Cover Page - NFIP Write Your Own Accounting Procedures Manual October 2005 NATIONAL FLOOD INSURANCE PROGRAM WRITE YOUR OWN (WYO) ACCOUNTING PROCEDURES MANUAL Ninth Printing October 1, 2005 WYO ACCOUNTING PROCEDURES MANUAL TABLE OF CONTENTS PART A MONTHLY FINANCIAL STATEMENT PACKAGE REPORTING REQUIREMENTS.................................................................. A-1 PART B FINANCIAL STATEMENTS - DEFINITION OF TERMS AND COMPLETION INSTRUCTIONS......................................................... B-1 PART C CASH MANAGEMENT PROCEDURES...................................................... C-1 I. Deposit of NFIP Funds .......................................................................... C-1 II. Transfer of Excess Funds...................................................................... C-2 III. WYO Company Expense Reimbursement ............................................ C-2 IV. Premium and Claim Checks Outstanding 6 Months and Older............. C-3 PART D LETTER OF CREDIT (LOC)/SMARTLINK II - HEALTH AND HUMAN SERVICES (HHS) PAYMENT MANAGEMENT SYSTEM........................... D-1 I. Overview of SMARTLINK II - HHS Payment Management System...... D-1 II. Application for Access to SMARTLINK.................................................. D-1 III. Operation of SMARTLINK ..................................................................... D-2 IV. SMARTLINK Payment Management System Reporting ....................... D-3 PART E AUTOMATED CLEARINGHOUSE (ACH) PROCEDURES......................... E-1 PART F SPECIAL ALLOCATED LOSS ADJUSTMENT EXPENSES (SALAE), SALVAGE/SUBROGATION PROCEDURES, AND SUPPLEMENTAL CLAIM PAYMENT PROCEDURES ............................................................. F-1 I. Special Allocated Loss Adjustment Expenses....................................... F-1 II. Salvage/Subrogation Procedures.......................................................... F-1 III. Supplemental Claim Payment Procedures............................................ F-2 PART G USE OF PREFORMATTED EXCEL FINANCIAL STATEMENT SPREADSHEET FOR MONTHLY FINANCIAL STATEMENT REPORTING…………….............................................................................. G-1 Financial Spreadsheet Control Form ........................................................... G-3 PART H CREDIT CARD PROCESSING ................................................................... H-1 I. Credit Card Principles............................................................................ H-1 II. Processing Procedures ......................................................................... H-2 III. Financial and Statistical Reporting Requirements................................. H-3 PART I LISTING OF PERTINENT WYO ACCOUNTING/FINANCIAL DOCUMENTS................................................. I-1 Table of Contents Effective: 10/1/05 WYO ACCOUNTING PROCEDURES MANUAL LIST OF EXHIBITS PART A EXHIBIT I INCOME STATEMENT................................................................... A-2 EXHIBIT II RECONCILIATION OF PAYABLE/RECEIVABLE BALANCE .............................................. A-3 EXHIBIT III BALANCE SHEET ITEMS .............................................................. A-4 EXHIBIT IV EXPENSE ALLOWANCE CALCULATION ..................................... A-5 EXHIBIT V-A FEE SCHEDULE – ALLOCATED LAE ........................................... A-6 EXHIBIT V-B FEE SCHEDULE – ALLOCATED LAE ........................................... A-7 EXHIBIT V-C FEE SCHEDULE – ALLOCATED LAE ........................................... A-8 EXHIBIT V-D FEE SCHEDULE – ALLOCATED LAE ........................................... A-9 EXHIBIT V-E ICC FEE SCHEDULE – ALLOCATED LAE .................................... A-10 EXHIBIT V-F FEE SCHEDULE – ALLOCATED LAE ........................................... A-11 EXHIBIT V-G ICC FEE SCHEDULE – ALLOCATED LAE .................................... A-12 EXHBIT VI OTHER LOSS AND LAE CALCULATION ...................................... A-13 EXHIBIT VII INTEREST INCOME....................................................................... A-14 EXHIBIT VIII-A LETTER OF CREDIT DRAWDOWNS ............................................ A-15 EXHIBIT VIII-B CASH PAYMENTS TO THE NFIP.................................................. A-16 EXHIBIT VIII-C CREDIT CARD PAYMENTS TO THE NFIP ................................... A-17 EXHIBIT VIII-D INTERNET PAYMENTS TO THE NFIP.......................................... A-18 EXHIBIT VIII-E WIRE TRANSFER PAYMENTS TO THE NFIP .............................. A-19 EXHIBIT IX RESTRICTED ACCOUNT DEPOSITS SUMMARY........................ A-20 List of Exhibits Effective: 10/1/05 WYO ACCOUNTING PROCEDURES MANUAL LIST OF EXHIBITS (cont’d) PART B EXHIBIT I INCOME STATEMENT................................................................... B-1 EXHIBIT II RECONCILIATION OF PAYABLE/RECEIVABLE BALANCE......... B-4 EXHIBIT III BALANCE SHEET ITEMS .............................................................. B-5 EXHIBIT IV EXPENSE ALLOWANCE CALCULATION ..................................... B-7 EXHIBIT V-A FEE SCHEDULE – ALLOCATED LAE ........................................... B-14 EXHIBIT V-B FEE SCHEDULE – ALLOCATED LAE ........................................... B-15 EXHIBIT V-C FEE SCHEDULE – ALLOCATED LAE ........................................... B-17 EXHIBIT V-D FEE SCHEDULE – ALLOCATED LAE ........................................... B-18 EXHIBIT V-E ICC FEE SCHEDULE – ALLOCATED LAE .................................... B-19 EXHIBIT V-F FEE SCHEDULE – ALLOCATED LAE ........................................... B-20 EXHIBIT V-G ICC FEE SCHEDULE – ALLOCATED LAE .................................... B-21 EXHIBIT VI OTHER LOSS AND LAE CALCULATION ...................................... B-23 EXHIBIT VII INTEREST INCOME....................................................................... B-25 EXHIBIT VIII-A LETTER OF CREDIT DRAWDOWNS ............................................ B-26 EXHIBIT VIII-B CASH PAYMENTS TO THE NFIP.................................................. B-26 EXHIBIT VIII-C CREDIT CARD PAYMENTS TO THE NFIP ................................... B-26 EXHIBIT VIII-D INTERNET PAYMENTS TO THE NFIP.......................................... B-27 EXHIBIT VIII-E WIRE TRANSFER PAYMENTS TO THE NFIP .............................. B-27 EXHIBIT IX RESTRICTED ACCOUNT DEPOSITS SUMMARY........................ B-28 List of Exhibits Effective: 10/1/05 PART A MONTHLY FINANCIAL STATEMENT PACKAGE REPORTING REQUIREMENTS The Write Your Own (WYO) Financial Control Plan requires WYO Companies to submit a monthly financial statement reporting package to the National Flood Insurance Program (NFIP) Bureau and Statistical Agent. The components of the reporting package are financial statements, reconciliation statements, certification statements, and statistical transactions. To ensure accurate monthly financial statements for the WYO Program, each WYO Company is required to submit financial data using the attached statements (Exhibits I- IX). These statements must be received no later than the 21st day of the calendar month following each month's closing. Any WYO Company whose statements are not received each month by the above deadline will not be included in the report to the Federal Emergency Management Agency (FEMA) for that period. A list will also be submitted to FEMA each month with the names of WYO Companies whose statements were not included. If there is no activity in any single month, the WYO Company should still submit a financial report indicating that month's earned premium and net income. The statements should be sent to the following address: National Flood Insurance Program Bureau & Statistical Agent ATTN: Finance and Statistical Control Department 7700 Hubble Drive Lanham, MD 20706-1833 E-Mail: financials@nfipstat.com Monthly financial statements are to be transmitted electronically via e-mail. For further instructions, please refer to the WYO Accounting Procedures Manual, Part G, Use of Preformatted Excel Financial Statement Spreadsheet for Monthly Financial Statement Reporting. In addition, the Financial Control Plan requires each WYO Company to perform monthly reconciliations. The completed reconciliation forms are to be submitted with the transaction detail. Please refer to the Financial Control Plan for these reporting requirements. The NFIP Bureau and Statistical Agent's Finance Group will review each WYO Company's financial reports for completion and reasonableness. If any questions arise concerning the financial reports, the appropriate WYO Company's representative will be contacted by the NFIP Bureau's accounting representative. EXHIBIT I INCOME STATEMENT COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING CURRENT FISCAL- MONTH YEAR-TO-DATE REVENUE 100. Net Written Premiums 105. Change in Unearned Premium 110. Earned Premium EXPENSES 115. Net Paid Losses 120. Allocated LAE (Line 500) 125. Other Loss and LAE Items (Line 660) 130. Change in Loss and LAE Reserves (Lines 325 through 340, Col. C) 135. Net Loss and LAE Incurred 140. Expense Allowance (Line 430) 150. Miscellaneous Expense 155. Total Expense 160. Operating Income (Loss) 165. Interest Income (Line 710) 170. Net Federal Policy Fees 175. Net Income (Loss) PREPARER'S NAME PHONE NUMBER EXHIBIT II RECONCILIATION OF PAYABLE/RECEIVABLE BALANCE COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING CURRENT FISCAL- MONTH YEAR-TO-DATE 200. Beginning Payable/ Receivable Balance (Line 315, Col. B) 205. Net Income (Loss) (Line 175) 210. LOC Funds Received (Line 800) 215. Disbursements to NFIP (Line 805) 220. Ending Payable/ Receivable Balance (Line 315, Col. A) EXHIBIT III BALANCE SHEET ITEMS COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING 300. Cash 305. Cash - Not Transferred To Restricted Account* 310. Cash - Not Transferred From Restricted Account* 315. Payable To (Receivable From) NFIP 320. Unearned Premium Reserves 325. Loss Reserves (Case) 330. Loss Reserves (IBNR) 335. LAE Reserves - Case (Allocated) 336. LAE Reserves - IBNR (Allocated) 340. LAE Reserves (Unallocated) 345. Premium Suspense (Under 60 Days Old) 346. Premium Suspense (60 Days and Older)* TOTAL A B C D INCREASE/ BEGINNING CURRENT PRIOR (DECREASE) OF FISCAL MONTH MONTH (Col. A-B) YEAR -0--0--0--0- Please show debits as positive numbers and bracket all credits. The columns must add to -0-. *Upon Treasury Department’s request, WYO Company must provide supporting aged detail for the reported balance. Companies will be notified when such a request is made. EXHIBIT IV EXPENSE ALLOWANCE CALCULATION COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING CURRENT FISCAL- MONTH YEAR-TO-DATE EXPENSE ALLOWANCE 400. Net Written Premiums (Line 100) 405. Expense Allowance % % % 410. Expense Allowance for Written Premium 411. For Future Reference 412. For Future Reference 413. For Future Reference 414. Subtotal Expense Allowance 415. Cancellation Premium Refund Adjustment Base 420. Commission Allowance % 15% 15% 425. Cancellation Commission Retention 426. Expense Allowance Adjustment for Bonus Commission 427. Rating Organization Expense 428. State Sales Tax on Insurance Services 429. Prior Term Refund Expense Allowance Due to the NFIP 430. Total Expense Allowance EXHIBIT V-A FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 9/30/90 AND PRIOR) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B C D NUMBER FEES PAID ENTRY VALUE RANGE CLOSED FEE (COLS. B X C) Erroneous AssignmentClosed Without Payment$ .01 -$ 200.00 200.01 -400.00 400.01 -600.00 600.01 -800.00 800.01 -1,000.00 1,000.01 -1,500.00 1,500.01 -2,000.00 2,000.01 -2,500.00 2,500.01 -3,000.00 3,000.01 -3,500.00 3,500.01 -4,000.00 4,000.01 -4,500.00 4,500.01 -5,000.00 5,000.01 -6,000.00 6,000.01 -7,000.00 7,000.01 -8,000.00 8,000.01 -9,000.00 9,000.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -20,000.00 20,000.01 -25,000.00 25,000.01 -30,000.00 30,000.01 -35,000.00 35,000.01 -40,000.00 40,000.01 -45,000.00 45,000.01 -50,000.00 50,000.01 -75,000.00 75,000.01 -100,000.00 100,000.01 -125,000.00 125,000.01 -150,000.00 150,000.01 -175,000.00 175,000.01 -200,000.00 200,000.01 to Limits $ 40.00 70.00 70.00 90.00 110.00 130.00 150.00 180.00 200.00 220.00 240.00 260.00 280.00 300.00 320.00 350.00 370.00 380.00 400.00 420.00 460.00 490.00 520.00 550.00 580.00 610.00 640.00 670.00 800.00 950.00 1,100.00 1,250.00 1,400.00 1,550.00 1,700.00 500-A. Total Allocated LAE Fees Paid - Exhibit V-A* *Upon FEMA request, a WYO Company must provide detail supporting the reported expense. EXHIBIT V-B FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 10/1/90 TO 10/31/96) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B C D NUMBER FEES PAID ENTRY VALUE RANGE CLOSED FEE (COLS. B X C) ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT MINIMUM FOR UPTON-JONES $ .01 -$600.00 600.01 -1,000.00 1,000.01 -2,000.00 2,000.01 -3,500.00 3,500.01 -5,000.00 5,000.01 -7,000.00 7,000.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -25,000.00 25,000.01 -35,000.00 35,000.01 -50,000.00 50,000.01 -100,000.00 100,000.01 -150,000.00 150,000.01 -200,000.00 $ 40.00 125.00 800.00 150.00 175.00 225.00 275.00 350.00 425.00 500.00 550.00 600.00 675.00 750.00 1,000.00 1,300.00 1,600.00 2,000.00 200,000.01 to Limits EXCESS MILEAGE 500-B. Total Allocated LAE Fees Paid - Exhibit V-B* *Upon FEMA request, a WYO Company must provide supporting detail for the reported expense. EXHIBIT V-C FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 11/1/96 TO 4/30/97) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B NUMBER ENTRY VALUE RANGE CLOSED ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT MINIMUM FOR UPTON-JONES $ .01 -$600.00 600.01 -1,000.00 1,000.01 -2,000.00 2,000.01 -3,500.00 3,500.01 -5,000.00 5,000.01 -7,000.00 7,000.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -25,000.00 25,000.01 -35,000.00 35,000.01 -50,000.00 50,000.01 -100,000.00 100,000.01 -250,000.00 250,000.01 and up 500-C. Total Allocated LAE Fees Paid - Exhibit V-C* C D FEES PAID FEE (COLS. B X C) $40.00 125.00 800.00 150.00 175.00 225.00 275.00 350.00 425.00 500.00 550.00 600.00 675.00 750.00 3.0% 2.3%, BUT NOT LESS THAN $3,000 2.1%, BUT NOT LESS THAN $5,750 *Upon FEMA request, a WYO Company must provide supporting detail for the reported expense. EXHIBIT V-D FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 5/1/97 TO 8/31/04) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B NUMBER ENTRY VALUE RANGE CLOSED ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT $ .01 -$ 600.00 600.01 -1,000.00 1,000.01 -2,000.00 2,000.01 -3,500.00 3,500.01 -5,000.00 5,000.01 -7,000.00 7,000.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -25,000.00 25,000.01 -35,000.00 35,000.01 -50,000.00 50,000.01 -100,000.00 100,000.01 -250,000.00 250,000.01 and up 500-D. Total Allocated LAE Fees Paid - Exhibit V-D* C D FEES PAID FEE (COLS. B X C) $ 40.00 125.00 150.00 175.00 225.00 275.00 350.00 425.00 500.00 600.00 750.00 900.00 1200.00 3.0% 2.3%, BUT NOT LESS THAN $3,000 2.1%, BUT NOT LESS THAN $5,750 *Upon FEMA request, WYO Company must provide supporting detail for the reported expense. EXHIBIT V-E INCREASED COST OF COMPLIANCE (ICC) FEE SCHEDULE - ALLOCATED LAE (USE FOR ICC CLAIMS WITH LOSS DATE OF 6/1/97 TO 8/31/04) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B C D NUMBER FEES PAID ENTRY VALUE RANGE CLOSED FEE (COLS. B X C) ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT $ .01 -$600.00 600.01 -1,000.00 1,000.01 -2,000.00 2,000.01 -3,500.00 3,500.01 -5,000.00 5,000.01 -7,000.00 7,000.01 -10,000.00 10,000.01 -15,000.00 $ 40.00 125.00 150.00 175.00 225.00 275.00 350.00 425.00 500.00 600.00 (Use the following entry value only for ICC total claims payments greater than $15,000 but not more than $20,000, and with a loss date of 5/1/00 to 4/30/03.) 15,000.01 -20,000.00 750.00 (Use the following entry range only for ICC total claims payments greater than $15,000 but not more than $30,000, and with a loss date of 5/1/03 to 8/31/04.) 15,000.01 -20,000.00 750.00 20,000.01 -30,000.00 900.00 500-E. Total Allocated LAE Fees Paid for ICC* *Upon FEMA request, WYO Company must provide supporting detail for the reported expense. EXHIBIT V-F FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 9/1/04 AND LATER) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B NUMBER ENTRY VALUE RANGE CLOSED ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT $ .01 -$1,000.00 1,000.01 -2,500.00 2,500.01 -5,000.00 5,000.01 -7,500.00 7,500.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -25,000.00 25,000.01 -35,000.00 35,000.01 -50,000.00 50,000.01 -100,000.00 100,000.01 -250,000.00 250,000.01 and up 500-F. Total Allocated LAE Fees Paid-Exhibit V-F* C D FEES PAID FEE (COLS. B X C) $ 60.00 225.00 300.00 425.00 500.00 575.00 650.00 750.00 850.00 1,000.00 1,250.00 3.0% 2.3% BUT NOT LESS THAN $3,000.00 2.1% BUT NOT LESS THAN $5,750.00 *Upon FEMA request, WYO Company must provide supporting detail for the reported expense. EXHIBIT V-G INCREASED COST OF COMPLIANCE (ICC) FEE SCHEDULE - ALLOCATED LAE (USE FOR ICC CLAIMS WITH LOSS DATE OF 9/1/04 AND LATER) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING A B C NUMBER ENTRY VALUE RANGE CLOSED FEE ERRONEOUS ASSIGNMENT CLOSED WITHOUT PAYMENT $ .01 -$1,000.00 1,000.01 -2,500.00 2,500.01 -5,000.00 5,000.01 -7,500.00 7,500.01 -10,000.00 10,000.01 -15,000.00 15,000.01 -25,000.00 25,000.01 -35,000.00 $ 60.00 225.00 300.00 425.00 500.00 575.00 650.00 750.00 850.00 1,000.00 D FEES PAID (COLS. B X C) __________ __________ __________ __________ __________ __________ __________ __________ 500 – G.Total Allocated LAE Fees Paid – Exhibit V-G 500 – F.Total Allocated LAE Fees Paid – Exhibit V-F 500 – E.Total Allocated LAE Fees Paid – Exhibit V-E 500 – D.Total Allocated LAE Fees Paid – Exhibit V-D 500 – C.Total Allocated LAE Fees Paid – Exhibit V-C 500 – B.Total Allocated LAE Fees Paid – Exhibit V-B 500 – A.Total Allocated LAE Fees Paid – Exhibit V-A 500. Total Allocated LAE Fees Paid* *Upon FEMA request, WYO Company must provide supporting detail for the reported expense. EXHIBIT VI OTHER LOSS AND LAE CALCULATION COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING CURRENT FISCAL- MONTH YEAR-TO-DATE UNALLOCATED LAE PAID 600. Net Paid Losses (Line 115) 605. Change In Case Reserves (Line 325, Col. C) 610. Case Incurred Losses 615. Unallocated Expense Allowance % x3.3% x3.3% 620. Unallocated LAE SALVAGE, SUBROGATION, AND RECOVERY 625. Net Salvage Received 630. Salvage Allowance % 635. Salvage Credit 640. Net Subrogation Received 645. Subrogation Allowance % 650. Subrogation Credit 652. Recovery of Losses Paid SPECIAL ALLOCATED LAE 655. Special Allocated Loss Adjustment Expenses 660. Total Other Loss & LAE Items (Sum of Lines 620, 635, 650, and 655) x10% x10% x25% x25% EXHIBIT VII INTEREST INCOME COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING CURRENT FISCAL- MONTH YEAR-TO-DATE 700. Total Interest Received 705. Restricted Account Charges 710. Total Interest Income EXHIBIT VIII-A LETTER OF CREDIT DRAWDOWNS COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING DATE AMOUNT 800. Total EXHIBIT VIII-B CASH PAYMENTS TO THE NFIP COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING DATE AMOUNT 805-B. Total Cash Payments 805-C. Total Credit Card Payments 805-D. Total Internet Payment 805-E. Total Wire Transfer Payments 805. Total Payments to NFIP EXHIBIT VIII-C CREDIT CARD PAYMENTS TO THE NFIP COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING DATE AMOUNT 805-C. Total Credit Card Payments EXHIBIT VIII-D INTERNET PAYMENTS TO THE NFIP COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING DATE AMOUNT 805-D. Total Internet Payments EXHIBIT VIII-E WIRE TRANSFER PAYMENTS TO THE NFIP (Greater than $100,000) COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING DATE AMOUNT 805-E. Total Wire Transfer Payments EXHIBIT IX RESTRICTED ACCOUNT DEPOSITS SUMMARY COMPANY (NAME) COMPANY (NUMBER) PERIOD ENDING RESTRICTED ACCOUNT DEPOSITS DATE AMOUNT 900. Total Deposits for the Month PART B FINANCIAL STATEMENTS - DEFINITION OF TERMS AND COMPLETION INSTRUCTIONS EXHIBIT I -INCOME STATEMENT 100. NET WRITTEN PREMIUMS: Represents the total premiums written (calculated values) less the premium refunds and voids. Consists of the premiums processed to the Policy Master File for the following Transaction Record Reporting and Processing (TRRP) Plan transactions: • New business (TRRP Plan, transaction #11) • Reinstatement with policy changes (TRRP Plan, transaction #15) • Renewals (TRRP Plan, transaction #17) • Endorsements (TRRP Plan, transaction #20) • Policy correction (TRRP Plan, transaction #23) • Policy cancellation (TRRP Plan, transaction #26) • Cancellation correction (TRRP Plan, transaction #29) NOTE: Written premium does not include the Federal Policy Fee. 105. CHANGE IN UNEARNED PREMIUM: (From Exhibit III, Line 320, Column C) Reflects the increase or decrease in the account balances of unearned premiums from the ending balance of the prior month to the ending balance of the current month. 110. EARNED PREMIUM: Line 100 + or - Line 105. Represents net written premium, plus or minus the change in unearned premium. 115. NET PAID LOSSES: Represents actual claim payments for flood losses. This amount is net of salvage, subrogation, recoveries, and applicable deductibles. Losses Paid consists of the following TRRP Plan transactions: • Open claim reserve (TRRP Plan, transaction #31) • Reopen claim (TRRP Plan, transaction #34) • Change Reserve (TRRP Plan, transaction #37) • Partial payments (TRRP Plan, transaction #40) • Close claim payments (TRRP Plan, transaction #43) • Close claim w/o payment (TRRP Plan, transaction #46) • General claim correction (TRRP Plan, transaction #61) • Addition to final payments (TRRP Plan, transaction #49) • Claim payment correction (TRRP Plan, transaction #64) • Change date of loss (TRRP Plan, transaction #84) • Change claim payment date (TRRP Plan transaction #87) • Recovery after final payment (TRRP Plan, transaction #52) • Recovery correction (TRRP Plan, transaction #67) NOTE: For paid losses, count the claim payment only, not the open reserve amount. 120. ALLOCATED LAE: From Exhibit V-G, Line 500 Represents fee expense for services provided in processing flood claims per the Fee Schedules. 125. OTHER LOSS AND LAE ITEMS: From Exhibit VI, Line 660 130. CHANGE IN LOSS AND LAE RESERVES: Reflects the increase or decrease in the following ending balances from prior period to the current: • Loss Reserves - Case (Exhibit III, Line 325, Column C). • Loss Reserves - IBNR (Exhibit III, Line 330, Column C). • LAE Reserves - Case (Allocated) (Exhibit III, Line 335, Column C). • LAE Reserves - IBNR (Allocated) (Exhibit III, Line 336, Column C). • LAE Reserves - Unallocated (Exhibit III, Line 340, Column C). 135. NET LOSS AND LAE INCURRED: Sum of Lines 115, 120, 125, and 130. 140. EXPENSE ALLOWANCE: From Exhibit IV, Line 430 Represents the amount given to the WYO Companies for operating, administrative, and commission expenses. For further details, see WYO Accounting Procedures Manual, Part B, Exhibit IV, Expense Allowance Calculation. 150. MISCELLANEOUS EXPENSE: Represents net underpayment or overpayment for premiums submitted within $6.00 of the system calculated amount (Breakage). This can occur on new business applications, endorsements, or renewal applications. The WYO Company should send supporting detail to reconcile to the total amount reported for miscellaneous expense. 155. TOTAL EXPENSE: Sum of Lines 135, 140, and 150. 160. OPERATING INCOME (LOSS): Line 110 less Line 155. 165. INTEREST INCOME: From Exhibit VII, Line 710 Line 700 less Line 705. 170 NET FEDERAL POLICY FEES Represents the amount charged for Federal Policy Fees, less the amount refunded for these fees. Federal Policy Fees consist of the following TRRP Plan transactions: • New business (TRRP Plan, transaction #11) • Reinstatement (TRRP Plan, transaction #15) • Renewals (TRRP Plan, transaction #17) • Endorsements (TRRP Plan, transaction #20) • Policy correction (TRRP Plan, transaction #23) • Policy cancellation (TRRP Plan, transaction #26) • Cancellation correction (TRRP Plan, transaction #29) 175. NET INCOME (LOSS): Sum of Lines 160, 165, and 170. EXHIBIT II -RECONCILIATION OF PAYABLE/RECEIVABLE BALANCE 200. BEGINNING PAYABLE/RECEIVABLE BALANCE: From Exhibit III, Line 315, Column B Represents the prior period ending balance. 205. NET INCOME (LOSS): From Exhibit I, Line 175 210. LOC FUNDS RECEIVED: From Exhibit VIII-A, Line 800 Represents the amount of money drawn from the Letter of Credit. 215. DISBURSEMENTS TO NFIP: From Exhibit VIII-B, Line 805 Represents funds inclusive of cash, wire, Internet, and credit card payments remitted to the NFIP by the WYO Company during the reporting period. 220. ENDING PAYABLE/RECEIVABLE BALANCE: Sum of Lines 200, 205, 210, and 215. EXHIBIT III -BALANCE SHEET ITEMS 300. CASH: Represents the General Ledger ending cash balance for the Flood Insurance Restricted Account. 305. CASH - NOT TRANSFERRED TO RESTRICTED ACCOUNT: Represents the total amount of cash due the restricted account but not transferred by the end of the reporting month. Consider this balance as FEMA’s Accounts Receivable. Upon FEMA's request, the WYO Company must provide supporting detail concerning the reported balance. The detail should include policy number or payer name and amount. This detail should also age balances under the following time frames: 60-180 days, 181-360 days, and over 360 days. The WYO Company will be notified when the data is required. 310. CASH - NOT TRANSFERRED FROM RESTRICTED ACCOUNT: Represents the total amount of cash due from the restricted account but not withdrawn by the end of the reporting period. Consider this balance as FEMA’s Accounts Payable. Upon FEMA's request, the WYO Company must provide supporting detail concerning the reported balance. This detail should include payee name or policy number and amount payable. This detail should also age balances under the following time frames: 60-180 days, 181-360 days, and over 360 days. The WYO Company will be notified when the data is needed. 315. PAYABLE TO (RECEIVABLE FROM) NFIP: Assets minus liabilities. 320. UNEARNED PREMIUM RESERVES: Represents the income received for the written premiums but not yet earned. Companies shall use a pro-rata earnings method over the life of the policy. 325. LOSS RESERVES (CASE): Represents the estimated loss (building and/or contents) for all the open claim cases. The balance of this account is affected by the following TRRP Plan transactions: • Open claim reserve (TRRP Plan, transaction #31) • Reopen claim (TRRP Plan, transaction #34) • Change reserve (TRRP Plan, transaction #37) • Partial payment (TRRP Plan, transaction #40) • Close claim with payment (TRRP Plan, transaction #43) • Close claim without payment (TRRP Plan, transaction #46) • General claim correction (TRRP Plan, transaction #61) • Claim payment correction (TRRP Plan, transaction #64) 330. LOSS RESERVES (IBNR): Represents the estimated outstanding losses for building and/or contents that are incurred but not yet reported. 335. LAE RESERVES - CASE (ALLOCATED): Represents an estimate of allocated LAE reserves for open reported claims only. 336. LAE RESERVES - IBNR (ALLOCATED): Represents an estimate of allocated LAE reserves for incurred but not reported claims only. 340. LAE RESERVES (UNALLOCATED): Represents the LAE reserves for the unallocated loss adjustment expenses on the reported IBNR (Line 330, Column A x 3.3%). 345. PREMIUM SUSPENSE (UNDER 60 DAYS OLD): Represents the total premiums aged under 60 days for policies that have not been processed. 346. PREMIUM SUSPENSE (60 DAYS AND OLDER): Represents the total premiums aged 60 days or more for policies that have not been processed. Upon FEMA's request, the WYO Company must provide supporting detail concerning the reported balance. The detail should contain policy number, policy effective date, amount, and number of days outstanding. EXHIBIT IV -EXPENSE ALLOWANCE CALCULATION 400. NET WRITTEN PREMIUM: From Line 100. 405. EXPENSE ALLOWANCE %: The WYO Company expense allowance percentage for operating, administrative, and commission expenses for a specific fiscal year. 410. EXPENSE ALLOWANCE FOR WRITTEN PREMIUM: Line 400 multiplied by Line 405. 411. THIS LINE ITEM IS RESERVED FOR FUTURE REFERENCE USE. 412. THIS LINE ITEM IS RESERVED FOR FUTURE REFERENCE USE. 413. THIS LINE ITEM IS RESERVED FOR FUTURE REFERENCE USE. 414. SUBTOTAL EXPENSE ALLOWANCE Total of Line 410. 415. CANCELLATION PREMIUM REFUND ADJUSTMENT BASE: The WYO Company may retain 15 percent of the premium refunded (exclusive of the Federal Policy Fee) on policies canceled for the cancellation reasons 9 and 20. For more information, please reference the NFIP Transaction Record Reporting and Processing (TRRP) Plan, Revision 4, Change 5, October 1, 2003, Page 4-39, Case V. Line 415 represents the total amount of the premium refunds for the allowable cancellation reasons 9 and 20. 420. COMMISSION ALLOWANCE %: Represents the percentage of the premium refund that can be retained as commission (15 percent). 425. CANCELLATION COMMISSION RETENTION: Line 415 multiplied by Line 420. 426. EXPENSE ALLOWANCE ADJUSTMENT FOR BONUS COMMISSION: Line 426 is used to record the annual adjustment to a WYO Company's expense allowance based upon its performance to achieve policy- or contract-in-force goals. The adjustment can result in a WYO Company earning additional expense allowance. The calculation of the expense allowance adjustment will be performed by the NFIP Bureau and Statistical Agent. A WYO Company will be notified by the NFIP Bureau of the additional expense allowance amount earned. If a WYO Company receives notice that it is entitled to additional expense allowance funds, the funds should be taken from the restricted flood account and the transaction recorded as a debit on Line 426. Line 426 is also used as necessary to record the Expense Allowance Adjustment from Cancellation Reason Code 24. Cancellation Reason Code 24 was established to cancel/rewrite when converting a standard rated policy to a Preferred Risk Policy (PRP) as a result of a map revision, Letter of Map Amendment (LOMA), or Letter of Map Revision (LOMR). The expense allowance is retained by the WYO Company on both the standard policy being canceled and the PRP being written. 427. RATING ORGANIZATION EXPENSE: Several WYO Companies have agreed to use the services of a rating organization in assisting FEMA in performing studies and investigations on a community or individual risk basis to determine more equitable and accurate estimates of flood insurance risk premium rates. With the prior approval of FEMA, these Companies will be reimbursed for fees charged in conjunction with this project. To report such expenses, the WYO Company should indicate the fee paid to the rating organization on its monthly financial statement, Exhibit IV, Line 427. The WYO Company may disburse funds directly from the WYO restricted account, or be reimbursed from the restricted account. A copy of the paid bill must be attached to the monthly financial statements. 428. STATE SALES TAX ON INSURANCE SERVICES: Background The Texas tax authorities have determined that Texas sales tax on insurance services is applicable to all fees paid by WYO Companies to claim adjusters, and/or adjusting firms, for handling NFIP claims for Texas. Because of this determination, the NFIP allotted the cost of the Texas adjuster services sales tax to Texas flood insurance policyholders. This was done by assessing an additional $5 charge to new business policies (effective 1/1/93) and renewal policies (effective 3/1/93). In addition, FEMA has determined it will reimburse, dollar-for-dollar, the expense incurred by a WYO Company that pays the Texas sales tax for adjuster services provided to Texas policyholders. A WYO Company may take the reimbursement for the tax expense after the tax has been paid to the adjuster and/or adjusting firm. Procedure In order to be reimbursed for the Texas sales tax, a WYO Company must make the payment to the adjuster and then submit supporting documentation. Reimbursement procedure guidelines are as follows: 1. Indicate the total amount of Texas sales charges paid for the reporting month on financial statement Exhibit IV (Expense Allowance Calculation), Line 428. Please note that this entry should not include your WYO Company's allocated loss adjustment fee for the adjustment of claims cases. This expense must be indicated on the appropriate Fee Schedule. 2. Include, with your financial statement package, a listing that details the Texas sales tax paid for adjuster services on each payment made. The total of the individual tax payments on this listing should agree with the total amount recorded on Exhibit IV, Line 428. The listing should contain the following information: the policy number (not claim number) associated with the paid adjuster expense; date of loss; name of adjuster and/or adjusting firm paid; date of the adjuster payment; total amount of payment to the adjuster (including sales tax); and amount of Texas sales tax paid. 3. Maintain in your WYO Company's records all supporting documentation concerning the payment of the Texas sales tax. 429. PRIOR TERM REFUND EXPENSE ALLOWANCE DUE TO THE NFIP: Line 429 is used to record the return of the expense allowance from the WYO Company to the NFIP based on the refund amount and the expense allowance in effect when the refund is processed. Effective October 1, 2003, changes were made regarding the NFIP's current refund and cancellation rules, in response to the WYO Companies' requests. These changes indicate that eligible prior term refunds older than 2 years will be processed by the NFIP Bureau and Statistical Agent. To adhere to this procedure, please continue to follow the existing NFIP Underwriting Procedures in the Flood Insurance Manual’s Cancellation and Endorsement sections when submitting your request for prior term refunds. FEMA bills and notifies the WYO Company via the Prior Term Refund Expense Report (see next page). This expense report is provided to the WYO Company on a monthly basis subsequent to the issuance of the prior term refund check to the insured. Upon receipt of the prior term refund billing information, the WYO Company should reflect the return of the expense allowance to the NFIP Bureau by showing the amount as a credit on Exhibit IV, Line 429, and a debit on Exhibit VIII-B. The expense allowance adjustment should be made within 30 days of receipt of the prior term refund billing information. When making the expense allowance adjustment, please send a copy of the prior term refund billing information with your monthly financial statement package for proper tracking. PRIOR TERM REFUND EXPENSE REPORT WYO COMPANY POLICY NUMBER INSURED NAME Policy Term Original Premium New Premium Refund Amount Due Insured Expense Allowance Rate Applied Expense Allowance Adjustment Due NFIP 430. TOTAL EXPENSE ALLOWANCE: Sum of Lines 414, 425, 426, 427, 428, and 429. EXHIBITS V-A, V-B, V-C, V-D, V-E, V-F, and V-G FEE SCHEDULES - ALLOCATED LAE Please be aware that there are seven financial statement fee schedules for allocated Loss Adjustment Expense (LAE). The key to the use of the proper fee schedule is the claim loss date. Once the claim loss date is known, simply apply the following guide to determine which financial statement fee schedule you should use to report the allocated LAE on your financial statement: DATE OF LOSS 9/30/90 and prior 10/1/90 through 10/31/96 11/1/96 through 4/30/97 5/1/97 through 8/31/04 6/1/97 through 8/31/04 9/1/04 and later 9/1/04 and later FEE SCHEDULE Exhibit V-A Exhibit V-B Exhibit V-C Exhibit V-D Exhibit V-E Used only for Increased Cost of Compliance (ICC) claim expenses Exhibit V-F Exhibit V-G Used only for Increased Cost of Compliance (ICC) claim expenses FEE SCHEDULE PRINCIPLES • The allocated LAE fee can be taken at the time either a partial claim payment or afinal claim payment is made. • Fees are not paid separately for building and content losses. Rather, the sum of the building and contents covered or gross losses is the basis for the fee. • The major task in using the various fee schedules is to determine the entry value foreach claim. The entry value may be based on either the covered loss or the grossloss. In addition, the entry value will not always equal the claim payment. • For fee schedule entry value calculations based on covered loss, the standarddeductible is subtracted from the covered loss amount, rather than the actual deductible amount shown on the policy. Covered loss is limited to the amount of insurance purchased. • Fee schedule entry value calculations based on gross loss pertain to all claims witha date of loss from 5/15/96 to 7/10/96 and all claims with a date of loss from 5/1/97and later. • Exhibit V-E is to be used to record and to report only LAE related to ICC claims witha loss date before 9/1/04. • Exhibit V-F is to be used to record and to report LAE related to claims with a lossdate of 9/1/04 and later. • Exhibit V-G is to be used to record and to report only LAE related to ICC claims witha loss date of 9/1/04 and later. EXHIBIT V-A - FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 9/30/90 AND PRIOR) 500-A. TOTAL ALLOCATED LAE FEES PAID: Allocated loss adjustment expenses for loss dates of 9/30/90 and prior are reported and reimbursed on the basis of the Exhibit V-A Fee Schedule. The following factors determine the fee to which the WYO Company is entitled: • All fee schedule entry values should be based on covered loss, less standard deductible for building ($500) and contents ($500), if applicable. • Fees are not paid separately for building and contents losses. • The Fee Schedule is predicated on the application of the $500 standard deductible to the covered losses, subject to the amounts of insurance purchased. • Bring forward total on Exhibit V-A, Line 500-A, to Exhibit V-G, Line 500-A. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-A. EXHIBIT V-B – FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 10/1/90 TO 10/31/96) 500-B. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-B: Allocated loss adjustment expenses for loss dates of 10/1/90 to 10/31/96 are reported on the Exhibit V-B Fee Schedule. The following procedures outline the calculation of the LAE and its reporting requirements. LOSS DATES BETWEEN 10/1/90 AND 5/14/96 AND BETWEEN 7/11/96 AND 10/31/96 • Allocated loss adjustment expenses for loss dates of 10/1/90 to 5/14/96 and loss dates of 7/11/96 to 10/31/96 are reimbursed based on the Exhibit V-B Fee Schedule. • All fee schedule entry value calculations should be based on covered loss (not gross loss) less standard deductibles for building ($500) and contents ($500), if applicable. Covered loss is limited to the amount of insurance purchased. • Fees are not paid separately for building and contents losses. • Bring forward total on Exhibit V-B, Line 500-B, to Exhibit V-G, Line 500-B. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-B. LOSS DATE BETWEEN 5/15/96 AND 7/10/96 • For claims with a loss date between 5/15/96 and 7/10/96, calculate the fee amount based on the Exhibit V-C Fee Schedule. All entry value calculations should be based on the gross loss. • For all claims with a fee range value of $50,000.01 and above, calculate the fee amount based on the Exhibit V-C Fee Schedule. The amount of fee in excess of the Exhibit V-B Fee Schedule is to be processed as a Special Allocated Loss Adjustment Expense (SALAE) - Type 2. No prior FEMA approval (authorization letter) is necessary. • The excess fee should be reported on the current financial statement Exhibit VI, Line 655. For the SALAE, follow the procedures as outlined in Accounting Training Assistance Bulletin (ATAB) 1-92, which requires a listing that details the SALAE by policy number, date of loss, amount, and type code. To establish an audit trail, please include the gross loss amount on your SALAE listing. • The basic fee (amount per Exhibit V-B Fee Schedule) is to be reported on Exhibit V-B, Fee Schedule - Allocated LAE. • For all claims with a fee range value of $50,000 and below, calculate the fee based on the Exhibit V-C Fee Schedule and use the financial statement Exhibit V-B Fee Schedule to report the LAE. Refer to the WYO Accounting Training Manual for additional information and examples. EXHIBIT V-C -FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 11/1/96 TO 4/30/97) 500-C. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-C: Allocated loss adjustment expenses for loss dates between 11/1/96 and 4/30/97 are reimbursed on the basis of the Exhibit V-C Fee Schedule. The following factors determine the fee to which the WYO Company is entitled: • All fee schedule entry values should be based on covered loss, less standard deductible for building ($500) and contents ($500), if applicable. • Fees are not paid separately for building and contents losses. The Exhibit V-C Fee Schedule incorporates the revised fee amounts for the entry value ranges of $50,000.01 and above, and its use will eliminate the need for WYO Companies to process the excess fee above the basic fee schedule as a SALAE. The Exhibit V-C Fee Schedule should be used only to report adjuster fees for claims with a loss date between 11/1/96 and 4/30/97. All fees for loss dates prior to 11/1/96 should be reported on financial statement Exhibit V-A or V-B. • Bring forward total on Exhibit V-C, Line 500-C, to Exhibit V-G, Line 500-C. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-C. EXHIBIT V-D - FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 5/1/97 TO 8/31/04) 500-D. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-D: Allocated loss adjustment expenses for loss dates of 5/1/97 to 8/31/04 are reimbursed on the basis of the Exhibit V-D Fee Schedule. All fee schedule entry values should be based on gross loss. Gross loss is defined as follows: (1) Gross loss shall mean the agreed cost to repair or replace before application of depreciation, deductibles, or other limiting clauses or conditions. (2) For the purpose of this schedule, should the loss exceed the available coverage, gross loss shall mean the amount of coverage. (3) If the claim involves a salvage "buy-back," gross loss shall mean the amount of the claim before the salvage value is deducted. (4) If the insured qualifies for replacement cost coverage, gross loss is determined on the basis of the entire replacement cost claim (including depreciation holdback). The Exhibit V-D Fee Schedule should be used only to report adjuster fees for claims with a loss date of 5/1/97 to 8/31/04. All fees for loss dates prior to 5/1/97 should be reported on financial statement Exhibit V- A, V-B, or V-C. EXHIBIT V-E -INCREASED COST OF COMPLIANCE (ICC) FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 6/1/97 TO 8/31/04) 500-E. TOTAL ALLOCATED LAE FEES PAID FOR ICC: This Exhibit is to be used only to report allocated loss adjustment expenses associated with ICC coverage payments. ICC allocated loss adjustment expenses for loss dates of 6/1/97 to 8/31/04 are reported and reimbursed on the basis of the Exhibit V-E Fee Schedule. The following factors determine the fee to which the Company is entitled: • All fee schedule entry values should be based on the loss amount. • The maximum loss limit is $15,000 up to loss date of 4/30/00. • The maximum loss limit was increased to $20,000 with loss date of 5/1/00 to 4/30/03. • The maximum loss limit was increased to $30,000 with loss date of 5/1/03 to 8/31/04. • ICC coverage is effective for new and renewal policies dated June 1, 1997, and later. • Bring forward total on Exhibit V-E, Line 500-E, to Exhibit X Line 500-E. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-E. EXHIBIT V-F -FEE SCHEDULE - ALLOCATED LAE (USE FOR CLAIMS WITH LOSS DATE OF 9/1/04 AND LATER) 500-F. TOTAL ALLOCATED LAE FEES PAID: Allocated loss adjustment expenses for loss dates of 9/1/04 and later are reimbursed on the basis of the Exhibit V-F Fee Schedule. All fee schedule entry values should be based on gross loss. Gross loss is defined as follows: 1. Gross loss shall mean the agreed cost to repair or replace before application of depreciation, deductibles, or other limiting clauses or conditions. 2. For the purpose of this schedule, should the loss exceed the available coverage, gross loss shall mean the amount of coverage. 3. If the claim involves a salvage "buy-back," gross loss shall mean the amount of the claim before the salvage value is deducted. 4. If the insured qualifies for replacement cost coverage, gross loss is determined on the basis of the entire replacement cost claim (including depreciation holdback). The Exhibit V-F Fee Schedule should be used only to report adjuster fees for claims with a loss date of 9/1/04 and later. All fees for loss dates prior to 9/1/04 should be reported on financial statement Exhibit V-A, V-B, or V-C. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-F. EXHIBIT V-G -INCREASED COST OF COMPLIANCE (ICC) FEE SCHEDULE - ALLOCATED LAE (USE FOR ICC CLAIMS WITH LOSS DATE OF 9/1/04 AND LATER) 500-G. TOTAL ALLOCATED LAE FEES PAID FOR ICC: This Exhibit is to be used only to report increased cost of compliance associated with ICC coverage payments. ICC allocated loss adjustment expenses for loss dates of 9/1/94 and later are reported and reimbursed on the basis of the Exhibit V-G Fee Schedule. The following factors determine the fee to which the WYO Company is entitled: • All fee schedule entry values should be based on the loss amount. • The maximum loss limit is $30,000. • ICC coverage is effective for new and renewal policies dated September 1, 1994, and later. • Bring forward total on Exhibit V-E, Line 500-G, to Exhibit V-G, Line 500-G. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-G.. 500-G. TOTAL ALLOCATED LAE FEES PAID-EXHIBIT V-G. Total brought forward from Exhibit V-G, Line 500-G. 500-F. TOTAL ALLOCATED LAE FEES PAID-EXHIBIT V-F. Total brought forward from Exhibit V-F, Line 500-F. 500-E. TOTAL ALLOCATED LAE FEES PAID-EXHIBIT V-E. Total brought forward from Exhibit V-E, Line 500-E. 500-D. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-D: Total brought forward from Exhibit V-D, Line 500-D. 500-C. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-C: Total brought forward from Exhibit V-C, Line 500-C. 500-B. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-B: Total brought forward from Exhibit V-B, Line 500-B. 500-A. TOTAL ALLOCATED LAE FEES PAID - EXHIBIT V-A: Total brought forward from Exhibit V-A, Line 500-A. 500. TOTAL ALLOCATED LAE FEES PAID: Sum of Lines 500-A, 500-B, 500-C, 500-D, and 500-E. NOTE: Upon FEMA's request, a WYO Company must provide supporting details for its fiscal year-to-date allocated loss adjustment expenses. The detail should include the policy number associated with the claim, date of loss, total claim payments, and the total allocated loss adjustment expense. Refer to the WYO Accounting Training Manual for additional information and instructions on how to complete Exhibit V-G. EXHIBIT VI - OTHER LOSS AND LAE CALCULATION 600. NET PAID LOSSES: From Line 115. 605. CHANGE IN CASE RESERVES: From Exhibit III, Line 325, Column C. 610. CASE INCURRED LOSSES: Sum of Lines 600 and 605. Represents the amount to which the unallocated LAE percentage allowance is applied. 615. UNALLOCATED EXPENSE ALLOWANCE %: Represents the unallocated expense allowance percentage. 620. UNALLOCATED LAE: Line 610 multiplied by Line 615. Represents the amount allowed the WYO Companies for unallocated LAE. 625. NET SALVAGE RECEIVED: Represents the recoveries made on salvaged items, net of the recovery expenses (transactions #52 and #67), plus any additional recovery that is not attributable to any single claim. 630. SALVAGE ALLOWANCE %: Represents allowance percentage for salvage collected (currently 10 percent). 635. SALVAGE CREDIT: Line 625 multiplied by Line 630. Represents the amount to be retained by the WYO Company as its share of collections. 640. NET SUBROGATION RECEIVED: Represents the recoveries made on subrogation cases. This amount should be net of expenses incurred for the subrogation collections (transactions #52 and #67). 645. SUBROGATION ALLOWANCE %: Represents allowance percent for subrogation collected (currently 25 percent). 650. SUBROGATION CREDIT: Line 640 multiplied by Line 645. Represents the amount retained by WYO Companies for their collection efforts. 652. RECOVERY OF LOSSES PAID Represents the amount of recoveries (transactions #52 and #67) for the erroneous payment of claim losses. 655. SPECIAL ALLOCATED LOSS ADJUSTMENT EXPENSES: These are SALAE (transactions #71 and #74) authorized by FEMA for reimbursement exclusive of expenses based on the Fee Schedule. The types of SALAE are as follows: • Expense Type 1 - Engineering Expense - WYO Company authorized to approve up to $2,500 per claim without FEMA's approval. • Expense Type 2 - Adjuster Expense (in excess of the applicable Fee Schedule) - WYO Company authorized to approve up to $500 per claim without FEMA's approval. • Expense Type 3 - Litigation Expenses - WYO Company authorized to approve up to $5,000 per claim without FEMA's approval. • Expense Type 4 - Cost of Appraisal (implementation of the Standard Flood Insurance Appraisal Clause) - WYO Company authorized to approve up to $2,500 per claim without FEMA's approval. For detailed information concerning the procedures for reporting SALAE on your monthly financial statement, refer to Part F of this Manual. 660. TOTAL OTHER LOSS & LAE ITEMS: Sum of Lines 620, 635, 650, and 655. This sum is posted to Exhibit I, Line 125. EXHIBIT VII - INTEREST INCOME 700. TOTAL INTEREST RECEIVED: Represents the interest, if any, that has been earned from NFIP funds deposited into the restricted flood account or any other account(s). Any interest earned on NFIP processing accounts, restricted accounts, satellite accounts, lockboxes, or other accounts must be paid to the NFIP. These funds and their associated interest are flood insurance- related money. 705. RESTRICTED ACCOUNT CHARGES: Represents the charges, if any, for the utilization of ACH, wire transfers, credit card, internet charges, or other charges related to the restricted flood account, that are levied by the banking institution. Funds exceeding $100,000 must be remitted by wire transfer. This method may require WYO Companies to transfer excess funds more frequently than once a week. It is FEMA’s understanding that wire transfers may be assessed an additional cost by your banking institution. Please negotiate with your banking institution to obtain the best possible per-transaction cost. For credit card processing, FEMA will absorb all bank service charges when using FEMA’s provider. The WYO Company will not be reimbursed by FEMA when using alternative credit card services other than FEMA’s provider. All other charges for hardware and software will be borne by the WYO Company. See Part H, Credit Card Processing, for additional information. These reported charges must be offset by any account earning credits. On a monthly basis, the WYO Company should send supporting detail to reconcile to the total amount reported for restricted account charges. 710. TOTAL INTEREST INCOME: Line 700 minus Line 705. This total is posted to Exhibit I, Line 165. Represents the total interest income for the month. EXHIBIT VIII-A - LETTER OF CREDIT DRAWDOWNS 800. TOTAL LETTER OF CREDIT (LOC) DRAWDOWNS: Represents the total amount of LOC funds deposited in the restricted account for the reporting month. As indicated, the Exhibit requires the date and amount of the individual drawdown. This total is then posted to Exhibit II, Line 210. EXHIBIT VIII-B - CASH PAYMENTS TO THE NFIP 805-B. TOTAL CASH PAYMENTS Represents the excess funds, exclusive of credit card payments, remitted to the U.S. Treasury. 805-C. CREDIT CARD PAYMENTS Represents funds remitted to the U.S Treasury. 805-D. INTERNET PAYMENTS Represents funds collected through the Internet system. 805-E. WIRE TRANSFER PAYMENTS Represents funds remitted to the U.S. Treasury through the use of wire transfers. 805. TOTAL PAYMENTS TO NFIP: The sum of Lines 805-B, 805-C, 805-D and 805-E. This total is then brought forward to Exhibit II, Line 215. EXHIBIT VIII-C - CREDIT CARD PAYMENTS TO THE NFIP 805-C. TOTAL CREDIT CARD PAYMENTS This Exhibit is to be completed by only those WYO Companies accepting credit card payments. Line 805-C represents the funds remitted to the U.S. Treasury through the use of the credit card payment mechanism. This total is then brought forward to Exhibit VIII-B, Line 805- C. EXHIBIT VIII-D - INTERNET PAYMENTS TO THE NFIP 805-D. INTERNET PAYMENTS The Internet transactions must be reported on Exhibit VIII-D, Internet Payments to NFIP. Line 805-D represents the funds collected through the Internet system. The total is then brought forward to Exhibit VIII-B, Line 805-D. Each Internet transfer must be reported on the day that it is made. EXHIBIT VIII-E – WIRE TRANSFER PAYMENTS TO THE NFIP 805-E. WIRE TRANSFER PAYMENTS The wire transfer payment must be reported on Exhibit VIII-E, Wire Transfer to NFIP. Line 805-E represents the funds remitted to the U.S. Treasury that is greater than $100,000, through the use of the wire transfer mechanism. The total is then brought forward to Exhibit VIII-B, Line 805-E. Each wire transfer must be reported on the day that it is made. EXHIBIT IX - RESTRICTED ACCOUNT DEPOSITS SUMMARY 900. TOTAL DEPOSITS FOR THE MONTH: Represents the total amount of funds deposited in the restricted account for the reporting month. As indicated, the Exhibit also requires the date and amount of the individual deposits. PART C CASH MANAGEMENT PROCEDURES I. DEPOSIT OF NFIP FUNDS All premiums (net of expense allowances), Federal Policy Fees, and interest income relating to the WYO flood insurance program shall be deposited in a special account in an FDIC-regulated bank separate from all other WYO Company business. For purposes of clarification, premiums collected will also include all "suspense" items, not only posted policies. In addition, all premiums and Federal Policy Fees collected for policies with a future effective date must be deposited into the WYO Company's restricted account as soon as processing allows. A WYO Company may not use flood funds to earn interest for its company. Any interest earned on NFIP processing accounts, restricted accounts, satellite accounts, lockboxes, or other accounts must be paid to the NFIP. Using existing cash flow systems of each WYO Company, the flood insurance cash activity should be monitored on the same basis as all other company funds. To supple- ment this cash monitoring process, particularly the timely deposit of funds, WYO Companies are required to report all monthly restricted account deposits on Exhibit IX of the financial statements. The WYO Company must deposit flood insurance funds in the restricted account as soon as possible following collection of the premium. Each WYO Company must exert a good faith effort to comply with this intent. Each WYO Company must be prepared to document and explain how its individual procedures satisfy the intent. In order to facilitate timely deposit of WYO funds, a WYO Company may, at its discretion, operate more than one restricted account. The company will continue to supply FEMA with one (1) financial report encompassing all such accounts. In addition, the company will be allowed only one (1) SMARTLINK (Letter of Credit) account. To ensure that the intent of overall proper cash management is achieved, each WYO Company shall outline its proposed cash management procedures for review by FEMA. These procedures shall be transmitted to the company's WYO Program Coordinator at the NFIP Bureau and Statistical Agent prior to the start of the company’s WYO operations. In addition, FEMA may request companies currently writing to update their cash management procedures or clarify a specific one. To ensure the proper control and maintenance of the flood insurance account, WYO Companies must establish a general ledger to record transactions and provide supporting detail for the cash balances. In addition, monthly reconciliations between bank statements and the general ledger cash balances must be performed. II. TRANSFER OF EXCESS FUNDS Transfer of excess funds from the Restricted Flood Insurance Account to the U.S. Treasury is mandatory and should be performed at least once a week. Excess funds are defined as those funds in the restricted account less $5,000 and established payables (Exhibit III, Line 310). Funds in the premium suspense account are to be included in the excess funds calculation. In addition, premiums and Federal Policy Fees collected for policies with future effective dates should be included in the excess funds calculation. Established reserves for claim payments and claim loss adjustment expenses are not included when calculating the excess funds amount. The WYO Company or vendor must transmit excess funds to FEMA on at least a weekly basis. If weekly transfers are not made, a WYO Company must be prepared to document the reasons for FEMA. The Cash Management Procedure requires WYO Companies to remit funds as follows: • Through the use of the Automated Clearinghouse (ACH) established by FEMA for excess funds of $100,000 or less. • Funds exceeding $100,000 must be remitted by wire transfer. This method may require WYO Companies to transfer excess funds more frequently than once a week. It is FEMA’s understanding that wire transfers may be assessed an additional cost by your banking institution. Please negotiate with your banking institution to obtain the best possible per-transaction cost. FEMA’s agency location code for NFIP funds is 70-07-0005 and the Treasury appropriations code is 70X4236. • Funds may be transferred through the Internet. This process is part of an e-business initiative that allows customers to make flood insurance premium payments with paperless check transactions using the Internet. The WYO Program Coordinator assigned to each company should be contacted to coordinate the company’s access to the ACH. In rare situations and with FEMA’s permission, excess funds checks may be sent directly to the NFIP Bureau and Statistical Agent. For more details on the ACH, please refer to Part E of this Manual. III. WYO COMPANY EXPENSE REIMBURSEMENT • The appropriate expense allowance for the WYO Company may be taken at the time the policy is processed and reported on the financial statement. • Allocated loss adjustment expenses based on the Fee Schedules can be taken at the time the claim payment is made. • Unallocated loss adjustment expenses may be taken at the time the reserve is established (with any necessary adjustments made as the incurred claim develops) or at the time the claim case is closed. • Special allocated loss adjustment expense reimbursement procedures are detailed in Part F of the WYO Accounting Procedures Manual. IV. PREMIUM AND CLAIM CHECKS OUTSTANDING 6 MONTHS AND OLDER The following procedures should be used in processing premium and claim checks that are outstanding (not cashed) for 6 months and later. A. Premium Checks 1. Void check(s). 2. Increase your net written premium (Exhibit I, Line 100) for the reporting month by the amount of the check(s). 3. Increase your cash account (Exhibit III, Line 300, Column A) by the amount of the voided check(s). 4. Your expense allowance for written premium (Exhibit IV, Line 410, Current Month Column) will be increased because of the increase in net written premium. 5. On your "Net Written Premiums" monthly reconciliation statement, show in the "Other-Explain" line the amount of the voided check(s), and then subtract this figure from your net written premium total. Identify this entry on the reconciliation statement with "Stale-Dated Check(s)." This adjustment is required since no statistical transaction will be generated for the voided check(s). 6. Maintain for 3 years the details supporting the voided check(s). B. Claim Checks 1. Void check(s). 2. Decrease your net paid losses (Exhibit I, Line 115) for the reporting month by the amount of the check(s). 3. Increase your cash account (Exhibit III, Line 300, Column A) by the amount of the voided check(s). 4. The "Losses" monthly reconciliation statement must show, on the "Other- Explain" line, the amount of the voided check(s). Add this figure to your reported net paid losses total. Identify this entry on the reconciliation statement with "Stale-Dated Check(s)." This adjustment is required since no statistical transaction will be generated for the voided check(s). 5. Maintain details supporting the voided check(s) for 3 years. PART D LETTER OF CREDIT (LOC)/SMARTLINK II - HEALTH AND HUMAN SERVICES(HHS) PAYMENT MANAGEMENT SYSTEM I. OVERVIEW OF SMARTLINK II - HHS PAYMENT MANAGEMENT SYSTEM The U.S. Department of Health and Human Services Payment Management System (DHHS PMS) is the system currently used by FEMA to enable WYO Companies to draw funds as needed from the U.S. Treasury. The DHHS PMS allows each recipient to request transfer of funds via computer through a program called SMARTLINK. After receipt of the request, transfer of the funds is made to the recipient's bank on a next business day basis. FEMA will delay approval of SMARTLINK requests only in extraordinary circumstances. A company's requests may be delayed if they seem excessive relative to its financial statement entries. In such cases, the company will be contacted immediately and the funds approved upon satisfactory resolution of the issue. II. APPLICATION FOR ACCESS TO SMARTLINK A. In order to participate in the WYO Program, a company must have a signed Financial Assistance/Subsidy Arrangement with FEMA. Once the Arrangement has been executed, a WYO Program Coordinator will be assigned by the NFIP Bureau and Statistical Agent to assist the company in establishing access to SMARTLINK for the purpose of paying claims and adjustment expenses arising from the issuance of flood insurance policies. B. The WYO Company should provide a complete Direct Deposit Form (Form 1199A), available at the financial institution where the Company has established its NFIP restricted account. Forms can also be accessed via the Internet (www.dpm.psc.gov). Instructions for completing the Direct Deposit Form are as follows: 1. Section 1 (to be completed by the recipient) - Fill out all paragraphs except paragraphs B and G. Be certain to enter your Company Tax ID number in paragraph C. This Employer Identification Number (EIN) is absolutely necessary for access to the SMARTLINK II Payment Management System. Provide the signature(s) of the person or persons granted authority to oversee the account to which funds are to be deposited, and date the form. 2. Section 2 (to be completed by the recipient) - The following agency address should be included: Federal Emergency Management Agency, FM-CFO, Room 716, 500 C Street, SW, Washington, DC 20472. 3. Section 3 (to be completed by the financial institution) -The financial institution's representative must sign the form and provide a telephone number for contact purposes. C. After the form is completed, provide all parts of the original form to your WYO Program Coordinator. NOTE: At the same time you transmit these forms to your WYO Program Coordinator, please provide the name, telephone number, and mailing address of your contact representative. Your contact will be given the access password for SMARTLINK to request funds for payment of flood claims. D. Once your WYO Company has been registered on SMARTLINK, DHHS will provide KERMIT communications software access, which will enable your representative to process online with SMARTLINK. DHHS will also provide the appropriate password, Technical Manual, and User's Manual. FEMA will provide the necessary additional information to request funds. III. OPERATION OF SMARTLINK A. As funds are needed, the recipient must follow the instructions in the SMARTLINK User's Manual to request funds via computer. The DHHS office hours are Monday through Friday from 8:00 a.m. to 7:30 p.m. EST. B. Upon receipt, the request is approved for payment through the Federal Reserve Bank of Richmond. Payment will be made on the business day after the request is received for funds via SMARTLINK. C. However, each WYO Company must keep track of its Letter of Credit balance. D. If for any reason the payment request is rejected, the recipient will be notified immediately. The recipient will, in most cases, be notified by DHHS via phone and given the reason(s) for the rejection. If the problem cannot be resolved, the individual should contact the assigned WYO Program Coordinator or a FEMA representative. E. Letter of Credit (LOC) balances for WYO Companies are normally kept at a "zero balance." If a Company wants an increase to pay for claims or premium refunds, it must send a written request to its Program Coordinator and include the following documentation: 1. The actual amount needed to pay claims or premium refunds. 2. The current balance in the company's LOC account. 3. The number and dollar amount of current company reserves as adjusted by previous payments. 4. Any other documentation that will support the request for additional funds. F. All LOC increases are forwarded by the WYO Program Coordinator to FEMA for processing. IV. SMARTLINK PAYMENT MANAGEMENT SYSTEM REPORTING The current financial statement entitled "Letter of Credit Drawdowns" (Exhibit VIII-A) must be completed and reported by the WYO Companies using the DHHS SMARTLINK Payment Management System. This financial statement must be submitted monthly as part of the financial statement package. If any other report is required by the DHHS on the SMARTLINK PMS, the WYO Company will be advised by memorandum. PART E AUTOMATED CLEARINGHOUSE (ACH) PROCEDURES Excess flood insurance funds of $100,000 or less must be transferred to the NFIP through the use of the Automated Clearinghouse (ACH) mechanism. (See other excess funds transfer methods in Part C of this manual). Bank of America is part of the U.S. Treasury electronic lockbox network and has been selected to serve as the ACH for WYO Company transfers to the NFIP. These transfers can be handled through the ACH as automatic debits from WYO Company bank accounts, using either a modem- equipped personal computer or a touch-tone telephone. To implement this procedure, the WYO Company sends a Direct Deposit Form or voided check to the WYO Program Coordinator, who submits it to FEMA to obtain the location code and password from Bank of America. When the WYO Company receives the required location code and password, excess funds transfers are completed as follows: For Telephone Transfers: Daily deposits must be reported by 1:50 p.m., EST., using the following instructions: 1. Calculate the check digit prior to the call, by adding the number of digits (including cents) to the value of all the digits. For example, if the amount to be deposited is $100,000.00: a. Total all the digits in the deposit amount: 1+0+0+0+0+0+0+0 = 1 b. Count the number of digits in the deposit: 1,0,0,0,0,0,0,0 = 8 c. Add a + b: 1 + 8 = 9 The check digit is 9. 2. Call 1-800-669-3110. 3. After the operator's identification, state your company's name. 4. When prompted for deposit amount, say: "Field 1 is $100,000.00." 5. When you have completed your reporting, the operator will repeat the amount. The operator will then give you a check digit (compare this with the one you have previously calculated and advise the operator of any discrepancy) and a trace number for possible future reference. 6. Your reporting is completed. For On-Line Transfers: 1. Turn the terminal's power switch "on." 2. Dial 1-800-827-3001 (if the baud rate is 1200). Dial 1-800-827-8001 (if the baud rate is 2400). 3. When the call is connected, listen for a continuous, high-pitched tone. When the tone is heard, place the phone receiver in the coupler box next to the terminal. 4. On the area of the coupler box labeled "CARRIER," a light will turn on after a few seconds. When it does, press the sign-on character key for your particular terminal or press the carriage return key twice. The following message will generate automatically: AUTONET LINE XXXXX. 5. The system will then ask for "COMMAND." Type in your Company's "Command" and press the carriage return key once. 6. Next, the terminal will display "ADP NETWORK SERVICES," and on the next line, six black squares followed by "PASSWORD." Type in your Company's "Password" and press the carriage return key once. 7. A message containing the log-on information will appear, and the system will ask for the Location Number. Type in your Company's "Location Number" and press the carriage return key once. 8. The system will then ask for the Password for the Location. Type in your Company's "Password for the Location" and press the carriage return key once. 9. The system will then prompt "ENTRY, CORRECTION, ADJUSTMENT, OR INQUIRY (E, C, A, I)." Type in the appropriate letter, and press the carriage return key once. 10. Next, the system will prompt "ENTER (1) DEPOSIT AMOUNT." Enter the deposit amount and press the carriage return key once. 11. The system will respond by providing a check digit and trace number. Calculate the check digit by adding the number of digits (including cents) to the value of all the digits. For example, if the amount to be deposited is $100,000.00: a. Total all the digits in the deposit amount: 1+0+0+0+0+0+0+0 = 1 b. Count the number of digits in the deposit: 1,0,0,0,0,0,0,0 = 8 c. Add a + b: 1 + 8 = 9 12. The system will continue to prompt for location number and deposit amount. When all locations have been entered, respond with *** at the location number prompt, and press the carriage return key once. 13. The system will then log off. 14. This completes the use of the ACH system for excess funds deposit. PART F SPECIAL ALLOCATED LOSS ADJUSTMENT EXPENSES (SALAE), SALVAGE/SUBROGATION PROCEDURES, AND SUPPLEMENTALCLAIM PAYMENT PROCEDURES I. SPECIAL ALLOCATED LOSS ADJUSTMENT EXPENSES Special Allocated Loss Adjustment Expenses are of the following types: • Expense Type 1 - Engineering Expense - WYO Company is authorized to approve up to $2,500 per claim without FEMA's approval. • Expense Type 2 - Adjuster Expense (in excess of the applicable Schedule Fee) - WYO Company is authorized to approve up to $500 per claim without FEMA's approval. • Expense Type 3 - Litigation Expenses - WYO Company is authorized to approve up to $5,000 per claim without FEMA's approval. • Expense Type 4 - Cost of Appraisal (implementation of the Standard Flood Insurance Policy’s appraisal clause) - WYO Company is authorized to approve up to $2,500 per claim without FEMA's approval. When approved, SALAE can be drawn from the Flood Insurance Restricted Account. When SALAE is incurred, it must be reported on the monthly financial statement, Exhibit VI, Line 655. In addition, the WYO Company representative must attach to its monthly financial statement a listing of all SALAEs taken in the reporting period. The listing should contain the following information: policy number, date of loss, SALAE amount, SALAE type code, and gross loss amount (when appropriate). The WYO Company representative must attach a copy of the FEMA approval letter for SALAEs that required approval. The SALAE statistical transaction and the appropriate monthly financial/statistical reconciliation form are also required from the WYO Company. II. SALVAGE/SUBROGATION PROCEDURES Expenses incurred in an unsuccessful subrogation situation will be reimbursed as an Expense Type 1 SALAE. The WYO Company's share of salvage and subrogation recoveries (10-percent salvage/25-percent subrogation) will be deducted from the net recovery proceeds prior to remitting the remaining proceeds to the restricted bank account. The amounts of salvage and subrogation recoveries reported to FEMA (via the recovery after final payment transaction) will be for the total recoveries, inclusive of the company's entitlement. III. SUPPLEMENTAL CLAIM PAYMENT PROCEDURES For claim losses that require reopening and reassignment, the additional loss adjustment expense (LAE) payment for the supplemental claim handling is calculated as the larger of the Closed Without Payment (CWOP) Fee ($225.00), or the difference between the allocated LAE determined by the entry value on the Fee Schedule (Exhibit V-A, V-B, V-C, V-D, V-E, V-F, or V-G of the monthly financial statement) when the claim was first closed and the entry value for the entire claim after the supplemental claim is concluded. With use of either criterion, the minimum LAE to be paid for the handling of a supplemental claim will be the CWOP Fee Schedule amount ($225.00). For more information and examples on supplemental claim payment cases, please refer to the WYO Accounting Training Manual, Part E. PART G USE OF PREFORMATTED EXCEL FINANCIAL STATEMENT SPREADSHEET FOR MONTHLY FINANCIAL STATEMENT REPORTING To expedite the processing of monthly financial statements, a preferred form of electronic financial reporting has been developed for WYO Companies and their vendors. The new procedure involves the use of a preformatted Excel spreadsheet containing Exhibits I-IX, the Financial Spreadsheet Control Form, and Reconciliation Exhibits. The WYO Company representative keys the Company's financial data onto the preformatted spreadsheet and e-mails this data to the NFIP Bureau and Statistical Agent at financials@nfipstat.com for processing. Use of these spreadsheets has enhanced the process, saving time for both the WYO Company and the NFIP Bureau and Statistical Agent. It has also significantly reduced paper maintenance and its associated costs. WYO Companies are encouraged to use this electronic reporting tool. However, the NFIP Bureau will accept hardcopy financial reporting as necessary. The procedure is outlined below: 1. Send all requests for a Preformatted Financial Statement Spreadsheet to financials@nfipstat.com. 2. NFIP Bureau and Statistical Agent Finance Group will send to your accounting representative a preformatted financial statement spreadsheet containing financial statement Exhibits I-IX, Financial Spreadsheet Control Form, and Reconciliation Exhibits. 3. Use the preformatted financial statement spreadsheet to record your monthly financial statement and reconciliation information. Key information into the unprotected cells only. Save the keyed financial statement information by a new file name using the “Save As” operation. This will not alter the original preformatted spreadsheet file, which you will maintain as a template for future use and reference. 4. Complete the required Financial Spreadsheet Control Form. For your convenience, this form is contained on the preformatted spreadsheet. E-mail the completed Financial Statement(s), Financial Spreadsheet Control Form, and Reconciliation Statement(s) file to financials@nfipstat.com. 5. When the e-mail option is not feasible for the WYO Company, the Bureau will accept a physical diskette and/or hardcopy reporting. Securely package and mail the Financial, Reconciliation, Financial Spreadsheet Control Form (hardcopy form below), and Certification Statements to the following address: National Flood Insurance Program Bureau and Statistical Agent ATTN: Finance and Statistical Control Department 7700 Hubble Drive Lanham, MD 20706-1833 6. The NFIP Bureau and Statistical Agent Finance Group will record the receipt date of the financial statement package. 7. The NFIP Bureau and Statistical Agent Finance Group will open the financial data in the financial system and review information. If data cannot be read clearly or if there are any questions, the Finance Group will contact your WYO Company's representative. 8. Upon verification, the NFIP Bureau and Statistical Agent Finance Group will upload data to the WYO FOCUS financial system. 9. Upon completion of the "upload," the NFIP Bureau and Statistical Agent Finance Group will file the WYO Company financial data in a secured area for future reference. NOTE: Please remember, the WYO Company’s financial data will be retained in the NFIP Bureau’s electronic storage and will not be returned to your Company. Please maintain copies for your records. All WYO Companies are encouraged to use this easy procedure for reporting monthly financial statement information. If you have any questions concerning the procedure or are interested in participating, please contact the NFIP Bureau and Statistical Agent Finance Manager. FINANCIAL SPREADSHEET CONTROL FORM WYO Company Name: File Name: Date Sent: Reporting Month/Year: Preparer's Name: Telephone Number: Current Month Fiscal–Year– to–Date $ $ Net Income (Loss) for Reporting Month (Exhibit I, Income Statement, Line 175): Payable to (Receivable from) NFIP (Exhibit III, Balance Sheet Items, Line 315, Current Month Column): $ $ PART H CREDIT CARD PROCESSING To assist in the dual goals of simplifying "doing business with the NFIP" and "promoting policies/contracts growth," FEMA has approved use of credit cards to pay for flood insurance policies. To encourage your WYO Company's use of the credit card payment mechanism, the major expense (all bank service charges associated with credit transactions) will be paid by FEMA when your WYO Company is using FEMA’s provider. All other expenses will be borne by your Company. I. CREDIT CARD PRINCIPLES • FEMA will absorb all bank service charges when using FEMA’s provider. The WYO Company will not be reimbursed by FEMA when using alternative credit card services other than FEMA’s provider. All other charges for hardware and software will be borne by the WYO Company. • The credit card authorization and processing bank will be Bank of America. All credit card processing software and hardware will be provided by Bank of America. • Assistance in equipment selection and configurations will also be provided by Bank of America representatives. Many options are available, from "point of sale" processing to "batch" processing at one central location. • Training in the use of credit card authorization and processing software will also be provided, at no charge, by a Bank of America representative. • The approved charge cards for use are VISA, MasterCard, American Express, Diners Club, and Discover. II. PROCESSING PROCEDURES • To charge the purchase of a flood insurance policy to a credit card, the following billing information is required: -Date of charge -Name of cardholder -Account number -Card expiration date -Dollar amount of charge -Cardholder's signature If a credit card charge is taken by telephone, the cardholder's signature is not required. The billing information should be attached to the application or included with the renewal update. It is the WYO Company's decision as to how this billing information is obtained. • Billing information must be retained for at least 3 years for billing dispute purposes and for the creation of an audit trail. • In addition, the following cancellation disclaimer must be placed not more than one quarter of an inch below the cardholder's signature line. "This policy is not subject to cancellation for reasons other than those set forth in the National Flood Insurance Program rules and regulations. In matters involving billing disputes, cancellation is not available other than for billing processing error or fraud." For credit card charges taken by telephone, the cancellation disclaimer must be read to the caller. • Funds generated through the credit card payment mechanism will be sent directly to the U.S. Treasury and not to the WYO Company's restricted account. The U.S. Treasury will receive the gross amount of the policy premium and the Federal Policy Fee. • There will be a 2-day delay before the U.S. Treasury receives Bank of America's payment for an approved credit card transaction. For example, the funds for a transaction approved on Monday will not be received by the U.S. Treasury until Wednesday. • Reports for all credit card approval and payment transactions will be provided on a daily basis by Bank of America. • New business, renewal, and endorsement premiums can be paid partially by credit card and by check/cash. • Cancellation or endorsement refunds should be made by check according to your standard refund processing procedures. However, if the customer insists, the refund should be applied to his/her credit card. III. FINANCIAL AND STATISTICAL REPORTING REQUIREMENTS • For financial statement reporting, use Exhibit VIII-C entitled "Credit Card Payments to NFIP" to report all credit payment transactions. This is the only additional financial statement reporting requirement. • For Transaction Record and Reporting Processing (TRRP) Plan statistical reporting, there are two requirements. - The "New/Rollover Indicator" data element has been eliminated and a new data element, "Premium Payment Indicator," has taken its place. This special indicator (C) must be used to identify only those flood policies that have been paid by credit card. - Use a special cancellation code (70) if the policy is canceled due to credit card processing error or fraud. • Since credit card payments will be sent directly to the U.S. Treasury, WYO Companies and vendors will have to build a mechanism to post credit card payments to their general ledger. NOTE: If your company or vendor is interested in implementing the credit card payment mechanism or requires further information, please contact your WYO Program Coordinator. PART I LISTING OF PERTINENT WYO ACCOUNTING/FINANCIAL DOCUMENTS • Financial Assistance/Subsidy Arrangement • Write Your Own (WYO) Accounting Procedures Manual (this document) • Write Your Own (WYO) Accounting Training Manual • Write Your Own (WYO) Program Financial Control Plan • Transaction Record Reporting and Processing (TRRP) Plan for the Write Your Own (WYO) Program 900-022E(10/05)