REPORT DIGEST

OFFICE OF THE TREASURER — THE ILLINOIS FUNDS

FINANCIAL AUDIT
FOR THE TWO YEARS ENDED JUNE 30, 2023

Release Date:  Aug. 8, 2024

FINDINGS THIS AUDIT: 2

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

FINDINGS LAST AUDIT: 2

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, 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

• (23-01) The Office of the Treasurer had
inadequate controls over the Office’s
Illinois Funds Program financial statement
preparation and review process.

• (23-02) The Office of the Treasurer did
not maintain adequate controls to ensure all
service providers’ internal controls were
reviewed.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE INTERNAL CONTROLS RELATED TO
REVIEW OF FINANCIAL STATEMENTS

The Office of the Treasurer (Office) had
inadequate internal controls over the
Office’s Illinois Funds Program financial
statement preparation and review process.

During preparation of the financial
statements, the Office incorrectly accounted
for cancelled, un-executed purchases and
redemptions. The cancelled purchases should
have been netted with purchase transactions.
The error led to the overstatement of both
subscriptions and redemptions on the
Statements of Changes in Fiduciary Net
Position by $170,421,701.

The Office corrected the error noted above
within the year-end financial statements.

We recommended the Office improve controls
over the financial reporting process of the
Illinois Funds Program by verifying that
cancelled, un-executed purchases are not
recorded at gross amounts within the
financial statements. (Finding 1, page 65).
This finding has been reported since 2020.

The Office accepted the recommendation and
stated it will implement additional controls
over the reporting and review process of the
Illinois Funds financial statements.

INADEQUATE INTERNAL CONTROLS RELATED TO
REVIEW OF SERVICE PROVIDERS

The Office of the Treasurer (Office) did not
maintain adequate controls to ensure all
service providers’ internal controls were
reviewed.

The Office utilized service providers as the
custodian of the Illinois Funds Program and
as payment processors for the E-Pay program.
As of June 30, 2023, the net position held
in trust for pool participants, internal and
external, was $19,191,730,000. The Office
did not establish an adequate process to
monitor its service and subservice
providers. The following issues were noted
during testing:

• One of three (33%) significant System and
Organization Control (SOC) reports was not
reviewed for the Illinois Funds Program. In
addition, the SOC report was not provided
timely to the auditors, as it was provided
222 days after the original request due
date.

• One SOC report for the Illinois Funds
Program included a qualified opinion related
to inadequate controls precluding operating
effectiveness of certain applicable
controls. The Office’s SOC report review did
not address the qualified opinion.

• The Office did not establish adequate
controls to review significant subservice
organizations related to the Illinois Funds
Program. There was no evidence the Office
was collecting, tracking and maintaining the
appropriate SOC reports for all significant
subservice organizations.

— Due to one of three (33%) SOC reports not
being provided to the auditors, the
population of significant subservice
organizations could not be determined. The
auditors were unable to determine the Office
reviewed the subservice organization SOC
reports.

— The Office provided two lists of
significant service and subservice
organizations. The list for the Illinois
Funds Program did not list any subservice
organizations. The list for the E-Pay
Program listed the Illinois Funds service
organization with three significant
subservice organizations.

— The Office provided its review of one
significant subservice organization for the
Illinois Funds within its service
organization review; however, the wording
for the subservice organization review had
not been updated from the prior fiscal year
report review.

• The Office did not establish adequate
controls to review significant service and
subservice providers related to the E-Pay
program. The population of E-Pay program
payment processors identified three
significant service providers and nine
significant subservice providers. Two of
three (67%) significant service
organizations, including the same report
identified above for the Illinois Funds
Program, were not reviewed. In addition, the
Office obtained a SOC 3 report for one its
service organizations but did not review the
report. Nine of nine (100%) significant
subservice organizations’ SOC reports were
not reviewed.   (Finding 2, pages 66-67)

We recommended the Office establish an
internal control process to document if a
review of controls is required. Additionally
we recommended the Office:

• Obtain and review SOC reports or perform
independent reviews of internal controls
associated with outsourced systems at least
annually.
• Either obtain and review SOC reports for
subservice organizations or perform
alternative procedures to satisfy itself
that the existence of the subservice
organization would not impact its internal
control environment.
• Document its review of the SOC reports in
a timely manner, reviewing all significant
issues with subservice organizations to
ascertain if corrective action plans exist
and when they will be implemented,
identifying any impacts to the Office, and
any compensating controls. (Finding 2, pages
66-67)

Management accepted the findings and stated
it has implemented further procedures to the
SOC report review process to confirm that
the audit findings are not repeated.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Office of the Treasurer, the Illinois
Funds Program as of and for the years ended
June 30, 2023, and June 30, 2022, are fairly
stated in all material respects.

This financial audit was conducted by Crowe
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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