Audit points out insurer’s defects

• By TED GRIGGS
• Advocate business writer
• Published: Dec 30, 2008 - Page: 1A - UPDATED: 12:05 a.m.

• Print
• Email
• Save
• Reprints
• Twitter
• Share

• Del.icio.us
• Digg
• Facebook
• Reddit
• 

An independent auditor’s report on Louisiana Citizens Property Insurance Corp.’s 2006 financial statements further emphasized the extent of problems uncovered in previous reports by the state Legislative Auditor’s Office.

Among other things, the accounting firm of LaPorte, Sehrt, Romig and Hand identified four contracts with costs ranging from $130,000 to $6 million but no evidence Citizens’ board had authorized the contracts. The contracts were executed by the Property Insurance Association of Louisiana, which was hired to administer Citizens’ operations.

The audit identified a number of “significant deficiencies,” or problems so great that they hampered Citizens’ ability to “initiate, authorize, record, process or report” financial information reliably. The problems, in most cases, were due to a lack of board oversight, the audit says.

The deficiencies at the state’s insurer of last resort have been addressed by Citizens’ new management, which has put in place a number of procedures to prevent the previous miscues from recurring.

For example, the auditors found that the Property Insurance Association billed Citizens for payments to apartment complexes for rent, furniture, cable, cleaning services and utilities. However, the records did not contain enough information to determine the nature of these expenses, the audit says.

Citizens chief executive officer John Wortman said the insurer is now in the process of going through these types of expenses with the association. In the instances where Citizens was improperly billed, it is asking the association to return those payments, Wortman said.

Wortman said the apartment rentals are definitely an area Citizens will pursue.

In the meantime, Wortman said most of the findings of the LaPorte audit had been pointed out by previous state Legislative Auditor reports.

“We’re happy that those are behind us,” Wortman said. “We have put controls in place, and we believe today that those deficiencies have been addressed.”

For example, in one response to the LaPorte audit, Citizens said it now requires the appropriate level of management approval for expenses. In addition, the person who authorized the services and who pays the invoices are no longer one and the same.

Joy Irwin, assistant legislative auditor and director of the Advisory Services Division, said the Legislative Auditor does not comment on independent auditors’ findings.

John Murray, of LaPorte, also said the firm declined to comment on the audit findings.

Other problems, which also turned up in the state Legislative Auditor’s reports, included:

• Reimbursement requests by association employees frequently lacked any supporting documentation, the audit shows. One employee turned in an expense under the heading “Mardi Gras.” It was one of several expense requests that appeared unrelated to business.
• Mileage reimbursement requests contained only amounts, not mileage logs or other details.“One trip contained 596 miles for a one-way trip to Baton Rouge but did not disclose where the trip departed from or the nature of business,” the audit says.
• Meals were another problem area, the audit says. The auditors considered at least nine bills “excessive.” Auditors found per-person costs for meals ranging from $40 to $117. There were also per-diem payments to workers who did not stay overnight during travel, the audit shows.
• Auditors were unable to determine how much of the personnel expenses the Property Insurance Association charged Citizens related to the insurer’s actual operations. “No time or other detail was evident,” the audit says.

Louisiana Citizens Property Insurance Corp.’s former chief executive officer, Terry Lisotta, was indicted earlier this month on 14 counts of theft involving money allegedly used for trips, football tickets and meals between 2003 and 2006.David Courcelle, who represents Lisotta, has said Lisotta’s expenses were monitored and approved by Citizens’ board. He said Lisotta is innocent and is being used as a scapegoat for Citizens’ financial problems and that Lisotta will fight the allegations cited in the indictment.