REPORT DIGEST

OFFICE OF THE SECRETARY OF STATE

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  May 25, 2021

FINDINGS THIS AUDIT:  3

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

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

SYNOPSIS

• (20-01) The Office of the Secretary of
State (Office) used inaccurate queries to
determine the adjustment to record cash
on hand and cash in transit at fiscal
year-end, excluded receipts deposited in
the Illinois State Treasurer’s clearing
accounts at the end of June 2020, and
failed to record June 2020 adjustments
made in August 2020 in its cash on hand
and cash in transit balances.

• (20-02) The Office did not have
internal control over reporting its
census data and did not have a
reconciliation process to provide
assurance census data submitted to its
pension and other postemployment benefits
(OPEB) plans was complete and accurate.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

WEAKNESSES IN DETERMINATION OF CASH ON
HAND AND CASH IN TRANSIT AMOUNTS REPORTED
IN THE FINANCIAL STATEMENTS

The Office used inaccurate queries to
determine the adjustment to record cash
on hand and cash in transit at fiscal
year-end, excluded receipts deposited in
the Illinois State Treasurer’s clearing
accounts at the end of June 2020, and
failed to record June 2020 adjustments
made in August 2020 in its cash on hand
and cash in transit balances.

We tested cash on hand and the cash in
transit balances reported in the General
Revenue Fund (Fund 0001), Road Fund
(0011), Capital Projects Fund (0694), and
the State Construction Account Fund
(0902).  Some of the more significant
issues we noted included the following:

• The spreadsheet used to calculate total
cash on hand and cash in transit for the
General Revenue Fund and Road Fund
improperly included July 2020 receipts
from the queries used to determine June
receipts not yet deposited into the
Treasurer’s Clearing Accounts at June 30,
2020. Further inaccurate receipt amounts
were included in the query used. This
error resulted in a $4.9 million
overstatement in the General Revenue Fund
and a $68.9 million overstatement in the
Road Fund.

• The June deposits included in the cash
on hand and cash in transit calculations
that were held in the Illinois State
Treasurer clearing accounts but not yet
remitted to the Illinois Office of
Comptroller did not include deposits from
June 29 and June 30, 2020. Further, one
clearing account was not included for the
General Revenue Fund. This error resulted
in a $7.4 million understatement in the
General Revenue Fund and a $39.9 million
understatement in the Road Fund. (Finding
1, pages 66-68).  This finding was first
reported in 2016.

We recommended the Office implement a
process to review the calculation over
the cash on hand and cash in transit
process to determine that the calculation
includes the correct fiscal year
information and considers all in transit
activity as of June 30th.

Office officials agreed with the
recommendation.

 INADEQUATE INTERNAL CONTROLS OVER CENSUS
 DATA

The Office did not have internal control
over reporting its census data and did
not have a reconciliation process to
provide assurance census data submitted
to its pension and other postemployment
benefits (OPEB) plans was complete and
accurate.

During testing, we noted included the
following:

• The Office had not performed an initial
complete reconciliation of its census
data recorded by State Employees’
Retirement System (SERS) and Central
Management Services (CMS) to its internal
records to establish a base year of
complete and accurate census data.

• After establishing a base year, the
Office had not developed a process to
annually obtain from SERS and CMS the
incremental changes recorded by SERS and
CMS in their census data records and
reconcile these changes back to the
Office’s internal supporting records.

• One of 80 (1%) employees tested did not
contribute the proper contribution rate
to SERS during Fiscal Year 2019, the
census data accumulation year for SERS’
actuarial valuation used to prepare the
Office’s Fiscal Year 2020 financial
statements. We noted the employee was
only contributing 4% of their total
compensation under the regular retirement
formula for employees with Social
Security, as opposed to 8% of their total
compensation under the regular
requirement formula for employees without
Social Security. We worked with SERS’
actuary to project the impact of this
error on SERS’ valuation and determined
it did not materially impact the Office’s
financial statements. (Finding 2, pages
69-71).

We recommended the Office implement
controls to ensure employee contributions
to SERS are complete, accurate, and in
accordance with the Illinois Pension
Code. Further, we recommended the Office
work with SERS and CMS to develop an
annual reconciliation process of its
active members’ census data from its
underlying records to a report from each
plan of census data submitted to the
plan’s actuary.

The Office accepted the recommendation.

OTHER FINDINGS

The remaining finding pertained to
failure to adjust license and fee
revenues. We will review the Office’s
progress towards the implementation of
our recommendations in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Office as of and for
the year ended June 30, 2020 are fairly
stated in all material respects.

This financial audit was conducted by
Sikich, 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:SDW