Maryland Automobile Insurance Fund

Transcription

1 Audit Report Maryland Automobile Insurance Fund January 2003

2 This report and any related follow-up correspondence are available to the public. Alternate formats may also be requested by contacting the Office of Legislative Audits as indicated at the bottom of the next page or through the Maryland Relay Service at Please address specific inquiries regarding this report to the Audit Manager listed on the inside back cover by telephone at (410) Electronic copies of our audit reports can be viewed or downloaded from the Internet via The Department of Legislative Services Office of the Executive Director, 90 State Circle, Annapolis, Maryland can also assist you in obtaining copies of our reports and related correspondence. The Department may be contacted by telephone at (410) or (301)

3 January 13, 2003 Delegate Van T. Mitchell, Co-Chair, Joint Audit Committee Senator Nathaniel J. McFadden, Co-Chair, Joint Audit Committee Members of Joint Audit Committee Annapolis, Maryland Ladies and Gentlemen: We have audited the Maryland Automobile Insurance Fund for the period beginning April 13, 2000 and ending August 11, Our audit did not disclose any findings. Respectfully submitted, Bruce A. Myers, CPA Legislative Auditor

4 (This Page Intentionally Left Blank) 2

5 Agency Responsibilities Background Information The Fund, which consists of an Insured and an Uninsured Division, operates under the provisions of Title 20 of the Insurance Article of the Annotated Code of Maryland. The Insured Division s purpose is to provide automobile liability and property damage insurance coverage on personal and, to a lesser extent, commercial vehicles to Maryland residents who are unable to obtain coverage from private insurance carriers. The Uninsured Division is responsible for paying claims to eligible uninsured victims of traffic accidents caused by operators of uninsured or unidentified vehicles, provided that the victim does not have recourse through an insurance policy which would cover any related loss. Current Status of Findings from Preceding Audit Report Our audit included a review to determine the current status of the fiscal/compliance finding included in our preceding audit report dated August 8, We determined that the Fund satisfactorily addressed that item. Audit Scope, Objectives and Methodology We have audited the Maryland Automobile Insurance Fund for the period beginning April 13, 2000 and ending August 11, The audit was conducted in accordance with generally accepted government auditing standards. As prescribed by the State Government Article, Section of the Annotated Code of Maryland, the objectives of this audit were to examine the Fund s financial transactions, records and internal control, and to evaluate its compliance with applicable State laws, rules and regulations. We also determined the current status of the finding contained in our preceding audit report. In planning and conducting our audit, we focused on the major financial related areas of operations based on assessments of materiality and risk. Our audit procedures included inquiries of appropriate personnel, inspection of documents and records, and observation of the Fund s operations. We also tested transactions and performed other auditing procedures that we considered necessary to achieve our objectives. 3

6 The Fund s management is responsible for establishing and maintaining effective internal control. Internal control is a process designed to provide reasonable assurance that objectives pertaining to the reliability of financial records, effectiveness and efficiency of operations including safeguarding of assets, and compliance with applicable laws, rules and regulations are achieved. Because of inherent limitations in internal control, errors or fraud may nevertheless occur and not be detected. Also, projections of any evaluation of internal control to future periods are subject to the risk that conditions may change or compliance with policies and procedures may deteriorate. Our audit did not include a review of the Fund s claims processing procedures, including related information technology systems, and tests of claims payments. In this regard, the Fund engaged an independent accounting firm to audit the statutory-basis financial statements of the Insured Division for the calendar years 2000 and In the related audit reports, the firm stated that the financial statements presented fairly, in all material respects, the financial position of the Insured Division as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting practices prescribed or permitted by the Maryland Insurance Administration. In addition, the Fund engaged the same accounting firm to audit the financial statements of the Uninsured Division for the calendar years 2000 and In the related audit reports, the firm stated that the financial statements presented fairly, in all material respects, the financial position of the Uninsured Division as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our reports are designed to assist the Maryland General Assembly in exercising its legislative oversight function and to provide constructive recommendations for improving State operations. As a result, our reports generally do not address activities we reviewed that are functioning properly. 4

7 AUDIT TEAM Peter J. Klemans, CPA Audit Manager Heather A. Warriner Senior Auditor Joseph E. Walzog Staff Auditor