REPORT DIGEST OFFICE OF THE SECRETARY OF STATE FINANCIAL AUDIT FOR THE TWO YEARS ENDED JUNE 30, 2021 Release Date: June 1, 2022 FINDINGS THIS AUDIT: 3 CATEGORY: NEW -- REPEAT – TOTAL Category 1: 0 -- 2 -- 2 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 2 -- 3 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 SYNOPSIS • (20-01) The Office of the Secretary of State (Office) used incorrect queries to determine the adjustment to record cash on hand and cash in transit at fiscal year-end and mistakenly included receipts from July 2021 in receipts deposited in the Illinois State Treasurer’s clearing accounts at the end of June 2021. • (20-02) The Office did not develop or retain adequate supporting documentation for its personnel transactions and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits (OPEB) plans was complete and accurate. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS WEAKNESSES IN DETERMINATION OF CASH ON HAND AND CASH IN TRANSIT AMOUNTS REPORTED IN THE FINANCIAL STATEMENTS The Office used incorrect queries to determine the adjustment to record cash on hand and cash in transit at fiscal year-end. The Office mistakenly included receipts from July 2021 in receipts deposited in the Illinois State Treasurer’s clearing accounts at the end of June 2021. During the testing over the cash on hand and cash in transit balances reported in the General Revenue Fund (Fund 0001) and the Road Fund (0011), auditors noted the following errors in the calculation: • The spreadsheet used to calculate total cash on hand and cash in transit for the General Revenue Fund and Road Fund excluded deposits from June 28 – 30, 2021 and improperly included July 2021 receipts from the queries used to determine June receipts not yet deposited into the Treasurer’s Clearing Accounts at June 30, 2021. This resulted in a $3.5 million overstatement in the General Revenue Fund and a $47.2 million understatement in the Road Fund. • The June deposits included in the cash on hand and cash in transit calculations that were held in the Illinois State Treasurer clearing accounts but not yet remitted to the Illinois Office of Comptroller excluded deposits from June 28 -30, 2021 and improperly included July 2021 receipts from the queries used to determine June receipts not yet deposited into the Treasurer’s Clearing Accounts at June 30, 2021. This resulted in a $1.6 million overstatement in the General Revenue Fund and a $41.0 million overstatement in the Road Fund. (Finding 1, pages 66-67) This finding was first reported in 2016. We recommended the Office implement a process to review the calculation over the cash on hand and cash in transit process to determine that the calculation includes the correct fiscal year information and considers all in transit activity as of June 30th. Office officials agreed with the recommendation. INADEQUATE INTERNAL CONTROLS OVER CENSUS DATA The Office did not develop or retain adequate supporting documentation for its personnel transactions and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits (OPEB) plans was complete and accurate. During testing, we noted included the following: • The Office had not performed an initial complete reconciliation of its census data recorded by State Employees’ Retirement System (SERS) to its internal records to establish a base year of complete and accurate census data. • After establishing a base year, the Office had not developed a process to annually obtain from SERS the incremental changes recorded by SERS in their census data records and reconcile these changes back to the Office’s internal supporting records. • For one of 120 employees tested, their gender listed per the supporting documentation in their payroll file did not match the gender listed in their data on the SERS payroll transaction report for Fiscal Year 2019. When made aware of the error, the Office corrected it and notified SERS of the change that needed to be made. (Finding 2, pages 68-70). We recommended the Office implement controls to ensure employee contributions to SERS are complete, accurate, and in accordance with the Illinois Pension Code. Further, we recommended the Office work with SERS and CMS to develop an annual reconciliation process of its active members’ census data from its underlying records to a report from each plan of census data submitted to the plan’s actuary. The Office accepted the recommendation. OTHER FINDINGS The remaining finding pertained to lack of controls over changes to its applications. We will review the Office’s progress towards the implementation of our recommendations in our next financial audit. AUDITOR’S OPINION The auditors stated the financial statements of the Office as of and for the year ended June 30, 2021 are fairly stated in all material respects. This financial audit was conducted by Sikich, 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:SDW