REPORT DIGEST

DEPARTMENT OF REVENUE

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2020

Release Date:  June 30, 2021

FINDINGS THIS AUDIT:  10

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  5 -- 4 -- 9
Category 3:  0 -- 0 -- 0
TOTAL:  5 -- 5 -- 10

FINDINGS LAST AUDIT: 11

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 Department of Revenue
(Department) for the two years ended June
30, 2020.  A separate Financial Audit as
of and for the year ended June 30, 2020
was previously released on June 9, 2021.
In total, this report contains 10
findings, 2 of which were also reported
in the Financial Audit.

SYNOPSIS

• (20-03) The Department was unable to
provide adequate records substantiating
the completeness of populations for one
or more laws, regulations, or other
requirements selected for testing.
Therefore, we concluded the Department’s
population records were not sufficiently
precise and detailed under the
Attestation Standards promulgated by the
American Institute of Certified Public
Accountants (AT-C § 205.35).

• (20-04) The Department did not maintain
adequate controls over income tax
abatements resulting from tax credits
issued under the Economic Development for
a Growing Economy (EDGE) program
administered by the Department of
Commerce and Economic Opportunity (DCEO).

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

COMPLETE POPULATIONS NOT PROVIDED

The Department of Revenue (Department)
was unable to provide adequate records
substantiating the completeness of
populations for one or more laws,
regulations, or other requirements. Due
to these conditions, we concluded the
Department’s population records were not
sufficiently precise and detailed under
the Attestation Standards promulgated by
the American Institute of Certified
Public Accountants (AT-C § 205.35) to
test the Department’s compliance for
certain testing areas.

Specifically, some of the more important
issues we noted were:

• While testing compliance with access to
controlled areas, we requested and the
Department provided a listing of
individuals that had access to secure
areas for Fiscal Years 2019 and 2020.
However, we could not reconcile this
listing to the listing of individuals
that entered the secure areas. As a
result, we are unable to determine if the
individuals that entered the secure area
had proper access rights.

• While testing compliance with personal
services, we requested the Department’s
employee populations for employees who
were hired, employees who had separated
employment from the Department, and
active employees as of the last payroll
period for Fiscal Years 2019 and 2020.
We noted several exceptions between the
listings provided.

• While testing compliance with state
property and equipment, we requested the
Department provide a population of state
property and equipment for Fiscal Years
2019 and 2020 in order to determine if
additions, deletions, and transfers were
proper. We were unable to reconcile the
population provided by the Department to
the Agency Report of State Property
(C15). As a result, we are unable to
determine if there were additions,
deletions, or transfers of which we were
unaware.

Even given the population limitations
which hindered our ability to conclude
whether the selected sample was
representative of the population as a
whole, we obtained the population
provided by the Department for each of
the areas the Department could not
substantiate, selected a sample, and
tested for compliance. Noncompliance for
those samples selected are reported in
Findings 2020-008 and 2020-009. (Finding
3, pages 17-19)

We recommended the Department strengthen
controls over the records maintained for
each area in which a compliance
requirement is present.

The Department accepted the
recommendation and stated it will
implement controls over the compilation
and subsequent review of testing
populations to ensure their accuracy.  In
addition, we will explore options for
systemic processes to replace any manual
processes.

INADEQUATE CONTROLS OVER TAX CREDIT
PROGRAMS

The Department did not maintain adequate
controls over income tax abatements
resulting from tax credits issued under
the Economic Development for a Growing
Economy (EDGE) program administered by
the Department of Commerce and Economic
Opportunity (DCEO).

During our testing of EDGE tax credits
claimed by taxpayers, we noted the
Department was not able to provide a copy
of the DCEO EDGE Tax Credit Certificate
of Verification for 11 out of 54 (20%)
taxpayers sampled. The EDGE Credit
amounts ranged from $21,246 to
$3,099,447. As a result of the Department
not requiring the taxpayer to provide a
copy of the certification at the time of
filing their returns, the Department
abated taxes without determining the
related credits were valid and proper.
Upon request, we were able to obtain a
copy of the certificates from DCEO.
(Finding 4, page 20)

We recommended the Department establish a
formal process to correspond with
taxpayer’s who claim a credit but do not
file a copy of their Certificate of
Verification with their tax return.

The Department accepted the
recommendation and stated it has worked
with DCEO to establish a shared location
where the certificates can be compiled.
Further, the Department stated it will
continue to communicate with DCEO the
importance of using the shared location
to ensure compliance.

OTHER FINDINGS

The remaining findings pertain to
weaknesses in cybersecurity programs and
practices, a lack of agreement to ensure
compliance with IT security requirements,
inadequate execution of interagency
agreements, exceptions in testing
personnel, inadequate controls over
processing and recording of State
property and equipment, and inadequate
accounting of postage balances. We will
review the Department’s progress towards
the implementation of our recommendations
in our next compliance examination.

AUDITOR’S OPINION

The financial audit report was previously
released. The auditors stated the
financial statements of the Department 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 Department for the two
years ended June 30, 2020, as required by
the Illinois State Auditing Act.  The
accountants qualified their report on
State Compliance for Finding 2020-003.
Except for the noncompliance described in
that finding, the accountants state the
Department complied, in all material
respects, with the requirements described
in the report.

The financial audit and this compliance
examination was performed 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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