REPORT DIGEST ILLINOIS WORKERS’ COMPENSATION COMMISSION COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2017 Release Date: March 14, 2019 FINDINGS THIS AUDIT: 10 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 1 -- 2 Category 2: 5 -- 3 -- 8 Category 3: 0 -- 0 -- 0 TOTAL: 6 -- 4 -- 10 FINDINGS LAST AUDIT: 8 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 our compliance examination of the Illinois Workers’ Compensation Commission for the two years ended June 30, 2017. A separate financial audit of the Self-Insurers Security Fund as of and for the year ended June 30, 2017, was previously released on March 12, 2019. In total, this report contains 10 findings, one of which was reported in the previously released financial audit. SYNOPSIS • (17-04) The Commission did not produce a report of aggregate statistics on work- related deaths, injuries, or illnesses resulting in the loss of three or more work days. • (17-06) The Commission did not exercise adequate internal control over its contractual agreements. • (17-07) The Commission did not exercise adequate internal control over voucher processing. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS FAILURE TO REPORT AGGREGATE STATISTICS The Commission did not produce a report of aggregate statistics on work-related deaths, injuries, or illnesses resulting in the loss of three or more work days. During testing, we noted the Commission did not produce the aggregate report due to the following conditions: • While the Commission receives reports on work-related deaths, injuries, and illnesses which resulted in the loss of three or more work days, the Commission does not track accident reports which are not eventually filed as an adjustment to a worker's claim. • The Commission does not capture data from reports filed on paper. While employers and insurers reported 21,082 incidents occurring in Fiscal Year 2016 and 15,496 incidents occurring in Fiscal Year 2017 electronically, Commission management provided us with an estimate of approximately 14,000 Fiscal Year 2016 incidents and approximately 10,300 Fiscal Year 2017 incidents were reported on paper. In addition, the Commission can only receive electronic initial reports of injuries, as supplementary reports must be filed on paper. Commission records indicate legal proceedings were conducted for 38,321 and 33,727 incidents in Fiscal Year 2016 and Fiscal Year 2017, respectively, where each proceeding likely should have had a supplementary report filed. • During our review of the four forms and associated instructions accepted by the Commission, we noted the forms were not designed to facilitate the capture of information needed to generate useful statistical reports. We noted the forms provided by the Commission, including the Employer's First Report of Injury (Form IC-45) and Employer's Supplementary Report of Injury (Form IC-85), are in a narrative format and do not have a coding process for the: – type/character of the injury; – part of the body affected; – location where the accident or illness exposure occurred; – the equipment, materials, and chemicals in use at the time of the incident; – occupation of the injured worker; and, – direct cause of the injury. Further, while we noted the forms developed by the International Association of Industrial Accident Boards and Commissions accepted by the Commission in lieu of its own forms, Workers Compensation - First Report of Injury or Illness (Form IA-1) and Workers Compensation - Subsequent Report (Form IA-2), provide significantly more detail about the injury, such as whether safety equipment was available and in use and the expected length of medical treatment, it did not have a coding process for each data element collected. (Finding 4, pages 22-24) We recommended the Commission enhance its reporting and data capture process so it can provide aggregate statistics to interested persons, or seek a legislative remedy. Commission officials stated they agreed with the recommendation and are working on standardized electronic data interchange services to collect workers’ compensation injury reports. INADEQUATE CONTROL OVER CONTRACTS The Commission did not exercise adequate internal control over its contractual agreements. During testing of six contractual agreements, some of the more significant issues we noted included the following: • One of six (17%) contractual agreements tested, totaling $353,355, was submitted to the Office of the State Comptroller 24 days late. Further, the Commission did not file a Late Filing Affidavit with this contract. • Two of six (33%) contractual agreements tested, totaling $84,618, were procured pursuant to an exemption to the Code; however, the Commission did not include either a brief description of the exemption or the applicable statutory reference on either agreement's Contract-Obligation Document (Form C-23) filed with the Office of the State Comptroller. • Two of six (33%) contractual agreements tested, totaling $72,250, were procured without obtaining a proper waiver from the Small Business Set-Aside Program from the State Purchasing Officer. (Finding 6, pages 27-29) We recommended the Commission implement controls to provide assurance: 1) each contract is timely filed with the Office of the State Comptroller; 2) each contract requiring a Late Filing Affidavit has an affidavit prepared and filed with the Office of the State Comptroller; 3) each contract's Form C-23 is properly completed; 4) waiver requests are approved by the appropriate party; and, 5) written contractual agreements delineate all of a vendor's functions. Commission officials agreed with the recommendations. INADEQUATE CONTROL OVER VOUCHER PROCESSING The Commission did not exercise adequate internal control over voucher processing. During testing of 152 non-payroll, non- awards and grants expenditures and seven refunds, some of the more significant issues we noted included the following control deficiencies: • Eleven vouchers (7%), totaling $307,998, were approved for payment 1 to 86 days late. • Three vouchers (2%) for travel reimbursements, totaling $2,173, were submitted to the Commission by the traveler between 82 and 127 days after the last day travel occurred. We did not note any reasonable explanation for why the traveler was unable to submit their travel voucher within 60 days on the voucher. • Two vouchers (1%), totaling $17,850, were not properly approved by the Commission's authorized officers prior to the purchase. • One refund voucher (14%), totaling $1,000, lacked evidence the voucher was reviewed by an appropriate officer prior to the Commission issuing the refund. • One voucher (1%), totaling $1,000, for an employee's tuition reimbursement was paid and approved without (1) the official receipt as a proof for tuition reimbursement and (2) the State's Tuition Reimbursement Application form was prepared 82 days after the start of the course and was only signed by the employee seeking reimbursement. • During testing, we noted three vouchers (2%) where the Commission did not retain and maintain documentation supporting changes to its purchases of goods and services from vendors. We noted one voucher, totaling $14,900, which did not have adequate documentation to support the hourly rate charged since the vendor and the Commission agreed to the rate orally. Additionally, we noted two vouchers, totaling $13,833, for the purchase of goods where changes to the order were agreed to orally by the Commission and the vendor. • Three vouchers (2%) for travel reimbursements, totaling $403, were paid twice. Subsequent to our examination of these transactions, the Commission was reimbursed for the overpayments. • One travel voucher (1%), totaling $1,154, for a travel reimbursement had excessive mileage claimed amounting to $188. During our discussions with Commission officials regarding this matter, the traveler indicated this error occurred when he reused a previously submitted voucher to prepare his new voucher and forgot to update the mileage claimed to reflect a change in his hearing site location. Subsequent to our examination of this transaction, the Commission was reimbursed for the overpayment. (Finding 7, pages 30-34) We recommended the Commission implement controls to provide assurance: 1) vouchers are timely processed; 2) travel vouchers are promptly submitted by travelers; 3) vouchers are properly approved and reconcile its supporting documentation; 4) vouchers are properly coded in accordance with SAMS requirements; 5) tuition reimbursements conform with Commission policies; 6) contractual terms are reduced to writing and formally agreed to with vendors and, in rare instances if necessary, oral terms are confirmed in writing with the vendor; 7) duplicate payments are not processed; and, 8) mileage reimbursement requests are checked for reasonableness. Commission officials agreed with the recommendation. OTHER FINDINGS The remaining findings pertain to (1) development and change control weaknesses, (2) disaster recovery planning weaknesses, and (3) inadequate control over property, receipts, workforce reporting, and performance evaluations. We will review the Commission’s progress towards the implementation of our recommendations in our next compliance examination. AUDITOR’S OPINION The financial audit of the Self-Insurers Security Fund was previously released. The auditors stated the financial statements of the Self-Insurers Security Fund as of and for the year ended June 30, 2017, are fairly stated in all material respects. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Commission for the two years ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants qualified their report on State compliance for Finding 2017-001 and Finding 2017-002. Except for the noncompliance described in these findings, the accountants stated the Commission complied, in all material respects, with the requirements described in the report. This compliance examination was conducted by E. C. Ortiz & Co., 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:djn