma City,
Oklahoma 73152-8801.
VI
HSPG &:. Associates, PC
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
Special Counsel
Multiple Injury Trust Fund:
We have audited the accompanying financial statements of the governmental activities
and each major fund of the Multiple Injury Trust Fund (MITF), a component unit of the
State of Oklahoma as of and for the years ended December 31, 2009 and 2008, which
collectively comprise MITF's basic financial statements as listed in the table of contents.
These financial statements are the responsibility of MITF's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall basic financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 1, the financial statements of MITF are intended to present the
financial position and the respective changes in financial position of only that portion of
the financial reporting entity of the State of Oklahoma that is attributable to the
transactions of MITF.
As discussed in Note 7, MITF had a net deficit of approximately $125,145,000 at
December 31, 2009 primarily due to court awards exceeding the apportionment of special
tax revenue collected.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities and each major
fund of the Multiple Injury Trust Fund, as of December 31, 2009 and 2008, and the
respective changes in financial position thereof for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated
June 28, 2010, on our consideration of MITF's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, contracts and
regulations and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that
Office: 405.844.9995 5400 N. Grand Blvd, OKC OK 73112
1
Fax: 405.844.9975
testing, and not to provide an opinion on the internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be considered in assessing the results of our
audit.
The management's discussion and analysis on pages i through vi is not a required part of
the basic financial statements but is supplementary information required by accounting
principles generally accepted in the United States of America. We have applied certain
limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information.
However, we did not audit the information and express no opinion on it.
June 28, 2010
2
Statements of Net Deficit
MULTIPLE INJURY TRUST FUND
December 31, 2009 and 2008
Assets
Cash and cash equivalents
Receivable from Oklahoma Tax Commission
Interest receivable
Fixed assets net of depreciation
Total assets
Liabilities
Payable to CompSource Oklahoma
Accrued leave obligation
Accrued interest payable on past awards (See Note 6)
Accrued interest payable on notes payable
Notes payable:
Payable within one year
Payable after one year
Permanent partial orders payable:
Payable within one year
Payable after one year
Permanent total orders payable:
Payable within one year
Payable after one year
Total liabilities
Net Deficit
Total net deficit
See accompanying notes to basic financial statements.
3
2009 2008
$ 7,007,784
4,315,065
27,345
262,054
lO,132,438
4,506,552
30,375
163,301
14,832,666 11,612,248
120,078 64,361
63,776 59,720
260,000 260,000
423,984 485,755
1,261,426 1,135,683
22,966,223 24,227,649
845,963 503,115
198,345 77,609
12,670,184 11,520,280
lOl,167,795 86,891,403
139,977,774 125,225,575
$ (125,145,108) (113,613,327)
MUL TIPLE INJURY TRUST FUND
Statements of Activities
Years ended December 31, 2009 and 2008
Program expenses:
Court awarded future payments
Reductions of past awards (See Note 5(c))
Total court awards net of reductions
Medical and claimant travel
Interest on notes payable
Operating, general, and administrative
Total program expenses
General revenues:
Apportionment from Oklahoma Tax Commission
Total general revenues
Other revenues:
Gain on settlement of interest payable on past awards (See Note 6)
Interest income
Total other revenues
Decrease (increase) in net deficit
Net deficit, beginning ofthe year
Net deficit, end of the year
See accompanying notes to basic financial statements.
4
2009
$ 32,718,777
(2,584,958)
30,133,819
316,629
1,727,275
992,600
33,170,323
21,340,977
21,340,977
297,565
297,565
(11,531,781)
(113,613,327)
$ (125,145,108)
2008
16,685,945
(5,154,665)
11,531,280
189,858
2,960,253
875,569
15,556,960
18,758,506
18,758,506
26,439,920
1,383,659
27,823,579
31,025,125
(144,638,452)
(113,613,327)
MULTIPLE INJURY TRUST FUND
Balance Sheets
Governmental Funds
December 31, 2009 and 2008
2009 2008
Total Total
Special Debt governmental Special Debt governmental
Assets revenue service funds revenue service funds
Cash and cash equivalents $ 10,132,438 10,132,438 7,007,784 7,007,784
Receivable from Oklahoma Tax Commission 4,506,552 4,506,552 4,315,065 4,315,065
Interest receivable 30,375 30,375 27,345 27,345
Total assets 14,669,365 14,669,365 11,350,194 11,350,194
Liabilities and Fund Balance (Deficit)
Payable to CompSource Oklahoma 120,078 120,078 64,361 64,361
Accrued leave obligation 63,776 63,776 59,720 59,720
Accrued interest payable on past awards (See Note 6) 260,000 260,000 260,000 260,000
Accrued interest payable on notes payable 423,984 423,984 485,755 485,755
Permanent partial orders payable 845,963 845,963 503,115 503,115
Total liabilities 1,289,817 423,984 1,713,801 887,196 485,755 1,372,951
Total fund balance (deficit) 13,379,548 (423,984) 12,955,564 10,462,998 (485,755) 9,977,243
Total liabilities and fund balance (deficit) $ 14,669,365 14,669,365 11,350,194 11,350,194
Reconciliation:
Total fund balance (deficit) - governmental funds 13,379,548 (423,984) 12,955,564 10,462,998 (485,755) 9,977,243
Amounts reported for governmental activities in the
statements of net deficit are different because:
Capital assets used in governmental activities are not
financial resources and therefore are not reported
in the governmental funds:
Governmental capital assets $310,393
Less accumulated depreciation (147,092) 163,301 163,301 262,054 262,054
Permanent partial and total orders payable after
one year are not due and payable in the current
period and therefore are not reported in the funds (101,366,140) (101,366,140) (86,969,012) (86,969,012)
Notes payable after one year are not due and payable
in the current period and therefore are not reported
in the funds (22,966,223) (22,966,223) (24,227,649) (24,227,649)
Permanent total orders payable within one year
will not be paid with current financial resources
and therefore are not reported in the funds (12,670,184) (12,670,184) (11,520,280) (11,520,280)
Notes payable within one year will not be paid
with current financial resources and therefore
are not reported in the funds (1,261,426) (1,261,426) (1,135,683) (1,135,683)
Net deficit of governmental activities $ (100,493,475) (24,651,633) (125,145,108) (87,764,240) (25,849,087) (113,613,327)
See accompanying notes to basic financial statements.
5
MULTIPLE INJURY TRUST FUND
Statements of Revenues, Expenditures, and Changes in Fund Balances (Deficit)
Governmental Funds
Years ended December 31, 2009 and 2008
2009 2008
Total Total
Special Debt governmental Special Debt governmental
Revenues revenue service funds revenue service funds
Apportionment from Oklahoma Tax Commission $ 21,340,977 21,340,977 18,758,506 18,758,506
Interest income 297,565 297,565 1,383,659 1,383,659
Total revenues 21,638,542 21,638,542 20,142,165 20,142,165
Expenditures
Court awards 14,586,787 14,586,787 17,981,545 17,981,545
Medical and claimant travel 316,629 316,629 189,858 189,858
Principal on notes payable 1,135,683 1,135,683 20,770,124 20,770,124
Interest on notes payable 1,727,275 1,727,275 2,960,253 2,960,253
Capital outlay 2,800 2,800 307,593 307,593
Operating, general, and administrative less depreciation 891,047 891,047 830,031 830,031
Total expenditures 15,797,263 2,862,958 18,660,221 19,309,027 23,730,377 43,039,404
Excess of revenues over (under) expenditures 5,841,279 (2,862,958) 2,978,321 833,138 (23,730,377) (22,897,239)
Other Financing Sources (Uses)
Transfers in 2,924,729 2,924,729 24,051,958 24,051,958
Transfers out (2,924,729) (2,924,729) (24,051,958) (24,051,958)
Reduction in interest on past awards due to
unclaimed settlement benefits (See Note 6) 5,165,540 5,165,540
Total other financing sources (uses) (2,924,729) 2,924,729 ( 18,886,418) 24,051,958 5,165,540
Net change in fund balances (deficit) 2,916,550 61,771 2,978,321 (18,053,280) 321,581 (17,731,699)
Fund Balance (Deficit)
Fund balances (deficit), beginning of the year 10,462,998 (485,755) 9,977,243 28,516,278 (807,336) 27,708,942
Fund balances (deficit), end of the year $ 13,379,548 (423,984) 12,955,564 10,462,998 (485,755) 9,977,243
See accompanying notes to basic financial statements.
6
MULTIPLE INJURY TRUST FUND
Reconciliation of Statements of Revenues,
Expenditures, and Changes in Fund Balances (Deficit) of Governmental Funds
to Statements of Activities
Years ended December 31, 2009 and 2008
Amounts reported for governmental activities in the statements of activities are different because:
2009 2008
Net change in fund balances - total governmental funds $ 2,978,321 (17,731,699)
Governmental funds report capital outlays as expenditures,
however, in the statement of activities, the cost of those assets
is allocated over their estimated useful lives as depreciation expense.
This is the amount by which capital outlays were greater thar
(less than) depreciation expense. (98,753) 262,054
Gain on settlement of interest payable on past awards (See Note 6) 21,274,380
The issuance of long-term debt provides current
financial resources to governmental funds, while
the repayment of the principal oflong-term debt
consumes the current financial resources of
governmental funds. Neither transaction, however,
has any effect on net deficit. 1,135,683 20,770,124
Reductions in permanent total orders payable and the
long-term portion of permanent partial orders payable are
reported as expenditures in governmental funds. 14,586,787 17,981,546
Increases in permanent total orders payable and the
long-term portion of permanent partial orders payable are
reported as expenses in the statements of activities. (30,133,819) (11,531,280)
Change in net deficit of governmental activities $ (11,531,781) 31,025,125
See accompanying notes to basic financial statements.
7
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
(1) Reporting Entity
In 1943, the Oklahoma Legislature created the Multiple Injury Trust Fund (MITF) , formerly the Special
Indemnity Fund, with a dual purpose: to encourage the hiring of individuals with a preexisting disability
and to protect those employers from liability for the preexisting disability. It does so by carrying the
responsibility for a portion of the benefits if the disabled worker suffers a subsequent injury. MITF is a
discretely presented governmental fund component unit of the State of Oklahoma, as agreed to by the
Office of State Finance and the State Auditor of Oklahoma.
When the workers' compensation court makes an award for benefits, those benefits are based upon the
individual's percentage of disability. MITF applies to situations where a physically impaired person suffers
an on-the-job injury and those two injuries (or disabilities), in combination, result in a percentage of
disability greater than that which would apply if there had been no preexisting disability. In other words,
the employer is only liable for the benefits that would have been due for the subsequent injury alone. MITF
picks up the remainder of the liability for the combined disability.
Benefits from MITF are not received automatically, but can be obtained by a worker by filing a claim
against MITF. In order to make a claim, the combined percentage of disability must be greater than 40% to
the body as a whole for injuries occurring prior to November 1, 1999. There are no such thresholds for
injuries occurring on or after November 1, 1999. For example, an individual with an existing 25%
impairment would have to have more than 15% impairment from the subsequent injury in order to make a
claim against MITF.
Although their purposes and sources of funding are distinct, MITF and CompSource Oklahoma
(CompSource), formerly the Oklahoma State Insurance Fund, are related. Section 175 of Oklahoma Statute
Title 85 gives CompSource responsibility for the "administration and protection" ofMITF and provides that
CompSource be reimbursed for associated administrative expenses.
(a) Summary of Significant Accounting Policies
The financial statements of MITF have been prepared in conformity with accounting principles
generally accepted in the United States of America (GAAP) as applied to government units. The
Government Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles. The more significant of
MITF's accounting policies are described below.
(b) Basis of Presentation and Accounting
The government-wide financial statements (i.e., the statements of net deficit and the statements of
activities) report information on all of the nonfiduciary activities of the government. Taxes and
intergovernmental revenues support governmental activities.
The statements of activities demonstrate the degree to which the direct expenses of a given function
or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment. Program revenues include: 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or
segment and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items not properly included among
programs revenues are reported instead as general revenues. MITF has no program revenues.
8
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
Separate financial statements are provided for governmental funds in which major individual
governmental funds are reported as separate columns in the fund financial statements.
The government-wide financial statements are reported using the economic resources measurement
focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows.
The governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon
as they are both measurable and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current period.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting;
however, debt service expenditures, as well as expenditures related to long-term claims and
judgments, are recorded only when payment is due. Amounts payable in the next current period are
recorded as under accrual accounting.
MITF reports the following major governmental funds:
• The special revenue fund is MITF's primary operating fund. It accounts for all financial
resources of MITF, except those required to be accounted for in another fund.
• The debt service fund accounts for the resources accumulated and payments made for
principal and interest on long-term debt of governmental funds.
The majority of monies received by MITF are restricted in accordance with predesignated purposes as
to how they can be transferred or used. Such restrictions are disclosed in the accounting policy
describing cash accounts. MITF retains full control of all monies to achieve the designated purposes.
(c) Revenue Recognition
Until December 31,2001, each mutual or interinsurance association, stock company, CompSource, or
other insurance carrier writing workers' compensation insurance in the State of Oklahoma was
assessed and paid to the Oklahoma Tax Commission (OTC) a sum equal to 2% of the total gross -
direct premiums written for workers' compensation on risks located in the State of Oklahoma. Also
until December 31, 2001, the OTC assessed and collected from employers carrying their own risk,
including group self-insurance associations, a temporary assessment at the rate of 4% of the total
compensation for permanent total disability awards, permanent partial disability awards, and death
benefits paid out during each quarter of the calendar year by the employers and group self-insurance
associations.
Effective January 1, 2002, the OTC assesses and collects from each uninsured employer 5% of their
total compensation paid for permanent disability and death awards. Also effective January 1, 2002,
the Workers' Compensation Court Administrator assesses an amount and the OTC collects such
assessments from each mutual or interinsurance association, stock company, CompSource, employers
carrying their own risk including group self-insurance associations, and other insurance carriers
writing workers' compensation insurance in the State of Oklahoma, up to 6% of total direct written
premiums for workers' compensation on risks located in this state. The enacted rate schedule since
inception of the law is as follows:
9
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
Effective Date Rate
January 1,2002 6.00%
July 1,2003 2.95%
July 1,2004 3.63%
July 1,2005 3.83%
July 1,2006 3.46%
July 1,2007 2.14%
July 1,2008 2.50%
July 1,2009 2.60%
A portion of the monies received from premium and loss assessments by the OTC are apportioned to
the MITF. Earned apportionments from the OTC are recognized monthly when the amounts due
from the OTC are measurable. MITF considers receivables collected by the OTC within 30 days after
year-end to be available and recognizes them as revenues of the current year.
(d) Related Parties
CompSource is required by statute to provide management services as well as act as a payment agent
for all nonclaim activities of MITF. Fees paid to CompSource for services and operating activities
amounted to approximately $882,000 and $816,000 for 2009 and 2008, respectively. The outstanding
payable to CompSource for administrative charges at December 31, 2009 and 2008 was
approximately $120,000 and $64,000, respectively. The outstanding payroll accrual to CompSource
at December 31,2009 and 2008 was approximately $64,000 and $60,000, respectively.
(e) Income Taxes
As a component unit and an integral part of the State of Oklahoma, the income of the MITF is not
subject to federal or state income tax.
(f) Cash Accounts
The various monies received or disbursed are recorded in the following account in accordance with
the statutes and intent of how the monies are to be expended:
• General Operating Account. This account contains monies received from taxes on all
permanent workers' compensation orders for payments of claims from MITF. Monies may
only be expended for claim payments, personnel payroll, and operating expenses, as directed
by statute.
(g) Cash Equivalents
Cash equivalents are defined as short-term, highly liquid investments that are readily convertible to
cash with an original maturity of three months or less when purchased.
(h) Compensated Absences
The liability and expense incurred for employee paid time off are recorded as accrued leave
obligation in the statements of net deficit, and as a component of operating, general, and
administrative expenses in the statements of activities.
10
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
(2) Reconciliation of Government-Wide and Fund Financial Statements
The governmental fund balance sheets include a reconciliation between total fund balance-governmental
funds and net deficit of governmental activities as reported in the government-wide statements of net
deficit. Elements of that reconciliation explain that "certain liabilities are not due and payable in the current
period or will not be paid with current financial resources and therefore are not reported in the funds." The
details are as follows for the years ended December 31 :
2009 2008
Fixed assets net of depreciation
Permanent partial orders payable after one year
Permanent total orders payable
Notes payable
Net adjustment to decrease fund balance - total
governmental funds to arrive at net deficit of
governmental activi ties
262,054
(77,609)
(98,411 ,683)
(25,363,332)
$ 163,301
(198,345)
(113,837,979)
(24,227,649)
$ (138,100,672) (123,590,570)
(3) Cash and Cash Equivalents
All cash and cash equivalents are on deposit with the State Treasurer's office. The State Treasurer requires
that financial institutions deposit collateral securities to secure the deposits in each such institution. The
amount of collateral securities to be pledged for the security of public deposits is established by rules
promulgated by the State Treasurer. Restrictions by state statute of cash balances by cash account are as
follows:
• General Operating Account. The cash balance remaining at December 31, 2009 and 2008 of
approximately $10,132,000 and $7,008,000, respectively, represents the excess of cash receipts
over disbursements and is carried forward to the next fiscal year.
(4) Fixed Assets
Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the
related assets using the straight-line method for financial statement purposes.
The following is a summary of property and equipment, at cost less accumulated depreciation, at December
31:
2009 2008
Internally developed software $
Data processing equipment
Less accumulated depreciation
269,217
41,176
(147,092)
269,217
38,375
(45,538)
$ ==1=63=,=30=1= 262,054
11
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
(5) Long-Term Obligations
(a) Orders Payable
At December 31, 2009 and 2008, MITF was indebted to claimants for court awarded judgments.
Only those judgments currently in arrears bear interest. The rate, set by statute, is the treasury bill
rate plus 4% to be updated annually.
Principal payments required under the court awarded judgments as recorded in the statements of net
deficit at December 31, 2009 and 2008 are as follows:
2009 2008
Awarded future payments due within one year
Awarded future payments due after one year
Total awarded future payments
$ 13,516,147
101,366,140
$ 114,882,287
12,023,395
86,969,012
98,992,407
The principal allocated by year cannot be determined as amounts paid are contingent on amounts
collected from the OTe. The long-term payments have not been discounted to present value.
Principal payments on permanent partial orders payable within one year required under the court
awarded judgments as recorded in the statements of net deficit of the government-wide financial
statements and the balance sheets of the governmental funds statements at December 31, 2009 and
2008 are $845,963 and $503,115, respectively. Court awarded judgments of $114,036,324 and
$98,489,292 at December 31, 2009 and 2008, respectively, are not recorded in the balance sheets of
the fund financial statements as these liabilities will not be paid with current financial resources or are
not due and payable in the current period.
(b) Notes Payable
At December 31, 2009 and 2008, notes payable amounted to $24,227,649 and $25,363,332,
respectively. The notes were entered into to satisfy delinquent permanent partial disability awards
and simple interest due on such awards owed by MITF. The notes bear interest at 7% and are payable
over 30 years in quarterly installments. The loans are secured by MITF revenues, any equity or other
interest of the State of Oklahoma, and any amounts appropriated or otherwise available to MITF. In
addition, $6,000,000 advanced in 2001 is also secured by any underlying claims paid by virtue of the
notes including, but not limited to, any special priority, right to interest, or enforcement mechanism
available. Advances from CompSource were made as permitted by Section 138(B) of State of
Oklahoma Title 85.
12
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
Annual debt service requirements to maturity are as follows:
Year ending December 31: Principal
2010
2011
2012
2013
2014
2015-2019
2020-2022
$ 1,261,426
1,352,071
1,449,230
1,553,370
1,664,994
10,301,128
6,645,430
$ 24,227,649
Interest
1,663,302
1,572,657
1,475,498
1,371,358
1,259,734
4,322,511
655,423
12,320,483
Total
2,924,728
2,924,728
2,924,728
2,924,728
2,924,728
14,623,639
7,300,853
36,548,132
At December 31, 2009 and 2008, unpaid accrued interest on notes payable totaled approximately $424,000
and $486,000, respectively. In 2008 MITF made an additional payment reducing the loan principal by
approximately $20,000,000.
(e) Changes in Long-Term Obligations
Long-term obligation activity for the year ended December 31, 2009 was as follows:
Beginning Ending Amounts due
balance Additions Reductions balance within one year
Awarded future payrrents $ 98,992,407 32,718,777 (16,828,897) 114,882,287 13,516,147
Notes payable 25,363,332 (1,135,683) 24,227,649 1,261,426
$ 124,355,739 32,718,777 (17,964,580) 139,109,936 14,777,573
Long-term obligation activity for the year ended December 31,2008 was as follows:
Beginning Ending Amounts due
balance Additions Reductions balance within one year
Awarded future payments $ 105,297,628 16,685,945 (22,991,166) 98,992,407 12,023,395
Notes payable 46,133,456 (20,770,124) 25,363,332 1,135,683
$ 151,431,084 16,685,945 (43,761,290) 124,355,739 13,159,078
Reductions of awarded future payments of approximately $17 million and $23 million, respectively, for the
years ended December 31, 2009 and 2008 include approximately $3 million and $5 million, respectively, in
reductions from settlements, abatements and adjustments related to section 172E of Oklahoma Statute Title
85 which requires MITF to delay the start of benefit payments to certain claimants.
13
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
(6) Accrued Interest Payable on Past Awards
Accrued interest on past awards represents interest payable to members of a class action lawsuit (Dean
Pilkington, et al., v. Special Indemnity Fund) originally recorded by MITF in 2001. On February 27, 2001,
the Oklahoma Supreme Court denied the MITF Petition for Certiorari in the case of Dean Pilkington, et al.,
v. Special Indemnity Fund ("Pilkington"). The claimant was seeking penalty interest against MITF on all
awards of the Workers Compensation Court that were unpaid, not fully paid, or paid late to claimants from
January 1, 1987 until May 9, 1996. The effect of the denial was the -awarding of approximately
$25,000,000 in compound interest as of December 31, 2001 plus additional annual, court determined,
interest on the award to the class of persons with delinquent permanent partial awards. The amount payable
at December 31,2009 and 2008 totaled $260,000.
Settlement of Dean Pilkington. et al.! v. Special Indemnity Fund:
On Apri128, 2008, the Workers' Compensation Court of the State of Oklahoma acknowledged a settlement
agreement entered into by the parties of the Pilkington case. The terms of the settlement required MITF, in
2008, to pay approximately $16,015,000 in claims to members of the class action, attorney fees and
administrative costs. The settlement required qualified claimants to file a claim no later than September 1,
2008 to receive payment. Any unclaimed settlement amounts would revert back to MITF. At December
31, 2008 MITF had paid out approximately $10,600,000 in settlement funds representing all qualified
claims, attorney fees and administrative costs to date. Additional claims totaling approximately $260,000
remain outstanding at December 31, 2009 and 2008 pending further consideration by the Workers'
Compensation Court. As a result, MITF recorded a gain in the government-wide statement of activities of
approximately $26.4 million, for the year ended December 31,2008.
At December 31,2007, MITF had recorded $16,015,000 as a liability and expenditure in the governmental
fund financial statements since payment of the settlement funds would be made in 2008 using current
resources. During the year ended December 31, 2008, MITF recorded in the governmental fund financial
statements, as other financing sources, a reduction in interest on past awards due to unclaimed settlement
benefits totaling approximately $5.2 million.
(7) Net Deficit
At December 31,2009 and 2008, MITF had a net deficit of approximately $125,145,000 and $113,613,000,
respectively, primarily due to court awards exceeding the apportionment of special tax revenue collected.
Currently, MITF pays all awards for permanent partial and permanent total claims immediately when they
become due. However, cash and cash equivalents at December 31, 2009 and 2008 are not sufficient to pay
all current and non-current liabilities.
The Senate Bill was signed by the Governor of Oklahoma on May 26, 2000. The Senate Bill provided
additional sources of funding to satisfy the permanent partial disability awards plus simple interest on
awards in arrears. Such sources are participation in any dividends paid by CompSource to state agencies,
loans from CompSource, additional fees from insurance carriers underwriting workers' compensation
insurance, and employers underwriting their own risk including group self-insurance associations.
Until December 31, 2001, each mutual or interinsurance association, stock company, CompSource, or other
insurance carrier writing workers' compensation insurance in this state paid to the OTC a sum equal to 2%
of the total gross direct premiums written for workers' compensation on risks located in the State of
Oklahoma. The OTC also assessed and collected from employers carrying their own risk, including group
self-insurance associations, a temporary assessment at the rate of 4% of the total compensation for
14
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
permanent total disability awards, permanent partial disability awards, and death benefits paid out during
each quarter of the calendar year by the employers and group self-insurance associations. The 4% special
tax against claimants and employers on all permanent disability awards was eliminated. In 2002, under
House Bill 1003, each mutual or interinsurance association, stock company, CompSource, or other
insurance carrier writing workers' compensation insurance in this state, and each employer carrying its own
risk, including each group self-insurance association, was assessed an amount up to 6% of the written
premiums total for workers' compensation on risks located in this state. If the maximum assessment does
not provide in anyone year an amount sufficient to make all necessary payments for obligations of MITF,
the unpaid portion shall be paid as soon thereafter as funds become available. Effective July 1, 2003, the
MITF tax was decreased from 6% to 2.95%. Effective July 1, 2004, the tax was increased to 3.63%.
Effective July 1, 2005, the tax was increased to 3.83%. Effective July 1, 2006, the tax was decreased to
3.46%. Effective July 1, 2007, the tax was decreased to 2.14%. Effective July 1, 2008, the tax was
increased to 2.5%. Effective July 1,2009, the tax was increased to 2.6%.
Per the 2000 legislative session, liability for permanent total disability from a combination of injuries was
shifted from MITF back to the claimant's last employer for subsequent injuries sustained after May 31,
2000. Legislature changed this law in 2005. Liability for permanent total disability awards was shifted back
to the MITF for subsequent injuries occurring after October 31, 2005. Benefits were increased from a five-year
minimum to a fifteen-year minimum, and survivor benefits were created.
(8) Interfund Transfers
Interfund transfers for the year ended December 31, 2009 consisted of the following:
Transfer from
Special
revenue
Debt
service Total
Transfer to:
Debt servi ce
Total
$ __ 2....:..,9_2_4..:....,7_29_
$ ==2~,=92=4~,7=29==
2,924,729
2,924,729
Interfund transfers for the year ended December 31, 2008 consisted of the following:
Transfer from
Special
revenue
Debt
service Total
Transfer to:
Debt servi ce
Total
$ --"2"4;,"05"1'-,9-5'8--
$ ==24=,=05=1=,9=58=
24,051,958
24,051,958
Transfers are used to: (1) move note proceeds from the debt service fund to the fund required to expend
them and (2) move receipts for debt service from the fund collecting the receipts to the debt service fund as
debt service payments become due.
15
MULTIPLE INJURY TRUST FUND
Notes to Basic Financial Statements
December 31, 2009 and 2008
(9) Contingencies
MITF is currently involved in a legal case, Cellino et al. v. MITF, which is a companion case to
Pilkington involving the same or similar issues asserted by a distinct group of claimants who were
not part of the Pilkington class. The case has been dismissed in the early stages of litigation. An
appeal by the claimants has resulted and the argument has been moved to be reset. Management is
defending the case based on the likelihood of a favorable outcome. Although it is not possible to
predict the outcome of the pending litigation, management believes that the pending actions will
not have a material adverse effect upon the revenue, net assets or financial condition of MITF.
Consequently, management has not provided for any amounts in the financial statements.
Additionally, MITF is a defendant in various litigation. Although the outcome of these matters is
not presently determinable, in the opinion of MITF's management, the resolution of these matters
will not have a material effect on the financial position ofMITF.
(10) Subsequent Events
There were no subsequent events through June 28, 2010, which is the date the financial statements
were available to be issued, requiring recording or disclosure in the financial statements for the
year ended December 31, 2009.
* * * * * *
16
HSPG &1 Associates PC _ __ __.._.._.................. _....._ _ 0 -- _ .. _- - ..-.-..- _. ..__ . ._ .---.- ..-.
Certified Public Accountants
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Special Counsel
Multiple Injury Trust fund:
We have audited the accompanying financial statements of the governmental activities and each
major fund of the Multiple Injury Trust Fund (MITF), a component unit of the State of
Oklahoma, as of and for the year ended December 31, 2009, and have issued our report thereon
dated June 28, 2010, which includes explanatory paragraphs regarding Management's
Discussion and Analysis, a paragraph emphasizing the accumulated fund deficit, and a paragraph
stating that the financial statements are intended to present the financial position and results of
operations of only that portion of the financial reporting entity of the State of Oklahoma
attributable to the transactions of MITF. We conducted our audit in accordance with auditing
standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered MITF's internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our
opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of MITF's internal control over financial reporting. Accordingly, we do not
express an opinion on the effectiveness ofMITF's internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose
described in the preceding paragraph and would not necessarily identify all deficiencies in
internal control over financial reporting that might be significant deficiencies or material
weaknesses. However, as discussed below, we identified certain deficiencies in internal control
over financial reporting that we consider to be significant deficiencies.
A control deficiency exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination
of control deficiencies, that adversely affects MITF's ability to initiate, authorize, record, process,
or report financial data reliably in accordance with generally accepted accounting principles
("GAAP") such that there is more than a remote likelihood that a misstatement of MITF's
financial statements that is more than inconsequential will not be prevented or detected by
MITF's internal control. We consider the findings described below to be significant deficiencies
in internal control over financial reporting.
Office: 405.844.9995 5400 N. Grand Blvd, OKe OK 73112
17
Fax: 405.844.9975
Finding #1 - MITF improperly recorded the liability of four court awards in fiscal year 2009
that were awarded by the court in fiscal years 2007 and 2008. This resulted in the
overstatement of expenses in fiscal year 2009 and the understatement of liabilities in the year
the court awarded the claimant benefits. Internal control procedures were not in place to
properly record the liability for court awarded modifications made to a settlement in the
proper period.
Finding #2 - MITF does not maintain a GAAP based accounting ledger or system of
accounts. Operational data is maintained primarily on a cash basis throughout the year. At
each year end, a reconciliation of cash based data with accrual based information is prepared
for GAAP financial reporting purposes. This reconciliation does not completely identify the
GAAP based financial position or changes thereof.
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the financial statements
will not be prevented or detected by MITF's internal control.
Our consideration of the internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all deficiencies
in the internal control that might be significant deficiencies and, accordingly, would not
necessarily disclose all significant deficiencies that are also considered to be material weaknesses.
However, we believe that finding #2 described above is a mat6rial weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether MITF's financial statements are free of
material misstatement, we performed tests of its, compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly,
we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance or other matters that are required to be reported under Government Auditing
Standards.
This report is intended solely for the information and use of management, the Governor, the
State of Oklahoma, and the State Legislature, and is not intended to be and should not be used by
anyone other than these specified parties.
June 28, 2010
18