MONTANA CHIROPRACTIC LEGAL PANEL AUDITED FINANCIAL STATEMENTS June 30,2006 and 2005 JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C. Certified Public Accountants and Business Advisors LEGISLATIVE AUDIT DIVISION Deputy Legislative Auditors: James Gillett Chief Deputy Legislative Auditor I Jim Pellegrini F. October 2006 The Legislative Audit Committee of the Montana State Legislature: Enclosed is the report on the audit of the Montana Chiropractic Legal Panel for the two fiscal years ended June 30,2006. The audit was conducted by Junkermier, Clark, Campanella, Stevens, PC under a contract between the firm and our office. The comments and recommendations contained in this report represent the views of the fm and not necessarily the Legislative Auditor. The agency's written response to the report recommendations is included in the back of the audit report. Respectfully submitted, Scott A. Seacat Legislative Auditor Enclosure 06C-12 Room 160 . State Capitol Building . PO Box 201 705 . Helena, MT . 59620- 1705 . Phone (406) 444-3 122 FAX (406) 444-9784 . E-Mail [email protected] MONTANA CHIROPRACTIC LEGAL PANEL CONTENTS Page Administrative officials 3 AUDITED FINANCIAL STATEMENTS Independent auditors' report Statements of assets, liabilities, and surplus - cash basis - Statements of revenues, expenses and change in surplus cash basis Notes to financial statements INDEPENDENT AUDITORS' REPORTS FOR GAO Independent auditors' 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. Agency response ADMINISTRATIVE OFFICIALS MONTANA CHIROPRACTIC LEGAL PANEL Mary Lou Garrett, Director P.O. Box 1098 Helena, Montana 59624- 1098 (406) 442-2674 e-mail: sunarloaf6?montana.com Montana Club Building P.O. Box 1164 Helena, Montana 59624 Junkerrnier Clark ~ h(4.06 ) 442-6901 fx. (406) 442-9690 Campanella Stevens PC. www.jccscpa.com Certified Public Accountants and Business Advisors INDEPENDENTA UDITORS' REPORT To the Director Montana Chiropractic Legal Panel Helena, MT - We have audited the accompanying statements of assets, liabilities, and surplus cash basis of Montana Chiropractic Legal Panel, as of June 30, 2006 and 2005, and the related statements of revenues, expenses, and - changes in surplus cash basis for the years then ended. These financial statements are the responsibility of Montana Chiropractic Legal Panel's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial statement 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 financial 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 the 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 1, Montana Chiropractic Legal Panel prepares its financial statements on the cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and surplus of the Montana Chiropractic Legal Panel, as of June 30,2006 and 2005, and its revenue, expenses and changes in surplus for the years then ended, on the basis of accounting described in Note 1. In accordance with Government Auditing Standards, we have also issued our report dated October 30,2006, on our consideration of Montana Chiropractic Legal Panel's intemal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of intemal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the intemal 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. Junkermier, Clark, Campanella, Stevens, P. C. Helena, Montana October 30,2006 Bozeman GreatFalls Helena Kalispell Missoula Whitefish MONTANA CHIROPRACTIC LEGAL PANEL - STATEMENT OF ASSETS, LIABILITIES, AND SURPLUS CASH BASIS June 30 2006 2005 ASSETS CURRENT ASSETS Cash in bank Time certificates of deposit Total current assets 33.063 4 1.993 Total assets $ 33.063 $993 LIABILITIES AND SURPLUS SURPLUS Surplus Total liabilities and surplus See the notes to financial statements. -5- MONTANA CHIROPRACTIC LEGAL PANEL - STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN SURPLUS CASH BASIS Years ended June 30 2006 2005 REVENUES Assessment fees Late fees Interest income Other income Total revenues EXPENSES Audit Bank service charges Copies Hearing expenses Management fee Panel member fees Postage Printing Rent Repairs Supplies Travel Telephone Other expenses Total expenses (DECREASE) IN SURPLUS Surplus, beginning of year SURPLUS, END OF YEAR See the notes to financial statements. -6- MONTANA CHIROPRACTIC LEGAL PANEL NOTES TO FINANCIAL STATEMENTS June 30,2006 and 2005 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities Montana Chiropractic Legal Panel was established by the "Montana Chiropractic Legal Panel Act" as authorized by Section 27-12-101 and 104 MCA. The panel is a quasi-governmental entity and is allocated to the Montana supreme court for administrative purposes only, except that 2- 12- 12 l(2) MCA does not apply. The Montana Chiropractic Legal Panel was created to review all malpractice claims or potential claims against chiropractic physicians, except claims subject to a valid arbitration agreement allowed by law. The purpose of the Montana Chiropractic Legal Panel is to prevent, whenever possible, the filing of court actions against chiropractic physicians and their employees for professional liability situations in which the facts do not permit at least a reasonable inference of malpractice. Also, the purpose of the Montana Chiropractic Legal Panel is to make possible the fair and equitable disposition of such claims against chiropractic physicians as are or reasonably may be well founded. Basis ofAccounting The accompanying financial statements have been prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. Accordingly, revenue is recorded when received rather than when earned and expenses are recognized when paid rather than when the obligation is incurred. Assessment Fees The Montana Chiropractic Legal Panel is funded by an annual assessment fee levied on all chiropractic physicians at the beginning of each fiscal year, beginning July 1. The amount of the assessment is set annually by the director and is equally assessed against all chiropractic physicians. A fund surplus at the end of the year that is not required for the administration of the Montana Chiropractic Legal Panel must be retained by the director and used to finance the administration for the Montana Chiropractic Legal Panel during the next fiscal year, in which event the director will reduce the next annual assessment to an amount estimated to be necessary for the proper administration of Montana Chiropractic Legal Panel during that fiscal year. The fund and any income from it must be held in trust, deposited in an account, and invested and reinvested by the director. 2. PANEL HEARINGS The Montana Chiropractic Legal Panel held one hearing during fiscal year ending June 30, 2005 and three hearings during fiscal year ending June 30,2006. k.4 r Montana Club Building P.O. Box 1164 u Helena, Montana 59624 Junkermier Clark r ~ h(4.06 ) 442-6901 fx. (406) 442-9690 Campanella Stevens P.C. www.jccscpa.com id Certified Public Accountants and Business Advisors 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 To the Director Montana Chiropractic Legal Panel Helena, MT We have audited the financial statements of Montana Chiropractic Legal Panel as of and for the years ended June 30,2006 and 2005, and have issued our report thereon dated October 30,2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 Montana Chiropractic Legal Panel's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Montana Chiropractic Legal Panel'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. We noted certain matters that we reported to management of Montana Chiropractic Legal Panel in a separate letter dated October 30, 2006. Bozeman Great Falls Helena Kalispell Missoula Wlutefish Report on internal control and compliance Page 2 of 2 This report is intended solely for the information and use of the legislative audit committee and the Director and is not intended to be and should not be used by anyone other than these specified parties. Junkermier, Clark, Campanella, Stevens, P.C. Helena, Montana October 30,2006