The accounting problem arose when the city paid Gallagher the fixed commission for insurance and not commission based on the actual premium for the insurance, he explained. Mr. Woods said that the city received a non-itemized bill from the broker and was not aware what the actual cost of the insurance was.

A similar situation arose in Lakeland, Fla., where Kevin Cook, the director of communications there, said the city received a check for more than $1 million covering a period from 1994 to the present.

Officials, who were at first astonished that they were getting a refund check for that amount, subsequently requested a meeting with Gallagher representatives to audit the books. Since that audit, Mr. Cook said the city requested more than $93,000 in overcharges and interest in addition to the $1 million Gallagher already paid.

He said the insurance covered a variety of placements throughout the city.

A third municipality, Alachua County, was reportedly given a check for $117,000 for overpayments.

David L. Marcus, vice president, Southeast region manager for Gallagher out of Boca Raton, Fla., said that the broker discovered the discrepancies after an internal audit. The audit was not related to the contingency fee scandal that has hit the industry, he said.

The audit, he said, found that one account executive did not follow the terms of the contract with the three municipalities. The account executive, whom he did not identify, has been terminated "and has nothing to do with Gallagher," said Mr. Marcus.

He said the firm has reported the incident to Florida authorities and is checking other accounts to make sure there were not additional overcharges elsewhere.

Mr. Marcus said Gallagher, after reviewing Lakeland's calculations, recently agreed to pay the city the additional monies it requested, calling it "fair." He added that the broker has not closed its books to Gainesville or Alachua, and will cooperate with any requests for audits either city has.

"We are trying to do the right thing," Mr. Marcus said. "We feel as though we have done the right thing with the client. If they feel we should do something additional, we will look at those requests, and if it makes sense, and it is reasonable, we will deal with it in the right and proper way."

Mr. Woods said while Gainesville's city staff knew of the payments and were working with Gallagher to review the payments, they failed to inform the city's governing body until weeks after the check was received. The city commissioners learned of the payment after a new contract for insurance was approved for Gallagher.

Since then, Gainesville has reported the incident to the State Attorney's Office. Mr. Woods said the city is not alleging any illegality on the part of Gallagher, but the city felt it had to protect itself and report the matter.

Both municipalities are now requiring itemized insurance bills before payments are made and fixed fee payments.

Bob Lotane, a spokesman with Florida's Department of Financial Services, said the department is looking into the payments, but he could not provide additional information on the investigation.