REPORT DIGEST OFFICE OF THE STATE TREASURER – THE ILLINOIS FUNDS FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: January 31, 2019 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 0 -- 1 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 1 -- 1 FINDINGS LAST AUDIT: 2 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 • (18-01) The Office did not maintain adequate controls to ensure all external service providers’ internal controls were reviewed. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS LACK OF ADEQUATE CONTROLS OVER THE REVIEW OF EXTERNAL SERVICE PROVIDER The Office did not maintain adequate controls to ensure all external service providers’ internal controls were reviewed. The Office utilized an external service provider as the custodian of the Illinois Funds Program and an external service provider as a payment processor for the E- Pay program. As of June 30, 2018, the net position held in trust for pool participants was $5.6 billion. During testing, the auditors noted: • Office personnel obtained and reviewed the Service Organization Control (SOC) report for one business group of the custodian of the Illinois Funds Program, but did not obtain all SOC reports to cover all significant services provided by the custodian. • The Office did not perform procedures to review and monitor the internal controls of the payment processor external service provider. (Finding 1, pages 63-64) We recommended the Office establish an internal control process to timely request, review and document the review of all SOC reports from its service providers when reports are issued. If SOC reports are not available, other procedures should be performed by the Office to ensure internal controls at the external service provider are adequate. The Office accepted the recommendation. AUDITOR’S OPINION The auditors stated the Office of the Treasurer, Illinois Funds financial statements as of and for the year ended June 30, 2018, are fairly stated in all material respects. This financial audit was conducted by Crowe 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:sjs