REPORT DIGEST OFFICE OF THE SECRETARY OF STATE COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2017 Release Date: March 6, 2018 FINDINGS THIS AUDIT: 4 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 3 -- 3 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 3 -- 4 FINDINGS LAST AUDIT: 6 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 SYNOPSIS • (17-1) The Office of the Secretary of State (Office) did not identify the required adjustments necessary to ensure the Office’s audited financial statements were accurately prepared. • (17-2) Multiple employees were permitted to have access to the same cash drawers at the Drivers License Facilities. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS FAILURE TO IDENTIFY FINANCIAL STATEMENT REPORTING ERRORS The Office did not identify the required adjustments necessary to ensure the Office’s audited financial statements for the year ended June 30, 2017, were accurately presented in accordance with generally accepted accounting principles (GAAP). The Office’s financial statements were originally submitted to the Illinois Office of the Comptroller with errors. The government-wide adjustments on the Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to Statement of Activities were materially misstated by approximately $340,000,000 primarily due to incorrect pension adjustments. In addition, the governmental funds balance sheet did not balance because total assets and deferred outflows of resources did not equal total liabilities, deferred inflows of resources and fund balances by $6,000 on the Statement of Net Position and Governmental Funds Balance Sheet. The Office submitted revised financial statements with the previous issues corrected, however, additional misstatements were noted. (Finding 1, pages 13-14) We recommended the Office implement internal control procedures to assess the risk of material misstatements of the Office’s financial statements and devote adequate resources to identify such misstatements during the financial statement preparation and review process. Office officials agreed with the recommendation and stated corrective measures will be taken in order to ensure that documentation of Office financial reporting procedures is current and complete, and that appropriate resources are utilized to ensure a more accurate and timely review of reports prior to submission. INADEQUATE CONTROL OF CASH AT DRIVERS LICENSE FACILITIES The Office permitted multiple employees to have access to the same cash drawers at the Drivers License Facilities (facilities). During our testing, we visited 6 of the Office’s 137 facilities. At 3 of the facilities visited, we noted multiple employees could access the same cash drawer. (Finding 2, pages 15-16) This finding has been repeated since 2005. We recommended the Office continue to develop procedures to ensure that each employee utilizes an individual cash drawer and not be permitted to access the drawer of other employees at the Drivers License Facilities. Office officials accepted our recommendation and stated the Office continues to assess its facility operations to ensure funds are safeguarded against loss, unauthorized use, and misappropriation and improvements are made whenever fiscally and operationally feasible. (For the previous Office response, see Digest Footnote #1.) OTHER FINDINGS The remaining findings pertain to inadequate change fund controls and PCI compliance weaknesses and are reportedly being given attention by the Office. We will review the Office’s progress towards the implementation of our recommendations in our next compliance examination. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Office for the two years ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants stated the Office complied, in all material respects, with the requirements described in the report. This compliance examination was conducted by Kerber, Eck & Braeckel 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 FJM:sdw DIGEST FOOTNOTES #1 – INADEQUATE CONTROL OF CASH AT DRIVERS LICENSE FACILITIES – Previous Office Responses 2015: The Office accepts this finding. As noted, there were no cases identified where receipts were stolen or used inappropriately. The Office continues to assess its facility operations to ensure funds are safeguarded against loss, unauthorized use, and misappropriation and improvements are made whenever fiscally and operationally feasible.