Financial Audit

GAO examined the financial statements of the Federal Crop Insurance Corporation (FCIC) for the years ended September 30, 1985 and 1984.

GAO noted that FCIC: (1) incurred annual losses of $222 million and $211 million from insuring agricultural crops against all unavoidable risks; (2) has not established premium rates to adequately cover losses on insured crops, which would enable it to build a reasonable reserve against unforeseen losses; (3) contended that adverse weather conditions caused the losses; (4) has received additional funding authority to pay producers' claims; (5) is examining the potential for premium rate increases, adjusting the level and extent of coverage on the basis of individual policyholders' histories, and spreading potential risk through reinsurance contracts; (6) accumulated an annual deficit of $728 and $516 million and annual negative capital positions of $194 million and $23 million; (7) had current liabilities exceeding its current assets by $82 million in 1985 and $23 million in 1984; and (8) may be unable to continue in existence without additional financial assistance from Congress. GAO found that the financial statements presented fairly the financial position of FCIC and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.