It’s been a year and a half since Louisiana’s insurer of last resort last balanced its checkbook, and its computer backup system loses details of records more than two weeks old, the agency’s board has learned.
The Louisiana Citizens Property Insurance Corp. board heard March 22 from a consultant hired after it learned that a breakdown in computerized records has left Citizens and its auditors unable to make a reliable audit or finish financial statements for the past two years.
Some board members asked why they hadn’t been told earlier about the problems, and when they would learn about all of them.
“I feel like a mushroom,” said state Rep. Rick Farrar, D-Pineville, a board member. “I feel like I’ve been kept in the dark and fed mushrooms.”
The board and the Louisiana Department of Insurance had hired with a Texas auditing firm, Bostick Crawford Consulting Group, to deal with the records problem. Billy Bostick said the backup system writes over data more than two weeks old. A new system will be installed to fix that, he said.
Consultants also told the board accounting and banking records did not match because bank statements had not been reconciled – the equivalent of balancing a checkbook.
Officials with the state legislative auditor, which brought the software crisis to light and is investigating the matter, said it was the first time they had heard about the bank account reconciliation problem at Citizens.
Citizens Chief Executive Officer Terry Lisotta reminded Farrar that the board made a business decision after Hurricane Katrina to concentrate on paying claims as quickly as possible. Everything else was put off, he said.
State Treasurer John Kennedy, a Citizens board member, said disruptions from the storm were understandable, but he could not see why the books had been out of kilter for so long.
In the past two weeks a clerical team has been going through Citizens’ records and bringing its bank statements up to date. As of March 22, the bank records had been reconciled through mid-2006 and the rest will be completed within three weeks.
In other action, the Citizens board insisted that Lisotta immediately request money from 26 private insurance companies that they were due to pay as part of their obligation to support the Citizens insurance pool after Hurricane Katrina.
If Citizens runs short of cash to pay claims, as it did after Katrina, all private property insurance companies in Louisiana are assessed amounts in proportion to their size in the market. For the most part those companies charged their customers to pay for the assessment. Those customers can get a state income tax credit for that assessment, under a law passed in December.
The legislative auditor in December delivered a report showing that Citizens had failed to collect $4.8 million from the 26 insurance companies. Citizens staff were aware of the collection gap in late 2005, Lisotta said.
“We made a business decision to put this on hold and take care of this later,” Lisotta said.
Some board members were incredulous that Lisotta still had not gone after the companies for the money. “This is craziness,” Kennedy said.
Last week Insurance Commissioner Jim Donelon started a formal search for a new chief executive for Citizens. He has hired a headhunter and estimates the job could pay $200,000 to $225,000.
The bills for fixing Citizens software and financial problems are growing, with the recent hiring of two firms specializing in software, consulting firms, several law firms, auditors and clerical personnel.
Information from: The Times-Picayune, http://www.timespicayune.com
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