REPORT DIGEST ILLINOIS STATE BOARD OF INVESTMENT FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: January 31, 2018 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 FINDINGS LAST AUDIT: 0 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 Illinois State Board of Investment’s (Board or ISBI) financial audit as of and for the year ended June 30, 2017. The Board’s compliance examination covering the year ended June 30, 2017 will be issued at a later date. SYNOPSIS • (17-01) The Board has not established adequate internal controls over the financial reporting process. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INACCURATE FINANCIAL REPORTING The Illinois State Board of Investment (ISBI) has not established adequate internal controls over the financial reporting process. During our audit of the financial statements we noted the value reported for one real estate investment sampled in our testing ($13,837,421) was understated by $5,894,255. Upon further review, we noted ISBI reported the cost basis of the investment instead of its fair value ($19,731,676) at year end. The error (representing 42.6% of the recorded balance of the investment) was not identified during ISBI’s preparation of investment reconciliations or related supervisory review procedures. ISBI’s real estate investments and total investments were $1,601,026,564 and $17,530,882,474, respectively, as of June 30, 2017. (Finding 1, pages 29-30) We recommended ISBI review its internal control procedures and implement the changes necessary to ensure investment accounts are accurately reported in its accounting records and in the financial statements. ISBI officials stated future controls will be enhanced to include a more detailed review to ensure an error of this nature is not repeated. AUDITOR’S OPINION The auditors stated the financial statements of the Board as of and for the year ended June 30, 2017 are fairly stated in all material respects. This financial audit was conducted by KPMG 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:TLK