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REPORT DIGEST
DEPARTMENT OF EMPLOYMENT
SECURITY
FINANCIAL AUDITFor the Year Ended: June 30, 2007 Release Date: February 20, 2008
State of Illinois Office of the Auditor General WILLIAM G. HOLLAND 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 report covers our financial audit of the Department of Employment Security’s Non-Shared Funds for the years ended June 30, 2007. A State compliance examination covering the two years ended June 30, 2007 will be issued in a separate report. SYNOPSIS ¨ The Department did not obtain an independent internal control review of its bank trustee involved in the processing of cash receipts and other data for the Department. {Expenditures and Activity Measures are summarized on the next page.}
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ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY
FINANCIAL AUDIT
For the Year Ended June 30, 2007
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STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Unemployment
Compensation Trust Fund (in thousands) |
2006 |
2006 |
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OPERATING
REVENUES: Unemployment taxes.............................................................. Federal government................................................................ Total Operating Revenues............................................ OPERATING EXPENSES: Benefit Payments and Refunds............................................ Operating Income........................................................... NONOPERATING
REVENUES (EXPENSES): Interest and investment income........................................... Other revenue.......................................................................... Interest and investment expenses........................................ Other expenses........................................................................ Total nonoperating revenues
(expenses)................... Income (loss) before transfers........................................ TRANSFERS IN (OUT) Increase (Decrease) in net
assets................................. NET
ASSETS, July 1,.................................................................... NET
ASSETS, June 30,................................................................ |
$2,334,077 25,730 2,359,807 1,795,169 564,638 64,279 - - - 64,279 628,917 (22,205) 606,712 1,671,032 $2,277,744 |
$2,647,627 31,013 2,678,640 1,719,571 959,069 33,865 - (6,731) (4,960) 22,174 981,243 (17,289) 963,954 707,078 $1,671,032 |
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STATEMENT
OF NET ASSETS (at June 30) Unemployment
Compensation Trust Fund (in thousands) |
2006 |
2006 |
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ASSETS: Cash and cash equivalents................................................... Investments............................................................................. Receivables, Net: Taxes................................................................................. Intergovernmental.......................................................... Others............................................................................... Other assets............................................................................. Total Assets.................................................................. LIABILITIES: Benefit payments payable..................................................... Intergovernmental payables................................................. Due to other state funds........................................................ Total Liabilities NET
ASSETS................................................................................... |
$2,778 1,765,139 476,759 28,974 90,872 4,065 $2,368,587 $81,946 4,717 4,180 90,843 $2,277,744 |
$10,000 1,137,136 505,595 27,844 75,405 3,714 $1,759,694 $75,840 7,526 5,296 88,662 $1,671,032 |
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AGENCY
DIRECTOR |
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During Audit Period: Mr. James P. Sledge (3/5/07 to current);
Ms. Brenda A. Russell (7/1/06 to 3/5/07) Currently: Mr. James P. Sledge |
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Internal control review of bank trustee
not obtained
For receipts totaling $800 million the
Department relies on the controls within the Bank
According to the Department the review
was not completed by the bank’s auditors in a timely manner |
FINDING, CONCLUSION, AND RECOMMENDATIONS FAILURE TO REVIEW COMPUTERIZED
INFORMATION SYSTEMS OF THIRD PARTY BANK TRUSTEE The Department did not obtain an independent internal control review of its bank trustee involved with the processing of cash receipts and other data for the Department. Without a review, the Department did not have assurance that information system controls to prevent errors or irregularities were established.
The Department contracts for computer services with an outside commercial bank to process cash receipts and other data submitted by employers. Substantially all of the Department’s Insurance tax receipts are processed by the bank. For approximately 35% of the Department’s Unemployment Insurance tax receipts totaling $800 million, the Department relies primarily on the controls within the Bank to ensure the receipts and other data are processed accurately.
Good internal controls require that third party service providers arrange to have a periodic independent review of internal controls placed in operation and issue a report on the results of this review commonly known as a SAS 70 report.
According to the Department, as a result of the prior compliance finding, it included a SAS 70 review in the fiscal year 2007 contract requirements for the bank trustee; however, the review was not completed by the bank’s auditors in a timely manner. (Finding 1, pages 47-48)
We recommended the Department periodically obtain and review a SAS 70 review from the third party bank trustee processing cash receipts and other data for the Department.
Department officials accepted our recommendation and stated the testing for the Type I SAS 70 review was completed in December 2007 and the corresponding final report will be issued in February 2008.
AUDITORS’ OPINION Our auditors stated the financial statements
present fairly, in all material respects, the financial position of the
Non-Shared Funds of the Department of Employment Security as of June 30,
2007, and the changes in financial position and cash flows, where applicable,
thereof for the year then ended. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:JAF:pp SPECIAL ASSISTANT AUDITORS McGladrey & Pullen, LLP were our special assistant auditors for this audit. |