Note:

 

This report of the Illinois Workersí Compensation Commissionsí Self-Insurers Security Fund (Fund) should be read in conjunction with the FY16 financial statements of the Fund and the auditorís report dated January 4, 2018. 

 

In FY16, the auditors issued an adverse opinion on the Fundís financial statements due to the Commission having an inadequate process to determine the claims liabilities of the Fund, and because the proper accounting treatment for the insolvent self-insurer security collected by the State of Illinois is not determinable due to two different irreconcilable interpretations of the Workerís Compensation Act.  Because of the adverse auditor opinion of the Fundís financial statements for the year ended June 30, 2016, the audit reports for the year ended prior to June 30, 2016 should not be relied upon without considering the auditorís report dated January 4, 2018.   

 


 

 

REPORT DIGEST

ILLINOIS INDUSTRIAL COMMISSION

FINANCIAL AND COMPLIANCE AUDIT

For the Two Years Ended:

June 30, 2001

Summary of Findings:

Total this audit 7
Total last audit 4
Repeated from last audit 3

Release Date:
June 26, 2002

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

 

 

 

 

 

 

SYNOPSIS

 

  • Assessments for the Rate Adjustment Fund and the Second Injury Fund were not paid timely. The Rate Adjustment Fund had a deficit of $8,811,584 for the year ended June 30, 2001.
  • The Commission did not perform required internal control reviews.
  • The Commission had not established adequate computer security controls.
  • The Commission had no formal methodology to assist in the development of information systems.

 

 

 

 

 

 

 

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

ILLINOIS INDUSTRIAL COMMISSION
FINANCIAL AND COMPLIANCE AUDIT
For The Two Years Ended June 30, 2001

EXPENDITURE STATISTICS

FY 2001

FY 2000

FY 1999

Total General Revenue Fund Expenditures (All Appropriated Funds)

$10,772,885

$10,421,339

$10,184,279

OPERATIONS TOTAL

$10,772,885

$10,421,339

$10,184,279

% of Total Expenditures

100%

100%

100%

Personal Services

$7,101,227

$7,013,003

$7,281,537

% of Operations Expenditures

65.9%

67.3%

71.5%

Average No. of Employees

181

182

185

Other Payroll Costs (FICA, Retirement)

$1,861,438

$1,882,757

$1,487,732

% of Operations Expenditures

17.3%

18.1%

14.6%

Contractual Services

$165,035

$162,138

$553,016

% of Operations Expenditures

1.5%

1.5%

5.4%

All Other Operations Items

$1,645,185

$1,363,441

$861,994

% of Operations Expenditures

15.3%

13.1%

8.5%

  • Cost of Property and Equipment

$1,735,442

$1,536,778

$1,557,271

 

SELECTED ACTIVITY MEASURES

FY 2000

FY 1999

FY 1998

Workersí Compensation Case Load Volume:

  • Cases Pending at Beginning of Year
  • Add: New Cases (+ reinstated)
  • Total Cases to be Processed
  • Less: Cases Closed
  • Cases Pending at Year End

 

116,438
72,957
189,395
(70,931)
118,464

 

117,686
70,801
188,487
(72,049)
116,438

 

122,037
70,861
192,898
(75,212)
117,686

 

AGENCY DIRECTOR

During Audit Period: John W. Hallock, Jr.
Currently: John W. Hallock, Jr.

 

 

 

 

 

 

Assessments for the Rate Adjustment Fund and the Second Injury Fund were not paid timely

 

 

 

 

 

 

 

The Rate Adjustment Fund had a deficit of $8,811,584 for the year ended June 30, 2001

 

 

 

The Commission did not perform required internal control reviews

 

 

 

 

 

 

The Commission had not established adequate computer security controls

 

 

 

 

 

 

 

 

 

 

 

 

The Commission had no formal methodology to assist in the development of information system

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

TIMELY COLLECTION OF ASSESSMENTS

Assessments for the Rate Adjustment Fund and the Second Injury Fund were not paid timely in accordance with statutory requirements. We sampled 75 companies with late payments. Our sample of 25 companies with assessments due March 15, 2000, showed late payments of $87,475; for 25 companies with payments due September 15, 2000, late payments totaled $104,452; and for 25 companies with payments due March 15, 2001, late payments totaled $286,320. Commission officials stated that no penalties were assessed because all employers and insurance carriers responded to the Commissionís notices by paying the delinquent amounts (Finding 3, pages 15-16) This finding has been repeated since 1989.

Not collecting assessments timely results in a loss of revenues and/or a deficiency of funds and we recommended the Commission continue its procedures to monitor and enforce timely collection of assessments. The Commission agreed and also stated it would continue to support legislation that would require assessments paid after the due date to automatically include interest for the period of delinquency. (For previous agency responses, see Digest Footnote 1.)

The Rate Adjustment Fund had a deficit of $8,811,584 for the year ended June 30, 2001. Assessments for this fund have been at the maximum for the 16 years ending June 30, 2001 and the fund has had to borrow money in order to meet its obligations. (See page 66 of this report for more information).

ANNUAL REVIEW OF INTERNAL CONTROL NOT PERFORMED

The Commission did not perform the required internal control reviews or file the Fiscal Year 2001 or 2000 certification that the Commissionís systems of internal fiscal and administrative controls are in compliance with the requirements of the Fiscal Control and Internal Auditing Act. Such an evaluation and certification is necessary to ensure assets are safeguarded, accounting data are reliable, operations are efficient and the Commission is in compliance with established policies, laws, regulations and contracts. (Finding 4, page 17)

The Commission agreed with our recommendation to comply with the requirements of the Fiscal Control and Internal Auditing Act.

COMPUTER SECURITY DEFICIENCIES

The Commission relies on its computer resources to meet its mission but has not established adequate security controls over its Local Area Network (LAN) or Internet Environments.

Our review of the Commissionís LAN and Internet security controls showed, among other things, that: 1) passwords were not required on all user accounts; 2) there were users who were actively logged on to the LAN for more than 24 hours, continuously providing an opportunity for unauthorized access or modification of resources and data; 3) physical security restrictions limiting public access to user workstations did not exist; 4) user accounts were generically assigned and shared by employees; 5) 66% of the workstations were not protected with anti virus software; and 6) direct access to the Internet was permitted without security controls. (Finding 6, pages 20-21)

The Commission accepted our recommendation to establish comprehensive policies and procedures that outline general security provisions, appropriate use of computer resources, backup and care of data, and other appropriate policies to help ensure that effective security controls exist.

LACK OF SYSTEM DEVELOPMENT AND CHANGE CONTROL STANDARDS

The Commission had not established formal system development methodology or change control procedures for its computing environment. The Commission develops, acquires, implements, maintains, and modifies information systems that are critical for completing its mission. However, there was no formal methodology to assist in the planning of the information systems development process, testing, and changing programs.

Our review of the Arbitration Tracking System, which was recently developed, showed: 1) the project was not formally approved; 2) a risk analysis was not performed; 3) the system design and testing was not formally documented; 4) the system was not approved before implementation; and 5) a postĖimplementation review was not performed. (Finding 7, pages 22-23)

The Commission agreed with our recommendation to develop a formal system development methodology.

OTHER FINDINGS

The remaining findings are less significant and are reportedly being given attention by Commission management. We will review the progress toward implementation of our recommendations during our next audit.

AUDITORSí OPINION

Our auditors state the financial statements present fairly, in all material respects, the financial position of the non-shared funds of the Illinois Industrial Commission as of June 30, 2001 and 2000.

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KMC:ak

SPECIAL ASSISTANT AUDITORS

Hill Taylor LLC were our special assistant auditors for this audit.

 

 

DIGEST FOOTNOTES

#1 DETERMINATION THAT EMPLOYER CONTRIBUTIONS ARE IN COMPLIANCE WITH STATUTES - Previous Agency Responses (Since 1989)

1999: "The Agency agrees with this recommendation. The Agency will continue to monitor to the timeliness of assessment payments, and when necessary utilize the provision to assess penalties. The agency will also continue to support legislation that would require assessments paid after the due date to automatically include interest for the delinquent period."

1997: "The agency agrees with this recommendation. The commission will continue its efforts to seek out insurance carriers and employers willing and capable of submitting accident report information electronically. Further, we will seek funds to expand our current system to accept electronic filing of paid benefit costs and specific injury data."

1995: "We agree with the recommendation. We will continue our efforts to secure timely payments into these funds and we will propose to the Workersí Compensation Advisory Board that we pursue a statutory amendment which would permit the charging of interest for late payments to be deposited along with any penalties into the Rate Adjustment Fund."

1993: "The Commission agrees with #2. Due to loss of staff in the fiscal office, individual assessment transmittal forms are no longer filed in individual files, but are batched together by date of receipt.

The Commission disagrees with #1. Based on the opinion of our legal counsel, penalties cannot be automatically imposed by the Commission. Imposition of penalties for late payment would require that the Commission make a finding that the payment in question was willfully and knowingly late."

1991: "The Agency disagrees. The Agency has procedures to monitor and collect assessments due to the Rate Adjustment Fund and Second Injury Fund. Further, based on opinions of our counsel, penalties cannot be automatically imposed, but can only be required "upon a finding by the Commission" that the payment was willfully and knowingly late."

1989: "The Agency has procedures to monitor and collect assessments due to the Rate Adjustment Fund and Second Injury Fund. During the period of the audit, however, the agency did not have enforcement powers adequate to ensure payment into the funds. On December 18, 1989, the Governor signed into law a major amendment to the Workers Compensation Act which included a provision that significant penalties will be assessed in the event of late or nonpayment into the Rate Adjustment and Second Injury Funds."