REPORT DIGEST

ILLINOIS STATE BOARD OF INVESTMENT

COMPLIANCE EXAMINATION
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  February 17, 2021

FINDINGS THIS AUDIT:  2

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

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

INTRODUCTION

This digest covers our Compliance
Examination of the Illinois State Board
of Investment (Board or ISBI) for the
year ended June 30, 2020.  A separate
Financial Audit as of and for the year
ending June 30, 2020 was previously
released on December 22, 2020.  In total,
this report contains two findings, none
of which were reported in the Financial
Audit.

SYNOPSIS

• (20-1) ISBI did not identify financial
reporting errors in the year-end
financial statement.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

FINANCIAL REPORTING ERRORS

The Illinois State Board of Investment
(ISBI) did not identify financial
reporting errors in the year-end
financial statement.

During our financial statement audit, we
identified two financial reporting errors
which were corrected by ISBI in the year-
end financial audit. Specifically, we
noted the following:

• ISBI improperly reported $40 million of
cash transferred to a new investment fund
near year end as a commingled fund
investment; however, the agreement for
this investment fund only permits funds
to be invested at the beginning of the
month.  Accordingly, ISBI’s cash was not
invested in the commingled fund until
July 1, 2020. ISBI reclassified this
transaction to Restricted Cash
(subscription advance) in the June 30,
2020 financial statements.

• ISBI understated unfunded commitments
for its investment in opportunistic debt
by $71 million.

ISBI’s financial statement review
procedures were not operating at a level
of precision to identify these errors.
(Finding 1, pages 11-12)

We recommended ISBI review the level of
precision of supervisory review
procedures and implement any changes
necessary to ensure errors similar to
those identified in this finding are
detected and corrected by management.

ISBI officials agreed with the finding
and recommendation.

OTHER FINDINGS

The remaining finding pertains to
untimely preparation of employee
timesheets.  We will review ISBI’s
progress towards the implementation of
our recommendation in our next compliance
examination.

AUDITOR’S OPINION

The financial audit was previously
released. The auditors stated the
financial statements of the Board as of
and for the year ended June 30, 2020 are
fairly stated in all material respects.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Board for the year
ended June 30, 2020, as required by the
Illinois State Auditing Act.  The
accountants stated the Board complied, in
all material respects, with the
requirements described in the report.

This compliance examination 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