Former Governor Bobby Jindal’s privatization of claims processing and loss prevention services for Louisiana’s Office of Risk Management (ORM) saved the state less money than originally promised, according to a recent audit. The legislative auditor found that the privatization contract resulted in net program savings of $9.8 million over five years – not the $50 million in claims savings that the contract required. As of June 30th, 2015, ORM calculated that FARA had achieved $48 million (96 percent) of the $50 million in guaranteed payment savings. However, ORM used an incorrect inflation factor, uncovered by the audit. With that adjustment, guaranteed savings should be $43.8 million, or 87.6 percent of the $50 million guaranteed by the contract. Auditors calculated that FARA owed the state $185,288 for not meeting the contractually-guaranteed savings, however, ORM has disputed the reduction of its inflation factors. FARA’s contract officially ends today. Sedgwick is set to take over FARA’s contract in an award that has been the subject of some strife.
Access the audit here.