Auditor: Lawsuit settlements cost Missouri taxpayers $115 million

(From State Auditor Nicole Galloway)

As part of her Budget Integrity Series of audits, Missouri State Auditor Nicole Galloway has released an audit of the state's Legal Expense Fund, which is the pool of money used to make payments stemming from lawsuits against the state. The report highlights how millions in taxpayer dollars are being spent on legal expenses with no system in place to track the amount and nature of payments.

The Office of Administration, which administers the fund in partnership with the Attorney General's Office, relies on an outdated system that lacks the ability to produce basic electronic reports. This makes it difficult to monitor the nature of the cases and identify if an agency is experiencing an unusually high volume of a particular type of claim.

"A culture of workplace discrimination does not pop up overnight, but the current system makes it hard to track and then address these types of problems," Auditor Galloway said. "With proper tools in place, the state would have the ability to identify and intervene, instead of blindly shelling out millions in taxpayer dollars and allowing inappropriate conduct to continue."

Last winter, media reports brought to light a series of sexual harassment and discrimination claims involving Department of Corrections employees. Reporting at the time highlighted a significant increase in payments and judgments related to employee discrimination between 2012 and 2016. The audit examined $4.2 million in Department of Corrections legal expenses, 75 percent of which involved claims of employment discrimination.

The audit also found payments out of the Legal Expense Fund were consistently higher than budgeted amounts. In fiscal year 2017, for example, the actual amount spent was more than $17 million higher than what was budgeted. These payments are funded by general revenue, which also funds essential services, such as K-12 and higher education. Over a six year period, expenditures from the Legal Expense Fund totaled more than $79 million.

"The legislature is essentially budgeting by guesswork, often using the same figure year after year, ignoring a history of high legal expenses," Auditor Galloway said. "Because schools and other state services compete for the same scarce state dollars, we must bring more integrity to the budgeting process."

Auditor Galloway also examined settlements and payments outside of the Legal Expense Fund. In less than three years, these payments totaled another $36 million of taxpayer money by 13 entities including state universities, the Department of Transportation and Department of Conservation.

The complete report is available here. Additional information about settlements outside of the Legal Expense Fund can be found here.