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SALT LAKE CITY — Board members for a little-known local governments' insurance co-op treated themselves at taxpayer expense to high-end restaurants, fancy hotels, golf and major league baseball games, a new state audit shows.
A state auditor's office investigation released Wednesday found the Utah Local Governments Trust fostered a "culture of excess" with spending that mostly benefits board members, many of whom are elected officials, rather than the communities they serve.
"This is some of the most egregious excess from a board level that we've seen in quite a while," said Utah State Auditor John Dougall.
In addition, the trust’s CEO, Steven Hansen, made $432,231 in salary and benefits last year, which is 86 percent higher than the average pay in similar entities and about 130 percent higher than the Utah Division of Risk Management director, according to the audit.
The trust was formed in 1974 in response to commercial markets refusing to insure, or charging exorbitant amounts to insure, governmental agencies. It is not an insurance company, but it serves a similar purpose. About 526 Utah cities, counties and special service districts participate in the pool rather than buy insurance through private markets.
Mayors, a city council member, a county commissioner and other local government managers make up the trust's 10-member board of directors.
Auditors looked at the board activities for 2014 and 2015. Extravagant spending includes:
• $2,118 for nine rooms at the Grand America hotel, $1,274 for 23 meals for board members, employees and spouses and $145 on parking for a Christmas party.
• $430 for four board members, two spouses, and the CEO to golf during a Park City retreat.
• $382 on tickets for a pro baseball game and $300 on concessions during a conference in San Diego.
• $1,664 on dinner at Ruth's Chris Steak House for 14 board members, trust employees and six spouses.
• $2,270 on five iPads for new board members.
Dougall said he couldn't speak to the board's spending prior to 2014 but "anecdotally what I'm told by the board chair is this had just kind of become tradition."
"We've heard what the audit said and we've pared back We've made changes to some of those things," Hansen said, noting the trust has worked with auditors the past 14 months.
In a written response, board chairman and Price Mayor Joe Piccolo said the trust agrees that some board expenses can and should be minimized or avoided. Meals and lodging would be limited to newly adopted per diem rates, and spouses' expenses would no long be covered.
Piccolo took issue with the report saying the CEO is overpaid.
Hansen, who was hired in 2010, continues to exceed the board's annual performance standards, Piccolo wrote. The board, he said, doesn't believe the job is comparable to the state's risk management director and the salary is in line with similar government risk pools.
"We believe that the CEO’s performance speaks to the incredible value he has brought to the trust," according to Piccolo.
The trust flies under the radar because some policy members aren't even aware it exists, Dougall said.
"There are certain benefits to the concept, but when you lack visibility, you can engage in certain practices which, in this case, seem to reward yourself and your board members rather than really focusing on how to provide the lowest cost, best value to the public," he said.
Dougall said by drawing attention to the trust, he hopes local governments will begin to hold it accountable. He said they could do that by shopping around for insurance products to get the best value, something few entities do.
"Even though the trust doesn't hold their members captive, their members for all intents and purposes don't go out for competitive bids," he said.
Hansen said the trust runs one of the most successful insurance pools with one of the lowest expense ratios in the country, better than its competitors, the nation's top 25 carriers and other governmental pools.
Because of the way the trust works with its members and focuses on cutting costs, it has returned $6.5 million to them the past five years, he said, adding the pool has a 99 percent member retention rate.
"You've literally got hundreds and thousands of eyes — attorneys, accountants, council people, mayors, executive staffs — looking at our proposals and selecting the trust as their partner," Hansen said.
