REPORT DIGEST

 

DEPARTMENT OF EMPLOYMENT SECURITY

 

FINANCIAL AUDIT

For the One Year Ended:

June 30, 2009

and

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2009

 

Summary of Findings:

Total this audit†††††††††††††††††††††† 7

Total last audit†† ††††††††††††††††††††3

Repeated from last audit††††††† 2

 

 

 

Release Date:

February 11, 2010

 

 

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

 

 

 
SYNOPSIS

 

®      The Department understated its cash and cash equivalents by $43 million.The related benefit payments payable was also understated by the same amount.

 

®      The Department did not execute its interagency agreements with other State agencies in a timely manner.

 

®      The Department did not obtain required information from claimants regarding dependent children.

 

®      The Department did not issue eligibility determinations within the prescribed timeframe.

 

®      In July 2009 the State of Illinois began receiving repayable advances from the Federal Government for the Illinois Unemployment Compensation Trust Fund. At December 31, 2009, this amount totaled approximately $1,168,532,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the next page.}

 

 

 

 

 

ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY

FINANCIAL AUDIT

For the Year Ended June 30, 2009

COMPLIANCE EXAMINATION

For the Two Years Ended June 30, 2009

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

Unemployment Compensation Trust Fund (in thousands)

 

2009

 

2008

OPERATING REVENUES:

††††† Unemployment taxes...........................................

††††† Federal government.............................................

Total Operating Revenues..............................

 

OPERATING EXPENSES:

††††† Benefit Payments and Refunds............................

Operating Income (Loss)...............................

 

NONOPERATING REVENUES (EXPENSES):

††††† Interest and investment income............................

††††††††††† Total nonoperating revenues...........................

 

Income (loss) before transfers...................... ††

 

TRANSFERS OUT.................................................

††††††††††† Increase (Decrease) in net assets...................

 

NET ASSETS, July 1,.............................................

NET ASSETS, June 30,..........................................

 

$1,600,817

1,644,757

3,245,574

 

 

5,086,053

(1,840,479)

 

 

61,180

†† 61,180

 

†† (1,779,299)

 

††† (11,702)

†† (1,791,001)

††††††††††††††††††

††††† 2,391,158

††††† $600,157

 

$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

††† $2,391,158

STATEMENT OF NET ASSETS (at June 30)

Unemployment Compensation Trust Fund (in thousands)

 

2009

 

2008

ASSETS:

Cash and cash equivalents...................................

Deposits held by the federal government...............

Receivables, Net:

Taxes...........................................................

Intergovernmental.........................................

Other............................................................

††††† Other assets........................................................

††††††††††††† Total Assets................................................

LIABILITIES:

Benefit payments payable....................................

Intergovernmental payables..................................

Due to other state funds.......................................

Total Liabilities

NET ASSETS...........................................................

 

$92,790

183,115

 

353,635

107,914

109,459

12,285

$859,198

 

$227,399

11,509

20,133

259,041

$600,157

 

$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

AGENCY DIRECTOR

During Audit Period:Mr. James P. Sledge (to 8/25/08)

Currently:Ms. Maureen T. OíDonnell (from 8/25/08 to current)


 

 

 

 

 

 

 

 

 

 

 

 


Cash and benefits payable were understated by $43 million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Interagency agreements were not executed timely

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Departmentís rules require this information be obtained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cases determined to be untimely

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Amount repayable to the Federal government is $1,168,532,000

 

 

 

 

 

 

 

 

FINDING, CONCLUSION, AND RECOMMENDATIONS

 

INACCURATE BALANCE OF CASH AND CASH EQUIVALENTS AND BENEFIT PAYMENTS PAYABLE

 

The Department of Employment Security (Department) understated its cash and cash equivalents by $43 million.The related benefit payments payable was also understated by the same amount.

 

During our audit, we noted that as of June 30, 2009, the Department recorded a transfer of funds amounting to $43 million against cash and cash equivalents for benefit payments when the actual transfer was not made until July 1, 2009.This resulted in an understatement in the Departmentís benefit payments payable.The financial statements and disclosures have been corrected for these adjustments. (Finding 1, page 13)

 

We recommended the Department evaluate its process and improve its controls over recording transactions in the correct fiscal year.

 

Department officials accepted our recommendation and indicated that there was a miscommunication throughout their Accounting Services.

 

 

            INTERAGENCY AGREEMENTS NOT
 †††††††††  EXECUTED IN A TIMELY MANNER

 

The Department did not execute its interagency agreements with other State agencies in a timely manner.

††††††††††† †††††††††††

During our detailed review of 15 interagency agreements, we noted that 13 of the agreements had contract terms prior to the completion of an executed agreement.The agreements were signed between 12 and 196 days late. (Finding 4, page 19)

 

We recommended the Department improve its process for timely executing interagency agreements.

 

Department officials accepted our recommendation and indicated that they will work toward improving the process.

 

††††††††††† UNSUPPORTED CLAIMS ON DEPENDENT
 †††††††††††CHILDREN

 

The Department did not obtain required information from claimants regarding dependent children.

†††††††††††††††††††††††

During our local office visits, we noted that the Unemployment Insurance Application did not provide space for information on the claimantís dependent childrenís name and birth dates. The Departmentís rules require this information be obtained. (Finding 5, page 20)

 

We recommended the Department revise the Unemployment Insurance Application to provide space for information on the claimantís dependent childrenís name and birth dates.

 

Department officials accepted our recommendation and stated that they will resolve the inconsistency between its current process and Department rules.

 

††††††††††† UNTIMELY ISSUANCE OF ELIGIBILITY
††††††††††† DETERMINATION

 

The Department did not issue eligibility determinations within the prescribed timeframe.

†††††††††††††††††††††††

During our testing, we noted the Department untimely issued eligibility determinations for 15 of 60 cases.The eligibility determinations were issued 1 to 38 days after the end of the 21-day prescribed timeframe.However, none of these cases resulted in an overpayment of unemployment insurance. (Finding 6, page 21)

 

We recommended the Department implement procedures to ensure all eligibility determinations are made within the prescribed timeframe.

 

Department officials accepted our recommendation.

 

OTHER FINDINGS

 

The remaining findings are reportedly being given attention by the Department. We will review the Departmentís progress toward implementation of all recommendations during the next audit.

 

SUBSEQUENT EVENT

 

In July of 2009, the State of Illinois began receiving repayable advances to the account of the Illinois Unemployment Compensation Trust Fund from the federal unemployment account.As of December 31, 2009, a total of 26 States were borrowing from the Federal Government to fulfill the mandate to pay unemployment benefits and Illinoisí loan balance was approximately $1,168,532,000.These loans are interest-free under current federal law through the end of calendar year 2010. (Page 36 of the Financial Report)

 

 

AUDITORSí OPINIONS

 

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, 2009, and the changes in financial position and cash flows, where applicable, thereof for the year then ended.

 

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:TLK:pp

 

SPECIAL ASSISTANT AUDITORS

 

Our special assistant auditors for this audit were E.C. Ortiz & Co. LLP.