REPORT DIGEST

DEPARTMENT OF REVENUE

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2022

Release Date:  October 12, 2023

FINDINGS THIS AUDIT: 18

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  3 -- 1 -- 4
Category 2:  11 -- 3 -- 14
Category 3:  0 -- 0 -- 0
TOTAL:  14 – 4 -- 18

FINDINGS LAST AUDIT: 10

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 digest covers our Compliance
Examination of the Department for the
two years ended June 30, 2022. A
separate Financial Audit as of and for
the year ended June 30, 2022, was
previously released on July 27, 2023.
In total, this report contains 18
findings, 3 of which were reported in
the Financial Audit.

SYNOPSIS

• (22-04) The Department was unable to
provide adequate records substantiating
the completeness of populations for one
or more laws, regulations, or other
requirements selected for testing.
Therefore, we concluded the
Department’s population records were
not sufficiently precise and detailed
under the Attestation Standards
promulgated by the American Institute
of Certified Public Accountants (AT-C §
205.36).
• (22-05) The Department did not
prepare or publish reports of summary
statistical information relating to
license or permit applications of
cigarette retailers as required by the
Cigarette Tax Act (Act) (35 ILCS 130/).

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

COMPLETE POPULATIONS NOT PROVIDED

The Department of Revenue (Department)
was unable to provide adequate records
substantiating the completeness of
populations for one or more laws,
regulations, or other requirements. Due
to these conditions, we concluded the
Department’s population records were
not sufficiently precise and detailed
under the Attestation Standards
promulgated by the American Institute
of Certified Public Accountants (AT-C §
205.36) to test the Department’s
compliance for certain testing areas.

Specifically, some of the issues we
noted were:

• While testing compliance with
contractual agreements, we requested
and the Department provided its
contractual agreement populations and
reconciliations for Fiscal Years 2021
and 2022. The Department was unable to
provide reconciliations between the
Agency Contract Report (SC14) or the
Obligation Activity Report (SC15) for 5
of the 24 months (21%) requested. In
addition, when comparing the SC14
reports to the Department's population,
we noted eleven contracts found in the
SC14 reports were not included in the
Department's population.

• While testing compliance with Agency
Workforce Reports, we requested the
Department to provide support for
reported employees and their salaries
for Fiscal Years 2021 and 2022.
However, the Department could not
provide the requested documentation as
it was not retained by the Department.

• While testing compliance with
personal services, we requested the
Department’s employee populations for
employees who were hired, employees who
had separated employment from the
Department, and active employees as of
the last payroll period for Fiscal
Years 2021 and 2022.  We noted several
exceptions between the listings
provided.

• While testing compliance with
Property Tax Code (35 ILCS 200), we
requested the Department provide a
population of water treatment facility
applicants for Fiscal Years 2021 and
2022, which have 2020 and 2021
assessments for tax purposes. However,
the Department could not provide
documentation to ensure the population
was complete.

Even given the population limitations
which hindered our ability to conclude
whether the selected sample was
representative of the population as a
whole, we obtained the population
provided by the Department for each of
the areas the Department could not
substantiate, selected a sample, and
tested for compliance. Noncompliance
for those samples selected are reported
in Findings 2022-008 through 2022-011,
2022-013, and 2022-014. (Finding 4,
pages 18-21) This finding has been
reported since 2018.

We recommended the Department
strengthen controls over the records
maintained for each area in which a
compliance requirement is present.

The Department accepted the
recommendation and stated it will
review internal processes for accuracy
to ensure complete populations are
reported. As applicable, procedures
will be updated and disseminated to
staff.


INADEQUATE CONTROLS OVER THE CIGARETTE
TAX ACT

The Department did not prepare or
publish reports of summary statistical
information relating to license or
permit applications of cigarette
retailers as required by the Cigarette
Tax Act (Act).
The Act (35 ILCS 130/) indicates in
section 4g that the following parties
are ineligible to receive a cigarette
retailer’s license: 1) persons
convicted of a cigarette or tobacco-
related felony if an investigation
determines the person to not be
sufficiently rehabilitated and 2) a
corporation if any officer, manager,
director or other shareholder owns more
than 5% of the stock.

Further, the Act (35 ILCS 130/)
indicates in section 4i that the
Department must prepare, publicly
announce, and publish a report of
summary statistical information
relating to new and renewal license or
permit applications from the preceding
calendar year, including information on
denials, approvals, and applicants with
prior conviction history.

During testing, we noted the
Department’s application process for
cigarette retailers currently does not
include background checks for felony
convictions or a review of financial
information to determine if more than
5% of a corporation is owned by any
officer, manager, director or
stockholder. (Finding 5, page 22)

We recommended the Department enhance
its application process to include a
background check and financial review
of the cigarette retailer applicants
and to update its Bureau of Criminal
Investigation database to include
criminal conviction information in
order to publish the required report.

The Department accepted with the
recommendation and stated it will
modify the registration process and
systemic edits to ensure ineligible
applicants do not receive cigarette
retailer licenses. In addition, the
Department stated it will coordinate
the publication of a report of summary
statistical information relating to new
and renewal license or permit
applications from the preceding
calendar year.

OTHER FINDINGS

The remaining findings are reportedly
being given attention by the
Department. We will review the
Department’s progress towards the
implementation of our recommendations
in our next State compliance
examination.

AUDITOR’S OPINION

The financial audit report was
previously released.  The auditors
stated the Department as of and for the
year ended June 30, 2022 are fairly
stated in all material respects.

ACCOUNTANT’S OPINION

The accountants conducted a State
compliance examination of the Agency
for the two years ended June 30, 2022,
as required by the Illinois State
Auditing Act.  The accountants
qualified their report on State
compliance for Findings 2022-001,
2022-002, 2022-004, and 2022-005.
Except for the noncompliance described
in these finding, the accountants
stated the Agency complied, in all
material respects, with the
requirements described in the report.

This State compliance examination was
conducted by RSM US, 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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