REPORT DIGEST

OFFICE OF THE SECRETARY OF STATE

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2024

Release Date:  January 23, 2025

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: 1

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

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Office of the Auditor General, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

• (24-1) The Office of the Illinois
Secretary of State (Office) had certain
deficiencies in their internal control to
ensure accurate census data was provided to
the State Employees’ Retirement System of
Illinois (System) for use in the applicable
annual actuarial valuations.

• (24-2) The Office inaccurately calculated
cash in transit at June 30, 2024, in the
General Fund (Fund 0001).

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INACCURATE CENSUS DATA

The Office had certain deficiencies in their
internal control to ensure accurate census
data was provided to the State Employees’
Retirement System of Illinois (System) for
use in the applicable annual actuarial
valuations.

Census data is demographic data (date of
birth, gender, years of service, etc.) of
the active, inactive, or retired members of
a pension or other postemployment benefit
(OPEB) plan. The accumulation of inactive or
retired members’ census data occurs before
the current accumulation period of census
data used in the plan’s actuarial valuations
(which eventually flows into each employer’s
financial statements), meaning the plan is
solely responsible for establishing internal
controls over these records and transmitting
this data to the plan’s actuary. In
contrast, responsibility for active members’
census data during the current accumulation
period is split among the plan and each
member’s current employer(s). Initially,
employers must accurately transmit census
data elements of their employees to the
plan. Then, the plan must record and retain
these records for active employees and then
transmit this census data to the plan’s
actuary.

We noted the Office’s employees are members
of both the pension plan administered by the
System and the State Employees Group
Insurance Program (SEGIP) sponsored by the
State of Illinois which includes OPEB. In
addition, we noted these plans have
characteristics of different types of
pension and OPEB plans, including single
employer plans and cost-sharing multiple-
employer plans.

During the performance of the OPEB census
examination (covering data as of June 30,
2022, used in the June 30, 2023 OPEB
actuarial valuation, for use in the
employer’s June 30, 2024 financial
statements), it was identified that:

• During backwards testing, the auditors
identified one of sixty (2%) employees
included on Office payroll reports with an
incorrect gender.

• During the review of the Office’s
reconciliation of its census data recorded
by the System and State to its internal
records, it was noted that, as of March
2023, the reconciliation had not yet been
communicated to the System.

During the performance of the pension census
examination (covering data as of June 30,
2023, used in the June 30, 2023 pension
actuarial valuation, for use in the
employer’s June 30, 2024 financial
statements), it was identified that:

• During forwards testing, the auditors
identified two of sixty (3%) employees
included on Office payroll reports with an
incorrect retirement deduction code.

The result of the errors in each of the
first bullets above led to inaccurate census
data being utilized by the System and the
State in the performance of the annual
pension and OPEB actuarial valuation
processes. The independent actuaries
utilized by the System and the State of
Illinois for the pension and OPEB plans
deemed the error immaterial to the plan
level valuations as a whole. (Finding 1,
pages 62-64)  This finding was first
reported in 2020.

We recommended the Office strengthen
controls to ensure accurate census data is
provided to the System and the State for use
in the annual actuarial valuation process.
If differences are noted between the
Office’s data and the System and State’s
data, these differences should be
communicated timely and rectified to ensure
the actuarial valuations are using accurate
data. We further recommended the Office
strengthen controls to complete timely
reconciliations of its census data with the
System.

Office officials accepted the
recommendation. In regards to the OPEB
related issues, officials stated the Office
did perform the reconciliation of census
data but it was inadvertently sent late. The
Office stated they will strengthen its
internal controls to meet the deadlines and
continue to work with the System to perform
future reconciliations. In regards to the
pension related issues, Office officials
stated they have since strengthened their
internal controls on determining Tier status
for new employees. Office officials further
stated they will continue to monitor and
evaluate their internal controls to ensure
accurate census data.


INACCURATELY CALCULATED CASH IN TRANSIT

The Office inaccurately calculated cash in
transit at June 30, 2024, in the General
Fund (Fund 0001).

During the testing of the cash on hand and
cash in transit balances reported in the
General Fund (Fund 0001) at June 30, 2024,
auditors noted a material difference when
comparing the license and fee revenue’s cash
in transit balance per the Office’s GAAP
package to the balance recalculated with
support from the estimated sales/fee
imposition process provided to us by the
Office. Auditors noted the cash in transit
balance at June 30, 2024, did not include
the adjustments, per the estimated sales/fee
imposition process, for license and fees
revenue from the months of May and June
2024. This error resulted in the total cash
in transit balance for the General Fund at
fiscal year-end being understated by $6.4
million. (Finding 2, pages 65-66)

We recommended the Office strengthen their
controls and review processes to ensure the
cash in transit balance in its financial
statements is accurate as of June 30th.

Office officials accepted the finding and
stated they will strengthen their internal
controls over the cash in transit entry
process to ensure accuracy in future
financial statements.

AUDITOR’S OPINIONS

The auditors stated the financial statements
of the Office as of and for the year ended
June 30, 2024 are fairly stated in all
material respects.

This financial audit was conducted by Sikich
CPA LLC.

COURTNEY DZIERWA
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