REPORT DIGEST

ILLINOIS WORKERS’ COMPENSATION COMMISSION –
SELF-INSURERS SECURITY FUND

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  November 21, 2019

FINDINGS THIS AUDIT:  1

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

This digest covers the financial audit of
the Self-Insurers Security Fund (Fund) as of
and for the year ended June 30, 2019.  The
Fund is overseen by the Illinois Workers’
Compensation Commission (Commission).  A
compliance examination of the entire
Commission for the two years ended June 30,
2019, will be issued in a separate report at
a later date.

SYNOPSIS

• (19-01) The initial financial statements
of the Fund provided to the auditors by the
Commission had an unreconciled error of
$80,291 on the face of the financial
statements.

EMPHASIS OF MATTERS

• As discussed in Note 15 to the financial
statements, the Fund had a total net
position (deficit) of ($5,588,065) as of
June 30, 2019. This deficit, which is
presented on an accrual basis, is the excess
of total liabilities and deferred inflows of
resources over total assets and deferred
outflows of resources. Management of the
Commission stated that, subject to Board
approval, future assessments will be used to
meet the Fund’s obligations in the future.

• As discussed in Note 2(M) to the financial
statements, the Fund recorded unpaid claims
of $7,201,478 as of June 30, 2019, that were
determined from an actuarial analysis
performed by the Commission’s actuary. As
discussed in Note 14(B) to the financial
statements, the actuary did not calculate an
estimate for four types of speculative
losses due to significant uncertainty in
estimating these contingencies arising from
the Fund’s limited historical claim
experience to date.  Given these conditions,
it is possible the Fund may experience
additional losses than currently reserved
for in Fund 940’s unpaid claims liability at
June 30, 2019.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

UNRECONCILED ERROR IN THE DRAFT FINANCIAL
STATEMENTS

The initial financial statements of the
Self-Insurers Security Fund (Fund) provided
to the auditors by the Illinois Workers’
Compensation Commission (Commission) had an
unreconciled error of $80,291 on the face of
the financial statements.

During testing, we noted the net position
(deficit) reported on the Fund’s Statement
of Net Position and Statement of Revenues,
Expenses, and Changes in Net Position
differed by $80,291 in its draft financial
statements. Commission management ultimately
determined this unreconciled difference was
due to errors within its pension, other
post-employment benefits, and security
deposits drawn accounts.  The Commission
corrected this error in the Fund’s final
financial statements.  (Finding 1, page 50)

We recommended the Commission improve its
internal financial statement review process
to identify and correct unreconciled
misstatements prior to submitting the
financial statements for audit.

Commission officials agreed with the
recommendation.

We will review the Commission’s progress
towards the implementation of our
recommendation in our next financial audit.

EMPHASIS OF MATTERS

The auditors had two significant, non-
standard emphasis of matters within the
Independent Auditor’s Report (pages 4-6).

First, as discussed in Note 15 to the
financial statements, the Fund had a total
net position (deficit) of ($5,588,065) as of
June 30, 2019. This deficit, which is
presented on an accrual basis, is the excess
of total liabilities and deferred inflows of
resources over total assets and deferred
outflows of resources. Management of the
Commission stated that, subject to Board
approval, future assessments will be used to
meet the Fund’s obligations in the future.

Second, as discussed in Note 2(M) to the
financial statements, the Fund’s recorded
unpaid claims of $7,201,478 as of June 30,
2019, were determined from an actuarial
analysis performed by the Commission’s
actuary. As discussed in Note 14(B) to the
financial statements, the actuary did not
calculate an estimate for four types of
speculative losses due to significant
uncertainty in estimating these
contingencies arising from Fund 940’s
limited historical claim experience to date.
Given these conditions, it is possible Fund
940 may experience additional losses than
currently reserved for in Fund 940’s unpaid
claims liability at June 30, 2019.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Fund as of and for the year ended
June 30, 2019, are fairly stated in all
material respects.

This financial audit was conducted by E. C.
Ortiz & Co., 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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