REPORT DIGEST ILLINOIS GRAIN INSURANCE CORPORATION FINANCIAL AUDIT AND COMPLIANCE EXAMINATION For the Two Years Ended: June 30, 2013 Release Date: February 20, 2014 Summary of Findings: Total this audit: 4 Total last audit: 2 Repeated from last audit: 1 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 Full Report are also available on the worldwide web at www.auditor.illinois.gov INTRODUCTION The Illinois Grain Insurance Corporation, a component unit of the State of Illinois, was created for the purpose of providing the economic stability of agriculture by establishing funds to pay grain producers and other claimants for losses incurred by the failure of a grain dealer or warehouseman. Fiscal support to carry out the responsibilities of the Corporation is provided by the Department of Agriculture. SYNOPSIS • The Corporation has not established the $2,000,000 Grain Insurance Reserve Fund as required by the Grain Code. • Weaknesses were noted in the Corporation’s administration of federal licensees’ participation in the Illinois Grain Insurance Fund. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS GRAIN INSURANCE RESERVE FUND NOT FUNDED The Illinois Grain Insurance Corporation has not funded the $2,000,000 Grain Insurance Reserve Fund required by the Grain Code. As of the end of examination fieldwork, the Corporation had not established the $2,000,000 Grain Insurance Reserve Fund. The Corporation’s management indicated the Grain Insurance Reserve Fund was not funded because the funds were not appropriated. Management also indicated they did not request an appropriation in fiscal years 2012 and 2013 because of budgetary constraints on the General Revenue Fund. (Finding 1, page 10) This finding has been repeated since 2005. We recommended the Corporation comply with the law by working with the Office of Management and Budget to obtain the necessary appropriation to fund the Grain Insurance Reserve Fund or seek legislative relief from the statutory requirement. Corporation officials agreed with our recommendation and stated they will address the non-funding of the Grain Insurance Reserve Fund at its annual Board meeting. Based on the recommendations of the Board, funding will again be sought from the Office of Management and Budget or legislative relief will be sought to alleviate the statutory requirement. (For the previous Corporation response, see Digest Footnote #1.) WEAKNESSES IN THE ADMINISTRATION OF FEDERAL LICENSEES’ PARTICIPATION IN THE FUND The Illinois Grain Insurance Corporation had weaknesses in its administration of federal licensees’ participation in the Illinois Grain Insurance Fund (Fund). The Corporation omitted provisions required by 240 ILCS 40/30-10(c)(2) in its cooperative agreements with federally licensed warehouses. None of the Corporation’s existing cooperative agreements contain these provisions. The Corporation’s website listed a federal licensee as participating in the Fund before the licensee had signed a cooperative agreement with the Corporation. The Corporation’s management stated the omission was due to oversight and a clerical error resulted in the website incorrectly indicating participation in the Fund. (Finding 3, pages 13-14) We recommended the Corporation revise its cooperative agreements to include all of the requirements outlined in the Grain Code. We also recommended the Corporation ensure the status of federal licensees doing business in Illinois is displayed accurately on the Corporation’s website. Corporation officials agreed with our recommendation and will revise the cooperation agreements to include all of the requirements outlined in the Grain Code. The Corporation will review the status of federal licensees doing business in Illinois for accuracy on a quarterly basis. OTHER FINDINGS The remaining findings pertain to untimely deposit of cash receipts and failure to include all fees in the Fee Imposition Report. We will follow up on these findings during our next examination of the Illinois Grain Insurance Corporation. AUDITORS’ OPINION Our auditors state the June 30, 2013 and June 30, 2012 financial statements of the Illinois Grain Insurance Corporation are presented fairly in all material respects. WILLIAM G. HOLLAND Auditor General WGH:SKM SPECIAL ASSISTANT AUDITORS Sikich, LLP was our special assistant auditors for this audit and examination. Digest Footnotes #1 GRAIN INSURANCE RESERVE FUND NOT FUNDED 2011: “The Corporation agrees with the finding and will request the appropriation in future budget years.”