A Florida chief inspector general report on travel expenses atthe state's last-resort insurer concludes that such expensesincurred by Citizens' board, management and employees — whilecompliant with written policies — are "excessive by statestandards," and recommends that Citizens be required to followstate-travel laws.

The report was undertaken at the request of Governor Rick Scottafter the Miami Herald published an article on Aug. 25,2012 charging that "executives at the state-run company have beenliving large at the same time they are asking hard-pressed Floridaproperty owners to pay more for insurance." The articles citedexamples of executives staying in luxury hotels, eating atexpensive restaurants, and purportedly violating company policy byusing corporate credit cards for personal expenses and to purchasealcoholic beverages. 

The inspector general calls Citizens' travel expense policy"insufficient," stating that two sets of policies — one enacted in2005 for employees and one enacted in 2006 for board members andsenior management — "improperly delegate the responsibility forcontrolling expenditures and maintaining adherence to the policy tothe individual rather than to the individual and management."

Citing further shortcomings, the report says the 2006 policy,while stating that expenses should be reasonable and appropriate,fails to specify conditions for making such a determination.Additionally, an updated policy in 2012 is unclear as to whether itapplies to employees only or also to senior managers. 

The report continues that Citizens also lacks sufficientcontrols to "ensure adequate oversight of travel and travel-relatedexpenses incurred by board members, senior managers and employees."The inspector general says the review determined that Citizens "didnot require sufficient detail to ascertain whether travel orexpense information reported was complete," and that travelers wereallowed to file multiple expense reports for a single trip, "makingit difficult to avoid duplicate charges or detect errors orfraud." 

The report outlines several expenses incurred that fell outsidestate travel laws, but noted that Citizens was not required tofollow such laws. In one example, the report says Citizens'chairman was reimbursed for lodging expenses in Tallahassee thatexceeded the negotiated room rate suggested for employees. "Wefound no explanation or documentation to explain why the higherlodging costs were incurred," the report says.

In an additional example, the report says Citizens' chieffinancial officer incurred expenses to stay in hotels withper-night rates ranging from $289 to $539 — and one expense inZurich, Switzerland of $289 for a six-hour "day use" hotelroom.

In another case, the CFO upgraded a $459 per-night deluxe roomin Bermuda to "gold" status, bumping the rate up to $633 per-nightfor a three-day stay. "We noted the [CFO] checked into the hotel ona Friday for a Monday meeting," the report says, adding there wereno written explanations for the added costs or additionalnights.

The report concludes, "We recommend that Citizens' travelpolicies be updated to reflect [that] state-travel laws apply toboard members, senior managers and all employees. We also recommendthat Citizens enhance their internal controls to address thefindings contained in this report."

In response, Gov. Scott says, "I requested this IG report toensure Citizens is held to the highest standards of accountabilityand transparency, and it is clear from the IG's findings thatCitizens is in urgent need of four reforms."

Listing reforms he wants to see, Scott says, "First, Citizensshould immediately change their travel guidelines to comply withofficial state travel restrictions. Second, Citizens board membersmust immediately change their travel policy to prohibit anyinternational travel. Third, the Citizens travel policy should befurther tightened to only allow essential employees to attend boardmeetings in order to eliminate excessive expenses. Finally, as Ihave previously said, Citizens needs its own independent statutoryIG to enforce existing rules, and the additional reforms it isclear they need to make."

Florida CFO Jeff Atwater adds in a statement, "This culture ofexcess and poor judgment is unacceptable, and Floridians deservebetter. I applaud the work of the governor's inspector general andsupport her recommendations, including implementing the moststringent travel standards."

Citizens' President, CEO and Executive Director BarryGilway released a statement responding to the report. "Wehave reviewed the report's findings and recommendations and agreethat, as guardians of public funds, we must hold ourselves to amore rigorous standard," Gilway says. "Last October, when questionsregarding Citizens employee and board travel expenses first came tolight, I implemented a more stringent travel policy that applies toall Citizens employees and senior management. As recommended in thereport, Citizens will further tighten our policy to better complywith state travel standards and reporting requirements. By actingin the most fiscally prudent manner possible, we hope to beginrestoring the public confidence in our ability to better serve assound financial guardians for our policyholders and all Floridataxpayers."