Report No. 2010-99
August 2010
Complete Audit Report

Findings in the audit of the Department of Insurance, Financial Institutions and Professional Registration-Insurance

Surplus Lines
The Department of Insurance, Financial Institutions and Professional Registration (DIFP)-Insurance does not have policies and procedures for tracking or assessing penalties on late filings for insurance policies issued during each quarter. The DIFP-Insurance compares quarterly reports on surplus lines insurance policies issued to annual reports to ensure premium taxes have been paid. Although the DIFP-Insurance has procedures in place to ensure annual reports are submitted, similar procedures to track the submission of quarterly reports have not been established. As a result, the DIFP-Insurance is unable to determine the extent late filings occurred and whether related interest and penalties are due. State law allows the DIFP-Insurance to assess fines up to $1,000 for each offense. However, no fines or penalties were assessed for late filings for policies issued during our audit period.

Examination Tax Credit
Missouri is one of only five states to allow insurance companies to receive tax credits for examination costs, resulting in a significant portion of examination costs being shifted from insurance companies to the state General Revenue Fund. State law allows all insurance companies to deduct the entire cost of examinations from premium taxes paid to the state and deposited into the state General Revenue Fund. Additionally, this statute allows insurance companies to carry forward these credits for 5 years. For tax years 2009 and 2008, examination tax credits claimed were approximately $1.6 and $2.2 million, respectively.

Cash Management
The DIFP-Insurance does not have adequate procedures to ensure minimal time elapses between the receipt of federal grant monies and the distribution of such grant monies to the contractor. During our review of the 21 reimbursements requested during the years audited, we noted 2 reimbursements totaling $290,035 were received and held for more than 2 business days before the related payment was made to the contractor. According to the grant agreement, grant payments are made by the Federal Payment Management System (PMS) in accordance with Department of Treasury and OMB requirements and are required to follow the Department of Health and Human Services Grants Policy Statement. This policy statement requires all funds to be fully disbursed by the close of the following business day after receipt of the funds and requires undisbursed federal funds to be returned to the PMS immediately.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov