Citizens Property Insurance Audit Committee Accepts Organizational Changes Related to Office of Corporate Integrity, Office of Internal Audit 2013 Budget

Nov 16, 2012


Citizens Property Insurance Corporation’s (“Citizens”) Office of Corporate Integrity (“OCI”) was disbanded in mid-October 2012 after an internal review revealed that department’s internal practices that were “more reactive than proactive,” with its employees focused mostly on workplace complaints and staff grievances instead of actual fraud.  Sometimes as long as two years was spent on a single investigation, according to a report by Citizens Office of the Internal Auditor (“OIA”).

Those findings are some of the operational issues highlighted in a report Citizens Chief of Internal Audit Joe Martins presented today, November 16, 2012, to Citizens’ Audit Committee (“Committee”).  The reported outlined reasons for the highly publicized internal organizational changes at Citizens.  It also recommended actions to be taken.

To view the meeting materials, click here.

Citizens President and CEO Barry Gilway said the review indicated that many internal problems at Citizens were due to a lack of policies, procedures and consistency across the organization.  Measures are underway to correct those issues, he said.

“There was a decision on the part of our Human Resources head and the head of Administration to resign from the organization,” Mr. Gilway noted.  “That was one move. The second move related to an organizational design shift.”

He said the head of Citizens’ Human Resources, once replaced, will report directly to him.  An offer will be made to a new Human Resources executive by Monday.

Additionally, Citizens has hired an outside firm to do a complete assessment of Human Resources’ policies and procedures.

“We have not waited until this report for the Audit Committee,” Mr. Gilway stated.  “We made several significant organizational changes.  We have moved forward in terms of an organizational design study.”

Mr. Gilway said it is evident Citizens needs “clear and succinct” policies and procedures to form the basis for management decisions.

Mr. Martins outlined the OIA report, explaining its findings and the proposed changes to correct any problems.

According to the report:

  • The OCI focused completely on investigating complaints reported through Citizens’ internal Hotline, Human Resources Management, or directly. If an incident was not reported, it was not considered for investigation.
  • Without restriction, the OCI selected which cases it chose to investigate, because the investigation and disposition policies and procedures were unclear.
  • An analysis of 42 cases investigated by the OCI between 2010 and 2012 showed that only three were substantiated and none of these resulted in disciplinary action.
  • OCI employees had no exposure to the implementation of proactive fraud management processes.

As a result of the findings, it was determined that Citizens must develop a fully-fledged forensic and fraud management capability, Mr. Martins explained.  The OCI was subsequently disbanded and efforts are underway to recruit forensic accountants and auditors.

Mr. Martins noted that Mike Regan from Accretive Solutions was named Acting Audit Director-Forensics and began work on November 13, 2012.   Mr. Regan will work toward developing and implementing a proactive and reactive fraud response plan, as well as developing policies and procedures for forensics investigations.  He also will create a transition plan for the incoming Audit Director.

Mr. Martins summarized key 2013 budget changes for the OIA, noting an increase from $1,193,886 in 2012 to $2,002,192 in 2013 due to allowances made for the hiring of qualified forensic auditors.

Committee members unanimously voted to approval the organizational changes and the proposed 2013 OIA budget.

In other business, Mr. Martins summarized the findings of a recent internal investigation into an anonymous complaint received through the “Tell Citizens” hotline related to the mishandlings of investigations, the mishandling of discipline and the mishandling of Citizens’ funds.

The internal investigation focused on 27 historical complaints dating from June 2008 to December 2011, logged in though the “Tell Citizens” hotline.  Five of the complaints were scrutinized in further detail after an initial review, Mr. Martins explained.  Those cases contained allegations of inappropriate behavior, falsification or destruction of information and sexual harassment, he noted.

A summary of the investigation findings follows:

Mismanagement of Investigations

  • A level of favoritism was found towards personnel in the Human Capital Management in that their own staff was treated differently than those in other departments.
  • Improper oversight and inadequate focus led to inconsistent treatment or partially completed investigation results.
  • Not all cases are reported and tracked despite the “Tell Citizens” hotline; the complaint reporting policy and procedure provides inconsistent avenues toward complaint management.
  • Guidance is unclear with respect to where the responsibility for investigation lies.

Result:  Policies and procedures are being developed to ensure a clear segregation between intake, investigation and conclusion in relation to complaints.

Mismanagement of Discipline

  • Management and execution of discipline within Citizens is inconsistent.  A “Determination Committee,” which determined the nature of discipline in matters of misconduct, was disbanded in February 2012.

Result:  A formal discipline policy and procedure will be developed and implemented to ensure consistency.

Mismanagement of Citizens’ Funds

  • Differences in payment schedules, calculations, settlement language regarding taxes and deductions, and payout of sick leave exist.

Result:  A formalized severance pay policy and procedure will be developed and implemented to ensure consistency.

Committee members lauded the work of the OIA and unanimously accepted the investigative reports.

With no further business before the Committee, the meeting was adjourned.


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