REPORT DIGEST

 

DEPARTMENT OF INSURANCE

 

FINANCIAL AND COMPLIANCE AUDIT

 

For the Two Years Ended:

June 30, 2003

 

Summary of Findings:

 

Total this audit                        2

Total last audit                        1

Repeated from last audit         0

 

Release Date:

March 4, 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

 

This Report Digest is also available on

the worldwide web at

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

 

 

 

 

SYNOPSIS

 
  • The Department paid costs from an appropriation line item for purposes not stipulated in the appropriation bill.
  • The Department did not transfer funds from the General Revenue Fund to the Insurance Premium Tax Refund Fund as required by the Illinois Insurance Code.

 

 

 

 

 

 

 

 

 

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

 

DEPARTMENT OF INSURANCE

FINANCIAL AND COMPLIANCE AUDIT

For The Two Years Ended June 30, 2003

 

EXPENDITURE STATISTICS

FY 2003

FY 2002

FY 2001

! Total Expenditures (All Funds)

$32,661,109

$33,988,300

$33,998,668

Personal Services

     % of Total Expenditures

     Average No. of Employees

$18,345,343

56.2%

351

$17,986,171

52.9%

382

$16,597,014

48.8%

368

                   Other Payroll Costs (FICA, Retirement)

                         % of Total Expenditures

 

$6,846,598

21.0%

$6,851,491

20.1%

$5,988,273

17.6%

Contractual Services

     % of Total Expenditures

 

$3,138,012

9.6%

 

$3,966,330

11.7%

 

$3,848,256

11.3%

All Other Operations Items

     % of Total Expenditures

 

$1,744,084

5.3%

 

$2,981,618

8.8%

 

$2,299,386

6.8%

REFUNDS TOTAL

% of Total Expenditures

$2,587,072

7.9%

$2,202,690

6.5%

$5,265,739

15.5%

! Cost of Property and Equipment

$5,043,783

$5,258,571

$6,073,009

SELECTED ACTIVITY MEASURES

FY 2003

FY 2002

FY 2001

Financial/Corporate Regulation

! Financial Statement Analysis

 

439

 

470

 

518

! Field Financial Examinations

104

121

111

Consumer Services

! Insurance Agency Examinations

 

363

 

434

 

410

! Closed Complaint Files

18,114

19,633

18,706

! Market Conduct Examinations

39

26

25

Pension Division

! Pension Fund Examinations

 

65

 

42

 

36

AGENCY DIRECTOR(S)

During Audit Period: Nathaniel Shapo (until January 2003), J. Anthony Clark (effective April 2003)
Currently: J. Anthony Clark (resigned effective February 13, 2004)

 

 

 

 

 

 

 

$307,079 of legal fees unrelated to the SHIP paid from the lump sum appropriation for the administration of the SHIP

 

 

 

 

 

 

 

 

$3,384,634 owed to the Insurance Premium Tax Refund Fund from the General Revenue Fund

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

EXPENDITURES NOT IN ACCORDANCE WITH APPROPRIATIONS

The Department expended $307,079 for legal fees from a lump sum appropriation for the administration of the Senior Health Insurance Program (SHIP). The legal fees incurred and expended were in connection with a retaliatory tax lawsuit filed against the Department and was unrelated to the SHIP.

We recommended the Department process expenditures in accordance with the appropriation bill. (Finding 1, page 12)

Department officials stated management at the time believed that the necessary approvals were attained, and the expenditures were made in accordance with legislative intent. Department officials also stated that as of FY04, the Department no longer receives a lump sum appropriation for the administration of the SHIP.

 

FAILURE TO TRANSFER FUNDS REQUIRED BY STATUTORY MANDATE

The Department did not transfer funds from the General Revenue Fund to the Insurance Premium Tax Refund Fund as required by the Illinois Insurance Code. At June 30, 2003, the Premium Tax Refund Fund is owed $3,384,634 from the General Revenue Fund.

Department personnel stated that significant cash balances totaling $2,941,717 remained in the Insurance Premium Tax Refund Fund from transfers made through June 30, 2003, and believed it would not be prudent to transfer unneeded funds from the General Revenue Fund during times of economic hardship. Additionally, in the event the following year refunds are in excess of the funds available, the Department has the statutory authority to issue credits for future tax liabilities.

We recommended the Department either comply with the statute and transfer funds to the Insurance Premium Tax Refund Fund as required, or seek changes to the statutes to provide an alternative funding methodology. (Finding 2, page 13)

Department officials stated they will ensure the deposit of premium tax collections to the Insurance Premium Tax Refund Fund is completed in a manner consistent with statute.

 

AUDITORS’ OPINION

Our auditors report the Department of Insurance’s financial statements of the Security Deposit Fund – 1109, as of and for the years ended June 30, 2003 and 2002 are fairly presented in all material respects.

 

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JSC:pp

SPECIAL ASSISTANT AUDITORS

Sikich Gardner & Co., LLP were our special assistant auditors for this audit.