Investments in bonds and in bonds and mortgages can be made only by the finance committee or as to bonds by a subcommittee to be designated as the bond committee. No such bond committee is now in existence. The finance committee has customarily delegated its bond investment powers to the president of the company. The committee's minutes usually do not show bond investments in detail. Mortgage investments with certain exceptions referred to elsewhere in the report are authorized by the finance committee and recorded in detail in their minutes. We believe that the finance committee cannot properly delegate its investment powers except to a bond committee. The responsibility for the making of investments should rest with the board of trustees or its duly authorized committees and a complete record of all such transactions made a part of the minutes. The by-laws of the company provide that the board of trustees. shall annually appoint the following standing committees: 1. Executive committee. 2. Finance committee. 3. Committee on insurance and agencies. 4. Examining committee in lieu of which an audit company may be employed. The executive committee consists of not more than ten trustees, one of whom must be the president. At the present time there are nine members on this committee. The executive committee possesses all the power and authority of the board of trustees when the board is not in session. Its regular meetings are held at least once every two weeks. The transactions of the committee are held and taken to be confirmed by the board of trustees unless disapproved or rescinded. This committee fixes the salaries of all officers and employees except the eight principal officers, whose salaries are fixed by the board of trustees. The finance committee consists of seven trustees, one of whom must be the president. This committee has charge of investing and managing the company's assets and of collecting, selling or otherwise disposing of the same. The committee is required to keep a record of all its transactions and submit same monthly to the executive committee. Such record is also required to be read at each quarterly meeting of the board of directors, unless otherwise ordered. The committee meets on Mondays, Wednesdays and Fridays. This committee is empowered to appoint a subcommittee to be known as the bond committee, consisting of the president and one or more officers or trustees. The committee on insurance and agencies consists of the president, secretary, actuary, medical director and superintendent of agencies. The committee meets twice each week. This committee has authority to approve or reject application for insurance within the limits prescribed by the board of trustees or by the executive committee, to recommend or disapprove claims relating to insurance policies referred to it for consideration, and generally to supervise the insurance and agency business of the company. However, it has no authority to make, alter or discharge contracts. The committee meets on Tuesdays and Fridays. It is required to keep a record of all its transactions and submit same monthly to the executive committee. Such record or a condensed statement thereof is also required to be read at each quarterly meeting of the board of trustees, unless otherwise ordered. The examining committee consists of not less than three and not more than five policyholders of the company. An audit company may be employed in lieu of this committee. The committee or audit company is required to make such examination of the books, assets and securities of the company as may be directed by the executive committee. The report of the committee or audit company is required to be submitted to the board of trustees at its meeting in January. The required examination for 1916 was made by a committee of four policyholders. For several years prior to 1916 the examination was made by an audit company. The business of the company is conducted through thirteen departments and their sub-divisions. The departments are as follows: 1. Secretary's department. 2. Loan department. 4. Legal department. 5. Medical department. 6. Inspection department. 7. Agency department. 8. Cashier's department. 9. Claim department. 10. Supply department. 11. Real estate department. 12. Auditor's department. 13. Building department. The heads of all departments are required by the by-laws to make monthly reports to the executive committee through the president. These reports or a condensed statement thereof are required to be submitted by the executive committee to the board of trustees at its next quarterly meeting. Accounting: From the ledgers, trial balances were drawn off as before closing December 31, 1913, 1914, 1915 and 1916. These balances were then traced into and checked with the annual statements for these years. It was noted that, more particularly in the last two years, new ledger accounts have been opened bringing the accounts in the general ledger more into harmony with the items required by the statement blank. For the year 1917 we drew off from the ledger a trial balance after closing December 31, 1916. From the posting mediums were then taken all entries, debit and credit, for the 12 months of 1917. These entries for the 12 months combined with the trial balance January 1, 1917, have been compared with a trial balance drawn from the company's ledger December 31, 1917, and the ledger postings for the year found to be correct. To determine the nature of the items entering into the various ledger accounts as well as their accuracy the following work was performed: All entries for the month of June, 1917, were traced from the posting mediums (which had been checked into ledger as previously described) into the reports or other original sources from which derived. Practically all such entries through the journal are from the agents' reports, which are discussed elsewhere in this report. After audit at the Home Office a summary of the entries to be made distributing the items in the report is prepared. Test checks of the accuracy of these summaries from the reports were made, more especially with reference to the correction entries based upon the Home Office audit of reports. In addition the other items put through the journal for June, 1917, were also investigated individual policy transactions traced to determine whether the accounts reflected the correct handling of the matter, monthly reports from the actuary's department developed as to their source, etc. Entries in the premium cash books, insurance cash book and policy loan cash books were also checked with warrants, cancelled checks, etc. In the case. of death claims and endowments the claim papers for the month of February, 1917, were checked with warrants and the warrants with checks and cash book entries. The mortgage loan cash books contain entries covering investments and repayments of same in mortgages and in bonds together with interest on same. These entries were not checked as the investment schedules were being verified from the papers relating to the investments themselves. Bond purchases for the first ten months of 1917 were checked from brokers' receipts to Schedule D. Interest items were checked direct with the schedules and from them to the annual statement. Any comments resulting from the foregoing work will appear in discussion of the statement items involved. The company's preparation for the 1916 statement, both ledger and non-ledger items, was checked from the company's working sheets, ledger accounts and department memoranda. We have prepared the following financial statement covering income and disbursements for the year 1917, together with assets and liabilities as at December 31, 1917. STATEMENT 2. Amount of ledger assets December 31 of previous year.. $359,917,242 36 19. Extra premiums for total and permanent disability benefits, $12,447.61, and for additional accidental death benefits, $—0— included in life policies..... 19 (a). Extra premiums for war service.... 20. Total premium income $7,885,082 05 47,246,803 34 12,447 61 13,495 41 $55,157,828 41 21. Consideration for supplementary contracts not involving life contingencies 1,389,273 06 22. Dividends left with the company to accumulate at interest . . 53,777 57 23. Ledger assets other than premiums, received from other companies for assuming their risks..... 24. Gross interest on mortgage loans less $10,115.45, accrued interest on mortgages acquired during 1917.. $10,240,366 03 25. Gross interest on collateral loans.... 26. Gross interest on bonds and dividends on stocks, less $76,862.87, accrued interest on bonds acquired during 1917. none 4,382,724 73 None. |