REPORT DIGEST

 

ILLINOIS GRAIN INSURANCE CORPORATION

 

FINANCIAL AUDIT

AND

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2005

 

Summary of Findings:

 

Total this audit                          3

Total last audit                          7

Repeated from last audit           1

 

Release Date:

 May 18, 2006

 

 

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 TTY (888) 261-2887

 

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

 

 

SYNOPSIS

 

¨      The Illinois Grain Insurance Corporation (Corporation) did not prepare its financial statements in accordance with generally accepted accounting principles.

¨      The Corporation had not established the $2,000,000 Grain Insurance Reserve Fund as required by the Grain Code.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the reverse page.}

 


 

ILLINOIS GRAIN INSURANCE CORPORATION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

FOR THE TWO YEARS ENDED JUNE 30, 2005

 

 

FINANCIAL ACTIVITY

FY 2005

FY 2004

FY 2003

Expenditures/Expenses:

        Environmental and Business Regulation

 

         $67,000

 

                     

     $    43,000

                     

                 

   $816,000

                 

Program Revenues:

        Charges for Services.............................

        Claims and Recovery............................

            Total Program Revenue....................

 

            Net Program Expense......................

General Revenues:

        Interest and Investment Income.............

 

Change in Net Assets...............................

 

      2,401,000

             4,000

      2,405,000

 

      2,338,000

 

           46,000

 

      2,384,000

 

      2,137,000

         289,000

      2,426,000

 

      2,383,000

 

           13,000

 

      2,396,000

 

     912,000

  1,302,000

  2,214,000

 

  1,398,000

 

       13,000

 

  1,411,000

 

Net Assets (Deficit), Beginning of the Year...

 

        (166,000)

 

     (2,562,000)

 

(3,973,000)

 

Net Assets (Deficit), End of the Year......

 

    $2,218,000

 

     $ (166,000)

 

$(2,562,000)

Cash and Cash Equivalents............................

Due from Primary Government and Other .....

Total Assets..................................................

Due to Primary Government...........................

Net Assets (Deficit)....................................

    $1,230,000

         988,000

      2,218,000

                     -

    $2,218,000

    $1,330,000

 ____504,000

      1,834,000

    _2,000,000

     $ (166,000)

$1,155,000

  __283,000

    1,438,000

_ 4,000,000

$(2,562,000)

 

SCHEDULE OF GRAIN DEALERS (UNAUDITED)

FY 2005

FY 2004

FY 2003

Active dealers – beginning of year...................

Add:  New dealers.........................................

Less:  Closed or insolvent dealers...................

Active dealers – end of year...........................

                399

                  20

                 (34)

                385

                414

                  13

                 (28)

                399

            440

                6

             (32)

            414

 

CORPORATION PRESIDENT

During Audit Period:  Charles Hartke

Currently:  Charles Hartke


 

 

 

 

 

 

 

 

 

 

 

 

 

Audit adjustments were necessary to record $127,000 in deferred revenue in fiscal year 2004 and $447,000 in fiscal year 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$2,000,000 Grain Insurance Reserve Fund not established as of the end of our fieldwork on December 9, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Illinois Office of the Comptroller indicated to the Corporation that existing language must be amended in order to make the necessary transfer

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

FINANCIAL STATEMENTS NOT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

      The Illinois Grain Insurance Corporation did not prepare its financial statements in accordance with generally accepted accounting principles. 

 

      Audit adjusting journal entries were required to the Corporation’s financial statements in fiscal year 2004, to reverse the fiscal year 2003 deferred revenue for $100,000, record the fiscal year 2004 deferred revenue for $127,000 and to adjust amounts due from the Grain Indemnity Trust Fund for $77,000.  In fiscal year 2005, audit adjustments were required to reverse fiscal year 2004 deferred revenue of $127,000, record current fiscal year deferral of $447,000, and adjust Due from Indemnity Trust for $2,000.

 

      Department personnel stated that the lack of adjustment for unearned revenue was an oversight.  Department officials stated they implemented the prior year’s finding regarding recorded amounts due from the Grain Indemnity Trust Fund in fiscal year 2005.  They were not able to make the adjustments to the fiscal year 2004 financial statements due to a conversion of their accounting record to an automated system.  

 

      Complete and accurate financial statements are critical to effective oversight and management of Corporation operations. (Finding 1, page 11)

 

      We recommend that Department of Agriculture personnel seek additional training on accounting principles related to revenue recognition to ensure that the Illinois Grain Insurance Corporation’s financial statements are prepared in accordance with generally accepted accounting principles.

 

      Department officials agreed with our recommendation and stated that they would reiterate the policy and procedure to ensure all necessary adjustments are estimated and recorded in accordance with generally accepted accounting principles.

 

GRAIN INSURANCE RESERVE FUND NOT ESTABLISHED

 

      The Illinois Grain Insurance Corporation had not established the $2,000,000 Grain Insurance Reserve Fund as required by the Grain Code.

 

      On April 5, 2005 the Corporation remitted the $4,000,000 balance due to the General Revenue Fund that was borrowed prior to June 30, 2003.  As of the end of our examination fieldwork on December 9, 2005, the Corporation had not established the $2,000,000 Grain Insurance Reserve Fund required by the Grain Code. 

 

      The Grain Code (240 ILCS 40/30-25) states, “Upon payment in full of all money that has been transferred to the (Grain Insurance) Fund prior to June 30, 2003 from the General Revenue Fund…the State of Illinois shall remit $2,000,000 to the Corporation to be held in a separate and discrete account …”    “The remittance of the $2,000,000 reserve shall be made to the (Illinois Grain) Corporation within 60 days of payment in full of all the money transferred to the (Grain Insurance) Fund as set forth above in this Section 30-25.”

 

      Department personnel stated that the Corporation has not received the $2,000,000 from the State and has therefore not set up the Reserve Fund.

 

      Failure to establish the Grain Insurance Reserve Fund decreases the insurance reserves the legislature mandated by State law to further insure grain farmers from the potential losses of failed grain warehouses and dealers.    (Finding 2, page 12)

 

      We recommended the Corporation request the $2,000,000 reserve from the State of Illinois to establish the Grain Insurance Reserve Fund.

 

      Agency officials agreed with our recommendation and indicated that they have established the fund, but have been informed by the Illinois Office of the Comptroller that existing language must be amended in order to make the necessary transfer to the Illinois Grain Insurance Corporation.  The agency will seek legislative change to ensure compliance with this requirement.

 

OTHER FINDING

 

      The remaining finding is less significant and is reportedly being given attention by the Corporation.  We will review progress toward implementing this recommendation in our next audit. 

 

 

AUDITORS’ OPINION

 

      Our auditors state the Illinois Grain Insurance Corporation’s financial statements for the years ended

June 30, 2005 and June 30, 2004 were fairly presented in all material respects.

 

 

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGM:JAF:pp

 

SPECIAL ASSISTANT AUDITORS

 

      McGladrey & Pullen LLP was our special assistant auditors for this audit and examination.