REPORT DIGEST DEPARTMENT OF CENTRAL MANAGEMENT SERVICES FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2018 Release Date: April 25, 2019 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 1 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 1 -- 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 report covers our financial audit of the Department of Central Management Services for the year ended June 30, 2018. SYNOPSIS • (18-1) The Department’s year-end financial reporting to the Office of the State Comptroller contained errors in the determination of certain year-end account balances and omission of a required disclosure. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING The Department’s year-end financial reporting in accordance with generally accepted accounting principles (GAAP) to the Illinois Office of the State Comptroller contained errors in the determination of certain year-end account balances and omission of a required disclosure. A few of the errors we noted during the audit of the June 30, 2018 follows: • The Department overstated liabilities in the Workers’ Compensation Revolving Fund by $1.076 million due to the duplicate recognition of a claim award in Fiscal Year 2018 that had been previously recognized in the prior fiscal year. The Department deemed this error immaterial and did not revised the applicable financial statements. • The Department understated liabilities in the Workers’ Compensation Revolving Fund by $1.352 million due to the exclusion of significant lapse period payroll data as well as all of the payroll data for one agency from the data used in actuarial calculations. The Department deemed this error immaterial and did not revise the applicable financial statements. • The Department failed to disclose commitments of $8.1 million in the State Garage Revolving Fund at June 30, 2018 related to vehicles ordered but not received as of that date. The Department revised the notes to the financial statements to include this disclosure. • The Department improperly reported $3.982 billion of bond proceeds received as a reduction of expenditures rather than as transfers-in. The Department reclassified the $3.982 billion received from expenditures to transfers-in for the June 30, 2018 financial statements. (Finding 1, pages 65-68) This finding has been repeated since 2015. We recommended the Department implement procedures and training measures throughout the Department to ensure required financial information is prepared and submitted to those responsible for financial reporting in a timely, accurate and complete manner. This should include allocating sufficient staff resources and the implementation of formal procedures to ensure complete, accurate, and reliable financial information is prepared and submitted to the Office of the State Comptroller (IOC). We also recommended these procedures address all elements of the Department’s financial reporting process including, but not limited to, reconciliation of accounting records used for transaction recording and reporting, supervisory review of supporting spreadsheets for data accumulation, the preparation of management estimates, consideration of required financial statement disclosures, and conformity to GAAP for infrequent or uncommon transactions. The Department stated they continue to strive to ensure accurate and timely GAAP reporting and they will continue to collaborate with the IOC during its GAAP reporting process. (For the previous Department response, see Digest Footnote #1) AUDITOR’S OPINION The auditors stated the financial statements of the Department of Central Management Services as of and for the year ended June 30, 2018, are fairly stated in all material respects. This financial audit was conducted by Sikich, 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:skm DIGEST FOOTNOTES #1 – Weaknesses in internal control over financial reporting 2017: The Department agrees with the finding and recommendation. The Department will strive to implement cross-training measures and financial reporting procedures to ensure the timeliness, accuracy, reliability, and reasonableness of data utilized to perform financial reporting. Additionally, the Department will continue to work diligently to fill key positions to ensure an independent, internal analytical review of calculations is documented and completed timely.