REPORT DIGEST UNIVERSITY OF ILLINOIS FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2020 Release Date: May 25, 2021 FINDINGS THIS AUDIT: 3 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 2 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 2 -- 3 FINDINGS LAST AUDIT: 2 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 The University’s financial audit report consists of three sets of financial statements as follows – the financial statements of the University, the revenue bond financial statements of the Auxiliary Facilities System and the Health Services Facilities System. This digest covers the University of Illinois’s Financial Audit as of and for the year ended June 30, 2020. The University’s Compliance Examination (including Single Audit) will be issued in a separate report at a later date. SYNOPSIS • (20-1) The University did not have adequate internal control over reporting its census data and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits plans was complete and accurate. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE INTERNAL CONTROLS OVER CENSUS DATA The University of Illinois (University) did not have adequate internal control over reporting its census data 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. Some of the more significant issues we noted during our testing are as follows: • The University had not performed an initial complete reconciliation of its census data recorded by SURS and CMS to its internal records to establish a base year of complete and accurate census data. • We conducted data matches of (1) individuals pulled from the University’s records whom the University believed should have been participating in SURS during the census data accumulation period throughout Fiscal Year 2018 and (2) the University’s faculty members teaching a class during the census data accumulation period throughout Fiscal Year 2018 to SURS’ records. As a result of this testing, we identified 18 individuals who had been improperly excluded from participating in SURS, which resulted in these people not having any employee contributions collected by the University and reported to SURS during the census data accumulation period throughout Fiscal Year 2018. Additionally, we identified one individual who did not qualify to participate in SURS. As this person had been deemed SURS-eligible, the University collected and reported employee contributions to SURS during the census data accumulation period throughout Fiscal Year 2018. We performed an analysis of transactions reported by the University to SURS during the census data accumulation period throughout Fiscal Year 2018, noting the following problems: • Seventy-two of 792 (9%) employees reported as hired had actually been hired in other fiscal years. SURS determined the total potential impact to each employee’s total service credit was it could be off by one-quarter to 2.25 years. • Forty-four of 467 (9%) employees with a departure on a leave of absence had the start date of the leave of absence untimely reported to SURS by the University. SURS determined the total potential impact to each of these employee’s total service credit was it could be off by one-quarter to 9.75 years. • Thirty-seven of 362 (10%) employees with a return from a leave of absence had the end date of the leave of absence untimely reported to SURS by the University. SURS determined the total potential impact to each of these employee’s total service credit was it could be off by one-quarter to 8.5 years. • As of the end of the census data accumulation year on June 30, 2018, we identified 25 employees where each employee’s associated termination or rehire date(s) had been untimely reported to SURS. While these employees were all associated with the University at June 30, 2018, some or all of these untimely reports may have occurred at other public universities and community colleges across the State. SURS determined these errors resulted in the employees being misclassified between the active, retired, and inactive member categories within SURS. The total potential impact to each former employee’s total service credit was it could be off between 0.0 and 1.75 years. (Finding 1, Pages 5-9) We recommended the University implement controls to ensure census data events are timely and accurately reported to the State Universities Retirement System (SURS) and the State of Illinois, Department of Central Management Services (CMS). We also recommended the University work with SURS 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. University officials agreed with the finding. OTHER FINDINGS The remaining findings pertaining to inadequate procedures over expense deferrals and other cut-off related issues and inadequate controls over university procurement card transactions and are reportedly being given attention by the University. We will review the University’s progress towards implementation of our recommendations in our next engagement. AUDITOR’S OPINION Our auditors stated the financial statements of the University, the Auxiliary Facilities System and the Health Services Facilities System as of June 30, 2020, and for the year then ended, are fairly stated in all material respects. This financial audit was conducted by CliftonLarsonAllen 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