REPORT DIGEST

ILLINOIS WORKERS’ COMPENSATION
COMMISSION, SELF-INSURERS SECURITY
FUND

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  Aug. 18, 2022

FINDINGS THIS AUDIT:  2

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  0 -- 1 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 2 -- 2

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

INTRODUCTION

This digest covers the financial audit
of the Self-Insurers Security Fund as
of and for the year ended June 30,
2021, and the findings arising from
the financial audit reported pursuant
to Government Auditing Standards.  A
separate digest covers the
Commission’s compliance examination
for the two years ended June 30, 2021.

SYNOPSIS

• (21-01) The Commission did not
ensure all events and transactions
impacting the Self-Insurers Security
Fund were appropriately recorded in
its internal accounting records and
presented fairly in its financial
statements.

EMPHASIS OF MATTER

As discussed in Note 16 to the
financial statements, the Self-
Insurers Security Fund has a total net
position (deficit) of ($5,951,591) as
of June 30, 2021.  This deficit, which
is presented on an accrual basis, is
the excess of total liabilities and
deferred inflows of resources over
total assets and deferred outflows of
resources.  Management of the
Commission stated that, subject to
approval by the Self-Insurers Advisory
Board (Board) established within the
Commission, future assessments will be
used to meet Fund 940’s obligations in
the future (Independent Auditor’s
Report on page 5 and Note 16 on page
46).

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

ACCOUNTING AND FINANCIAL REPORTING
PROBLEMS

The Illinois Workers’ Compensation
Commission (Commission) did not ensure
all events and transactions impacting
the Self-Insurers Security Fund (Fund
940) were appropriately recorded in
its internal accounting records and
presented fairly in its financial
statements.

During initial testing, we noted
amounts recorded within Fund 940’s
financial statements did not
internally tie out among the various
statements. These errors included:

• Fund 940’s ending net position
within its Statement of Net Position
and Statement of Revenues, Expenses,
and Changes in Net Position did not
agree by $4,066.

• Fund 940’s operating income (loss)
within its Statement of Cash Flows and
Statement of Revenues, Expenses, and
Changes in Net Position did not agree
by $40,151.

After completing our testing to
identify the causes of these problems,
we determined the Commission made the
following eight accounting and three
classification errors:

• The Commission did not record
deferred outflows of contributions to
the State Employees Retirement System
of Illinois (SERS), totaling $4,352,
paid during the State’s Lapse Period.

• The Commission made a duplicate
entry for a refund from SERS of excess
Fiscal Year 2019 contributions,
totaling $411.

• The Commission made a duplicate
entry for a refund payable of an
overpayment of an assessment by a
self-insurer, totaling $3,366.

• The Commission did not properly
account for the settlement of a prior
period refund payable to an excess
insurer during the current period,
totaling $4,396.

• The Commission did not identify and
record all of Fund 940’s miscellaneous
accounts receivable, totaling $1,284.

• The Commission’s supporting schedule
for cash activity and interest
allocations within each insolvent
self-insurer’s security deposits
account, Fund 940’s account, and
excess insurance activity was not
completely accurate. Also, the
Commission did not consider whether
events subsequent to June 30, 2021,
which provided new evidence about the
Fund’s estimated liabilities, were
reflected in Fund 940’s draft
financial statements as of and for the
year ended June 30, 2021. The net
effect of these errors was an
overstatement of four accounts,
including total unpaid claims by
$784,224, total unearned security
deposits by $152, benefit claims
expense by $779,612, and excess
insurance receivable by $4,764.

• The Commission made a duplicate
entry for the collection of a
miscellaneous receivable, totaling
$2,057.

• The Commission did not record the
settlement of $59 due to the Rate
Adjustment Fund from Fund 940 during
Fiscal Year 2021.

• The Commission did not properly
classify current and noncurrent
liabilities within Fund 940. We noted
the following:

— The current net other postemployment
(OPEB) liability was overstated and
the noncurrent net OPEB liability was
understated by $640,803.

— Current unearned security deposits
were understated, while noncurrent
unearned security deposits were
overstated, by $6,829.

— Current unpaid claims were
understated, while noncurrent unpaid
claims were overstated, by $86,990.

We proposed, and the Commission
posted, adjusting entries to correct
these errors in Fund 940’s final
financial statements. (Finding 1,
pages 50-52)

We recommended the Commission continue
its efforts to fully understand and
appropriately record and report
transactions and events impacting Fund
940. Further, we recommended the
Commission ensure all transactions and
events impacting Fund 940 are recorded
and reported in strict adherence with
the generally accepted accounting
principles applicable to Fund 940.
Additionally, the Commission should
ensure an independent supervisory
review by an individual with
sufficient skills, knowledge, and
experience to identify and correct
errors is performed during the
preparation of Fund 940’s supporting
schedules, journal entries, and
financial statements.  Finally, the
Commission should monitor and
consider whether events subsequent to
the end of the fiscal year that occur
before the dating of the auditor’s
report provide new evidence about
estimates used to develop Fund
940’s draft financial statements which
should be adjusted for prior to the
issuance of Fund 940’s final financial
statements.

Commission officials agreed with our
recommendation.

OTHER FINDING

The remaining finding pertains to
census data reconciliations.  We will
review the Commission’s progress
towards the implementation of our
recommendation in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Fund as of and for
the year ended June 30, 2021, are
fairly stated in all material
respects.

This financial audit was conducted by
Roth&Co.

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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