Petroleum Storage Tank Release Indemnity Fund financial statements 2008 2009 |
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C 5600.3 P497r 2008-2009 c.l Petroleum Storage Tank Release Indemnity Fund (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Financial Statements June 30, 2009 and 2008 (With Independent Auditors' Report Thereon) December 15,2009 Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the balance sheet-governmental funds/statement of net assets (cash basis) as of June 30, 2009, of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, and the related statement of revenues, expenditures, and changes in fund balances-governmental funds/statement of activities (cash basis) for the year then ended and have issued our report thereon dated December 15,2009. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 30, 2009. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Indemnity Fund are described in Note 2 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2009. We noted no transactions entered into by the Indemnity Fund during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. 1421 E. 45th Street· Shawnee, OK 74804 P: 405.878.7300 www.finley-cook.com F: 405.878.4780 Significant Audit Findings, Continued Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund December 15,2009 Page -2- Corrected and Uncorrected Misstatements There are no uncorrected financial statement misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated December 15,2009. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Indemnity Fund's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Indemnity Fund's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Required Communication Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund December 15, 2009 Page -3- We as independent auditors are required to: a. Communicate significant deficiencies and material weaknesses in internal control to the audit committee or its equivalent. b. Report directly to the audit committee (or equivalent) any fraud that causes a material misstatement of the financial statement and any fraud involving senior management. Fraud perpetrated by lower-level employees is also to be reported if it resulted in an individually significant misstatement. c. Report illegal acts that come to our attention (except those that are clearly inconsequential). We have nothing to report. This information is intended solely for the use of the Oklahoma Corporation Commission, the Storage Tank Advisory Council, Petroleum Storage Tank Division management, the Office of the Auditor and Inspector of the State of Oklahoma, the Governor, and the Oklahoma Legislature and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, FINLEY & COOK, PLLC CERTIFIED PUBLIC ACCOUNTANTS Nathan Atchison Partner PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Table of Contents CASH BASIS FINANCIAL STATEMENTS Independent Auditors' Report............................................................ 1 Basic Financial Statements Balance Sheets-Governmental Funds/ Statements of Net Assets (Cash Basis) 3 Statements of Revenues, Expenditures, and Changes in Fund Balances-Governmental Funds/ Statements of Activities (Cash Basis)......................................................................................... 4 Notes to Cash Basis Financial Statements 5 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government AuditingStandards _12.. Schedule of Findings and Reponses................................................................................................... 21 Schedule of Prior Year Findings....... 22 r INDEPENDENT AUDITORS' REPORT Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the accompanying cash basis financial statements of the governmental activities and the major fund of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, as of and for the years ended June 30, 2009 and 2008, which collectively comprise the Indemnity Fund's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Petroleum Storage Tank Division's management. Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 2, the financial statements were prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States, and are not intended to present the financial position and results of operations in conformity with accounting principles generally accepted in the United States. As discussed in Note 1, the financial statements of the Indemnity Fund are intended to present the financial position and the changes in financial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund. They do not purport to, and do not, present fairly the financial position of the Petroleum Storage Tank Division ofthe Oklahoma Corporation Commission as of June 30, 2009 and 2008, and the changes in its financial position for the years then ended, in conformity with accounting principles generally accepted in the United States. In our opinion, the fmancial statements referred to above present fairly, in all material respects, the respective cash basis financial position ofthe governmental activities and the major fund of the Indemnity Fund as of June 30, 2009 and 2008, and the respective changes in cash basis financial position thereoffor the years then ended, on the basis of accounting described in the accompanying notes. (Continued) - 1 - 1421 E. 45th Street· Shawnee, OK 74804 P: 405.878.7300 www.finley-cook.com F: 405.878.4780 INDEPENDENT AUDITORS' REPORT, CONTINUED The Indemnity Fund has not presented management's discussion and analysis or a budget-to-actual comparison that the Governmental Accounting Standards Board has determined are necessary to supplement, although not required to be a part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued a report dated December 15,2009, on our consideration of the Indemnity Fund's internal control over financial reporting and on our tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Shawnee, Oklahoma December 15, 2009 - 2 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) BALANCE SHEETS-GOVERNMENTAL FUNDS/ STATEMENTS OF NET ASSETS (CASH BASIS) June 30,2009 and 2008 2009 2008 General Fund Statement of Net Assets Assets Current assets: Cash and cash equivalents $ 15,363,020 15,363,020 Total assets $ 15,363,020 15,363,020 Liabilities Liabilities $ Fund Balances Reserved for encumbrances Unreserved Total fund balances 15,110,996 252,024 15,363,020 Total liabilities and fund balances $ 15,363,020 Net Assets Unrestricted $ 15,363,020 See Independent Auditors' Report. See accompanying notes to cash basis financial statements. - 3 - General Fund 21,670,478 21,670,478 18,707-,630- 2,962,848 21,670,478 21,670,478 Statement of Net Assets 21,670,478 21,670,478 21,670,478 PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS/ STATEMENTS OF ACTIVITIES (CASH BASIS) Years Ended June 30, 2009 and 2008 2009 2008 General Statement of General Statement of Fund Activities Fund Activities Expenditures/expenses: Claims reimbursement $ 25,419,100 25,419,100 24,180,837 24,180,837 Storage tank inspection and compliance 644,224 644,224 1,876,693 1,876,693 Claims processing 1,347,713 1,347,713 929,865 929,865 Administrative expenses 501,781 501,781 528,077 528,077 Allocation to the Oklahoma Corporation Commission 816,628 816,628 1,052,279 1,052,279 Total expenditures/expenses 28,729,446 28,729,446 28,567,751 28,567,751 ____ Progr~ r~venues: Proceeds from motor fuel tax assessment 21,534,525 21,534,525 22,391,663 22,391,663 Interest income 794,680 794,680 1,287,875 1,287,875 Deductible on claims 87,185 87,185 94,612 94,612 Other income 5,598 5,598 19,499 19,499 Net program revenue 22,421,988 22,421,988 23,793,649 23,793,649 General revenues Changes in fund balances/ net assets (6,307,458) (6,307,458) (4,774,102) (4,774,102) Fund balances/net assets: Beginning of year 21,670,478 21,670,478 26,444,580 26,444,580 End of year $ 15,363,020 15,363,020 21,670,478 21,670,478 See Independent Auditors' Report. See accompanying notes to cash basis financial statements. -4- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS June 30, 2009 and 2008 (1) NATURE OF OPERATIONS AND REPORTING ENTITY Principal Activity The Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund") is administered by the Oklahoma Corporation Commission's (the "Commission") Petroleum Storage Tank Division (the "Division"). The Indemnity Fund was created by a legislative act in 1989 to provide funding for the rehabilitation of polluted sites due to releases of petroleum from storage tank systems into the environment of the state. The Indemnity Fund encourages voluntary corrective action in a manner and to a level of completion that protects the public health, safety, and welfare and minimizes damage to the environment by reimbursing to eligible persons allowable costs incurred for corrective actions to clean up eligible releases. Indemnity Fund monies are also used to pay the salaries of employees of the Compliance and Inspection Department of the Commission who are involved in the regulation of storage tanks pursuant to the Oklahoma Storage Tank Regulation Act. The activities ofthe Indemnity Fund are subject to Title 17, Chapters 14 and 15 of the Oklahoma Statutes Title 17 O.S. 350 et seq., which were last amended by Senate Bill 155, which was effective November 1,2005, and Senate Bi1l1366, which was effective July 1,2006, and House Bill 1423, which was effective July 1,2008. The Indemnity Fund is currently funded by a $0.01 assessment on the sale of each gallon of motor fuel. From July 1, 2004, through January 31, 2006, 25% of the assessment on the sale of each gallon of motor fuel, diesel fuel, and blending materials was allocated to higher education as approved by the Oklahoma Legislature. From February 1,2006, through June 30, 2006, the Indemnity Fund received the full $0.01 assessment. Effective July 1, 2006, the first $1,000,000 received in each fiscal year from the $0.01 assessment on motor fuel, diesel fuel, and blending materials is to be deposited directly into the Commission's revolving fund. Eight percent (8%) of the remainder of the assessment collected during each fiscal year is deposited into the Department of Environmental Quality's revolving fund. The remaining assessment received will be deposited into the Indemnity Fund. Effective July 1,2008, House Bill 1423 amended Title 17, Section 352, by defining the "motor fuel" that the one cent ($0.01) per gallon assessment is based on. The Indemnity Fund was previously funded by a one cent ($0.01) assessment on the sale of each gallon of motor fuel, diesel fuel, and blending materials (as defmed by Title 68, Section 500.3 of the Oklahoma Statutes). House Bill 1423 condensed the wording to only include "motor fuel" as it has the same meaning as "blended fuel" (the words "diesel fuel" and "blending materials" were taken out of the statute). Per Title 68, Section 500.3, blended fuel is defined as "a mixture composed of gasoline or diesel fuel and another liquid, other than a de minimis amount of a product such as carburetor detergent or oxidation inhibitor, that can be used as a fuel in a highway vehicle. This term includes gasohol, ethanol, and fuel grade ethanol." See Independent Auditors' Report. - 5 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (1) NATURE OF OPERATIONS AND REPORTING ENTITY, CONTINUED Principal Activity, Continued House Bill 1423 also authorized Underground Storage Tank Operator Training and authorized either the Storage Tank Regulation Revolving Fund created in Section 315 of Title 17 or the Indemnity Fund to be able to pay for this "training," up to $250,000. In connection with the revenues received by the Indemnity Fund, currently the first $1,000,000 received in each fiscal year from the one cent ($0.01) assessment on motor fuel is to be deposited directly into the Commission's revolving fund. Eight percent (8%) of the remainder of the assessment collected during each fiscal year is to be deposited into the Department of Environmental Quality's revolving fund. Effective July 1,2008, House Bill 1423 now states that ofthe remaining assessment received, $500,000 is to be deposited each month into the Department of Transportation's Weigh Station Improvement revolving fund until a total of$51 ,000,000 is reached. The remaining portion each month will be deposited into the Indemnity Fund. The amount paid to the Department of Transportation' s Weigh Station Improvement revolving fund for the year ended June 30, 2009, was as follows: Cumulative amount to be paid, beginning of year $ Payments during the year 51,000,000 (6,000,000) Cumulative amount to be paid, end of year $ 45,000,000 Funds Included in Presentation For purposes of this report, the Indemnity Fund (Fund 1185F) has been combined with Fund 205, a revolving fund established by the Commission to pay the administrative expenses of the Indemnity Fund utilizing monies transferred from the Indemnity Fund. Financial Reporting Entity The Indemnity Fund is included in the General Fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission. The accompanying financial statements are intended to present only the changes in fmancial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund and not that of the General Fund of the Petroleum Storage Tank Division ofthe Oklahoma Corporation Commission. See Independent Auditors' Report. -6- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity, Continued In accordance with the Governmental Accounting Standards Board, the Indemnity Fund's financial statements should include the operations of all organizations for which the Indemnity Fund has financial accountability. The Indemnity Fund has determined there are no other organizations for which it has financial accountability. Basis of Presentation As further noted below, the financial statements have been prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements-and Management's Discussion andAnalysis-for State and Local Governments (GASB 34), defmesthe accounting principles to be used for the presentation of financial statements of the Indemnity Fund. Government- Wide Financial Statements The statements of net assets and statements of activities display information about the Indemnity Fund as a whole. The Indemnity Fund's activities are all governmental in nature and generally are financed primarily through assessment revenues received. The Indemnity Fund has no business-type activities as defined by GASB 34. Fund Financial Statements Fund financial statements are normally organized into funds, each of which is considered to be a separate accounting entity. A fund is accounted for by providing a separate set of self-balancing accounts which constitute its assets, liabilities, fund equity, revenues, and expenditures/expenses. For the financial statement presentation, the Indemnity Fund has only one fund, which is the General Fund. The General Fund is the operating fund of the Indemnity Fund and is used to account for all activities of the Indemnity Fund. See Independent Auditors' Report. - 7 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Measurement Focus and Basis of Accounting NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded, regardless of the measurement focus applied. On the government-wide statements of net assets and the statements of activities, the Indemnity Fund's activities are presented using the "economic resources" measurement focus as defined below: Measurement Focus • The statements of net assets and the statements of activities utilize an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of changes in net assets and financial positions. All assets and liabilities (whether current or noncurrent) associated with their activities are normally reported. However, due to the presentation of these financial statements on a cash basis, only cash is reported. In the fund financial statements, the "current financial resources" measurement focus is used as defined below: • The General Fund utilizes a "current financial resources" measurement focus. Only current financial assets and liabilities are generally included on the balance sheet. The operating statements present sources and uses of available spendable financial resources during a given period. The fund uses fund balances as the measure of available spendable financial resources at the end of the period, as limited by the use of the cash basis of accounting. Because of the cash basis of accounting, the fund balances total to the cash balance at the end of the year. - 8 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Measurement Focus and Basis of Accounting, Continued Basis of Accounting The accompanying financial statements have been prepared using the cash basis of accounting and are not intended to present the financial position and results of operations in conformity with accounting principles generally accepted in the United States. If the aforementioned financial statements were prepared in accordance with accounting principles generally accepted in the United States, the following changes would be necessary: • The Indemnity Fund would utilize the accrual basis of accounting in the government-wide financial statements and the modified accrual basis of accounting in the fund financial statements. • The Indemnity Fund would capitalize and record on its accrual basis financial statements, at cost, fixed assets (such as land, buildings, furniture, and equipment) and depreciate such assets. • The Indemnity Fund would record liabilities and long-term debt on its accrual basis financial statements. Cash and Cash Equivalents Deposits in OK INVEST (see Note 3) and highly liquid investments with original maturities of 3 months or less are considered to be cash equivalents. Deductibles Eligible claims for reimbursement are subject to a co-payment equal to 1% of the eligible costs, up to a maximum co-payment of $5,000. -9- See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Indemnity Fund Maintenance Level State statute sets forth a maintenance level of cash (presented herein as cash and cash equivalents) for the Indemnity Fund in an amount equal to $5,000,000 plus the previous 6 months' cash disbursements for claim reimbursements. In the event the Indemnity Fund's cash balance falls below this specified maintenance level at any month-end on or before December 31, 2012, the one cent ($0.01) assessment (or applicable portion thereof) is to be deposited into the Indemnity Fund for at least the following 3 calendar months. If the Indemnity Fund's cash balance exceeds the specified maintenance level, the assessment (or applicable portion thereof) is to be deposited into other funds as directed by state statute. Senate Bill 155, which was effective November 1,2005, amended State Statute 17 O.S. 352(7) to define disbursements as funds expended or encumbered for the purpose of calculating the regulatory maintenance level. Encumbrances Monies are encumbered for budgetary purposes as environmental cleanup projects are approved by the Director of the Division. Encumbrances at June 30, 2009 and 2008, were $15,110,996 and $18,707,630, respectively. Advertising Costs All costs associated with advertising are expensed as incurred. Income Taxes The Indemnity Fund is exempt from state and federal income taxes, and accordingly, no provision for income taxes is reflected by the Indemnity Fund. See Independent Auditors' Report. - 10 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (3) CASH AND CASH EQUIVALENTS Cash and cash equivalents of the Indemnity Fund at June 30 consisted of the following: Deposits in OK INVEST $ 15,363,020 21,670,478 OK INVEST is a fund that is managed by the state treasurer on a pooled basis as part of the deposits of the State of Oklahoma and requires that financial institutions deposit collateral securities to secure the deposits of such cash in each institution. The amount of collateral securities to be pledged for the security is established by rules promulgated by the state treasurer. Deposits are invested overnight in repurchase agreements and other various securities. In accordance with the state treasurer's policies, the amount of collateral securities to be pledged by financial institutions through the state treasurer's office are pledged at market value and must be at 110% of value to collateralize the amount on deposit, less any federal insurance coverage. It is the policy of OK INVEST to invest in only securities with a Moody's credit rating of A or higher. The custodial credit risk for deposits is the risk that the Indemnity Fund will not be able to recover deposits that are in the possession of any outside party. Deposits are exposed to custodial credit risk if they are not insured or collateralized. At June 30, 2009 and 2008, all of the Indemnity Fund's deposits were held in other governmental agencies, insured, or fully collateralized. 2009 2008 Third-party claims $ 24,774,841 23,599,665 Settlements 11,797 40,833 Suspicion of releases 632,462 540,339 $ 25,419,100 24,180,837 (4) CLAIMS REIMBURSEMENTS Claims reimbursements for the years ended June 30 consisted of the following: Third-party claims are those claims in which an eligible tank owner has received reimbursement from the Indemnity Fund for allowable cleanup costs incurred. See Independent Auditors' Report. - 11 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Settlements are payments to settle disputed claims for reimbursement (see Note 10). (4) CLAIMS REIMBURSEMENTS, CONTINUED Payments for suspicion of releases are payments to third parties for costs incurred to investigate and assess a site for a confirmed release and to determine whether additional cleanup procedures are necessary. (5) OPERATING EXPENSES Operating expenses at June 30 consisted of the following: 2009 Storage Tank Administrative Claims Inspection and Expenses Processing Compliance Salaries and benefits $ 395,453 761,640 588,311 Professional services 91,577 512,113 51,756 Other 14,751 73,960 4,157 $ 501,781 1,347,713 644,224 2008 Storage Tank Administrative Claims Inspection and Expenses Processing Compliance Salaries and benefits $ 382,617 762,047 1,864,157 Professional services 120,103 41,422 6,433 Other 25,357 126,396 6,103 $ 528,077 929,865 1,876,693 - 12 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED The overhead allocation paid to the Commission is determined by the Comptroller of the Commission. For the years ended June 30, 2009 and 2008, amounts paid included $195,741 and $161,450, respectively, for salaries of personnel in the Office of General Counsel and $620,887 and $890,829, respectively, for other general and administrative expenses of the Commission. (6) ALLOCATION TO THE OKLAHOMA CORPORATION COMMISSION Plan Description (7) RETIREMENT PLAN The Indemnity Fund indirectly contributes to the Oklahoma Public Employees Retirement Plan (the "Retirement Plan"), a cost-sharing, multiple-employer public employee retirement system administered by the Oklahoma Public Employees Retirement System (the "System"). The Retirement Plan provides retirement, disability, and death benefits to plan members and beneficiaries. The benefit provisions are established and may be amended by the Oklahoma Legislature. Title 74 of the Oklahoma Statutes, Sections 901 through 932 and 935, as amended, assigns the authority for management and operation of the Retirement Plan to the Board of Trustees of the System. The System issues a publicly available annual financial report that includes fmancial statements and required supplementary information for the Retirement Plan. That annual report may be obtained by writing to the Oklahoma Public Employees Retirement System, 5801 N. Broadway Extension, Suite 400, Oklahoma City, Oklahoma 73118 or by calling 1-800-733-9008. - 13 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Funding Policy (7) RETIREMENT PLAN, CONTINUED· Retirement Plan members and the Indemnity Fund are required to contribute at a rate set by statute. The contribution requirements of Retirement Plan members and the Indemnity Fund are established and may be amended by the Oklahoma Legislature. The contribution rates are as follows: Fiscal Year 2009 Fiscal Year 2008 State Employees Indemnity Fund All Salary All Salary 3.5% 14.5% State Employees Indemnity Fund All Salary All Salary 3.5% 13.5% Fiscal Year 2007 State Employees Indemnity Fund All Salary All Salary 3.5% 12.5% The Indemnity Fund's contributions to the Retirement Plan for the years ended June 30, 2009, 2008, and 2007, were approximately $261,000, $455,000, and $414,000, respectively, and were equal to its required contributions for each year. Deferred Compensation Plan (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN The State of Oklahoma offers its employees a Deferred Compensation Plan (the "Plan") as authorized by Section 457 of the Internal Revenue Code (IRC), as amended by the Tax Reform Act of 1986, and in accordance with the provisions of Sections 1701 through 1706 of Title 74 of the Oklahoma Statutes. The supervisory authority for the management and operation of the Plan is the Board of Trustees of the Oklahoma Public Employees Retirement System (the "Board"). The Plan is available to all State of Oklahoma employees, as well as any elected officials receiving a salary from the State of Oklahoma. Participants may direct the investment of their contributions in available investment options offered by the Plan. The minimum contribution amount is the equivalent of $25 per month, and participants are immediately 100% vested in their respective accounts. All interest, dividends, and investment fees are allocated to participants' accounts. - 14 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Deferred Compensation Plan, Continued (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN, CONTINUED Participants may defer until future years up to the lesser of 100% of their compensation as defined by Plan documents or the maximum amount allowed each year as determined by the Internal Revenue Service, currently $16,500 for calendar year 2009. The Plan offers a catch-up program to participants, which allows them to defer annually for the 3 years prior to their year of retirement up to twice that plan year's deferral limit. The amount of additional contributions in excess of the normal maximum contributions to the Plan are also limited to contributions for years in which the participant was eligible but did not participate in the Plan or the difference between contributions made and the maximum allowable level. To be eligible for the catch-up program, the participant must be within 3 years of retirement with no reduced benefits. Participants age 50 or older may m~e additional contributions of up to $5,500 annually subject to certain limits. Deferred compensation benefits are paid to participants or beneficiaries upon termination, retirement, death, or unforeseeable emergency. Such benefits are based on a participant's account balance and are disbursed in a lump sum or periodic payments at the option of the participant or beneficiaries in accordance with the Plan's provisions. Effective January 1, 1998, the Board established a Trust and a Trust Fund covering the Plan's assets, pursuant to federal legislation enacted in 1996, requiring public employers to establish such trusts for plans meeting the requirements of Section 457 ofthe IRC no later than January 1, 1999. Under the terms of the Trust, the corpus or income of the Trust Fund may be used only for the exclusive benefit of the Plan's participants and their beneficiaries. Prior to the establishment of the Trust, the Plan's assets were subject to the claims of general creditors of the State of Oklahoma. The Board acts as trustee of the Trust. The participants' accounts are invested in accordance with the investment elections of the participants. The Board is accountable for all deferred compensation received, but has no duty to require any compensation to be deferred or to determine that the amounts received comply with the Plan or to determine that the Trust Fund is adequate to provide the benefits payable pursuant to the Plan. Further information may be obtained from the Oklahoma State Employees Deferred Compensation Plan's audited financial statements for the years ended June 30, 2009 and 2008. The Indemnity Fund believes that it has no liabilities in respect to the Plan. - 15 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Deferred Savings Incentive Plan (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN, CONTINUED Effective January 1, 1998, the State of Oklahoma established the Oklahoma State Employees Deferred Savings Incentive Plan (the "Savings Incentive Plan") as a money purchase pension plan pursuant to IRC Section 401 (a). The Savings Incentive Plan and its related Trust are intended to meet the requirements ofIRC Sections 401 (a) and 501(a). Any qualified participant who is a State of Oklahoma employee that is an active participant in the Oklahoma State Employees Deferred Compensation Plan is eligible for a contribution of the amount determined by the Oklahoma Legislature, currently the equivalent of$25 per month. Participation in the Savings Incentive Plan is automatic in the month of participation in the Plan and is not voluntary. Upon cessation of contributions to the Plan, termination of employment with the State of Oklahoma, retirement, or death, a participant will no longer be eligible for contributions from the State of Oklahoma into the Savings Incentive Plan. Participants are at all times 100% vested in their Savings Incentive Plan account. Participant contributions are not required or permitted. Qualified participants may make rollover contributions to the Savings Incentive Plan, provided such rollover contributions meet applicable requirements of the IRe. Plan participants may direct the investment of the contributions in available investment options offered by the Savings Incentive Plan. All interest, dividends, and investment fees are allocated to the participants' accounts. Savings Incentive Plan benefits are paid to participants or beneficiaries upon termination, retirement, or death. Such benefits are based on a participant's account balance and are disbursed in a lump sum or periodic payments or may be rolled over to a qualified plan at the option of the participant or beneficiaries. (9) OTHER RELATED-PARTY TRANSACTIONS Included in administrative expenses and claims processing are payments to other state agencies for various goods and services totaling $70,022 and $80,136 for the years ended June 30, 2009 and 2008, respectively. - 16 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED The LUST Trust Fund Grant pays for the initial cost of cleaning polluted sites when the tank owner cannot be located, is financially unable, or is unwilling to clean the site. After the site is cleaned, application can be made to the Indemnity Fund on behalf of the LUST Trust Fund Grant to recover those funds spent. Recovered funds are spent by the LUST Trust Fund Grant on other remediation projects. There were no amounts paid during 2009 or 2008 from the Indemnity Fund to the LUST Trust Fund Grant for such sites. (9) OTHER RELATED-PARTY TRANSACTIONS, CONTINUED (10) COMMITMENTS AND CONTINGENCIES During the year ended June 30, 2004, the Indemnity Fund, along with the Division and the Commission, entered into two settlement agreements regarding legal disputes over claim reimbursements filed in previous years. The first settlement with ConocoPhillips was reached on August 21,2003, for $3,600,000 and involved 46 cases for work that was completed between 1991 and 2000. Under this settlement agreement, the Indemnity Fund paid $1,000,000 from September 2003 to June 2004 and paid $125,000 monthly from July 2004 to February 2006, with one final payment of $100,000 in March 2006. The second settlement was reached on November 25,2003, for $4,500,000 and involved 103 cases with 60 different tank owners. Under this settlement, the Indemnity Fund paid $579,230 from January 2004 to June 2004, and paid $150,000 monthly from July 2004 to August 2006, including an additional $20,770 throughout that time. In connection with the ConocoPhillips settlement described above, the Commission, the Commissioners, and certain employees have been named as defendants in litigation, which alleges that the Indemnity Fund has wrongfully paid monies that the claimants were not entitled to receive. This case was brought by taxpayers on behalf of the State of Oklahoma (a "qui tam" action) to recover monies and invoke penalties against the defendants, and asks for damages of $10,800,000. Commission management believes that the purpose of this suit is to recover monies paid pursuant to the settlement and invoke penalties against the defendants. The Commission's response to the qui tam action was to file a declaratory judgment suit, which asked the district court to determine whether the payment of the claims was lawfuL This case was before the Oklahoma Supreme Court, and on August 20,2009, the trial court granted ConocoPhillips' motion for summary judgment on some of the issues in the case. It is believed that when comprehensive motions for summary judgment are presented (likely in late December 2009 or early January 2010), those motions will be favorably received by the trial court. If those motions are denied, the case will likely go to trial sometime in the spring of 20 1o. Similar qui tam litigation was filed on July 7, 2006, on the above-mentioned second settlement. That litigation seeks damages of $13,500,000. The Commission intends to vigorously defend any qui tam actions. At this time, Commission management has not determined the amount of any adjustment that may result from this matter or whether such adjustment, if any, would have a material adverse effect on the Indemnity Fund. See Independent Auditors' Report. - 17 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED During the years ended June 30, 2006 and 2005, there was an investigation being conducted by the State of Oklahoma Attorney General's Office and the Multi-County Grand Jury concerning activities relating to the Indemnity Fund and the Division. This investigation is ongoing and relates to a prior administration. (10) COMMITMENTS AND CONTINGENCIES, CONTINUED (11) SUBSEQUENT EVENTS The Indemnity Fund has evaluated subsequent events through December 15, 2009, which is the date the financial statements were available to be issued. There are no recognized or non-recognized subsequent events included in the financial statements or related notes. See Independent Auditors' Report. - 18 - REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the accompanying cash basis financial statements of the governmental activities and the major fund of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, as of and for the years ended June 30, 2009 and 2008, which collectively comprise the Indemnity Fund's basic financial statements as listed in the table of contents, and have issued our report thereon dated December 15, 2009. Our report included a paragraph noting that the financial statement was prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States, and an explanatory paragraph stating that the basic financial statements of the Indemnity Fund are intended to present the financial position and changes in financial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Indemnity Fund's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Indemnity Fund's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Indemnity Fund's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. (Continued) A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. - 19 - REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, CONTINUED Internal Control Over Financial Reporting, Continued Compliance and Other Matters Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. As part of obtaining reasonable assurance about whether the Indemnity Fund's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Oklahoma Corporation Commission, the Storage Tank Advisory Council, Petroleum Storage Tank Division management, the Office of the Auditor and Inspector of the State of Oklahoma, the Governor, and the Oklahoma Legislature and is not intended to be and should not be used by anyone other than these specified parties. Shawnee, Oklahoma December 15, 2009 - 20- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) SCHEDULE OF FINDINGS AND RESPONSES Year Ended June 30,2009 This Schedule of Findings and Responses includes compliance findings that we believe are reportable in accordance with the reporting criteria set forth in Government Auditing Standards. There were no findings noted during the year ended June 30, 2009. - 21 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) SCHEDULE OF PRIOR YEAR FINDINGS Year Ended June 30, 2009 There were no findings noted during the year ended June 30, 2008. - 22- ·, , MAY 25 lOll
Object Description
Description
Title | Petroleum Storage Tank Release Indemnity Fund financial statements 2008 2009 |
OkDocs Class# | C5600.3 P497r 2008-2009 |
Digital Format | PDF, Adobe Reader required |
ODL electronic copy | Deposited by agency in print; scanned by Oklahoma Department of Libraries 7/2011 |
Rights and Permissions | This Oklahoma state government publication is provided for educational purposes under U.S. copyright law. Other usage requires permission of copyright holders. |
Language | English |
Full text | C 5600.3 P497r 2008-2009 c.l Petroleum Storage Tank Release Indemnity Fund (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Financial Statements June 30, 2009 and 2008 (With Independent Auditors' Report Thereon) December 15,2009 Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the balance sheet-governmental funds/statement of net assets (cash basis) as of June 30, 2009, of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, and the related statement of revenues, expenditures, and changes in fund balances-governmental funds/statement of activities (cash basis) for the year then ended and have issued our report thereon dated December 15,2009. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 30, 2009. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Indemnity Fund are described in Note 2 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2009. We noted no transactions entered into by the Indemnity Fund during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. 1421 E. 45th Street· Shawnee, OK 74804 P: 405.878.7300 www.finley-cook.com F: 405.878.4780 Significant Audit Findings, Continued Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund December 15,2009 Page -2- Corrected and Uncorrected Misstatements There are no uncorrected financial statement misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated December 15,2009. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Indemnity Fund's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Indemnity Fund's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Required Communication Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund December 15, 2009 Page -3- We as independent auditors are required to: a. Communicate significant deficiencies and material weaknesses in internal control to the audit committee or its equivalent. b. Report directly to the audit committee (or equivalent) any fraud that causes a material misstatement of the financial statement and any fraud involving senior management. Fraud perpetrated by lower-level employees is also to be reported if it resulted in an individually significant misstatement. c. Report illegal acts that come to our attention (except those that are clearly inconsequential). We have nothing to report. This information is intended solely for the use of the Oklahoma Corporation Commission, the Storage Tank Advisory Council, Petroleum Storage Tank Division management, the Office of the Auditor and Inspector of the State of Oklahoma, the Governor, and the Oklahoma Legislature and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, FINLEY & COOK, PLLC CERTIFIED PUBLIC ACCOUNTANTS Nathan Atchison Partner PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Table of Contents CASH BASIS FINANCIAL STATEMENTS Independent Auditors' Report............................................................ 1 Basic Financial Statements Balance Sheets-Governmental Funds/ Statements of Net Assets (Cash Basis) 3 Statements of Revenues, Expenditures, and Changes in Fund Balances-Governmental Funds/ Statements of Activities (Cash Basis)......................................................................................... 4 Notes to Cash Basis Financial Statements 5 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government AuditingStandards _12.. Schedule of Findings and Reponses................................................................................................... 21 Schedule of Prior Year Findings....... 22 r INDEPENDENT AUDITORS' REPORT Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the accompanying cash basis financial statements of the governmental activities and the major fund of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, as of and for the years ended June 30, 2009 and 2008, which collectively comprise the Indemnity Fund's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Petroleum Storage Tank Division's management. Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 2, the financial statements were prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States, and are not intended to present the financial position and results of operations in conformity with accounting principles generally accepted in the United States. As discussed in Note 1, the financial statements of the Indemnity Fund are intended to present the financial position and the changes in financial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund. They do not purport to, and do not, present fairly the financial position of the Petroleum Storage Tank Division ofthe Oklahoma Corporation Commission as of June 30, 2009 and 2008, and the changes in its financial position for the years then ended, in conformity with accounting principles generally accepted in the United States. In our opinion, the fmancial statements referred to above present fairly, in all material respects, the respective cash basis financial position ofthe governmental activities and the major fund of the Indemnity Fund as of June 30, 2009 and 2008, and the respective changes in cash basis financial position thereoffor the years then ended, on the basis of accounting described in the accompanying notes. (Continued) - 1 - 1421 E. 45th Street· Shawnee, OK 74804 P: 405.878.7300 www.finley-cook.com F: 405.878.4780 INDEPENDENT AUDITORS' REPORT, CONTINUED The Indemnity Fund has not presented management's discussion and analysis or a budget-to-actual comparison that the Governmental Accounting Standards Board has determined are necessary to supplement, although not required to be a part of, the basic financial statements. In accordance with Government Auditing Standards, we have also issued a report dated December 15,2009, on our consideration of the Indemnity Fund's internal control over financial reporting and on our tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Shawnee, Oklahoma December 15, 2009 - 2 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) BALANCE SHEETS-GOVERNMENTAL FUNDS/ STATEMENTS OF NET ASSETS (CASH BASIS) June 30,2009 and 2008 2009 2008 General Fund Statement of Net Assets Assets Current assets: Cash and cash equivalents $ 15,363,020 15,363,020 Total assets $ 15,363,020 15,363,020 Liabilities Liabilities $ Fund Balances Reserved for encumbrances Unreserved Total fund balances 15,110,996 252,024 15,363,020 Total liabilities and fund balances $ 15,363,020 Net Assets Unrestricted $ 15,363,020 See Independent Auditors' Report. See accompanying notes to cash basis financial statements. - 3 - General Fund 21,670,478 21,670,478 18,707-,630- 2,962,848 21,670,478 21,670,478 Statement of Net Assets 21,670,478 21,670,478 21,670,478 PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS/ STATEMENTS OF ACTIVITIES (CASH BASIS) Years Ended June 30, 2009 and 2008 2009 2008 General Statement of General Statement of Fund Activities Fund Activities Expenditures/expenses: Claims reimbursement $ 25,419,100 25,419,100 24,180,837 24,180,837 Storage tank inspection and compliance 644,224 644,224 1,876,693 1,876,693 Claims processing 1,347,713 1,347,713 929,865 929,865 Administrative expenses 501,781 501,781 528,077 528,077 Allocation to the Oklahoma Corporation Commission 816,628 816,628 1,052,279 1,052,279 Total expenditures/expenses 28,729,446 28,729,446 28,567,751 28,567,751 ____ Progr~ r~venues: Proceeds from motor fuel tax assessment 21,534,525 21,534,525 22,391,663 22,391,663 Interest income 794,680 794,680 1,287,875 1,287,875 Deductible on claims 87,185 87,185 94,612 94,612 Other income 5,598 5,598 19,499 19,499 Net program revenue 22,421,988 22,421,988 23,793,649 23,793,649 General revenues Changes in fund balances/ net assets (6,307,458) (6,307,458) (4,774,102) (4,774,102) Fund balances/net assets: Beginning of year 21,670,478 21,670,478 26,444,580 26,444,580 End of year $ 15,363,020 15,363,020 21,670,478 21,670,478 See Independent Auditors' Report. See accompanying notes to cash basis financial statements. -4- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS June 30, 2009 and 2008 (1) NATURE OF OPERATIONS AND REPORTING ENTITY Principal Activity The Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund") is administered by the Oklahoma Corporation Commission's (the "Commission") Petroleum Storage Tank Division (the "Division"). The Indemnity Fund was created by a legislative act in 1989 to provide funding for the rehabilitation of polluted sites due to releases of petroleum from storage tank systems into the environment of the state. The Indemnity Fund encourages voluntary corrective action in a manner and to a level of completion that protects the public health, safety, and welfare and minimizes damage to the environment by reimbursing to eligible persons allowable costs incurred for corrective actions to clean up eligible releases. Indemnity Fund monies are also used to pay the salaries of employees of the Compliance and Inspection Department of the Commission who are involved in the regulation of storage tanks pursuant to the Oklahoma Storage Tank Regulation Act. The activities ofthe Indemnity Fund are subject to Title 17, Chapters 14 and 15 of the Oklahoma Statutes Title 17 O.S. 350 et seq., which were last amended by Senate Bill 155, which was effective November 1,2005, and Senate Bi1l1366, which was effective July 1,2006, and House Bill 1423, which was effective July 1,2008. The Indemnity Fund is currently funded by a $0.01 assessment on the sale of each gallon of motor fuel. From July 1, 2004, through January 31, 2006, 25% of the assessment on the sale of each gallon of motor fuel, diesel fuel, and blending materials was allocated to higher education as approved by the Oklahoma Legislature. From February 1,2006, through June 30, 2006, the Indemnity Fund received the full $0.01 assessment. Effective July 1, 2006, the first $1,000,000 received in each fiscal year from the $0.01 assessment on motor fuel, diesel fuel, and blending materials is to be deposited directly into the Commission's revolving fund. Eight percent (8%) of the remainder of the assessment collected during each fiscal year is deposited into the Department of Environmental Quality's revolving fund. The remaining assessment received will be deposited into the Indemnity Fund. Effective July 1,2008, House Bill 1423 amended Title 17, Section 352, by defining the "motor fuel" that the one cent ($0.01) per gallon assessment is based on. The Indemnity Fund was previously funded by a one cent ($0.01) assessment on the sale of each gallon of motor fuel, diesel fuel, and blending materials (as defmed by Title 68, Section 500.3 of the Oklahoma Statutes). House Bill 1423 condensed the wording to only include "motor fuel" as it has the same meaning as "blended fuel" (the words "diesel fuel" and "blending materials" were taken out of the statute). Per Title 68, Section 500.3, blended fuel is defined as "a mixture composed of gasoline or diesel fuel and another liquid, other than a de minimis amount of a product such as carburetor detergent or oxidation inhibitor, that can be used as a fuel in a highway vehicle. This term includes gasohol, ethanol, and fuel grade ethanol." See Independent Auditors' Report. - 5 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (1) NATURE OF OPERATIONS AND REPORTING ENTITY, CONTINUED Principal Activity, Continued House Bill 1423 also authorized Underground Storage Tank Operator Training and authorized either the Storage Tank Regulation Revolving Fund created in Section 315 of Title 17 or the Indemnity Fund to be able to pay for this "training," up to $250,000. In connection with the revenues received by the Indemnity Fund, currently the first $1,000,000 received in each fiscal year from the one cent ($0.01) assessment on motor fuel is to be deposited directly into the Commission's revolving fund. Eight percent (8%) of the remainder of the assessment collected during each fiscal year is to be deposited into the Department of Environmental Quality's revolving fund. Effective July 1,2008, House Bill 1423 now states that ofthe remaining assessment received, $500,000 is to be deposited each month into the Department of Transportation's Weigh Station Improvement revolving fund until a total of$51 ,000,000 is reached. The remaining portion each month will be deposited into the Indemnity Fund. The amount paid to the Department of Transportation' s Weigh Station Improvement revolving fund for the year ended June 30, 2009, was as follows: Cumulative amount to be paid, beginning of year $ Payments during the year 51,000,000 (6,000,000) Cumulative amount to be paid, end of year $ 45,000,000 Funds Included in Presentation For purposes of this report, the Indemnity Fund (Fund 1185F) has been combined with Fund 205, a revolving fund established by the Commission to pay the administrative expenses of the Indemnity Fund utilizing monies transferred from the Indemnity Fund. Financial Reporting Entity The Indemnity Fund is included in the General Fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission. The accompanying financial statements are intended to present only the changes in fmancial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund and not that of the General Fund of the Petroleum Storage Tank Division ofthe Oklahoma Corporation Commission. See Independent Auditors' Report. -6- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity, Continued In accordance with the Governmental Accounting Standards Board, the Indemnity Fund's financial statements should include the operations of all organizations for which the Indemnity Fund has financial accountability. The Indemnity Fund has determined there are no other organizations for which it has financial accountability. Basis of Presentation As further noted below, the financial statements have been prepared using the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements-and Management's Discussion andAnalysis-for State and Local Governments (GASB 34), defmesthe accounting principles to be used for the presentation of financial statements of the Indemnity Fund. Government- Wide Financial Statements The statements of net assets and statements of activities display information about the Indemnity Fund as a whole. The Indemnity Fund's activities are all governmental in nature and generally are financed primarily through assessment revenues received. The Indemnity Fund has no business-type activities as defined by GASB 34. Fund Financial Statements Fund financial statements are normally organized into funds, each of which is considered to be a separate accounting entity. A fund is accounted for by providing a separate set of self-balancing accounts which constitute its assets, liabilities, fund equity, revenues, and expenditures/expenses. For the financial statement presentation, the Indemnity Fund has only one fund, which is the General Fund. The General Fund is the operating fund of the Indemnity Fund and is used to account for all activities of the Indemnity Fund. See Independent Auditors' Report. - 7 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) Measurement Focus and Basis of Accounting NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded, regardless of the measurement focus applied. On the government-wide statements of net assets and the statements of activities, the Indemnity Fund's activities are presented using the "economic resources" measurement focus as defined below: Measurement Focus • The statements of net assets and the statements of activities utilize an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of changes in net assets and financial positions. All assets and liabilities (whether current or noncurrent) associated with their activities are normally reported. However, due to the presentation of these financial statements on a cash basis, only cash is reported. In the fund financial statements, the "current financial resources" measurement focus is used as defined below: • The General Fund utilizes a "current financial resources" measurement focus. Only current financial assets and liabilities are generally included on the balance sheet. The operating statements present sources and uses of available spendable financial resources during a given period. The fund uses fund balances as the measure of available spendable financial resources at the end of the period, as limited by the use of the cash basis of accounting. Because of the cash basis of accounting, the fund balances total to the cash balance at the end of the year. - 8 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Measurement Focus and Basis of Accounting, Continued Basis of Accounting The accompanying financial statements have been prepared using the cash basis of accounting and are not intended to present the financial position and results of operations in conformity with accounting principles generally accepted in the United States. If the aforementioned financial statements were prepared in accordance with accounting principles generally accepted in the United States, the following changes would be necessary: • The Indemnity Fund would utilize the accrual basis of accounting in the government-wide financial statements and the modified accrual basis of accounting in the fund financial statements. • The Indemnity Fund would capitalize and record on its accrual basis financial statements, at cost, fixed assets (such as land, buildings, furniture, and equipment) and depreciate such assets. • The Indemnity Fund would record liabilities and long-term debt on its accrual basis financial statements. Cash and Cash Equivalents Deposits in OK INVEST (see Note 3) and highly liquid investments with original maturities of 3 months or less are considered to be cash equivalents. Deductibles Eligible claims for reimbursement are subject to a co-payment equal to 1% of the eligible costs, up to a maximum co-payment of $5,000. -9- See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Indemnity Fund Maintenance Level State statute sets forth a maintenance level of cash (presented herein as cash and cash equivalents) for the Indemnity Fund in an amount equal to $5,000,000 plus the previous 6 months' cash disbursements for claim reimbursements. In the event the Indemnity Fund's cash balance falls below this specified maintenance level at any month-end on or before December 31, 2012, the one cent ($0.01) assessment (or applicable portion thereof) is to be deposited into the Indemnity Fund for at least the following 3 calendar months. If the Indemnity Fund's cash balance exceeds the specified maintenance level, the assessment (or applicable portion thereof) is to be deposited into other funds as directed by state statute. Senate Bill 155, which was effective November 1,2005, amended State Statute 17 O.S. 352(7) to define disbursements as funds expended or encumbered for the purpose of calculating the regulatory maintenance level. Encumbrances Monies are encumbered for budgetary purposes as environmental cleanup projects are approved by the Director of the Division. Encumbrances at June 30, 2009 and 2008, were $15,110,996 and $18,707,630, respectively. Advertising Costs All costs associated with advertising are expensed as incurred. Income Taxes The Indemnity Fund is exempt from state and federal income taxes, and accordingly, no provision for income taxes is reflected by the Indemnity Fund. See Independent Auditors' Report. - 10 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED (3) CASH AND CASH EQUIVALENTS Cash and cash equivalents of the Indemnity Fund at June 30 consisted of the following: Deposits in OK INVEST $ 15,363,020 21,670,478 OK INVEST is a fund that is managed by the state treasurer on a pooled basis as part of the deposits of the State of Oklahoma and requires that financial institutions deposit collateral securities to secure the deposits of such cash in each institution. The amount of collateral securities to be pledged for the security is established by rules promulgated by the state treasurer. Deposits are invested overnight in repurchase agreements and other various securities. In accordance with the state treasurer's policies, the amount of collateral securities to be pledged by financial institutions through the state treasurer's office are pledged at market value and must be at 110% of value to collateralize the amount on deposit, less any federal insurance coverage. It is the policy of OK INVEST to invest in only securities with a Moody's credit rating of A or higher. The custodial credit risk for deposits is the risk that the Indemnity Fund will not be able to recover deposits that are in the possession of any outside party. Deposits are exposed to custodial credit risk if they are not insured or collateralized. At June 30, 2009 and 2008, all of the Indemnity Fund's deposits were held in other governmental agencies, insured, or fully collateralized. 2009 2008 Third-party claims $ 24,774,841 23,599,665 Settlements 11,797 40,833 Suspicion of releases 632,462 540,339 $ 25,419,100 24,180,837 (4) CLAIMS REIMBURSEMENTS Claims reimbursements for the years ended June 30 consisted of the following: Third-party claims are those claims in which an eligible tank owner has received reimbursement from the Indemnity Fund for allowable cleanup costs incurred. See Independent Auditors' Report. - 11 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Settlements are payments to settle disputed claims for reimbursement (see Note 10). (4) CLAIMS REIMBURSEMENTS, CONTINUED Payments for suspicion of releases are payments to third parties for costs incurred to investigate and assess a site for a confirmed release and to determine whether additional cleanup procedures are necessary. (5) OPERATING EXPENSES Operating expenses at June 30 consisted of the following: 2009 Storage Tank Administrative Claims Inspection and Expenses Processing Compliance Salaries and benefits $ 395,453 761,640 588,311 Professional services 91,577 512,113 51,756 Other 14,751 73,960 4,157 $ 501,781 1,347,713 644,224 2008 Storage Tank Administrative Claims Inspection and Expenses Processing Compliance Salaries and benefits $ 382,617 762,047 1,864,157 Professional services 120,103 41,422 6,433 Other 25,357 126,396 6,103 $ 528,077 929,865 1,876,693 - 12 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED The overhead allocation paid to the Commission is determined by the Comptroller of the Commission. For the years ended June 30, 2009 and 2008, amounts paid included $195,741 and $161,450, respectively, for salaries of personnel in the Office of General Counsel and $620,887 and $890,829, respectively, for other general and administrative expenses of the Commission. (6) ALLOCATION TO THE OKLAHOMA CORPORATION COMMISSION Plan Description (7) RETIREMENT PLAN The Indemnity Fund indirectly contributes to the Oklahoma Public Employees Retirement Plan (the "Retirement Plan"), a cost-sharing, multiple-employer public employee retirement system administered by the Oklahoma Public Employees Retirement System (the "System"). The Retirement Plan provides retirement, disability, and death benefits to plan members and beneficiaries. The benefit provisions are established and may be amended by the Oklahoma Legislature. Title 74 of the Oklahoma Statutes, Sections 901 through 932 and 935, as amended, assigns the authority for management and operation of the Retirement Plan to the Board of Trustees of the System. The System issues a publicly available annual financial report that includes fmancial statements and required supplementary information for the Retirement Plan. That annual report may be obtained by writing to the Oklahoma Public Employees Retirement System, 5801 N. Broadway Extension, Suite 400, Oklahoma City, Oklahoma 73118 or by calling 1-800-733-9008. - 13 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Funding Policy (7) RETIREMENT PLAN, CONTINUED· Retirement Plan members and the Indemnity Fund are required to contribute at a rate set by statute. The contribution requirements of Retirement Plan members and the Indemnity Fund are established and may be amended by the Oklahoma Legislature. The contribution rates are as follows: Fiscal Year 2009 Fiscal Year 2008 State Employees Indemnity Fund All Salary All Salary 3.5% 14.5% State Employees Indemnity Fund All Salary All Salary 3.5% 13.5% Fiscal Year 2007 State Employees Indemnity Fund All Salary All Salary 3.5% 12.5% The Indemnity Fund's contributions to the Retirement Plan for the years ended June 30, 2009, 2008, and 2007, were approximately $261,000, $455,000, and $414,000, respectively, and were equal to its required contributions for each year. Deferred Compensation Plan (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN The State of Oklahoma offers its employees a Deferred Compensation Plan (the "Plan") as authorized by Section 457 of the Internal Revenue Code (IRC), as amended by the Tax Reform Act of 1986, and in accordance with the provisions of Sections 1701 through 1706 of Title 74 of the Oklahoma Statutes. The supervisory authority for the management and operation of the Plan is the Board of Trustees of the Oklahoma Public Employees Retirement System (the "Board"). The Plan is available to all State of Oklahoma employees, as well as any elected officials receiving a salary from the State of Oklahoma. Participants may direct the investment of their contributions in available investment options offered by the Plan. The minimum contribution amount is the equivalent of $25 per month, and participants are immediately 100% vested in their respective accounts. All interest, dividends, and investment fees are allocated to participants' accounts. - 14 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Deferred Compensation Plan, Continued (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN, CONTINUED Participants may defer until future years up to the lesser of 100% of their compensation as defined by Plan documents or the maximum amount allowed each year as determined by the Internal Revenue Service, currently $16,500 for calendar year 2009. The Plan offers a catch-up program to participants, which allows them to defer annually for the 3 years prior to their year of retirement up to twice that plan year's deferral limit. The amount of additional contributions in excess of the normal maximum contributions to the Plan are also limited to contributions for years in which the participant was eligible but did not participate in the Plan or the difference between contributions made and the maximum allowable level. To be eligible for the catch-up program, the participant must be within 3 years of retirement with no reduced benefits. Participants age 50 or older may m~e additional contributions of up to $5,500 annually subject to certain limits. Deferred compensation benefits are paid to participants or beneficiaries upon termination, retirement, death, or unforeseeable emergency. Such benefits are based on a participant's account balance and are disbursed in a lump sum or periodic payments at the option of the participant or beneficiaries in accordance with the Plan's provisions. Effective January 1, 1998, the Board established a Trust and a Trust Fund covering the Plan's assets, pursuant to federal legislation enacted in 1996, requiring public employers to establish such trusts for plans meeting the requirements of Section 457 ofthe IRC no later than January 1, 1999. Under the terms of the Trust, the corpus or income of the Trust Fund may be used only for the exclusive benefit of the Plan's participants and their beneficiaries. Prior to the establishment of the Trust, the Plan's assets were subject to the claims of general creditors of the State of Oklahoma. The Board acts as trustee of the Trust. The participants' accounts are invested in accordance with the investment elections of the participants. The Board is accountable for all deferred compensation received, but has no duty to require any compensation to be deferred or to determine that the amounts received comply with the Plan or to determine that the Trust Fund is adequate to provide the benefits payable pursuant to the Plan. Further information may be obtained from the Oklahoma State Employees Deferred Compensation Plan's audited financial statements for the years ended June 30, 2009 and 2008. The Indemnity Fund believes that it has no liabilities in respect to the Plan. - 15 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED Deferred Savings Incentive Plan (8) OKLAHOMA STATE EMPLOYEES DEFERRED COMPENSATION PLAN AND DEFERRED SAVINGS INCENTIVE PLAN, CONTINUED Effective January 1, 1998, the State of Oklahoma established the Oklahoma State Employees Deferred Savings Incentive Plan (the "Savings Incentive Plan") as a money purchase pension plan pursuant to IRC Section 401 (a). The Savings Incentive Plan and its related Trust are intended to meet the requirements ofIRC Sections 401 (a) and 501(a). Any qualified participant who is a State of Oklahoma employee that is an active participant in the Oklahoma State Employees Deferred Compensation Plan is eligible for a contribution of the amount determined by the Oklahoma Legislature, currently the equivalent of$25 per month. Participation in the Savings Incentive Plan is automatic in the month of participation in the Plan and is not voluntary. Upon cessation of contributions to the Plan, termination of employment with the State of Oklahoma, retirement, or death, a participant will no longer be eligible for contributions from the State of Oklahoma into the Savings Incentive Plan. Participants are at all times 100% vested in their Savings Incentive Plan account. Participant contributions are not required or permitted. Qualified participants may make rollover contributions to the Savings Incentive Plan, provided such rollover contributions meet applicable requirements of the IRe. Plan participants may direct the investment of the contributions in available investment options offered by the Savings Incentive Plan. All interest, dividends, and investment fees are allocated to the participants' accounts. Savings Incentive Plan benefits are paid to participants or beneficiaries upon termination, retirement, or death. Such benefits are based on a participant's account balance and are disbursed in a lump sum or periodic payments or may be rolled over to a qualified plan at the option of the participant or beneficiaries. (9) OTHER RELATED-PARTY TRANSACTIONS Included in administrative expenses and claims processing are payments to other state agencies for various goods and services totaling $70,022 and $80,136 for the years ended June 30, 2009 and 2008, respectively. - 16 - See Independent Auditors' Report. PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED The LUST Trust Fund Grant pays for the initial cost of cleaning polluted sites when the tank owner cannot be located, is financially unable, or is unwilling to clean the site. After the site is cleaned, application can be made to the Indemnity Fund on behalf of the LUST Trust Fund Grant to recover those funds spent. Recovered funds are spent by the LUST Trust Fund Grant on other remediation projects. There were no amounts paid during 2009 or 2008 from the Indemnity Fund to the LUST Trust Fund Grant for such sites. (9) OTHER RELATED-PARTY TRANSACTIONS, CONTINUED (10) COMMITMENTS AND CONTINGENCIES During the year ended June 30, 2004, the Indemnity Fund, along with the Division and the Commission, entered into two settlement agreements regarding legal disputes over claim reimbursements filed in previous years. The first settlement with ConocoPhillips was reached on August 21,2003, for $3,600,000 and involved 46 cases for work that was completed between 1991 and 2000. Under this settlement agreement, the Indemnity Fund paid $1,000,000 from September 2003 to June 2004 and paid $125,000 monthly from July 2004 to February 2006, with one final payment of $100,000 in March 2006. The second settlement was reached on November 25,2003, for $4,500,000 and involved 103 cases with 60 different tank owners. Under this settlement, the Indemnity Fund paid $579,230 from January 2004 to June 2004, and paid $150,000 monthly from July 2004 to August 2006, including an additional $20,770 throughout that time. In connection with the ConocoPhillips settlement described above, the Commission, the Commissioners, and certain employees have been named as defendants in litigation, which alleges that the Indemnity Fund has wrongfully paid monies that the claimants were not entitled to receive. This case was brought by taxpayers on behalf of the State of Oklahoma (a "qui tam" action) to recover monies and invoke penalties against the defendants, and asks for damages of $10,800,000. Commission management believes that the purpose of this suit is to recover monies paid pursuant to the settlement and invoke penalties against the defendants. The Commission's response to the qui tam action was to file a declaratory judgment suit, which asked the district court to determine whether the payment of the claims was lawfuL This case was before the Oklahoma Supreme Court, and on August 20,2009, the trial court granted ConocoPhillips' motion for summary judgment on some of the issues in the case. It is believed that when comprehensive motions for summary judgment are presented (likely in late December 2009 or early January 2010), those motions will be favorably received by the trial court. If those motions are denied, the case will likely go to trial sometime in the spring of 20 1o. Similar qui tam litigation was filed on July 7, 2006, on the above-mentioned second settlement. That litigation seeks damages of $13,500,000. The Commission intends to vigorously defend any qui tam actions. At this time, Commission management has not determined the amount of any adjustment that may result from this matter or whether such adjustment, if any, would have a material adverse effect on the Indemnity Fund. See Independent Auditors' Report. - 17 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) NOTES TO CASH BASIS FINANCIAL STATEMENTS, CONTINUED During the years ended June 30, 2006 and 2005, there was an investigation being conducted by the State of Oklahoma Attorney General's Office and the Multi-County Grand Jury concerning activities relating to the Indemnity Fund and the Division. This investigation is ongoing and relates to a prior administration. (10) COMMITMENTS AND CONTINGENCIES, CONTINUED (11) SUBSEQUENT EVENTS The Indemnity Fund has evaluated subsequent events through December 15, 2009, which is the date the financial statements were available to be issued. There are no recognized or non-recognized subsequent events included in the financial statements or related notes. See Independent Auditors' Report. - 18 - REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Oklahoma Corporation Commission Petroleum Storage Tank Release Indemnity Fund We have audited the accompanying cash basis financial statements of the governmental activities and the major fund of the Petroleum Storage Tank Release Indemnity Fund (the "Indemnity Fund"), administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission, as of and for the years ended June 30, 2009 and 2008, which collectively comprise the Indemnity Fund's basic financial statements as listed in the table of contents, and have issued our report thereon dated December 15, 2009. Our report included a paragraph noting that the financial statement was prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States, and an explanatory paragraph stating that the basic financial statements of the Indemnity Fund are intended to present the financial position and changes in financial position of only that portion of the governmental activities and each major fund of the Petroleum Storage Tank Division of the Oklahoma Corporation Commission attributable to the transactions of the Indemnity Fund. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Indemnity Fund's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Indemnity Fund's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Indemnity Fund's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. (Continued) A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. - 19 - REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, CONTINUED Internal Control Over Financial Reporting, Continued Compliance and Other Matters Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. As part of obtaining reasonable assurance about whether the Indemnity Fund's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the Oklahoma Corporation Commission, the Storage Tank Advisory Council, Petroleum Storage Tank Division management, the Office of the Auditor and Inspector of the State of Oklahoma, the Governor, and the Oklahoma Legislature and is not intended to be and should not be used by anyone other than these specified parties. Shawnee, Oklahoma December 15, 2009 - 20- PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) SCHEDULE OF FINDINGS AND RESPONSES Year Ended June 30,2009 This Schedule of Findings and Responses includes compliance findings that we believe are reportable in accordance with the reporting criteria set forth in Government Auditing Standards. There were no findings noted during the year ended June 30, 2009. - 21 - PETROLEUM STORAGE TANK RELEASE INDEMNITY FUND (Administered by the Petroleum Storage Tank Division of the Oklahoma Corporation Commission) SCHEDULE OF PRIOR YEAR FINDINGS Year Ended June 30, 2009 There were no findings noted during the year ended June 30, 2008. - 22- ·, , MAY 25 lOll |
Date created | 2011-07-12 |
Date modified | 2011-10-28 |
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