California’s largest workers’ compensation insurance carrier operated so secretively that the board appointed by the governor to oversee it was often kept out of the loop on major purchases and charitable contributions, according to a sweeping audit being released today by Insurance Commissioner Steve Poizner, the Sacramento Bee.

The eight-month examination, which resulted in 110 recommendations and findings, paints a troubling picture of a hybrid public-private insurer operating without the accounting controls and checks and balances typical of public agencies and publicly traded companies.

The management and structural shortcomings at the State Compensation Insurance Fund are being felt by injured workers, who have experienced significant delays in getting medical bills processed. The insurer has consequently been hit with more than $19 million in late payment penalties.

Founded in 1914 as the worker’s comp insurer of last resort, especially for small businesses, State Fund this past year has been rocked by scandals, firings of top executives and a joint criminal investigation by insurance regulators, the California Highway Patrol and San Francisco County District Attorney’s Office. The criminal probe is expected to continue until summer, officials said.

The commissioner’s findings are particularly shocking because State Fund is so large: a $3.5 billion-a-year operation with 8,000 employees across the state. It writes workers’ comp policies for 23 percent of state employers.

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