State Compensation Insurance Fund has "achieved significant progress in getting the organization back on track," or so says board President Jeanne Cain in a letter. It was sent today to Senator Mike Machado and accompanies a status report on the Fund's internal operations.

The report does not detail any of the findings of the organization's independent internal review or of the on-going investigation by the California Department of Insurance, California Highway Patrol and San Francisco District Attorney's Office, but it does outline a number of steps taken to "set a new course" at the State Fund, including the hiring of Stephen C. Kolakowski as a temporary Chief Financial Officer.

Interim President Larry Mulryan also retained workers' compensation insurance management expert Neal Conolly of CP Associates to assist with ongoing operational changes at the Fund. According to the reports, Connolly was chosen in part for his familiarity with State Fund, having led an earlier review of its operations on behalf of the board.

Other positions under consideration for hire include a Chief Information Technology Officer, Chief Investment Officer, Chief Underwriting Officer and General Counsel, all of which the Fund is now advocating the legislature adopt in this legislative session.

In her letter, Cain also addressed the organization's interest in expanding the board to include a corporate governance committee, ethics committee, investment committee and audit committee – a little difficult to accomplish with only five board members. This follows in part the proposal put forth by Dale Debber, publisher of Workers' Comp Executive some time ago. Click here to see the Debber proposal.

Assembly Bill 1682 (John Benoit, R-Riverside), which seeks to increase the board's size to 11, is currently serving as a place holder and is expected to pass this session.

In the letter to Machado, Cain clearly points out that none of the changes made are a result of concern about the financial health of State Fund, or the quality of work performed by employees.

According to the report, in the five months since Cain appeared before the Senate Banking, Finance and Insurance Committee to discuss the organization's state of affairs and pending legislation, efforts have been made to tighten internal controls.

In so doing, she reports, the group administrative fee program has been reformulated to include mandatory audits, and the creation of a code of ethics for board members, officers and employees.

The five-month investigate into whether any criminal conduct has taken place at State Fund or in connection with its operations is still on-going, and little information has been made available on its status.

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Filed by Christine Stanley in Sacramento