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REPORT DIGEST DEPARTMENT OF EMPLOYMENT SECURITY FINANCIAL AUDIT
For the Year Ended: June 30, 2008
Release Date: April 30, 2009
State of
Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
To obtain a copy of the
Report contact: Office of the Auditor
General
(217) 782-6046 or TTY (888)
261-2887 This Report Digest and Full
Report are also available on the worldwide web at
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INTRODUCTION This report covers our financial audit of the Department of Employment Security’s Non-Shared Funds for the years ended June 30, 2008. A State compliance examination covering the two years ended June 30, 2009 will be performed next year. SYNOPSIS¨ The Department overstated its allowance for uncollectible taxes receivable by $24,200,000.
{Expenditures and Activity Measures are summarized on the next page.} |
ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY
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STATEMENT OF REVENUES,
EXPENSES AND CHANGES IN NET ASSETS Unemployment
Compensation Trust Fund (in thousands) |
2008 |
2007 |
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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............................
Total nonoperating revenues
(expenses)..........
Income (loss) before transfers......................
TRANSFERS IN (OUT).........................................
Increase (Decrease) in net assets...................
NET
ASSETS, July 1,.............................................
Prior period adjustment..............................................
NET
ASSETS, June 30,..........................................
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$1,971,147
26,992
1,998,139
1,991,147
6,992
88,650
88,650 95,642
(13,866)
81,776
2,277,774
31,638
$2,391,158 |
$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 |
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STATEMENT
OF NET ASSETS (at June 30) Unemployment
Compensation Trust Fund (in thousands) |
2008 |
2007 |
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ASSETS:
Cash and cash equivalents...................................
Deposits held by the federal government...............
Receivables, Net:
Taxes...........................................................
Intergovernmental.........................................
Others..........................................................
Other assets........................................................
Total Assets................................................
LIABILITIES:
Benefit payments payable....................................
Intergovernmental payables..................................
Due to other state funds.......................................
Total Liabilities NET
ASSETS...........................................................
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$449 1,906,219 432,901
30,886 123,446
4,818 $2,498,719 $96,813 6,423
4,325
107,561 $2,391,158 |
$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 |
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AGENCY
DIRECTOR |
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During Audit Period: Mr. James P. Sledge (to 8/25/08) Currently: Ms. Maureen T. O’Donnell (from 8/25/08) |
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Allowance for uncollectible taxes was
overstated by $24.2 million
Methodology utilized did not correlate to
historical collections
Prior period adjustment
Current year adjustment |
FINDING, CONCLUSION, AND RECOMMENDATIONS INACCURATE BALANCE OF ALLOWANCE
FOR UNCOLLECTIBLE ACCOUNTS The Department of Employment Security (Department) overstated its allowance for uncollectible taxes receivable by $24,200,000. As of June 30, 2008 the Department had taxes receivable of $495,478,000 and penalties and interest (P&I) receivable of $44,067,000. In our audit of the Department’s allowance for taxes and P&I receivable we noted that the methodology utilized to calculate its allowance for uncollectible receivables did not correlate with its known history of collecting these types of receivables. Rather, it was based on the unrelated percentage of the year-end balance over the total of prior year’s balance and current year’s additions to receivables. Based on a
recalculation considering the historical collection percentage of new and
delinquent receivables, it was determined that the allowance for taxes
receivable should be $106,644,000.
This resulted in a prior period overstatement of the allowance for
taxes receivable recorded of $31,638,000 and a current period understatement
of $7,459,000. The financial
statements and disclosures have been corrected. (Finding
1, pages 36-37) We recommended the Department evaluate its
process and improve its controls over calculating the allowance for
uncollectible accounts. Department officials accepted our
recommendation and indicated that it had updated its spreadsheet with
the new calculation of the estimated allowance for uncollectible unemployment
insurance taxes using agency historical data and forecasts of changes in the
annual unemployment rate for the U.S. economy. OTHER
FINDING The other finding concerned inadequate controls over
computer security. We will review
progress toward implementation of all recommendations during the next
audit. AUDITORS’ OPINIONSOur 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, 2008,
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 AUDITORSOur special assistant auditors for this audit were E.C. Ortiz & Co. LLP. |