Note:

 

This report of the Illinois Workers’ Compensation Commissions’ Self-Insurers Security Fund (Fund) should be read in conjunction with the FY16 financial statements of the Fund and the auditor’s report dated January 4, 2018. 

 

In FY16, the auditors issued an adverse opinion on the Fund’s financial statements due to the Commission having an inadequate process to determine the claims liabilities of the Fund, and because the proper accounting treatment for the insolvent self-insurer security collected by the State of Illinois is not determinable due to two different irreconcilable interpretations of the Worker’s Compensation Act.  Because of the adverse auditor opinion of the Fund’s financial statements for the year ended June 30, 2016, the audit reports for the year ended prior to June 30, 2016 should not be relied upon without considering the auditor’s report dated January 4, 2018.   

 


 

 

REPORT DIGEST

 

WORKERS’ COMPENSATION COMMISSION

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

 

For the Two Years Ended:

June 30, 2005

 

Summary of Findings:

Total this audit                                    9

Total last audit                                  10

Repeated from last audit        5

 

Release Date:

 

 

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

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 the Full Report is also available on the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

¨      The Commission made payments for efficiency initiative billings from improper line item appropriations.

 

¨      The Commission did not submit Official Headquarters Reports to the Legislative Audit Commission in accordance with statue.

 

¨      The Commission was not in compliance with the Fiscal Control and Internal Auditing Act.

¨      Property and equipment was not adequately reported in the Commission’s records.

¨      The Commission had not established a formal System Development Methodology or Change Control Procedures.

¨      The Commission had not established adequate computer security controls.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the reverse page.}

 

 


 

 ILLINOIS WORKERS’ COMPENSATION COMMISSION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2005

 

EXPENDITURE STATISTICS

FY 2005

FY 2004

FY 2003

·         Total Expenditures (All Appropriated Funds)

 

$14,880,598

 

$12,747,722

 

$10,265,726

      OPERATIONS TOTAL.............................

$14,880,598

     $12,747,722

$10,265,726

            % of Total Expenditures....................

100%

100%

100%

            Personal Services................................

$9,028,576

$7,993,415

$7,475,498

               % of Operations Expenditures.........

60.7%

62.7%

72.8%

               Average No. of Employees..............

171

163

160

            Other Payroll Costs (FICA,

            Retirement).........................................

 

$2,211,545

 

        $1,759,668

 

$1,596,678

               % of Operations Expenditures.........

14.8%

13.8%

15.6%

            Contractual Services...........................

$621,547

          $706,652

$457,267

               % of Operations Expenditures.........

4.2%

5.5%

4.4%

            All Other Operations Items.................

$3,018,930

$2,287,987

$736,283

               % of Operations Expenditures.........

20.3%

18.0%

7.2%

·         Cost of Property and Equipment............

$1,736,486

$1,826,656

$1,475,205

SELECTED ACTIVITY MEASURES (Not Examined)

FY 2005*

FY 2004

FY 2003

Workers’ Compensation Case Load Volume:

·         Cases Pending at Beginning of Year

         114,222

      116,237

        118,651

·         Add:  New Cases (+ reinstated)

           60,951

        64,350

          68,022

·         Total Cases to be Processed

         175,173

      180,587

        186,673

·         Less:  Cases Closed

          (65,106)

      (66,375)

         (70,436)

·         Cases Pending at Year End

         110,067

      114,212

        116,237

* Estimated

COMMISSION CHAIRMAN

      During Audit Period: Dennis R. Ruth

      Currently:                  Dennis R. Ruth



 

 

 

 

 

 

 

The Commission made payments from where there were available funds, not from line item appropriations where the savings were anticipated to occur

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Commission did not submit Official Headquarters Reports to the Legislative Audit Commission as required by statute

 

 

 

 

 

Because his headquarters was designated as Collinsville (his place of residence), the Commission reimbursed the Chairman travel expenses of $45,101 in fiscal years 2004 and 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commission believes chairman appropriately headquartered in Collinsville

 

 

 

 

 

 

 

 

 

The Commission did not file certifications for fiscal years 2004 and 2005

 

 

 

 

 

 

 

 

 

Property and equipment were not adequately reported in the Commission’s records

 

 

 

 

 

 

 

 

None of the 26 equipment items purchased in fiscal years 2004 and 2005, totaling $74,661, could be located

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Commission had not established adequate development and change control standards

 

 

 

 

 

 

 

 

 

 

 

 

 

The Commission had not established adequate security policies over its computer environment

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

PAYMENTS MADE FROM IMPROPER LINE ITEM APPROPRIATIONS

 

      The Commission made payments for efficiency initiative billings from improper line item appropriations.

 

      Public Act 93-0025, in part, outlines a program for efficiency initiatives to reorganize, restructure and reengineer the business processes of the State.  The Commission received one billing in FY05 for $1,597 from the Department of Central Management Services for savings from procurement efficiency initiatives.  CMS billing documentation showed printing and office supplies as the detailed object codes where procurement efficiencies were expected to occur.  The Commission made payments for these billings not from line item appropriations where the cost savings were anticipated to have occurred, but from line items where Commission staff determined there were available funds (contractual services).  (Finding 1, pages 11-12)

 

      We recommended the Commission only make payments for efficiency initiative billings from line item appropriations where savings would be anticipated to occur.  The Commission’s response indicated they would do this in the future.

 

 

OFFICIAL HEADQUARTERS REPORT DEFICIENCIES

 

      The Commission did not submit Official Headquarters Reports to the Legislative Audit Commission in accordance with statute.  Additionally, the Commission did not follow State rules concerning Agency Head’s headquarters designation.

 

      We noted the following:

 

-          The Commission did not file Official Headquarters Reports (TA-2 reports) with the Legislative Audit Commission as required by statute.

-          TA-2 reports that were filed reflected the Chairman’s official headquarters as Collinsville. Since the TA-2 reports are designed to reflect only these officials and employees whose official headquarters are designated at a location other than where those persons are required to spend the largest part of their working time, this filing constitutes an acknowledgement by the Commission that, while the Chairman’s official headquarters are designated as Collinsville, he does not spend the largest part of his or her working time there. Under the Governor’s Travel Control Board rules, “[a]11 Agency Heads shall be headquartered at the location where official duties require the largest part of their working time…”unless an exception is requested in writing by the Agency Head and approved by the Governor’s Travel Control Board.  The designation of official headquarters is important in determining whether and to what extent travel expenses will be reimbursed by the State.

 

-          Incomplete timesheets made it difficult for auditors to determine where the Chairman spent the largest part of his working time.  Because his headquarters was designated as Collinsville (his place of residence), the Commission reimbursed the Chairman travel expenses of $45,101 for mileage, lodging, meals, and airfare in fiscal years 2004 and 2005 for travel to the Commission’s four other offices, including Chicago, the Commission’s main office. (Finding 2, pages 13-15)

 

     We recommended the Commission file official headquarters reports with the Legislative Audit Commission as required by law and that the Commission either designate the Chairman’s headquarters as the location where he spends the largest part of his working time or seek approval from the Governor’s Travel Control Board for any alternate designation.

 

Commission officials concurred that the TA-2’s were filed late and that three of the Chairman’s timesheets were missing; however, they believe the Chairman is appropriately headquartered in Collinsville as that is where he spends the largest part of his working time, and no exemption is needed from the Governor’s Travel Board.  

 

 

FAILURE TO FILE FCIAA CERTIFICATION

 

      The Commission was not in compliance with the Fiscal Control and Internal Auditing Act (FCIAA). 

 

      The Commission did not file the Fiscal Control and Internal Auditing Act certification for fiscal years 2004 and 2005.  Furthermore, no internal audits were performed, including no audit of the petty cash fund  (Finding 3, page 16-17)  This finding was first reported in 2001.

 

 

      The Commission concurred with our recommendation to comply with the requirements of the Fiscal Control and  Internal Auditing Act. (For previous agency responses, see Digest Footnote #1.)

 

INADEQUATE PROPERTY CONTROL RECORDS

 

      Property and equipment were not adequately reported in the Commission’s records.  The Commission’s property and equipment balance was $1,439,765 as of June 30, 2005.

 

The following exceptions were noted:

 

- The Commission conducted a complete physical inventory, in conjunction with the update of their inventory record, in 2005. The previous physical inventory was performed in June 2001.  State agencies are required to conduct inventories annually.

 

- Twenty-six of 26 items purchased in fiscal years 2004 and 2005, totaling $74,661, could not be located.

In addition, 14 of the 26 (54%) equipment purchases tested, totaling $34,967, could not be traced to inventory records because they were fiscal year 2005 purchases that had not been added to the Commission’s property records.

 

-Twenty-two of 30 (73%) equipment items physically observed at Commission offices could not be traced to the property control records.  The items had been retagged but the property records did not include the new numbers.

 

-Twenty of 23 equipment items (87%) selected from the property records, totaling $18,058.47, could not be located and physically observed. (Finding 5, pages 20-21)  This finding has been repeated since 1987.

 

         Commission officials concurred with our recommendation to implement procedures to strengthen the

accounting for property and equipment.  (For previous agency responses, see Digest Footnote #2.)

 

 

LACK OF SYSTEM DEVELOPMENT AND CHANGE CONTROL STANDARDS

 

        The Commission had not established a formal System Development Methodology or Change Control Procedures. 

       

       The Commission had thirteen computer applications that were critical for completing its mission.  However, there was no formal methodology to assist in the planning, development, testing, implementation and modification of computer applications.  (Finding 8, pages 26 – 27) This finding has been repeated since 2001.

 

        Commission officials concurred with our recommendation to develop and implement a formal systems development methodology to assist in planning, developing, testing and implementing new system developments or modifications to existing systems.  (For previous agency responses, see Digest Footnote #3.)

 

 

COMPUTER SECURITY ADMINISTRATION DEFICIENCIES

 

      The Commission had not established adequate security policies to control computer operations.

 

      The Commission had not established adequate security policies over its computer environment. The Commission relied on its mainframe and local area network (LAN) to meet its mission.  The current computer policy was outdated and did not provide details with regards to computer operations at the Commission.  (Finding 9, page 28-29)

 

      The Commission concurred with our recommendation to establish comprehensive policies and procedures that outline general security provisions, appropriate use of computer resources, backup and care of data, and other appropriate policies to help ensure that effective controls exist. 

 

 

OTHER FINDINGS

 

        The remaining findings are reportedly being given attention by Commission management.  We will review the progress toward implementation of our recommendations during our next audit.

 

 

AUDITORS’ OPINION

 

      Our auditors state the financial statements present fairly, in all material respects, the respective financial position of the Self-Insurers’ Security Fund of the State of Illinois Workers’ Compensation Commission, as of June 30, 2005, and the changes in financial position and cash flows, where applicable, thereof for the year then ended.

 

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:KMC:drh

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors for this audit were Martin & Shadid, P.C.

 

 

 

 

 

DIGEST FOOTNOTES

 

              #1 – FAILURE TO FILE FCIAA CERTIFICATION - Previous Agency Responses (Since 2001)

 

2003:     “The Commission concurs with the recommendation.  We will refocus our attention to internal audit issues with the assistance of the Office of Internal Audit within the Department of Central Management Services.”

 

              #2 – INADEQUATE PROPERTY CONTROL RECORDS – Previous Agency Responses (Since 1987)

 

2003:     “The Commission concurs with the recommendation.  We will complete the physical inventory by the end of February 2004.  This inventory process will allow us to include specific room locations in our records, in addition to the official location code used by CMS.”

 

              #3 – LACK OF SYSTEM DEVELOPMENT AND CHANGE CONTROL STANDARDS – Previous Agency Responses (Since 2001)

 

2003:     “The Commission concurs and will comply with this recommendation.”