State Senator Mary Lazich (R-New Berlin) represents parts of four counties: Milwaukee, Waukesha, Racine, and Walworth. Her Senate District 28 includes New Berlin, Franklin, Greendale, Hales Corners, Muskego, Waterford, Big Bend, the town of Vernon and parts of Greenfield, East Troy, and Mukwonago. Senator Lazich has been in the Legislature for more than a decade. She considers herself a tireless crusader for lower taxes, reduced spending and smaller government.
For close to 100 years, the Wisconsin State Life Insurance Fund has been offering low-cost individual life insurance to
The Legislative Audit Bureau (LAB) completed a review of the Fund and found internal control weaknesses of concern. The audit focused on the calendar years ending December 31, 2008, 2007, 2006, and 2005.
Financial statements for he Fund are prepared in compliance with provisions required by the National Association of Insurance Commissioners (NAIC). The guidelines, the LAB concedes are complex and the deadline for submitting reports is tight.
Even so, the LAB reports that despite assurances from Fund staff that they would meet accounting and reporting requirements, “they have not done so.” That has resulted in “an increased risk that the Fund’s financial statements contain errors.”
The LAB writes, “During our current audit, we again identified deficiencies in the Fund’s accounting and financial reporting procedures…we again identified significant financial reporting errors that needed to be adjusted to ensure the audited financial statements were fairly presented. For example:
• Investment income was understated by $146,666 for calendar year 2005 and by $200,325 for calendar year 2008 because there was an error in the formula used to prepare the exhibit for net investment income.
• The general expenses account for calendar year 2006 was understated by $53,302 because certain expenses were inadvertently excluded from the electronic spreadsheet used to prepare the exhibit for general expenses.
• The dividends to policyholders account was overstated by $795,852 for calendar year 2008 because staff entered an incorrect amount into the exhibit included in the Annual Statement for dividends.
• The net realized capital gain (loss) account was understated by $755,864 in 2008 because staff improperly reported a loss on an investment in General Motors bonds as an unrealized loss. Because these bonds were assigned an NAIC credit rating of ‘6,’ staff should have reported the decline in value as a realized loss.
We note that while the majority of these errors appear to relate to Fund staff’s incomplete understanding of accounting and financial reporting, the material errors would have been detected through a more thorough review of the Fund’s financial statements.”
The LAB recommends Fund staff take greater care in preparing annual statements.
The audit also uncovered that the Fund’s general ledger cash balance differed from that on WISMART, the state’s central accounting system. As of December 31, 2008, the difference had reached $40, 937. The LAB recommends Fund staff work with the state Department of Administration to rectify the discrepancy and make sure all transactions are recorded correctly.
The LAB also expressed concern about improper access to and use of OCI computer systems
I commend the LAB for another outstanding review. You can read the LAB’s report here.