REPORT DIGEST

ILLINOIS WORKERS’ COMPENSATION
COMMISSION  — SELF-INSURERS SECURITY
FUND

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2022

Release Date:  March 16, 2023

FINDINGS THIS AUDIT:  2

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  0 -- 1 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 2 -- 2

FINDINGS LAST AUDIT: 2

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 financial audit
of the Illinois Workers’ Compensation
Commission (Commission) - Self-
Insurers Security Fund as of and for
the year ended June 30, 2022, and the
findings arising from the financial
audit reported pursuant to Government
Auditing Standards.

SYNOPSIS

• (22-01) The Commission did not
ensure all events and transactions
impacting the Self-Insurers Security
Fund were appropriately recorded in
its internal accounting records and
presented fairly in its financial
statements.

EMPHASIS OF MATTER

As discussed in Note 16 to the
financial statements, the Self-
Insurers Security Fund has a total net
position (deficit) of ($5,467,321) as
of June 30, 2022. This deficit, which
is presented on an accrual basis, is
the excess of total liabilities and
deferred inflows of resources over
total assets and deferred outflows of
resources. Management of the
Commission stated that, subject to
approval by the Self-Insurers Advisory
Board established within the
Commission, future assessments will be
used to meet Fund’s obligations in the
future (Independent Auditor’s Report
on page 6 and Note 16 on page 47).

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

ACCOUNTING AND FINANCIAL REPORTING
PROBLEMS

The Illinois Workers’ Compensation
Commission (Commission) did not ensure
all events and transactions impacting
the Self-Insurers Security Fund (Fund
940) were appropriately recorded in
its internal accounting records and
presented fairly in its financial
statements.

During initial testing, we noted the
following:

• The Commission’s supporting schedule
for cash activity and interest
allocations within each insolvent
self-insurer’s security deposits
account, Fund 940’s account, and
excess insurance activity were not
accurate. Furthermore, the claims paid
in excess of one insolvent self-
insurer’s security were erroneously
charged by the Commission to the
unearned security deposit account
instead of the Fund 940’s account. The
net effect of these errors were
understatements of total unpaid claims
by $66,047, total unearned security
deposits by $93,775, benefit claims
expense by $161,485 and interest
income by $1,728, and overstatement of
total security deposit by $65.

• The Commission did not record the
accrual for an expense incurred during
the Fiscal Year, totaling $14,924.

• The Commission made an erroneous
entry to record the reversal of
deposit in transit, thereby,
overstating Cash and Cash Equivalent
account and understating
Excess Insurance Receivable by $1,165.

• The Commission did not include all
of Fund 940’s miscellaneous accounts
receivable, totaling $1,284, in
recording the beginning balances
entry.

• In addition to the errors noted
above, the Commission did not properly
classify the cash activities in the
financial statement of cash flows. The
net effect of these errors to the
ending balance was $1,164.

We proposed, and the Commission
posted, adjusting entries to correct
these errors in Fund 940’s final
financial statements. (Finding 1,
pages 52-53)

We recommended the Commission ensure
all transactions and events impacting
Fund 940 are recorded and reported in
strict adherence with the generally
accepted accounting principles
applicable to Fund 940. Additionally,
we recommended the Commission ensure
an independent supervisory review by
an individual with sufficient skills,
knowledge, and experience to identify
and correct errors is performed during
the preparation of Fund 940’s
supporting schedules, journal entries,
and financial statements.

Commission officials agreed with our
recommendation.

OTHER FINDING

The remaining finding pertains to
inaccurate census data.  We will
review the Commission’s progress
towards the implementation of our
recommendation in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Self-Insurers
Security Fund as of and for the year
ended June 30, 2022, are fairly stated
in all material respects.

This financial audit was conducted by
Roth & 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:JGR