REPORT DIGEST

DEPARTMENT OF EMPLOYMENT SECURITY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2022

Release Date:  July 6, 2023

FINDINGS THIS AUDIT: 5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 3 -- 4
Category 2:  1 -- 0 -- 01
Category 3:  0 -- 0 -- 0
TOTAL:  2 -- 3 -- 5

FINDINGS LAST AUDIT: 3

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

DISCLAIMER

The Department has not maintained
certain accounting records and
supporting documents for the Trust Fund
relating to transactions with its
beneficiaries, nor is the Trust Funds’
internal control adequate to provide
safeguards over the Trust Fund assets
and to assure the proper recording of
transactions.  As such, we were unable
to satisfy ourselves by performing
other auditing procedures concerning
both the opening net position at July
1, 2021, as well as the activity for
the year ended June 30, 2022.  Since
opening balances enter in the
determination of revenues, expenses,
and cash flows, we were unable to
determine whether any adjustments might
have been necessary in respect of the
changes in net position for the year
reported in the statement of revenues,
expenses, and changes in net position
and the cash flows reported in the cash
flow statement.   Because of the
significance of the matter described,
we have not been able to obtain
sufficient appropriate audit evidence
to provide a basis for an audit opinion
on the statements of revenues, expenses
and changes in net position and cash
flows for the year ended June 30, 2022.
Accordingly, we do not express an
opinion on the Statements of Revenues,
Expenses and Changes in Net Position
and Cash Flows.

SYNOPSIS

• (22-2)  The Department of Employment
Security (Department) failed to
maintain accurate and complete Pandemic
Unemployment Assistance (PUA) claimant
data.
• (22-3)  The Department did not
maintain appropriate controls over
financial reporting.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

FAILURE TO MAINTAIN ACCURATE AND
COMPLETE PANDEMIC UNEMPLOYMENT
ASSISTANCE CLAIMANT DATA

The Department of Employment Security
(Department) failed to maintain
accurate and complete Pandemic
Unemployment Assistance (PUA) claimant
data.

On March 27, 2020, the President of the
United States signed the Coronavirus
Aid, Relief, and Economic Security
(CARES) Act which provided states the
ability to provide unemployment
insurance to individuals affected by
the pandemic, including those who would
not normally be eligible for
unemployment.  Based on the
Department’s records, as of June 30,
2022, 11,213 claimants received
payments totaling $3,026,210,633.

In order to determine if claimants were
eligible for benefits, we requested
claimant data.  Although the claimant
data was provided, the data required
considerable manipulation in order to
make the data auditable and organized.
Therefore, we were unable to determine
if the data was complete and accurate.
As a result, we were unable to conduct
detailed testing to determine whether
the claimants were entitled to
benefits. (Finding 2, page 24)

We recommended the Department implement
controls to ensure the claimants’ data
is complete and accurate.

The Department accepted our
recommendation.

LACK OF INTERNAL CONTROLS OVER
FINANCIAL ACCOUNTING AND REPORTING

The Department did not maintain
appropriate controls over financial
reporting.

During the audit, several adjustments
were posted to correct errors
identified by the auditors.  A few of
the adjustments we noted during our
testing follow:

• Receivables due from the federal
government relating to the waiver of
the first waiting week for new
claimants was improperly recorded and a
large portion was found to relate to
prior periods, resulting in a
restatement of opening net position.
The impact of this error is receivables
being overstated by $12,547,000,
revenue being overstated by
$506,163,000, and opening net position
being understated by $493,616,000.
Management elected to record the
adjusting entry for this error.
• Receivables for overpayments that are
still in the adjudication and appeals
processes were improperly recorded, as
the Department does not have a claim to
the monies until the adjudication and
appeals processes are complete.  The
impact of this error is receivables
being overstated by $393,731,000,
allowance for uncollectible accounts
being overstated by $378,582,000,
revenue being overstated by
$369,507,000, and expenses being
overstated by $354,358,000.  Management
elected to record the adjusting entry
for this error.

• Allowance for uncollectible accounts
relating to overpayment receivables
were not appropriately evaluated and
recorded based on historical and
subsequent collection data.  The impact
of this error was expenses and
allowance for uncollectible accounts
being understated by $201,497,000.
Management elected to record the
adjusting entry for this error.
(Finding 3, pages 25-26)

We recommended the Department implement
controls to ensure receivables and the
related activity are recorded in the
correct period and that allowance
estimates are appropriate and based on
all available data.  In addition, we
recommended cash reconciliations be
prepared timely and include appropriate
reconciling items such as outstanding
and voided checks.  Finally, we
recommended the Department strengthen
its internal review processes over
financial statement entries to prevent
errors.

The Department accepted our
recommendations.

OTHER FINDINGS

The remaining findings pertain to
failure to implement general
information technology controls over
the Pandemic Unemployment Assistance
System, failure to perform timely cash
reconciliations, and inadequate
controls over GenTax access. We will
review the Department’s progress
towards the implementation of our
recommendations in our next financial
audit.

AUDITOR’S OPINIONS

The auditors qualified their opinion on
the statement of net position of the
Unemployment Compensation Trust Fund.
Further, the auditors did not express
an opinion on the statements of
revenues, expenses, and changes in net
position and the cash flows of the
Unemployment Compensation Trust Fund.
Except for these matters, the auditors
stated the statement of net position of
the Unemployment Compensation Trust
Fund of the Department as of and for
the year ended June 30, 2022, is fairly
stated in all material respects.

This financial audit 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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