REPORT DIGEST
ILLINOIS GRAIN INSURANCE CORPORATION
FINANCIAL AND COMPLIANCE AUDIT For the Two Years Ended: June 30, 2003
Summary of Findings:
Total this audit 7 Total last audit 0 Repeated from last audit 0
Release Date: March 30, 2004
State of Illinois Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
To obtain a copy of the Report contact: Office of the Auditor General Iles Park Plaza 740 E. Ash Street Springfield, IL 62703 (217) 782-6046 or TDD (217) 524-4646
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SYNOPSIS
{Expenditures and Activity Measures are summarized on the reverse page.} |
ILLINOIS GRAIN INSURANCE CORPORATION
FINANCIAL AND COMPLIANCE AUDIT
FOR THE TWO YEARS ENDED JUNE 30, 2003
FINANCIAL ACTIVITY |
FY 2003 |
FY 2002 |
Expenditures/Expenses: Environmental and Business Regulation |
$816,000
|
$9,110,000
|
Program Revenues: Charges for Services Claims and Recovery Total Program Revenue
Net Program Expense
General Revenues: Interest and Investment Income
Change in Net Assets |
912,000 1,302,000 2,214,000
1,398,000
13,000
1,411,000 |
126,000 77,000 203,000
(8,907,000)
100,000
(8,807,000) |
Net Assets (Deficit), Beginning of the Year |
(3,973,000) |
4,834,000 |
Net Assets (Deficit), End of the Year |
$(2,562,000) |
$(3,973,000) |
Cash and Cash Equivalents Due from Primary Government and Other Total Assets Due to Primary Government Net Assets (Deficit) |
$1,155,000 ____283,000 1,438,000 _4,000,000 $(2,562,000) |
$19,000 ____8,000 27,000 _ 4,000,000 $(3,973,000) |
SCHEDULE OF GRAIN DEALERS |
FY 2003 |
FY 2002 |
Active dealers – beginning of year Add: New dealers Less: Closed or insolvent dealers Active dealers – end of year |
440 6 (32) 414 |
458 12 (30) 440 |
CORPORATION PRESIDENT |
During Audit Period: Joseph Hampton (7/1/01 thru 4/28/03); Charles Hartke (5/16/03 thru 6/30/03) Currently: Charles Hartke, Director, Department of Agriculture |
$282,000 in amounts due to the Grain Insurance Fund were not recorded
Adjusting journal entries are not independently reviewed
The Corporation has never had a written policies and procedures manual
License, Fee and Registration receipts were overstated by $76,720 |
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS AMOUNTS DUE FROM TRUST FUND NOT RECORDED The Illinois Grain Insurance Corporation did not record amounts due from the Illinois Grain Indemnity Trust Fund for reimbursement of claims paid. Department of Agriculture management determined there was approximately $282,000 due to the Illinois Grain Insurance Fund for reimbursements payable from the Grain Indemnity Trust Fund. The Illinois Grain Code (240 ILCS 40/25-20 (d) (1)) requires certain proceeds "to be first used to repay the [Illinois Grain Insurance] Fund for moneys transferred to the Trust Account". An adjusting journal entry was required to the Corporation’s financial statements and to record amounts not originally reported on accounting reports submitted to the Illinois State Comptroller. Generally accepted accounting principles require that all assets of the Corporation be accounted for and reported in its financial statements. Department personnel stated that they were not familiar with the accounting principles requiring the use of estimates in the preparation of financial statements and therefore had not calculated and recorded all amounts due from the Illinois Grain Indemnity Trust. We recommended the Department of Agriculture personnel periodically review the status of balances maintained in the Grain Indemnity Trust Fund and report amounts receivable therefrom when appropriate. (Finding 1, page 10) Department officials accepted our recommendation.
INADEQUATE CONTROLS OVER ADJUSTING JOURNAL ENTRIES Adjusting journal entries were used to correct errors that have been previously posted to the assessments receivable journal, to change items previously posted that changed due to billing disputes, or to correct cash balances because of insufficient fund checks, service charges, etc. The same individual who maintains the general ledger records all adjusting journal entries. Although we did not note numerous, unusual or questionable journal entries made during the audit period, an independent review of the adjusting journal entries was not performed. Good internal control procedures require an independent review and approval of all adjusting journal entries by a senior member of the accounting staff. The lack of review and approval of adjusting journal entries increases the risk of errors, omissions and inaccuracies in the general ledger account balances and also increases the risk of loss from fraud or theft. According to Department of Agriculture management, the Corporation was unaware of the control weakness. The Corporation relied on reviews of monthly financial statements by the State Treasurer’s designee as an overall control of entries posted to the general ledger. We recommended the Corporation appoint a senior level accounting or administrative staff person the task of review and subsequently correcting or approving all proposed adjusting journal entries before posting the entries to the general ledger. (Finding 2, page 11) Department officials accepted our recommendation and indicated that they would implement a policy that required all adjusting journal entries be reviewed and authorized by senior accounting or administrative staff prior to execution.
LACK OF WRITTEN POLICIES AND PROCEDURES MANUAL The Corporation has never had a written policies and procedures manual from its inception. Department of Agriculture personnel stated that they previously had considered the Illinois Grain Code to be the Corporation’s policies and procedures manual. The Grain Code, however, does not address procedural and administrative matters and related internal controls. The lack of a policies and procedures manual can create varying degrees of inconsistency within the Corporation’s operation and can make it more difficult to train personnel in their job duties. We recommended the Corporation create a policies and procedures manual. Specifically, the manual should document items such as:
Department officials accepted our recommendation and stated that they previously recognized that written policies and procedures manuals should be developed. Further, they stated this matter would be brought before the Corporation’s board and a policies and procedures manual will be developed.
INACCURATE ACCOUNTING REPORT FILED WITH THE OFFICE OF THE STATE COMPTROLLER The Corporation filed an inaccurate accounting report entitled "Report of Receipts and Disbursements for Locally Held Funds" (Form C-17) with the Illinois Office of the Comptroller. The Form C-17 for the quarter ended June 30, 2002 overstated the amount reported for Licenses, Fees or Registration receipts by $76,720. Statewide Accounting Management System (SAMS) procedure 33.13.10 requires agencies to file quarterly, with the Office of the State Comptroller, a report of their locally held funds receipts and disbursements for the fiscal year to date. The C-17 report is used by the State Comptroller to capture cash receipts and disbursements activity of funds that are not held in the State Treasury. Department of Agriculture management stated that inaccurate receipt information in the Form C-17 resulted from a clerical error in the compilation of the report. We recommended that a senior level fiscal employee independently review and reconcile all reports submitted to the Comptroller to the quarterly financial reports prepared by the Department’s accounting personnel. (Finding 5, page 14) Department officials accepted our recommendation and indicated that they had filed an amended report to correct the overstatement. OTHER FINDINGS The remaining findings are less significant and are reportedly being given attention by the Corporation. We will review progress toward implementing these recommendations in our next audit.
AUDITORS’ OPINION Our auditors state the Illinois Grain Insurance Corporation’s financial statements for the years ended June 30, 2003 and June 30, 2002 were fairly presented in all material respects.
____________________________________ WILLIAM G. HOLLAND, Auditor General WGM:JAF:pp SPECIAL ASSISTANT AUDITORS Our special assistant auditors for this audit were Sleeper, Disbrow, Morrison, Tarro & Lively, LLC. |