The SA Auditor-General has identified “key shortcomings” in the management of the state’s local government insurance schemes.

The Local Government Association of South Australia (LGASA) runs mutual liability and workers’ compensation schemes on behalf of council members, in partnership with scheme manager JLT.

Auditor-General Andrew Richardson’s report raises a number of concerns, including a lack of contract management policy framework and informal performance monitoring.

There is potential for overpayment of the scheme manager’s remuneration fees, and unauthorised variations to contractual arrangements.

“The LGASA has not implemented essential elements of contract management practices,” the report says. “These issues significantly limit assurance that the schemes are continually managed efficiently and cost-effectively.”

However, the report acknowledges the findings of a previous independent study that concluded another provider would struggle to supply the same breadth of services at the same cost, due to JLT’s specialist experience.

It says the surplus for the workers’ compensation scheme stands at $29.6 million, and it has saved members $236 million in premiums since its inception in 1986.

The mutual liability scheme has a $26.9 million surplus and, while there is no verified savings total, JLT estimates it at $100 million since it started in 1989.

JLT CEO Leo Demer told insuranceNEWS.com.au the figures are “absolutely sensational”.

“The issues [raised by the Auditor-General] are important, but you have to consider what the overall outcomes are, and whether the schemes have been good for local government,” he said.

“The financial results back up just how good these schemes are. There has never been a member leave in SA – we have had 100% membership since day one.

“With nearly $60 million in surpluses and $336 million in savings, why wouldn’t you want to be involved?”

LGASA CEO Matt Pinnegar says all the Auditor-General’s recommendations have been accepted and the association is “committed to ensuring good governance practices are in place and adhered to, and that value for money is maintained”.