Audit: State agency lax in chasing down fines

The Minnesota Commerce Department has failed to press for collection of millions of dollars owed by insurance agents, mortgage companies and others for violating state laws, the state's Legislative Auditor said Thursday.

Auditors found that department officials didn't submit many unpaid penalties to a collections unit of the state Revenue Department, which can use tools like wage garnishment to prod violators to pay.

The unpaid penalties ranged from $1,000 to $2 million. But the total listed in the audit report -- based on a list prepared by the Commerce Department -- was not accurate because of duplicate entries. When those are subtracted, the total of uncollected penalties is $9.2 million over three years.

Brad White, who was in charge of the audit, said the duplicate entries weren't noticed during the review. Even so, he said the department's process "still needs to be worked on."

Deputy Commerce Commissioner Jim Pearson agreed. He said the department already is working to improve collections and has begun submitting unpaid amounts to the Revenue Department.

The department has obtained court judgments against some violators. However, Pearson said that many of the penalties could still be hard to collect.

"One of the difficulties we have is that a lot of these judgments are assessed against folks with little or zero assets," he said. "We need to do a better job in not just assuming you can't collect there."

Auditors also said the department inaccurately billed some regulated parties for the costs of government regulatory reviews. The incorrect billings resulted in overpayments by electric and natural gas utilities of up to $162,000 a year. In some instances, the department underbilled utilities for staff hours on cases.

In past insurance industry audits and investigations, the department "did not have any support for employee costs it billed to insurance companies," the audit report said. The department also didn't always know if insurers had paid the billed amounts. By law, costs of such reviews are the responsibility of regulated parties.

Pearson said the department is working with auditors to account for staff time on investigations and to correct any bills.

The audit also made a range of other recommendations to the department, including tightening travel expense oversight and better accounting for unclaimed assets from bank safe deposit boxes.