"However, significant differences in the data files prevent reliable data matching and identification of noncompliant businesses. During our audit the Commission started working with Employment Security and the Rate Bureau to obtain the necessary data; however, employees of noncompliant businesses will remain at risk until data improvements are achieved," the auditor said.

Even when data is available, the Commission is lax about enforcement. "Specifically, the Commission does not follow up on workers’ compensation insurance cancellations and lapses that the Rate Bureau reports to the Commission," the report says. It notes for fiscal 2012 the Rate Bureau reported 11,323 businesses either cancelled their coverage or let it lapse.

"The number of citizens at risk could be significant. In April 2012, a local newspaper estimated that there were approximately 30,000 businesses operating in North Carolina without workers’ compensation coverage," the audit said.

Lastly, the Commission has not strictly enforced penalty assessments and collections on delinquent businesses. "As a result, the Commission has not only failed to punish noncompliant businesses, but North Carolina schools may have been deprived of millions of dollars of needed funds," the report says.

It notes in fiscal 2011 the Commission assessed $79,025 in penalties of which it collected $59,925. In May 2012, the Commission changed its procedures and began assessing penalties as soon as a potential uninsured case was identified by its claims department. As a result of the operational change, assessed penalties increased to $6.5 million (8,125% increase) in state fiscal year 2012.

"Nothing prevented the Commission from operating that way in the past," the auditor reported. However, the Commission has collected only 2% of the assessments. In contrast, Florida collected 31% of the $40 million it assessed, Utah collected 40% of $5.9 million, Wisconsin collected 48% of $4.6 million, and South Carolina collected 75% of the $2.8 million it assessed.

The Commission says it has stepped up enforcement, but notes a portion of the $6.5 million mentioned in the audit is not final because of appeals by employers. The agency adds in many cases enforcement has been put on hold pending an employers’ agreement to pay compensation due the injured worker. Under North Carolina statute, the Commission may suspend collection of penalties if the employer pays due compensation.

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