The state auditor says Illinois hands out workers' compensation payments too easily and lacks enough employees to spot fraud.
Auditor General William Holland's report Wednesday recommends that lawmakers make further improvements to the troubled workers' comp program.
Holland found compensation for on-the-job injuries was made without medical evidence. Some benefits were paid where no request had been made.
The state paid $295 million from 2007 to 2010.
The audit determined that adjustors reviewing claims had caseloads of 1,500 each, although the industry recommends no more than 250. It also founds the state had no way to identify fraud by analyzing statistics.
Illinois lawmakers overhauled the process last year after reports about exorbitant payouts and other problems.