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

 

 

 

This Report Digest is also available on

the worldwide web at

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

 

 

SYNOPSIS

  • The Illinois Grain Insurance Corporation (Corporation) did not record amounts due from the Illinois Grain Indemnity Trust Fund for reimbursement of claims paid.
  • The Corporation did not provide for an independent review of adjusting journal entries posted to the general ledger.
  • The Corporation did not have a written policy and procedures manual.
  • The Corporation filed an inaccurate locally held funds accounting report with the Illinois Office of the Comptroller.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{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 Ė beginning of year

Add: New dealers

Less: Closed or insolvent dealers

Active dealers Ė 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 Corporationís 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 Treasurerís 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 Corporationís 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 Corporationís 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:

    • A clearly defined hierarchy of personnel that includes specific positions and specific duties within those positions.
    • A clearly defined set of procedures, including the specific procedures in such areas as billing, cash receipts and accounts receivable; disbursements and accounts payable; and the general ledger. (Finding 4, page 13)

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 Corporationís 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 Departmentís 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.

 

AUDITORSí OPINION

Our auditors state the Illinois Grain Insurance Corporationís 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.