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Pinellas school district is overpaying insurance consultant, business leaders say

A group of area business leaders who scoured Pinellas County school district finances says the district is overpaying a consultant by at least $750,000, in conflict with its contract.

Irwin Novack, CEO of Kane's Furniture and a member of the Pinellas Education Foundation, reported to Pinellas School Board members this week that the $1.5 million they're paying to Aon Hewitt Consulting for two years of work is twice what they should be paying.

School officials, however, say that while the contract language may be in question, the School Board, the superintendent and Aon, an insurance and benefits consultant, all agreed on what Aon should be paid when its contract was approved May 10, 2011.

Aon serves as a broker that negotiates for better health insurance rates for school district employees. The Pinellas Education Foundation was scrutinizing its contract as part of a larger review to help the district save money.

Aon Hewitt is due $750,000 for the length of its two-year contract, Novack said, since the contract states that the amount was to be paid "for the entire term of this agreement."

Instead, the district is paying annually.

"The payments that are flowing to them are different than what was agreed upon, in our opinion," Novack said.

School officials say that isn't the case.

A memo from former superintendent Julie Janssen to the School Board referred to the contract as having a "$750,000 annual cost." The memo was included in that May 2011 meeting agenda.

"No one can seriously suggest that the board should seek to shirk its contractual obligation and pay less than what the board knows it owes," School Board attorney Jim Robinson wrote in an email to the Tampa Bay Times Friday.

Dick Klima, senior vice president at Aon who is the school district's chief contact, confirmed with the Times Friday that he believes his firm has appropriately received an annual payment of $750,000. By coincidence, Klima is also a member of the Pinellas Education Foundation board of trustees.

On Thursday, the foundation, a business-led nonprofit that raises money for schools, released a 37-page report that details cost-cutting recommendations to save the district millions.

Besides pointing out the contract payment, the foundation report also recommended the board scrutinize the need for the contract, which hasn't been competitively bid since 2006. The contract came before the board in 2011 for ratification because the consultant agreed to lower its fee, which previously was $813,000 a year.

"We believe it is the fiduciary obligation of (the school district) to ensure that (the district's) current consultant is bringing the best service for the most competitive and appropriate cost to the plan participants," the report read.

School Board chairwoman Robin Wikle said after Novack's report that she would be looking more closely at the foundation's claims about Aon.

This is not the first time the Aon contract has come under scrutiny. In 2006, the Times reported that the district had contracted with Aon for two decades without ever putting it out for competitive bid. The arrangement produced millions of dollars annually for the firm, including $2.2 million in commissions from school employee benefits in 2005 alone.

Following the scrutiny, the district rebid the contract, eliminating the ability of the broker to accept commissions on the medical insurance program.

Aon won the contract again.

Still, at the May 2011 meeting of the School Board, board members sounded skeptical that the Aon contract was merited.

Aon's $750,000 fee is paid out of the premiums school employees pay for optional benefits such as dental insurance and disability insurance. The money is deducted from employee paychecks, administrators pointed out, and does not come from the district's operating budget. "The money is coming from somewhere, and I think it's coming from the pocketbooks of our employees," board member Janet Clark said at the time. "I think it's time we said no ... we should be able to negotiate our own insurance policies."

Rebecca Catalanello can be reached at (727) 893-8707 or rcatalanello@tampabay.com.

Pinellas school district is overpaying insurance consultant, business leaders say 04/06/12 [Last modified: Friday, April 6, 2012 11:49pm]
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