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NYS Comptroller

THOMAS P. DiNAPOLI

Taxpayers' Guide to State and Local Audits

Department of Financial Services
Costs to Administer the Insurance Division Operations for the Three Fiscal
Years Ended March 31, 2012


Issued: October 09, 2013
Link to full audit report 2013-S-6
Link to 90-day response

Purpose
To determine whether the Department of Financial Services (Department) is reporting its assessable expenses accurately, pursuant to Section 332, Article 3 of the Insurance Law. Our audit covered the period April 1, 2009 through March 31, 2012.

Background
The Department was established with the merger of the former Departments of Insurance and Banking on October 3, 2011. The Department's Insurance Division carries on the core functions of regulating all insurance activities in New York, including life, property/casualty and health insurance. Insurance regulation includes ensuring that the interests of insurance policyholders, providers and producers are balanced. The Department's specific insurance regulatory responsibilities include monitoring the financial solvency of insurers; approving the formation, consolidation or mergers of insurance organizations; and licensing/monitoring agents, brokers and adjusters.

In accordance with Section 332 of the Insurance Law, the costs to administer the Department's Insurance Division are to be borne by the insurance industry via assessments on all domestic insurers and all licensed United States branches of foreign insurers domiciled in New York State. Section 332 requires the State Comptroller to audit the expenses of the Department's Insurance Division. The Insurance Division's recoverable costs are assessed against the insurance industry by prorating costs among insurers based on the dollar value of premiums written in New York State.

Key Findings

  • We found that the Department is reporting its assessable expenses accurately. The funds spent by the Department for the Healthy New York program, postage, and equipment rental were related to Department activities and were adequately documented. The funds spent by the two sub-allocation agencies (Department of Health's Immunization Program and Department of Law's Automobile Insurance Fraud Unit) were related to the purpose of each program as stated in their appropriation documents and were adequately documented.
  • With the merger in 2011-2012, the Department determined that certain operational functions benefit both its Insurance and Banking Divisions, and developed a methodology to allocate these costs. However, the Insurance Division incorrectly applied the percentages for these costs, resulting in $229,662 assessed to the Banking Division that should have been allocated to the Insurance Division. Management intends to correct this understatement of the Insurance Division's costs by adjusting to the current year (2012-2013) assessment.

Key Recommendation

  • Take appropriate steps to correct the $229,662 cost allocation error identified as a result of this audit.

Other Related Audits/Reports of Interest

State Insurance Department: Costs to Administer Department Operations for the Three Fiscal years ended March 31, 2009 (2009-S-85)


State Government Accountability Contact Information:
Audit Director: John Buyce
Phone: (518) 473-4271; Email: StateGovernmentAccountability@osc.state.ny.us
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236