REPORT DIGEST

DEPARTMENT OF CENTRAL MANAGEMENT SERVICES -
UNIVERSITY BENEFITS ANALYSIS SCHEDULES

COMPLIANCE EXAMINATION
FOR THE YEAR ENDED JUNE 30, 2017

Release Date: November 29, 2017

FINDINGS THIS AUDIT: 1

CATEGORY: NEW -- REPEAT -- TOTAL
Category 1: 0 -- 1 -- 1
Category 2: 0 -- 0 -- 0
Category 3: 0 -- 0 -- 0
TOTAL: 0 -- 1 -- 1

FINDINGS LAST AUDIT: 1

Category 1: Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State laws
and regulations (material noncompliance).
Category 2: Findings that are significant
deficiencies in internal control and
noncompliance with State laws and
regulations.
Category 3: Findings that have no internal
control issues but are in noncompliance with
State laws and regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are also
available on the worldwide web at
www.auditor.illinois.gov

INTRODUCTION

The Department of Central Management Services
pays for the group insurance costs for
certain university employees on behalf of all
State-operated universities in Illinois. At
the end of each fiscal year, the Department
prepares the University Benefits Analysis
Report that summarizes exempt and non-exempt
employees and exempt and non-exempt funding.
These amounts are utilized in the
universities’ fiscal year financial
reporting. The State Comptroller also uses
these amounts to determine the amount of on-
behalf revenue to allocate to the
universities.

SYNOPSIS

• (17-1) The Department used inaccurate data
during the calculation of the University
Benefit Analysis.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INACCURATE DATA USED DURING CALCULATION OF
THE UNIVERSITY BENEFIT ANALYSIS

During our examination of the University
Benefit Analysis (UBA) for June 30, 2017, we
noted errors in the data used by the
Department of Central Management Services
resulting in misstatements of the estimated
cost of health insurance benefits paid on-
behalf of State universities.

Errors in the data used included the
following:

• During our testing of non-exempt
contributions, we noted a $1,160,893 payment
was erroneously entered into the Benefits
Reimbursement System for the University of
Illinois at Urbana-Champaign that was not a
non-exempt contribution payment. Because this
additional payment was entered, the amount of
health insurance coverage costs paid by the
Department on behalf of State universities
was understated by $1,160,893. The Department
did not adjust the UBA for this
understatement.

• The average cost per employee is a figure
shown at the bottom of the UBA schedule,
which represents the Department’s estimated
average cost of group health insurance
benefits per covered member during the fiscal
year. This figure is calculated as part of
the annual State Employees Group Insurance
Program rate setting process. During our
review of the calculation, we noted the
Department included a $9,897,414 estimated
Affordable Care Act (ACA) payment in the
average cost calculation. However, a sunset
provision in ACA on reinsurance fees was
effective on December 31, 2016. Therefore,
the Department did not pay this fee in fiscal
year 2017, and this amount should not have
been included as part of the calculation. As
a result, the estimated costs paid by the
Department on behalf of State universities
were overstated by $4,732,447. The Department
did not adjust the UBA for these
overstatements. (Finding 1, pages 7-8).

We recommended the Department implement
procedures to ensure the preparation of the
University Benefits Analysis is based on
accurate and reliable data.

The Department agreed with the
recommendation. The Department will strive to
implement financial reporting procedures to
ensure the accuracy, reliability, and
reasonableness of data utilized to perform
the University Benefit Analysis.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of management’s assertions
regarding the University Benefits Schedules
for the year ended June 30, 2017. The
accountants qualified their report on State
compliance for Finding 2017-001. Except for
the noncompliance described in this finding,
the accountants stated the Agency complied,
in all material respects, with the
requirements described in the report.

This compliance examination was conducted by
Sikich LLP.

JANE CLARK
Division Director

This report is transmitted in accordance with
Section 3-14 of the Illinois State Auditing
Act.

FRANK J. MAUTINO
Auditor General

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