REPORT DIGEST DEPARTMENT OF EMPLOYMENT SECURITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: January 11, 2018 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 FINDINGS LAST AUDIT: 1 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 This digest covers the Department of Employment Security’s (Department) Financial Audit of the Unemployment Compensation Trust Fund for the year ended June 30, 2017. The Department’s Compliance Examination covering the two years ended June 30, 2017 will be issued at a later date. SYNOPSIS • (17-1) The Department did not have adequate controls over financial reporting to allow management or employees in the normal course of performing their assigned functions to prevent or detect financial statements misstatements in a timely manner. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER FINANCIAL CLOSE AND REPORTING The Department did not have adequate controls over financial reporting to allow management or employees in the normal course of performing their assigned functions to prevent or detect misstatements in a timely manner. Auditors noted amounts in the Unemployment Trust Fund (Fund) associated with additional contribution refunds that were not captured in the Fund’s general ledger. As a result, the payables for employer contributions refunds were understated by $5.7 million and associated revenues were overstated by the same amount. The Department subsequently corrected the financial statements. (Finding 1, page 25). We recommended the Department implement procedures to ensure reimbursable transactions and other unapplied credits are properly recorded in the Department’s reporting system to ensure the underlying records and financial statements are accurate. Department officials agreed with the recommendation and stated the Department implemented a new tax revenue system in which all receivables and payables are available and reconciled. AUDITOR’S OPINION Our auditors stated the financial statements present fairly, in all material respects, the financial position of the Unemployment Compensation Trust Fund of the Illinois Department of Employment Security as of June 30, 2017, and the changes in financial position and cash flows for the year then ended. This Financial Audit was conducted by RSM US 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:JGR