full disclosure
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Full Disclosure. Are you treading water, swimming upstream, or are you leading the pack?. Perspective. As a Risk Manager Consultant Re-insurer. Objective/Vision/Mission. Credibility Third-Party review of financial statements Integrity Accountability Challenges - PowerPoint PPT PresentationTRANSCRIPT
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Full Disclosure
Are you treading water, swimming upstream, or
are you leading the pack?
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Perspective
• As a Risk Manager
• Consultant
• Re-insurer
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Objective/Vision/Mission
• Credibility–Third-Party review of financial
statements
• Integrity• Accountability• Challenges• Comfort level as an administrator
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How many Risk Management Organizations engage/contract
a separate Independent Financial Audit of your risk
management activities?
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How many internally create financial information, and as a component part of the state,
your financials are blended into the State’s financials?
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Is there anyone who does not create financial statements, nor obtain an audit of their program
of any type?
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How many produce an Annual Report, either as required by
statute, or simply to inform the public of your financial
condition?
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FULL DISCLOSURE
• Governments have a special responsibility to provide the public with a fair representation of their financial affairs.
• End users of the financial statements are:– Citizens– Members of your pool– Representatives of higher units of government– Bond rating organizations– Creditors/investors
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• How do State Risk Management agencies of government promote full disclosure?
• How do State Risk Management agencies of government provide the public with a fair representation of their financial affairs?
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• Interim (monthly) financial statements
• End of fiscal year financial statements
• End of fiscal year financial statements audited by an independent auditing firm
• Alternatively, third-party financial review with an opinion
• Produce a Comprehensive Annual Financial Report (CAFR)
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Report of Independent Auditors
• Our responsibility is to express an opinion on these financial statements based on our audit.
• To make certain the audited financial statements are free from material misstatements.
• In our opinion, the financial statements present fairly, in all material respects, the financial condition of the organization.
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Independent auditors agreed to do
• Express and opinion on financial statements
• Review required supplementary and other financial information for consistency
• Review CAFR
• Report on compliance on internal controls
• Issue a management letter
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How many prepare a Comprehensive Annual
Financial Report (CAFR) and submit it to the Government Finance Officers Association
(GFOA) for review?
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CAFR publishers
• Unit of government, i.e., – a state; – a risk management agency– County– Municipality– School district
• Public college of university• Public employee retirement system• Governmental investment pool
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Government Finance Officers Association (GFOA)
• GFOA encourages all government units to prepare an easily readable and understandable comprehensive annual financial report.
• CAFR provides reviewers useful information in evaluating the financial condition of a government.
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LOSS RATIO
Loss Ratio
147%
105%
79% 75%
0%
20%
40%
60%
80%
100%
120%
140%
160%
2002 2003 2004 Industry
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EXPENSE RATIO
Expense Ratio
6%7%
10%
25%
0%
5%
10%
15%
20%
25%
30%
2002 2003 2004 Industry
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Combined Ratio
Combined Ratio
153%
112%
89%100%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
2002 2003 2004 Industry
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2004 Unpaid claims and claims adjustment expense
(in thousands)
• Liability
• Property
• Mine Subsidence
• House Bill 601
• Total
• $170,850
• $2,723
• $2,497
• $43,258
• $219,328
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Claims Dollars Incurred by Customer Type
Fiscal Years 1987 Through 2004
48%
18%
8%
9%
6% 11%
State Agencies
Boards of Education
County Commissions
Cities / Towns
Other Local Governments
Non Profits
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Components of Total Claim Liability by Customer and Line of Business
18%
23%
3%7%24%
2%
1%
1%
1%
20%
State Gen. Liab.
SB#3 Gen. Liab.
State Auto
SB#3 Auto
State Med Mal
SB#3 Med Mal
State Property
SB#3 Property
Mine Subsid.
HB 601
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Nominal Ultimate Values
Ultimates
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
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Ultimate Projections
• 1995• 1996• 1997• 1998• 1999• 2000• 2001• 2002• 2003• 2004• 2005• 2006
• $36,802,486• $42,693,402• $42,711,737• $41,615,477• $41,020,612• $37,939,062• $35,948,256• $41,331,465• $46,708,337• $61,161,270• $65,484,645• $63,852,757
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FY 2006 SB#3 Premiums
13,284,394
5,791,335
5,174,5295,725,293
15,572,082
Non-Profits
Other local Gov't
Cities
County Comm.
Bd. of Educ.
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Unaudited Balance Sheet as of June 30, 2005
AssetsCash 55,377,752 Advance deposit w/carrier 41,874,643 Receivables 740,752 Total short term assets 97,993,147
Investments 101,839,637
Total assets 199,832,784
LiabilitiesAccounts payable 955,661 small claims payable 43,297 Agents commissions 2,080,335 Unearned revenue 10,991,091 Current claim reserve 50,361,651 Total short term liabilities 64,432,035
compensated absences 166,553 Noncurrent claim reserve 134,707,393
Total long term liabilities 134,873,946
Total liabilities 199,305,981
Prior yr retained earnings (27,385,950) Transfer to Mutual (4,582,267) Retained earnings 32,495,020 Total retained earnings 526,803
Total liabilities and ret.earn. 199,832,784
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Unfunded Liabilitynet asset (deficiency)
UNFUNDED LIABILITY
(80,000)
(70,000)
(60,000)
(50,000)
(40,000)
(30,000)
(20,000)
(10,000)
-
10,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Fiscal Years Ended June 30
Dollars (in thousands)
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Abbreviated Combined unaudited Balance Sheet at June 30, 2005
Assets State SB #3 Mine Sub HB 601 Total
Total short term 48,319,525 42,882,889 2,076,065 4,714,668 97,993,147
Total long term 56,325,852 25,097,226 20,416,559 101,839,637
Total assets 104,645,377 67,980,115 22,492,624 4,714,668 199,832,784
Liabilities
Total short term 24,368,207 37,135,311 1,694,741 1,233,776 64,432,035
Total long term 73,082,873 58,042,259 1,068,579 2,680,235 134,873,946
Total Liabilities 97,451,080 95,177,570 2,763,320 3,914,011 199,305,981
Prior yr earn (defic) (15,690,572) (29,571,951) 17,356,992 519,580 (27,385,951)Transfer to Mutual (4,582,267) (4,582,267)Ret earn (deficiency) 22,884,868 2,374,496 2,372,312 4,863,344 32,495,020Tot earn (deficiency) 7,194,296 (27,197,455) 19,729,304 800,657 526,802
Tot liab+ret earn(def) 104,645,376 67,980,115 22,492,624 4,714,668 199,832,783
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Abbreviated Combined unaudited Balance Sheet at June 30, 2005
Assets State SB #3 Mine Sub HB 601 Total
Total short term 48,319,525 42,882,889 2,076,065 4,714,668 97,993,147
Total long term 56,325,852 25,097,226 20,416,559 101,839,637
Total assets 104,645,377 67,980,115 22,492,624 4,714,668 199,832,784
Liabilities
Total short term 24,368,207 37,135,311 1,694,741 1,233,776 64,432,035
Total long term 73,082,873 58,042,259 1,068,579 2,680,235 134,873,946
Total Liabilities 97,451,080 95,177,570 2,763,320 3,914,011 199,305,981
Prior yr earn (defic) (15,690,572) (29,571,951) 17,356,992 519,580 (27,385,951)Transfer to Mutual (4,582,267) (4,582,267)Ret earn (deficiency) 22,884,868 2,374,496 2,372,312 4,863,344 32,495,020Tot earn (deficiency) 7,194,296 (27,197,455) 19,729,304 800,657 526,802
Tot liab+ret earn(def) 104,645,376 67,980,115 22,492,624 4,714,668 199,832,783