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
• Comfort level as an administrator
How many Risk Management
Organizations engage/contract
a separate Independent
Financial Audit of your risk
management activities?
How many internally create
financial information, and as a
component part of the state,
your financials are blended into
the State’s financials?
Is there anyone who does not
create financial statements, nor
obtain an audit of their program
of any type?
How many produce an Annual
Report, either as required by
statute, or simply to inform the
public of your financial
condition?
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
• 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?
• 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)
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.
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
How many prepare a
Comprehensive Annual
Financial Report (CAFR) and
submit it to the Government
Finance Officers Association
(GFOA) for review?
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
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.
LOSS RATIO
Loss Ratio
160%
147%
140%
120%
105%
100%
79%
80% 75%
60%
40%
20%
0%
2002 2003 2004 Industry
EXPENSE RATIO
Expense Ratio
30%
25%
25%
20%
15%
10%
10%
7%
6%
5%
0%
2002 2003 2004 Industry
Combined Ratio
Combined Ratio
180%
160% 153%
140%
120% 112%
100%
100% 89%
80%
60%
40%
20%
0%
2002 2003 2004 Industry
2004 Unpaid claims and claims
adjustment expense
(in thousands)
• Liability • $170,850
• Property • $2,723
• Mine Subsidence • $2,497
• House Bill 601 • $43,258
• Total • $219,328
Claims Dollars Incurred by
Customer Type
Fiscal Years 1987 Through 2004
State Agencies
6% 11% Boards of Education
9% 48% County Commissions
Cities / Towns
8%
18% Other Local Governments
Non Profits
Components of Total Claim Liability by Customer
and Line of Business
20%
1% State Gen. Liab.
SB#3 Gen. Liab.
1%
State Auto
1% 18%
SB#3 Auto
2% State Med Mal
SB#3 Med Mal
23%
24% State Property
7% 3%
SB#3 Property
Mine Subsid.
HB 601
Nominal Ultimate Values
Ultimates
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Ultimate Projections
• 1995 • $36,802,486
• 1996 • $42,693,402
• 1997 • $42,711,737
• 1998 • $41,615,477
• 1999 • $41,020,612
• 2000 • $37,939,062
• 2001 • $35,948,256
• 2002 • $41,331,465
• 2003 • $46,708,337
• 2004 • $61,161,270
• 2005 • $65,484,645
• 2006 • $63,852,757
FY 2006 SB#3 Premiums
13,284,394
15,572,082
5,791,335
5,725,293
5,174,529
Non-Profits
Other local Gov't
Cities
County Comm.
Bd. of Educ.
Unaudited Balance Sheet as of June 30, 2005
Assets
Cash 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
Liabilities
Accounts 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
Unfunded Liability
net asset (deficiency)
UNFUNDED LIABILITY
10,000
-
(10,000) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
(20,000)
Dollars (in (30,000)
thousands) (40,000)
(50,000)
(60,000)
(70,000)
(80,000)
Fiscal Years Ended June 30
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 32,495,020
Tot 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
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 32,495,020
Tot 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