REPORT DIGEST

DEPARTMENT OF LABOR

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2023

Release Date:  March 28, 2024

FINDINGS THIS AUDIT: 12

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 3 -- 4
Category 2:  3 -- 5 -- 8
Category 3:  0 -- 0 -- 0
TOTAL:  4 – 8 -- 12

FINDINGS LAST AUDIT:  12

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

Because of the significance and
pervasiveness of the findings described
within the report, we (the accountants)
expressed an ADVERSE OPINION on the
Department of Labor’s compliance with the
specified requirements which comprise a
State compliance examination. The
Codification of Statements on Standards for
Attestation Engagements (AT-C § 205.72)
states a practitioner “should express an
adverse opinion when the practitioner,
having obtained sufficient appropriate
evidence, concludes that misstatements,
individually or in the aggregate, are both
material and pervasive to the subject
matter.”

SYNOPSIS

• (23-01) The Department of Labor
(Department) did not exercise adequate
control over its accounts receivable and
related reporting.

• (23-02) The Department failed to establish
and maintain adequate internal control over
its Special State Trust Fund (Fund 251),
which holds unpaid wages due to employees.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER ACCOUNTS RECEIVABLE

The Department of Labor (Department) did not
exercise adequate control over its accounts
receivable and related reporting.

During testing, we noted the following:
• The Department was unable to provide
detailed individual accounts receivable
records for the General Revenue Fund (Fund
001), Child Labor and Day and Temporary
Labor Services Enforcement Fund (Fund 357),
Employee Classification Fund (Fund 446),
and Wage Theft Enforcement Fund (Fund 885).
• The Department’s Accounts Receivable
Activity (Form C-97) did not report any
amounts considered to be uncollectible and
did not report any write-offs during Fiscal
Year 2022 and Fiscal Year 2023. The
Department started Fiscal Year 2022 with
approximately $1.3 million in accounts
receivable, which went to zero as of June
30, 2022 after making negative adjustments,
totaling approximately $1 million, to change
accounts receivable to zero.
• The Department was unable to provide an
aging schedule to support its Aging of Total
Gross Receivables (Form C-98).
• The Department was unable to provide
current policies or procedures for handling
and reporting its accounts receivable,
tracking and monitoring complaints received,
posting delinquent accounts receivable into
the Comptroller’s Illinois Debt Recovery
Offset Portal system or pursuing other debt
collection procedures, and writing off
uncollectible receivables.

Due to these conditions, we were unable to
conclude whether the Department’s population
records were sufficiently precise and
detailed under the Attestation Standards
promulgated by the American Institute of
Certified Public Accountants (AT-C § 205.36)
to test the Department’s accounts
receivable.

Even given the population limitations noted
above which hindered the ability of the
accountants to conclude whether selected
samples were representative of the
population as a whole, we performed the
following tests and noted the following:
• The Department was unable to provide
supporting documentation for additions or
collections reported on Form C-97 reports
during Fiscal Years 2022 and 2023.
• Six of 8 (75%) Form C-97 tested did not
have documentation retained to indicate the
individual who prepared and supervisor
review of the forms.
• Two of 8 (25%) Form C-97 tested did not
have documentation retained to indicate the
dates the forms were filed with the
Comptroller.
• Two of 8 (25%) Form C-97 were filed 12 and
13 days late.
• Two of 8 (25%) Form C-97 tested were not
submitted to the Comptroller. (Finding 1,
pages 10-12) This finding has been reported
since 2005.

We recommended the Department take action to
ensure its accounts receivable are properly
recorded, collection efforts are made, and
accounts receivable reports are properly
prepared in accordance with all applicable
laws, rules, and regulations.

The Department accepted the recommendation
and stated they will work on reconciling the
audit definition of an account receivable
with legal standards for when a fine,
penalty, or fee becomes due and collectible
by the Department.

FAILURE TO ESTABLISH AND MAINTAIN ADEQUATE
INTERNAL CONTROL OVER THE SPECIAL STATE
TRUST FUND

The Department failed to establish and
maintain adequate control over its Special
State Trust Fund (Fund 251), which holds
unpaid wages due to employees. As of June
30, 2023, Fund 251 had $1,593,905 in cash.

Pursuant to the Illinois Wage Payment and
Collection Act (WPCA) (820 ILCS
115/11.5(a)), the Department collects, when
necessary, an employee’s wages or final
compensation due and holds these moneys
until the employee (now, claimant) can be
located by the Department and properly paid.
Additionally, pursuant to the Minimum Wage
Law (MWL) (820 ILCS 105/12(b)), the
Department collects, when necessary, unpaid
minimum wages and overtime due to employees
and holds these moneys until the employee
(now, claimant) can be located by the
Department and properly paid.  Finally, the
Statewide Accounting Management System
(SAMS) (Procedure 05.50.01) notes fiduciary
funds account for assets held by a
governmental unit in a trustee capacity or
as an agent for individuals, and SAMS
(Exhibit 27.50.10-A) notes Fund 251 is an
agency type of fiduciary fund.

During our testing, we noted:

• Eight of 60 (13%) claimant payments
tested, totaling $59,164, were approved for
payment between 14 to 32 days after the
Department determined the monies were owed
to the claimant.

• We were unable to reconcile the
Department’s ledger of claimants to Fund
251’s cash balance from the Monthly Cash
Report (SB05) prepared by the Comptroller.
We noted unreconciled differences of
$1,487,630 and $1,554,686 at June 30, 2022,
and June 30, 2023, respectively.
• At June 30, 2023, the Department was
holding claimant balances related to
activity in previous Fiscal Years. Each of
these balances required a proper disposition
by the Department. (Finding 2, pages 13-15)
This finding has been reported since 2007.

We recommended the Department take action to
ensure:
• claimant payments are promptly processed
and paid, along with the posting of proper
accounting entries, when distributed from
Fund 251;
• reconciliations of the total amount due to
claimants at the end of each month to the
SB05 report are performed and any
unreconciled discrepancies are investigated
and properly resolved;
• amounts due to claimants older than one
year under the MWL are promptly transferred
to the General Revenue Fund, with the timely
posting of proper accounting entries; and,
• amounts due to claimants under the WPCA
are properly handled under the relevant
provisions of the Revised Uniform Unclaimed
Property Act, with the timely posting of
proper accounting entries.

The Department accepted the recommendation
and stated they have updated several of the
statutes they enforce (Illinois Wage Payment
and Collection Act and Illinois Minimum Wage
Act) as well as its administrative rules to
clarify the timeline and process for
distributing funds to wage claimants and
identifying those funds for which the
claimant/employee cannot be located. They
also recently developed an updated internal
policy regarding when unclaimed funds should
be sent to the Illinois State Treasurer’s
Unclaimed Property Fund.

OTHER FINDINGS

The remaining findings pertain to receipt
processing internal controls not operating
effectively; inadequate control over
personal services, monthly reconciliations,
and census data; failure to fully utilize
the State’s Enterprise Resources Planning
System; weaknesses in cybersecurity programs
and practices; change management,
information technology access and state
property; and lack of disaster contingency
planning or testing to ensure the recovery
of computer systems.  We will review the
Department’s progress towards the
implementation of our recommendations in our
next State compliance examination.

ACCOUNTANT’S OPINION

The accountants conducted a State compliance
examination of the Department for the two
years ended June 30, 2023, as required by
the Illinois State Auditing Act.  Because of
the effect of noncompliance described in
Findings 2023-001 through 2023-004, the
accountants stated the Office did not
materially comply with the requirements
described in the report.

This State compliance examination was
conducted by West & Company, LLC.

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

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