Citizens Property Insurance says it will change travel and expense procedures, and in some cases already has, to more closely resemble stricter guidelines in place for state government employees in response to a review that found “excessive spending” by company officials traveling for work, reports David Royse of the News Service of Florida.
A state review of Citizens Property’s travel found in January that company officials appeared to generally follow Citizens rules, but that those rules aren’t stringent enough to prevent “excessive spending.”
The company’s response to the review, released Friday, said changes already had been made in many cases and in other cases will be, though the company also defended some individual examples of questionable expenses, by at least saying that they were within the company’s guidelines for travel at the time.
The review of the company’s travel expenditures during the first eight months of last year was requested by Gov. Rick Scott after reports surfaced in the media of lavish spending by top company officials traveling on company time. Citizens is a state-backed insurance company required to provide property coverage in areas where Florida residents historically haven’t been able to get affordable coverage. While it doesn’t directly get state money, if it can’t pay claims, it would be backed by the state through an assessment on other policy holders – which many lawmakers say is basically a tax.
The review, conducted by Chief Inspector General Melinda Miguel, recommended that Citizens change its travel policies to match the law that applies to state employees, which Citizens CEO Barry Gilway said this week the company will move toward.
“Although, as your report notes, Citizens has not in the past been required to follow state expense and travel guidelines, I appreciate the consideration that as an organization closely aligned to the state with the ability to levy taxes on Floridians in the form of premium assessments, Citizens has a responsibility to hold itself to the most rigorous fiscal standards,” Gilway wrote in a response dated Wednesday to the IG’s review. “Citizens therefore will implement changes to our travel and expense procedures that will more closely mirror the travel guidelines followed by Florida’s state agencies.”
The company also announced Friday that it will change its procedures for purchasing to match those adhered to by state agencies “as part of its ongoing effort to increase fiscal prudence and accountability.”
“Clarifying and strengthening our internal procurement procedures will be the first of many concrete improvements made as Citizens lives up to its commitment to hold itself to the highest levels of financial and ethical integrity,” Gilway said in a statement released by the insurer.
Florida Chief Financial Officer Jeff Atwater said the changes agreed to by the company would help the company regain the confidence of policyholders and the public.
“Citizens has taken the appropriate action by complying with the more stringent laws and rules that govern purchasing at state agencies,” Atwater said. “It is the expectation of thousands of policyholders and all residents of this state that this public entity would be as thoughtful and careful with the hard-earned dollars of Floridians as any other public entity.”
But the questions about travel have drawn the most attention.
In all, during the eight months reviewed by the inspector general’s office, top employees at the company spent more than $1.3 million on travel, with car expenses and hotels making up the bulk of the spending. The report noted a number of instances of questionable decisions on spending money while traveling.
It also noted lax policies, such as setting no guidelines for what constitutes an appropriate or reasonable lodging expense, for example.
Citizens changed some of its travel policies back in October of 2012, and in some cases those changes addressed concerns raised in the review. Citizens said in its response on Friday that it has put limits on lodging costs, for employees, for example, although not for board members. And all out-of-state travel now requires written pre-approval from the president or his designee, Citizens noted. In-state travel also requires verbal approval from a management employee.
Citizens also defended some individual expenditures questioned by reviewers – saying essentially that amounts spent on some trips don’t tell the whole story. For example, sometimes officials choose hotels that may be more expensive than others, but it’s sometimes done to avoid having to spend an extra night travelling, for example.
Citizens officials also noted that international travel sometimes comes with high costs that are hard to avoid. In response to reviewers’ highlighting of an instance where the company’s chief financial officer spent $236 for a hotel room in Zurich, Switzerland – a generally standard amount for business hotels in that city – but got the room only for a few hours during the day, appearing to not even need an overnight room. The company said the CFO had flown overnight to Zurich and was leaving later in the day after a meeting. But after the overnight flight, the CFO needed to “rest, shower and freshen up” before the meeting – and didn’t need the hotel for another night because she was leaving on a flight later that day for London.
Another statement from Citizens trying to explain other expenses points to the high cost of staying at hotels in the business world in which Citizens operates.
After being questioned on why Chief Financial Officer Sharon Binnun upgraded a $459 a night room at a hotel in Bermuda to a $633 a night room, the company noted that the brokers Binnun was meeting with were staying there and the meetings were in that hotel. The room rate was average for that location. And, the company said, had the upgrade not happened, the charges would have been almost essentially the same.
Without the upgrade, she would have had to pay for Internet, printing costs in the business center and “breakfast would have been $45 a day,” the company said in its response to the review.
The inspector general reviewed expense reports for travel and related expenses for the company’s eight board members and other current and former senior managers and other employees from Jan. 1, 2012 to Aug. 31, 2012.