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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.
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