ICBC pledges to cut managers and perks after scathing audit

VANCOUVER (NEWS1130) – ICBC is pledging to cut hundreds of management jobs and eliminate perks after a bruising audit found the Crown corporation is top heavy.

But don’t expect your insurance rates to go down, at least for now.

The review of the public auto insurer found from 2008 to 2011, the pay of senior managers at the public auto insurer rose more than 50%, while lower-level managers and professionals saw less of a hike.

The increase in the number of managers and their hike in pay occurred during the global economic crisis, when the province moved to rein in spending and eliminate costs.

“The combination of more people and higher wages is both unacceptable and something that is going to change, and change very quickly,” says Finance Minister Kevin Falcon.

Falcon claims ICBC has been keeping rates low for years, which may have caused the province not to look more closely at the rising number of managers being hired until now.

“What I saw happening at ICBC is management was being added but you would have no way of really knowing that without going in and doing the kind of digging that was done by the audit team,” he says.

The audit makes 24 recommendations, including slashing management positions and salaries to 2008 levels.

ICBC Board Chair Paul Taylor says they’re already acting on some of them and plan to eliminate almost 200 jobs.

“We are to reduce to, I think, seven people reporting to the CEO,” says Taylor.  “We’ll implement that over the next period of time.  We are also committed to reducing our overall management complement by 135 positions over the next 20 months.”

Taylor says ICBC is being squeezed by lower returns on investments and rising bodily injury claim costs, but is committed to keeping rates low.

“ICBC continues to ensure that insurance rates stay at or below the rate of inflation over time,” he says.

ICBC CEO Jon Schubert has agreed to step down as of November 15th, but will stay on at full pay as an advisor until June 2013.

Union and NDP not impressed

COPE Local 378 Vice President Jeff Gillies says Falcon shouldn’t have needed an audit to tell him ICBC has too many managers making too much money.

“It’s something that could’ve been figured out by taking due diligence in an ICBC board meeting,” Gillies says.  “Another aspect of the review that was unsurprising to us was it conveniently avoided the real cost driver of most insurance policies: the $1.2 billion the Christy Clark government is taking from ICBC. That money is being funneled right into provincial coffers.”

Gillies says managers have enjoyed salary bumps while unionized workers haven’t had a wage hike since 2009.

NDP ICBC Critic Mable Elmore agrees that the BC government should have realized salaries were getting out of control a long time ago.

“I think it’s unbelievable that minister Falcon didn’t know what was going on because for many years the NDP has been saying that they’ve been hiring too many executives and paying them too much,” Elmore says.  “We have certainly known about it, so it’s surprising Mr. Falcon is just learning about it now.”

She says they’ve seen similar trends with other Crown corporations.

Click here to read the full report.

SUMMARY OF RECOMMENDATIONS
1. ICBC and the Province of British Columbia should develop a closer and more consistent relationship to improve oversight of ICBC and ensure alignment of priorities
2. ICBC’s Board should develop clear expectations on cost containment
3. ICBC should develop and implement an overall strategy to more effectively manage bodily injury claims
4. ICBC should review the utilization of internal and external legal resources to maximize cost effectiveness
5. ICBC should reduce total management and confidential staffing to a level more consistent with 2008
6. ICBC should develop action plans, with timelines, for maximizing span of control and reducing management layers across the organization
7. ICBC should reduce total management and confidential compensation to a level more consistent with 2008
8. ICBC should bring their compensation framework more in line with the greater public sector and ensure more consistent compliance with policies
9. ICBC should regularly conduct detailed reviews of the budget to ensure costs are contained and aligned with the Province of British Columbia’s priorities
10. ICBC should strengthen their oversight of the corporation’s expenses to instil a culture of cost containment and financial discipline
11. ICBC should more clearly demonstrate value for money in procurement, using competitive processes whenever possible
12. ICBC should develop relevant key performance indicators to ensure it can appropriately monitor its procurement process and performance
13. ICBC should strengthen the procurement process through the implementation of a vendor complaint and dispute resolution mechanism, and a post-contract evaluation process
14. ICBC should amend their records retention policy to prevent the destruction of documentation for ongoing contracts
15. ICBC should ensure that IT policy and procedures are appropriatelydocumented
16. ICBC should ensure that new disaster recovery plans are developed and tested before the new Transformation Program systems are implemented
17. ICBC should ensure the IT security function has the appropriate reporting relationship and authority in the organization
18. ICBC should prioritize and implement the remaining security initiatives stated in the Technology Alignment Strategy, given the significant risk and impact to the Transformation Program and the new IT environment
19. ICBC should provide interim progress reports to the Province of British Columbia on the costs, scope, benefits, and schedule of each Transformation Program phase, along with any variance explanation
20. ICBC should formally involve the Province of British Columbia with significant IT projects to leverage public sector experience and lessons learned from other large scale initiatives
21. ICBC should ensure that key areas identified in the Transformation Program risk assessments are promptly addressed
22. ICBC should quantify the additional financial benefits to be realized from the Transformation Program
23. ICBC should ensure that comprehensive audits of the Driver Licensing systems are performed regularly, given the sensitivity of the information within the Driver Licensing systems
24. ICBC should place a higher priority on replacing the legacy Driver Licensing systems