Specifications include, but are not limited to: The Contractor shall take all steps necessary to conduct a comprehensive audit of the Captive each fiscal year during the term of this Contract. The first such audit shall be for fiscal year ending June 30, 2023, which shall be based on data from June 15, 2022 through June 30, 2023. Each audit shall be of a scope satisfactory to the Commissioner and in accordance with the Revised Tennessee Captive Insurance Act and the regulations promulgated thereunder. The comprehensive annual audits shall consist of the following: a. Opinion of Independent Certified Public Accountant. The State shall provide the Contractor with the Captive’s financial statements, which shall thereafter be examined by the Contractor in accordance with generally accepted auditing standards as determined by the American Institute of Certified Public Accountants. The Contractor shall render its opinion of the financial statements, which opinion shall cover all years presented. The opinion shall be expressed in accordance with generally accepted accounting principles, which shall include, but shall not be limited to, an evaluation of whether the financial statements are fairly presented, materially correct, complete, and reported in accordance with generally accepted accounting principles, and if not, the reasons therefore with a detailed explanation of any unusual items or circumstances under which the auditor was unable to reach that conclusion. The opinion shall further assess the possibility of fraud involving the Captive and gauge whether the Captive will remain viable as a going concern. The opinion shall be prepared, addressed, and signed in a format specified by the Commissioner. b. Report of Evaluation of Internal Controls. If the Captive has annual direct written and assumed premiums of five hundred million dollars ($500,000,000) or more, or such lower amount as shall be determined in writing by the State and communicated to the Contractor, the Contractor shall prepare a report of evaluation of internal controls, which shall include an evaluation of the internal controls of the Captive relating to the methods and procedures used in the securing of assets and the reliability of the financial records, including, but not limited to, such controls as the system of authorization and approval and the separation of duties. The review shall be conducted in accordance with generally accepted auditing standards or statutory accounting principles and the report shall be filed with the State and such other Tennessee state officials as the State may direct. At the State’s sole discretion, this review and report shall not be required in the event the Captive obtains an exemption from this evaluation by the Commissioner. c. Accountant's Letter. The Contractor shall furnish the Captive, for inclusion in the filing of the audited annual financial report, a letter stating: (1) that the Contractor is independent with respect to the Captive and conforms to the standards of the Contractor’s accounting profession as contained in the Code of Professional Ethics and pronouncements of the American Institute of Certified Public Accountants and pronouncements of the Financial Accounting Standards Board; (2) the general background and experience of the staff engaged in audit including the experience in auditing captives or other insurance companies; (3) that the Contractor understands that the audited annual report and the Contractor’s opinions thereon will be filed with the Department in compliance with the Revised Tennessee Captive Insurance Act and the regulations promulgated thereunder with the Department; (4) that the Contractor consents to the requirements of Tenn. Comp. R. & Regs. 0780-01-41- .03(4), which are restated in Section A.8 below, and that the Contractor consents and agrees to make available for review by the Commissioner, the Commissioner's designee or the Commissioner's appointed agent, the Work Papers as defined above; (5) that the Contractor is properly licensed by an appropriate state licensing authority and that the Contractor is a member in good standing in the American Institute of Certified Public Accountants; and (6) such other information as may be required by the Revised Tennessee Captive Insurance Act and the regulations promulgated thereunder.
