Audit report, state of Georgia, Department of Insurance, year ended June 30, 1995

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STATE OF GEORGIA DEPARTMENT OF AUDITS
254 WASHINGTON STREET ATLANTA. GEORGIA 30334

AUDIT REPORT STATE OF GEORGIA DEPARTMENT OF INSURANCE YEAR ENDED JUNE 30, 1995

DEPARTMENT OF INSURANCE - TABLE OF CONTENTS -

Page

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

EXIIlBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET (STATUTORY BASIS)

ALL FUND TYPES AND ACCOUNT GROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCES

(STATUTORY BASIS)

GOVERNMENTAL FUND TYPES

5

C STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

BUDGET FUND

6

D STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES

COMPARED TO BUDGET

BUDGET FUND

8

E STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS

STATE REVENUE COLLECTIONS FUND

9

F NOTES TO THE FINANCIAL STATEMENTS

10

SUPPLEMENTARY INFORMATION

G COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES

FIDUCIARY FUND TYPE - AGENCY FUNDS

26

SCHEDULES

1 SCHEDULE OF APPROVED BUDGET

27

2 CASH AND CASH EQUIVALENTS

28

3 INVESTMENTS

29

4 SCHEDULE OF FEDERAL REVENUES

30

5 SCHEDULE OF OTHER OPERATING EXPENSES

31

6 RECONCILIATION OF TRAVEL

32

7 SUMMARY OF SALARIES, TRAVEL, AND PER DIEM AND FEES

33

DEPARTMENT OF INSURANCE - TABLE OF CONTENTS -
SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS

SECTION I FINANCIAL

CLAUDE L. VICKERS
STATE AUDITOR (404) 656-2174

DEPARTMENT OF AUDITS
254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400
January 25, 1996

Honorable Zell Miller, Governor Members of the General Assembly of Georgia Honorable John W. Oxendine, Commissioner Department ofInsurance
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through F) ofthe Department of Insurance as of and for the year ended June 30, 1995. These financial statements are the responsibility of the Department's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, these financial statements were prepared on a prescribed basis of accounting that demonstrates compliance with the budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position (statutory basis) ofthe Department ofInsurance as of June 30, 1995, and the results of its operations (statutory basis) for the year then ended, on the basis of accounting described in Note 1.
Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information (Exhibit G and Schedules 1 through 7) is presented for purposes of additional analysis and is not a required part of the financial statements of the Department of Insurance.

95ARL-1

Such infonnation has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~~~
Claude L. Vickers State Auditor
CLV:gp
95ARL-1

FINANCIAL STATEMENTS - 1-

DEPARTMENT OF INSURANCE COMBINED BALANCE SHEET (STATUTORY BASIS)
ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 1995

ASSETS
Cash and Casfl Equivalents (See Schedule)
lnvestn ients (See Schedule)
Accounts Receivable State Appropriation
Federal Financial Assistance
Prepaid Items Fixed Assets
Equipment
Amount to be Provided for Payment of Accrued Compensated Absences
Total Assets

GOVERNMENTAL FUND TYPES

STATE

REVENUE

BUDGET

COLLECTIONS

FIDUCIARY FUND TYPE
AGENCY

$

93,692.35 $

$

876,520.54

169,571.19

$ 1,046,091.73

$

0.00

0.00 $

2,498,114.91

$ 191,012,918.23

$ 1,139,784.08 s _ _ _ _ _o_.oo_ s 193,511,033.14

LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accounts Payable Payroll Withholdings Funds Held for Others Compensated Absences
Total Liabilities
Fund Equity Investment in General Fixed Assets Fund Balances Reserved State Revenue Collections Fund Unreserved
Designated
Surplus Deficit
Total Fund Equity

$

$

478,355.54

1,278.34

$

479,633.88 $

173.64 $ 193,511,033.14
173.64 $ 193,511,033.14

$

$

660,150.20

$

660,150.20 $

0.00
-173.64 -173.64

Total Liabilities and Fund Equity

$

The notes to the financial statements are an integral part of this statement. -2-

1,139,784.oa s _ _ _ _ _o_.oo_ s 193,511,033.14

EXHIBIT"A"

ACCOUNT GROUPS

GENERAL

GENERAL

FIXED

LONG-TERM

ASSETS

DEBT

TOTALS

(Memorandum Only)

JUNE 30, 1995

JUNE 30,1994

$

2,591,807.26 $

3,472,992.91

$

191,012,918.23 $ 192,517,009.69

$

876,520.54 $

24,779.42

169,571.19

71,987.50

$

1,046,091.73 $

96,766.92

$

0.00 $

21,329.17

$ 1,267,853.61

$

1,267,853.61 $

1,043,428.57

$ 830,225.47 $

830,225.47 $

878,424.50

$ 1,267,853.61 $ 830,225.47 $

196,748,896.30 $ 198,029,951.76

$
$ 830,225.47 $ 830,225.47 $

173.64 $ 478,355.54
1,278.34 193,511,033.14
830,225.47

262.00 119,513.97
1,390.00 195,440,619.67
878,424.50

194,821,066.13 $ 196,440,210.14

$ 1,267,853.61

$

1,267,853.61 $

1,043,428.57

0.00

0.00

$ 1,267,853.61

660,150.20 -173.64

546,575.05 -262.00

$

1,927,830.17 $

1,589,741.62

$ 1,267,853.61 $ 830,225.47 $

196,748,896.30 $ 198,029,951.76

-3-

DEPARTMENT OF INSURANCE COMBINED STATEMENT OF CHANGES IN FUND BALANCES {STATUTORY BASIS)
GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30.1995

EXHIBIT"B"

FUND BALANCES - JULY 1
Reserved Unreserved
Designated Surplus
Deficit
ADDITIONS
Adjustments to Prior Year's Accounts Payable C8sh Receipts for the Year
Exhibit "E" Excess of Funds Available over Expenditures
Exhibit c
Prior Year's Checks Voided Reimbursement of Prior Year's Expenditures
DEDUCTIONS
Unreserved Fund Balance (Surplus) Returned to Office of Treasury and Fiscal Services Year Ended June 30, 1993 Year Ended June 30, 1994
Adjustments to Prior Year's Accounts Receivable
cash Disbursements for the Year Exhibit "E"
FUND BALANCES - JUNE 30
(To Exhibit "A")

BUDGET

STATE REVENUE COLLECTIONS

TOTALS

{Memorandum On~

YEAR ENDED

JUNE 301 1995

JUNE 301 1994

$ $ 546,575.05 $ 546,575.05 $

0.00 $
-262.00 -262.00 $

0.00 $

22.918,239.84

546,575.05 -262.00
546,313.05 $

1,505,917.81 0.00
24.424.157.65

$

73,102.96

$

$ 201,192,969.79

586,043.89 1,003.35 0.00

$ 660.150.20 $ 201,192,969.79 $

73,102.96 $
201,192,969.79
586,043.89 1,003.35 0.00
201,853.119.99 $

11,460.11
181,294,386.48
680,884.01 0.00
3,988.00
181,990,718.60

$

0.00

$

546,575.05

0.00

$ 201.192,881.43

$ 546,575.05 $ 201,192,881.43 $

0.00 $ 546,575.05
0.00
201.192,881 .43 201,739,456.48 $

1,505,917.81 0.00
149,757.07
204,212,888.32 205,868,563.20

$ 6601150.20 $

-173.64 $

6591976.56 $

5461313.05

The notes to the financial statements are an integral part of this statement. -5-

DEPARTMENT OF INSURANCE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30, 1995

EXHIBIT"C"

FUNDS AVAILABLE
REVENUES
STATE APPROPRIATION GeneralAppropriation Amended Appropriation
TotalStateAppropriation
FEDERAL REVENUES (See Schedule)
OTHER REVENUES RETAINED Contract Georgia Department of Human Resources Fire Safety Inspections of Health Care Facilities Reimbursements For Per Diem Expenditures Various Receiverships For Salaries Sales Photocopies Rulemaking Mailing List
Total Other Revenues Retained
Total Funds Available

TOTALS

YEAR ENDED

JUNE 301 1995

JUNE 301 1994

$

14,648,410.00 $

455,500.00

$

15,103,910.00 $

$

1.510.855.59 $

14,263,632.00 0.00
14,263,632.00
1.260.290.61

$

38,880.06 $

544,103.85 13,979.10

22,841.22 36,300.00

$

656.104.23 $

29,434.52
241,494.81 526.10
20,263.16 19400.00 311,118.59

$

s _ _ _ 11,210,869.82

15_._835_,04_1._20_

EXPENDITURES
PERSONAL SERVICES
Salaries and Wages Employer's Contributions for:
F.I.CA Retirement Health Insurance Personal Liability Insurance Unemployment Compensation Insurance Workers' Compensation Insurance Assessments by Merit System Drug Teating
REGULAR OPERATING EXPENSES
Motor Vehicle Expenses Supplies and Materials
The notes to the financial statements are an integral part of this statement.
-6-

$

9,390,113.61 $

673,067.08 1,430,831.09 1,152,074.80
28,512.00 12,898.00 131,503.00 27,575.64
276.50

$

12,846,851.72 $

8,798,245.36
632,467.66 1,383, 122.86 1,085,785.41
39,360.00 17,325.00 116,573.00 26,610.70
276.50
12.099,766.49

$

94,679.20 $

374,736.34

112,785.22 391,717.98

DEPARTMENT OF INSURANCE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
BUDGET FUND YEAR ENDED JUNE 30. 1995

EXHIBIT"C"

EXPENDITURES
REGULAR OPERATING EXPENSES
Repairs and Maintenance Rents (Other than Real Estate) Insurance and Bonding Other Operating Expenses (See Schedule) Duplicating and Rapid Copy Publications and Printing
TRAVEL
MOTOR VEHICLE PURCHASES
EQUIPMENT
Equipment Purchases
COMPUTER CHARGES
Other Costs Supplies and Materials Repairs and Maintenance Other Operating Expenses
Software Equipment
Equipment Purchases Per Diem, Fees and Contracts
Per Diem and Fees Computer Billings, DOAS
REAL ESTATE RENTALS
TELECOMMUNICATIONS
PER DIEM, FEES AND CONTRACTS
Per Diem and Fees
Total Expenditures
Excess of Funds Available over Expenditures

TOTALS

YEAR ENDED

JUNE 301 1995

JUNE 301 1994

$

75,178.56 $

5,915.50

36,755.12

107,689.44

22,904.27

101,525.02

$

819.383.45 $

$

361.117.51 $

$

124.599.00 $

$

n.284.92 s

58,126.05 5,053.50 11,747.47
104,425.21 27,254.47 40,068.54
751178.44
3 n1557.90
72.000.00
88181.74

$

347.07 $

4,206.00

0.00

32,368.29

365,894.01

5,185.00 29813n.1s

$

706.3n.53 s

$

799.748.00 $

$

277.911.49 $

1,437.39 6,750.00
30.00 16,529.85
151,103.04
0.00 240.187.29
416,037.57
585.551.25
281.301.11

$

671.552.31 $

$

16,684,825.93 $

5861043.89

482.582.69 15,154,157.19
6801884.01

$

11.210,869.82 s _ _ _15835_.._04_1_.20_

The notes to the financial statements are an integral part of this statement. -7-

DEPARTMENT OF INSURANCE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
YEAR ENDED JUNE 30, 1995

EXHIBIT"D"

FUNDS AVAILABLE
REVENUES
state Appropriation Federal Revenues Other Revenues Retained

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 15,103,910.00 $ 1,255,765.00 6281960.00

15,103,910.00 $ 1,510,855.59 6561104.23

0.00 255,090.59
271144.23

EXPENDITURES
Personal Services Regular Operating Expenses Travel Motor Vehicle Purchases Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts

$ 16,988,635.00 $

--------- 17,270,869.82 $

282,234.82

$ 13,296,352.00 $ 746,138.00 361,560.00 84,000.00 90,750.00 689,494.00 806,814.00 251,433.00 6621094.00

12,846,851.72 $ 819,383.45 361,117.51 124,599.00 77,284.92 706,377.53 799,748.00 277,911.49 671,552.31

449,500.28 -73,245.45
442.49 -40,599.00 13,465.08 -16,883.53
7,066.00 -26,478.49
-9A58.31

Excess of Funds Available over Expenditures

$ 16,988,635.00 $

- - - - - - 16,684,825.93 $

303,809.07

$

586,043.89 $ __,......._s_86,.,o_4_3_.a_9

The notes to the financial statements are an integral part of this statement. -8-

DEPARTMENT OF INSURANCE
STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
STATE REVENUE COLLECTIONS FUND
YEAR ENDED JUNE 30. 1995

EXHIBIT"E"

STATE REVENUE COLLECTIONS
Business Licenses and Regulatory Fees Insurance Agents' Licenses and Examination Fees

Insurance Regulatory Licenses and
Fees
Insurance Company FUing Fees
Insurance Company Licenses Pre-Need Funeral Licences and
Service Fees Miscellaneous Business Licenses
and Regulatory Fees

Industrial Loan Company Licenses and Regulatory Fees Licenses Investigation Fees

Safety Fire Prevention Licenses and Fees carnival and Show Fees Certificate of Competency Fees Certificate of Occupancy Fees Construction Permit Fees Explosive Storage Fees Liquid Petroleum and Gas Fees Mobile Home Dealers' Licenses

Taxes and Other Industrial Loan Company Taxes Industrial Loan Company Tax Penalties

Insurance Premium Taxes

$

Less: Distribution to Counties

and Cities

Insurance Premium Tax Interest Insurance Premium Tax Penalties

Sales and Miscellaneous Administrative Fines Sales of Manuals and Miscellaneous Service Charges for Disc Copies

Settlement Recovery

Total Cash Receipts

CASH AND CASH EQUIVALENTS - JULY 1 1994

CASH RECEIPTS

$

$

1,345,823.00

1,131,586.75

15,675.00

446,085.00

$

528,000.00

26,250.00

$

3,300.00

58,995.69

41,800.00

191,467.83

25,050.00

49,800.00

129,665.00

$ 2,103,051.78 17,852.61 $
381,716,571.31
194,526,435.54 s 1s1,190,135.n
94,872.28 312,338.36

2, 120,904.39 187,597,346.41

$

1,011,835.75

15,710.78

1 666.90

$

6,451,007.29
2,939,169.75 554,250.00
500,078.52
189,718,250.80 1,029,213.43 1 000.00
201,192,969.79 -262.00

$

2011192i707.79

TRANSFERS To Office of Treasury and Fiscal Services
CASH AND CASH EQUIVALENTS - JUNE 30. 1995

DISBURSEMENTS

The nates to the financial statements are an integral part of this statement. -9-

$

201, 192,881.43

-173.64

s _ _ _20_1..,1._1S2;;;;.;?.o..1._1s_

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY The Department of Insurance, an organizational unit ofthe State of Georgia, is part of the executive branch of the government of the State of Georgia. The Department has primary oversight responsibilities for the insurance industry in the State of Georgia. The Department also provides fire safety regulation and instruction
and supervises industrial loan companies opera.ting within the State of Georgia. The Department of Insurance is under the control and management ofthe Commissioner ofInsurance, who is elected by the qualified voters.
The Department ofInsurance does not have authority to determine the amount of funding it will receive from the State of Georgia for any given fiscal year. Such authority is vested in the General Assembly of Georgia. The Department also does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the Department ofInsurance is included within the State of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational and financial relationships with the State ofGeorgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING The Department ofInsurance uses funds and account groups to report on its financial position and the results ofits operations determined in conformity with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia. A fund is an independent fiscal and accounting entity with a self-balancing set of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds are maintained consistent with legal and managerial requirements. Account groups are a reporting device used to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. Funds and account groups presented in the accompanying financial statements are as follows:
GOVERNMENTAL FUND TYPES
BUDGET FUND - The fund used to account for activities and functions as set forth in the Amended Appropriations Act of 1994-1995. The Budget Fund is similar in nature to a General Fund as identified in generally accepted accounting principles in that the Budget Fund is used to account for all activities except those required to be accounted for in some other fund.
STATE REVENUE COLLECTIONS FUND - The fund used to account for the collection of specific revenues ofthe State ofGeorgia as provided by statute or administrative action and the subsequent transfer of such funds to the Office of Treasury and Fiscal Services. This presentation differs from generally accepted accounting principles in that such activity should be included in the General Fund of the governmental organization.

- 10-

DEPARThffiNT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXIIlBIT "F"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
FIDUCIARY FUND TYPE
AGENCY FUNDS - The funds used to account for assets held for use by other funds, governments, or individuals.
ACCOUNT GROUPS
GENERAL FIXED ASSETS - The account group used to account for fixed assets used in governmental .fund type operations. Fixed assets purchased are recorded at cost or at estimated historical cost if historical cost is not practically determinable. Donated fixed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on general fixed assets.
The cost ofnormal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not included in the General Fixed Assets Account Group. Material improvements adding to the value or useful life of the assets are included in the General Fixed Assets Account Group.
GENERAL LONG-TERM DEBT - The account group used to report the noncurrent portions of certain governmental long-term liabilities, such as claims, judgments and compensated absences, which will be paid from future resources.
BASIS OF ACCOUNTING MEASUREMENT FOCUS
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. Governmental funds should be accounted for using the flow of current financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets and unreserved fund balance as a measure of available spendable resources. In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund remits its unreserved fund balance (surplus) to the Office ofTreaswy and Fiscal Services in the subsequent fiscal year.
GOVERNMENTAL FUND TYPES BUDGET FUND
Except as disclosed in the following paragraphs, units of government of the State of Georgia record their Budget Fund revenues and expenditures in accordance with the modified accrual basis of accounting. Under the modified accrual basis ofaccounting, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Revenues that are accrued include primarily State appropriations, Federal grants and entitlements, and certain amounts earned under operating agreements with other parties. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized
- II -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXIIlBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING GOVERNMENTAL FUND TYPES BUDGETFUND
when due, and certain compensated absences, claims and judgements which are recognized when the obligations are expected to be liquidated with expendable available financial resources.
Contractual obligations for services which have not been performed and for goods which have not been delivered at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. This accounting practice causes expenditure-driven grant revenues to be accrued based, in part, on the unexecuted portion of contracts for goods and services. The recognition of encumbrances as expenditures and liabilities is in conformity with accounting practices prescribed or permitted by statutes and regulations ofthe State ofGeorgia, but is not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation of fund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures determined in accordance with generally accepted accounting principles.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances ofthe Budget Fund in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations ofthe State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures.
STATE REVENUE COLLECTIONS FUND The State Revenue Collections Fund is maintained on the Cash Receipts and Disbursements basis of accounting as prescribed or permitted by statutes and regulations of the State of Georgia. This basis of accounting is defined as that method of accounting in which certain revenue and the related assets are
recognized when received rather than when earned, and certain expenses are recognized when paid rather than
when the obligation is incurred. The State Revenue Collections Fund, which should be included in the General Fund in accordance with generally accepted accounting principles, should be maintained on the modified accrual basis of accounting.
FIDUCIARY FUND TYPE AGENCY FUNDS
Agency Funds are custodial in nature and do not measure results of operations or have a measurement focus. The modified accrual basis of accounting is utilized for recognizing assets and liabilities.
BUDGET Appropriation allotments to the Department of Insurance are on the basis of a budget submitted by the Department and approved by the Legislature and the Governor. The budget is adopted on a basis consistent with accounting practices prescribed or permitted by statutes and regulations ofthe State of Georgia and is compiled in the same manner as all State departments. Expenditures are classified by budget unit object classes
- 12-

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXlilBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUDGET as provided in Act No. 1208 of Georgia Laws 1994 (as approved April 18, 1994) and amended by Act No. 6 ofGeorgia Laws 1995 (as approved February 22, 1995), which is an appropriated budget and is referred to in these notes as the Amended Appropriations Act of 1994-1995.

Overexpenditure of a budget unit object class, except for the "common object classes", included in the Department's final amended budget is in violation of Section 80 of the 1994-1995 Amended Appropriations Act. Expenditures ofno more than 102% ofthe stated amount for each common object class are authorized by Section 80. However, the total expenditure for the group of common object classes may not exceed the sum of the stated amounts for the separate object classes of the group. The common object classes include Personal Services, Regular Operating Expenses, Travel, Motor Vehicle Purchases, Equipment, Computer Charges, Real Estate Rentals, Telecommunications and Postage.

A comparison of anticipated funds available and budgeted expenditures to actual funds available and expenditures by object class indicates that the Per Diem, Fees and Contracts object class was overspent by $9,458.31. In addition, expenditures for the following "common object classes" exceeded the authorized expenditure level of 102% of the budgeted amount for each common object class by the amounts identified below:

Regular Operating Expenses

Motor Vehicle Purchases

s===38=9==1"""9"""o. ==o

Computer Charges

$===l3=0==9'='=3==.6'==5

Telecommunications

$==""=21=4""=4==9==8. '==3

CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include demand deposits with banks and other financial institutions and short-term, highly liquid investments with maturities of three months or less from the date of acquisition.

INVESTMENTS Investments are defined as those financial instruments with terms of three months or more from the date of purchase and certain other securities held for the production of revenue. Investments are stated at cost.

INVENTORIES No inventories ofsupplies are reported in the current financial statements. Expendable supplies are recorded as expenditures at the time of purchase.

- 13 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATE:MENTS
JUNE 30, 1995

EXIDBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNRESERVED FUND BALANCE In accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, the Budget Fund's unreserved fund balance is remitted to the Office of Treasury and Fiscal Services in the subsequent fiscal year as surplus. This amount of unexpended general appropriations is available to the State for reappropriation in subsequent years.
COMPENSATED ABSENCES Compensated absences represent obligations of the Department relating to employee's rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulating annual leave in which payment is probable and can be reasonably estimated. No liability has been recorded in the individual funds for the current portion of this obligation as this amount will not be liquidated with expendable available financial resources. Funds are provided in the appropriation of funds each year to the Department to cover the cost of annual leave paid to terminated employees.
The liability for compensated absences at year end is reported in the General Long-Term Debt Account Group for governmental funds.
MEMORANDUM ONLY - TOTAL COLUMNS Total columns on the Combined Statements (Statutory Basis) are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position, results of operations or changes in financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
COMPARATIVE DATA Comparative total data for the prior year have been presented in selected sections of the accompanying financial statements in order to provide an understanding of the changes in the Department's financial position and operations. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the Department's financial position and operations or would cause the statements to be unduly complex and difficult to understand.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds of the State of Georgia cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or ofthe State of Georgia.
- 14 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATE1\1ENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (2) Bonds, bills, certificates ofindebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.

(3) Bonds ofany public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose.

(4) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

(5) Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, and debt obligations issued by the Federal Land Bank, the Federal Home Loan Banlc, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

(6) Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies ofthe State of Georgia the option of exempting demand deposits from the collateral requirements.

CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1995, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk.

Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the Department or by its agent in the Department's name.

Category 2 - Amounts collateralized with securities (at market value) held by the pledging financial institution's trust department or agent in the Department's name.

Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution or by its trust department or agent, but not in the Department's name, and amounts uncollateralized.

Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$265115747 $1150393344 $ 40682975 $1078153586 $ 31556783

- 15 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS

For purposes ofanalysis ofcustodial credit risk, investments consist of U. S. Government securities, Canadian Bonds, and Securities on Deposit. Investments are stated at cost, and are summarized and classified as to custodial credit risk within the categories described below:

Category 1 - Insured or registered, or securities held by the Department or its agent in the Department's name.

Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the Department's name.

Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the Department's name.

Tl]!2 ofInvestment
U. S. Government Securities Canadian Bonds Securities on Deposit
Total

Risk Categories

1

2

3

Carrying Amount

Market Value

$ 100,000.00 $ 10,000.00
s $ 11000000

0.00 $

0.00 $ 100,000.00 $ 100,000.00

10,000.00 Not Available

190,843J94.38 190,843J94.38 204,597,431.28

000 $]20 843J24 38 SJ90 2S3J24 38 $204 ffl.7. 431 28

Securities on Deposit, as reflected on Schedule "3", represent securities held pursuant to statutes which require
licensed insurance companies to establish deposits with the Department of Insurance prior to issuance of a certificate of authority to transact insurance business in the State of Georgia by the Commissioner of Insurance. The purchase and redemption of the securities are the responsibility of the licensed insurance companies. The purchase and redemption of such securities are allowed as long as the required levels of deposits are maintained. The securities are held by an agent in the Department's name.

NOTE 3: CHANGES IN GENERAL FIXED ASSETS

In accordance with the statutory definition of moveable personal property as defined in Official Code of Georgia Annotated Section 50-16-161, only those items with an acquisition cost of$1,000.00 or greater are reflected in the General Fixed Assets Account Group.

The following is a summary of changes of equipment in the General Fixed Assets Account Group during the fiscal year:

- 16 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXIIlBIT "F"

NOTE 3: CHANGES IN GENERAL FIXED ASSETS

Balance July 1, 1994

$ 1,043,428.57

Additions Deductions

479,914.80 255,489.76

Balance June 30, 1995

$ 1,267,853.61

NOTE4: GENERALLONG-TERMDEBT

CHANGES IN GENERAL LONG-TERM DEBT During the year ended June 30, 1995, the following changes occurred in the compensated absences liability reported in the General Long-Term Debt Account Group:

Balance July 1, 1994

$ 878,424.50

Deductions Annual Leave Earned and Utilized (Net) Salaries Salary Related Fringe Benefits

44,773.84 3,425.19

Balance June 30, 1995

$ 830,225.47

NOTE 5: OTHER FINANCIAL NOTES

DEFICIT FUND BALANCE The State Revenue Collections Fund has a deficit fund balance of$173.64 at June 30, 1995. This resulted from the Department of Insurance remitting funds to Office of Treasury and Fiscal Services in excess of collections.

NOTE 6: RISK MANAGEMENT

Public Entity Risk Pool

The State Personnel Board, Merit System of Personnel Administration internally administers for the State of Georgia a program of health benefits for the employees of units ofgovernment of the State of Georgia and units of county government and local education agencies located within the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units of government participating in the plan, and appropriations made by the General Assembly of Georgia. The State Personnel Board, Merit System ofPersonnel Administration has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the State Employees' Health Benefit Plan as established by the State Personnel Board.

- 17 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 6: RISK MANAGEMENT
Other Risk Management
The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS services claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance is purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Department oflnsurance is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the state agencies by DOAS to provide claims servicing and claims payment.
NOTE 7: DEFERRED COMPENSATION PLAN
The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees of the State of Georgia and county health departments, permits such employees to defer a portion oftheir salary until future years. Participation in the plan is optional. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property or rights of the State of Georgia subject only to the claims of the State's general creditors. Participant's rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value of the deferred account of each participant. Financial information relative to the plan is presented in the financial report ofthe State Personnel Board - Merit System ofPersonnel Administration for the year ended June 30, 1995.
NOTE 8: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The Department oflnsurance participates in the Employees' Retirement System of Georgia ("ERS"), a singleemployer, defined benefit plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. The Department's payroll for the year ended June 30, 1995, for employees covered by ERS was $9,149,062.96. The Department's total payroll for all employees was $9,390,113.61.

- 18 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 8: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Benefits The benefit structure of ERS was significantly modified on July l, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.
Members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest eight consecutive calendar qu~ers of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 30 years of service regardless of age.
Contributions Required and Contributions Made Under the old plan, member contributions consist of employee contributions paid by the employee of 1.25% ofannual compensation and 4.75% ofannual compensation paid by the Department on behalf of the employee. Under the new plan, member contributions consist solely of 1.25% of annual compensation paid by employee. The Department also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 1995, the ERS employer contribution rate for the Department amounted to 14.89% of covered payroll and included the 4.75% contributed on behalf of the employee referred to above. Contributions are also made on amounts paid for accumulated leave of retiring employees.
Total contributions to the plan made during fiscal year 1995 amounted to $1,476,576.39, of which $1,362,213.12 was made by the employer and $114,363.27 was made by employees. These contributions met the requirements of the plan.
Funding Status and Progress Pension Benefit Obligation
The amount shown as the "pension benefit obligation" is a standardized disclosure measure of the present value ofpension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status ofERS on the going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among employers. The measure is the actuarial present value of credited projected benefits, and is independent of the funding method used to determine contributions to the plan.
- 19 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXIIlBIT "F"

NOTE 8: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Funding Status and Progress Pension Benefit Obligation
The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1994. Significant actuarial assumptions used in the valuation include the following:

I) The present value offuture pension benefits paid was computed using a discounted rate of 7. 5 percent. This rate is also the same rate assumed to be earned on investments in the plan in future years.

2) Future pension payments reflect the following assumed salary increases as a result of inflation and merit mcreases:

Age 20 25 30 35 40 to 65

Percentage 9.5% 8.5% 6.5% 6.0% 5.7%

3) ERS has the authority to grant cost-of-living adjustments by state statute. As of June 30, 1994, cost-ofliving adjustments have been included in the pension benefit obligation.

The total unfunded pension benefit obligation ofERS as ofJune 30, 1994, was $310,149,000, as follows:

Pension Benefit Obligation:
Retirees and Beneficiaries Currently Receiving Benefits and Terminated Employees Entitled to Benefits but Not Yet Receiving Benefits
Current Employees
Accumulated Contributions
Employer-Financed Vested
Employer-Financed Nonvested
Total Pension Benefit Obligation
Net Assets Available for Benefits
Unfunded Pension Benefit Obligation

$ 2,227,653,000
648,516,000 1,085,190,000 1,206,805,000 $5,168,164,000 4,858,015,000 $ 310,149,000

- 20-

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 8: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Status and Progress Pension Benefit Obligation
The measurement ofthe total pension benefit obligation is based on an actuarial valuation as of June 30, 1994. Net assets available for benefits were valued as of the same date. ERS does not make separate measurements of assets and pension benefit obligation for individual employers.
Funding Policy The ERS funding policy provides for periodic employer contributions at actuarially determined rates that, expressed as percentages ofannual payroll, are sufficient to accumulate sufficient assets to pay benefits when due. Level percentage of payroll employer contribution rates are determined using the entry age funding method. ERS also uses the level percentage of payroll method to amortize the unfunded liability within approximately 20 years following the valuation date.
Total contributions from all employers to ERS for the year ended June 30, 1995, were $256,624,679.00. The Department's contribution was actuarially determined and represented 0.53% of total contributions made by all participating employers.
Significant actuarial assumptions used to compute contributions are the same as those used to compute the standardized measure of pension obligation.
Trend Information Historical trend information is presented in the financial report ofERS for the year ended June 30, 1995. This information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description The Department of Insurance participates in the Georgia Defined Contribution Plan ("GDCP") which is a single-employer defined contribution plan established by the Georgia General Assembly in July 1993 for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Employees' Retirement System Board of Trustees. The Department's payroll for the year ended June 30, 1995, for employees covered by GDCP was $124,469.32. The Department's total payroll for all employees was $9,390,113.61.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board. If a member has less than $ 3,500 credit to his/her account, the Board has the option of requiring a lump sum distribution to the member
- 21 -

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXHIBIT "F"

NOTE 8: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Earnings are credited to each member's account in a manner established by the Board. Upon tennination ofemployment, the amount ofthe member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 1995 amounted to $9,335.28 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 9: LEAVE POLICIES
Employees earn ten hours of sick leave each month with a maximum accumulation of ninety days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
Employees earn annual leave ranging from ten to fourteen hours each month depending upon the employees' length ofcontinuous State service with a maximum accumulation of forty five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. See Note 1 - Compensated Absences.
Certain employees who retire with one hundred and twenty days or more of forfeited annual and sick leave are entitled to additional service credit in the Employees' Retirement System of Georgia.
NOTE 10: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the Department expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the Department of Insurance, if any, are generally considered to be actions against the State of Georgia. Pursuant to the Official Code of Georgia Annotated, the Department ofAdministrative Services maintains a program of purchased insurance and self-insurance which provides coverage for such litigation, claims and assessments. Accordingly, significant litigation, claims and assessments pending against the State ofGeorgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1995.
-22-

DEPARTMENT OF INSURANCE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1995

EXIIlBIT "F"

NOTE 11: BONDING INFORMATION
The Commissioner and all employees of the Department of Insurance are bonded under a Public Employees Blanket Bond written by Employers Insurance of Wausau, their Bond No. 1450-00-110723, on which the premium was paid to October 1, 1995. Under this agreement the Public Employee Dishonesty Coverage insures the Department to a maximum of$1,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees. The Faithful Performance ofDuty Coverage insures the Department to a maximum of $1,000,000.00 against loss sustained from failure of its employees to perform faithfully their duties or to account properly for all monies and property received by virtue oftheir position or employment.
All employees of the Department oflnsurance are also bonded under Commercial Crime Policies written by the United States Fire Insurance Company, their Policy Nos. 626 012292 6 and 626 012294 4, on which premiums were paid to October 1, 1995. Under these additional public employee dishonesty coverages, the policies insure the Department to a maximum of$9,000,000.00 against loss sustained through fraudulent or dishonest acts by its employees.

- 23 -

SUPPLEMENTARY INFORMATION - 25 -

DEPARTMENT OF INSURANCE COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
FIDUCIARY FUND TYPE - AGENCY FUNDS YEAR ENDED JUNE 30, 1995

EXHIBIT"G"

FUND
Receiverships Revenue Collections
Escrow Account Securities on Deposit (1)

ASSETS/ LIABILITIES JULY 11 1994

ADDITIONS

DELETIONS

ASSETS/ LIABILITIES JUNE 30, 1995

$

6,860,201.37 $

751,467.47 $

4,979,080.08 $

2,632,588.76

30,950.00 188,549,468.30

55,500.00 14,466,204.29

51,400.00 12,172,278.21

35,050.00 19018431394.38

$ 195,440,619.67 $ 15,273,171.76 $ 17,202,758.29 $ 193,511,033.14

(1) These investments represent securities held pursuant to statutes which require licensed insurance companies to establish deposits with the Department of Insurance prior to the issuance of a certificate of authority to transact insurance business in the State of Georgia by the Commissioner of Insurance. The purchase and redemption of the securities are the responsibility of the licensed insurance companies. The purchase and redemption of such securities are allowed as long as the required levels of deposits are maintained. The securities are held by an agent in the Department's name.

See notes to the financial statements.

-26-

DEPARTMENT OF INSURANCE SCHEDULE OF APPROVED BUDGET
YEAR ENDED JUNE 30, 1995

SCHEDULE "1"

FUNDS AVAILABLE
REVENUES
State Appropriation Federal Revenues Other Revenues Retained

ORIGINAL

AMENDED

BUDGET

APPROPRIATION APPROPRIATION ADJUSTMENTS

TOTAL

$ 14,648,410.00 $ 1,109,444.00 50,556.00

455,500.00 $

$ 146,321.00 578,404.00

15,103,910.00 1,255,765.00 628,960.00

$ 15,808,410.00 $

455,500.00 $

724,725.00 $ 16,988,635.00

EXPENDITURES
Personal Services Regular Operating Expenses Travel Motor Vehicle Purchases Equipment Computer Charges Real Estate Rentals Telecommunications Per Diem, Fees and Contracts

$ 12,844,345.00 $ 713,762.00 401,560.00 84,000.00 55,750.00 447,756.00 806,814.00 251,433.00 202,990.00

380,000.00 $ 75,500.00

72,007.00 $ 32,376.00 -40,000.00
35,000.00 166,238.00
459,104.00

13,296,352.00 746,138.00 361,560.00 84,000.00 90,750.00 689,494.00 806,814.00 251,433.00 662,094.00

$ 15,808,410.00 $

455,500.00 $

724,725.00 $ 16,988,635.00

See notes to the financial statements.

- 27 -

DEPARTMENT OF INSURANCE CASH AND CASH EQUIVALENTS
JUNE 30, 1995

SCHEDULE "2"

NONINTEREST BEARING ACCOUNTS
Bank South, N.A, Atlanta, Georgia
NationsBank of Georgia, N.A., Atlanta, Georgia
Trust Company Bank, Atlanta, Georgia
Wachovia Bank of Georgia, Atlanta, Georgia

$

61,140.17

5,757.25

26,794.93

34,876.36 $ 128,568.71

INTEREST BEARING ACCOUNTS
Wachovia Bank of Georgia, Atlanta, Georgia
Wachovia Bank of Georgia, Atlanta, Georgia
Certificates of Deposit No. 5571275 Purchase Date: May 30, 1995 No. 6026581 Purchase Date: June 23, 1995 No. 6033614 Purchase Date: May22,1995 No. 6033619 Purchase Date: June 9, 1995 No. 6033673 Purchase Date: June 5, 1995 No: 6033680 Purchase Date: June 16, 1995 No. 6033692 Purchase Date: June 16, 1995 No. 6043232 Purchase Date: June 23, 1995 No. 6043520 Purchase Date: June 2, 1995 No. 6043521 Purchase Date: June 23, 1995

$

Maturity Date: Maturity Date: Maturity Date: Maturity Date: Maturity Date: Maturity Date:

July 3, 1995 July 25, 1995 August 21, 1995 July 11, 1995 July 7, 1995 July 18, 1995

Maturity Date: Maturity Date:

July 18, 1995 July 25, 1995

Maturity Date: July 5, 1995

Maturity Date: July 251995

907,208.74
42,229.44 195,982.92
33,442.17 284,622.23
47,281.17 45,520.00 138,513.89 168,304.23 383,160.29 216,799.83

2,463,064.91

$ 2,591,633.62

See notes to the financial statements.

-28-

DEPARTMENT OF INSURANCE INVESTMENTS JUNE 30, 1995

SCHEDULE "3"

INVESTMENT TYPE
Certificate of Deposit Wachovia Bank of Georgia, Atlanta, Georgia No.5595428
Canadian Bonds No. CCR06146 No. CCR06147
U. S. Treasury Bonds No. 1380L

PURCHASE DATE
April 5, 1995 January 1, 1973 January 1, 1973 August 15, 1991

Securities on Deposit (List on File) (1)

MATURITY DATE

AMOUNT

October 5, 1995
January 1 ,2003 January 1, 2003
August 15, 2000

$

59,523.85

5,000.00 5,000.00

100,000.00

$

169,523.85

190,843,394.38

(1) These investments represent securities held pursuant to statutes which require licensed insurance companies to establish deposits with the Department of Insurance prior to issuance of a certificate of authority to transact insurance business in the State of Georgia by the Commissioner of Insurance. The purchase and redemption of the securities are the responsibility of the licensed insurance companies. The purchase and redemption of such securities are allowed as long as the required levels of deposit are maintained. The securities are held by an agent in the Department's name.

$ 191,012,918.23

See notes to the financial statements.

-29-

DEPARTMENT OF INSURANCE SCHEDULE OF FEDERAL REVENUES
YEAR ENDED JUNE 30, 1995

PROGRAM
Federal Emergency Management Agency National Fire Academy Educational Program Direct
Health and Human Services, U. S. Department of Medicare - Hospital Insurance Through Georgia Department of Human Resources Medical Assistance Program Through Georgia Department of Human Resources
Housing and Urban Development, U. S. Department of Manufactured Home Construction and Safety Standards Direct Through National Conference of States on Building Codes and Standards, Incorporated Through Various Mobile Home Manufacturers

CFDA NUMBER
83.010
93.773 93.778
14.171 14.171 14.171

SCHEDULE "4"

AMOUNT

$

16,490.43

90,846.72 116,640.22

446,321.50
6,707.42 833,849.30

$ 1,510,855.59

See notes to the financial statements.

- 30-

DEPARTMENT OF INSURANCE SCHEDULE OF OTHER OPERATING EXPENSES
YEAR ENDED JUNE 30, 1995
REGULAR OPERATING EXPENSES
Clipping Service Courier Service Financial Character Reference Freight, Express, Storage Internal Revenue Service Penalty Fee Medical Examinations Notary Republic Fees Parking Seminar and Registration Fees Subscription and Dues Tolls Training Translation Expense Veterinary Fees Witness Expense

SCHEDULE "5"

$

1,110.45

4,116.73

275.65

7,815.03

2,066.26

36.00

32.00

1,417.50

32,461.70

36,690.73

290.50

6,060.97

576.20

478.49

14,261.23

$ 107,689.44

See notes to the financial statements.

- 31 -

DEPARTMENT OF INSURANCE RECONCILIATION OF TRAVEL YEAR ENDED JUNE 30, 1995

Total per Annual Supplement

Adjustments Adair, Baker, Bell, Bennett, Brooks, Champlin, Crawley, Cregan, Curtin, Daniels, Deriso, Elder, Fields, Fortson, Free, Garriss, Grant, Guilford, Hadden, Hall, Hodges, Hutcheson, Johnson, Johnson, Manders, Matysiak, McGruder, Murchison, Patterson, Philpot, Pickle, Powell, Pulliam, Rachael, Richardson, Roof, Ryles, Seabolt, Spain, Stewart, Tillman, Waller, Whittle, Wdliams,

GaryV. Morris D. A.O. John R. Meredith C. DannyM. James H. Joseph Kevin F. Felicia T. Richard B. Patricia E. Scott K. Ralph H. Carl S. Marvin D. Fifina V. Gregory Charles A. Joseph A. Richard K. Susan D. HaroldW. Jackie M. Steven Richard J. Jacqueline V. RoyB. Carl A. Mary A. Leslie A. Brenda Robert G. Victor A. Debra L. Donald F. TimC. Lester S. Harry D. Dena F. Samuele. Ernest C., Jr. Lucille E. James

Total per Report See notes to the financial statements.

- 32 -

SCHEDULE "6"

$

360,145.62

12.00 5.00
28.00 5.00
94.00 44.00
5.00 36.00 10.00 7.00
5.00 20.00 42.00
5.00 5.00 15.00 5.00 6.25 5.00 57.14 17.00 31.00 2.50 5.00 27.50 61.00 9.00 20.00 5.00 12.50 17.00 7.50 30.00 27.00 12.00 26.00 63.00 5.00 2.50 60.00 8.00 5.00 105.75 1.25

$ ==36=1=,1=1=7=.5=1

DEPARTMENT OF INSURANCE SUMMARY OF SALARIES, TRAVEL. AND PER DIEM AND FEES
YEAR ENDED JUNE 30, 1995

SCHEDULE "7"

BUDGET FUND
Regular Computer Charges

SALARIES

TRAVEL

PER DIEM AND FEES

$ 9,390,113.61 $

361,117.51 $

671,552.31 5,185.00

$ 9,390,113.61 $ 361,117.51 $ 676,737.31

See notes to the financial statements.

- 33-

SECTION II FINDINGS AND IMPROPER OR QUESTIONED COSTS

DEPARTMENT OF INSURANCE SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS
YEAR ENDED JUNE 30, 1995

STATUS OF PRIOR YEAR FINDINGS AND IMPROPER OR QUESTIONED COSTS

The status of findings disclosed in the report for the year ended June 30, 1994, is summarized below:

Audit Control Number

Status of Findings

408-94-01 408-94-02 408-94-03 408-94-04 408-94-05 408-94-06

Corrective Action Implemented Corrective Action Implemented Corrective Action Implemented Corrective Action Implemented Corrective Action Implemented Corrective Action Implemented

CURRENT YEAR

BUDGET PREPARATION/EXECUTION Overexpenditure ofBudget Unit Object Class Financial Statements Audit Control Number 408-95-01

The total approved budget for the Department of Insurance provided for expenditures totaling $16,988,635.00. A comparison of anticipated funds available and budgeted expenditures to actual funds available and expenditures by object class indicates that the Per Diem, Fees and Contracts object class was overspent by $9,458.31. In addition, expenditures for the following "common object classes" exceeded the authorized expenditure level of 102% of the budgeted amount for each common object class by the amounts identified below:

Regular Operating Expenses

$ 58,322.69

Motor Vehicle Purchases

$ 38,919.00

Computer Charges

$ 3,093.65

Telecommunications

$ 21,449.83

These overexpenditures are in violation of Section 80 of the Amended Appropriations Act of 1994-1995. These overexpenditures were caused by the Department's failure to monitor the expenditure of funds against the budgeted expenditures by object class.

The Department should review its internal control procedures over budget operations, design procedures which would prohibit the expenditure offunds in excess of budget approval, and implement those procedures to strengthen the controls over budget function.

DEPARTMENT OF INSURANCE SCHEDULE OF FINDINGS AND IMPROPER OR QUESTIONED COSTS
YEAR ENDED JUNE 30, 1995
CURRENT YEAR
FEDERAL FINANCIAL REPORTS Reimbursement Requests Do No Agree With Recorded Expenditures Federal Financial Assistance Medicare-Hospital Insurance (CFDA 93.773) Medical Assistance Program (CFDA 93. 778) Audit Control Number 408-95-02
For the year under review, an examination of the Requests for Reimbursement submitted to the Georgia Department of Human Resources, for the Medicare-Hospital Insurance and Medical Assistance Program disclosed that the reports were not supported by the accounting records. The fund source trial balance (FACS report 2411) is the Fiscal Accounting and Control System report which provides revenue and expenditure data for each source of funds received. For the year under review, the FACS report 2411 for fund source 34-32, "Health and Human Services", does not agree with Requests for Reimbursement submitted to the Georgia Department of Human Resources. The Department oflnsurance was unable to reconcile the differences.
These differences were caused by the Department's failure to reconcile the Requests for Reimbursement with the appropriate accounting records before submission.
The Department of Insurance should implement procedures to ensure that Requests for Reimbursement submitted to the Georgia Department ofHuman Resources are accurate and agree with accounting records.