REPORT DIGEST

OFFICE OF THE SECRETARY OF STATE

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2023

Release Date:  February 8, 2024

FINDINGS THIS AUDIT: 1

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

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

• (23-01) The Office of the Illinois
Secretary of State (Office) had certain
deficiencies in their internal control to
ensure accurate census data was provided to
the State Employees’ Retirement System of
Illinois (System) for us in the applicable
annual actuarial valuations.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INACCURATE CENSUS DATA

The Office had certain deficiencies in their
internal control to ensure accurate census
data was provided to the State Employees’
Retirement System of Illinois (System) for
us in the applicable annual actuarial
valuations.

Census data is demographic data (date of
birth, gender, years of service, etc.) of
the active, inactive, or retired members of
a pension or other postemployment benefit
(OPEB) plan. The accumulation of inactive or
retired members’ census data occurs before
the current accumulation period of census
data used in the plan’s actuarial valuations
(which eventually flows into each employer’s
financial statements), meaning the plan is
solely responsible for establishing internal
controls over these records and transmitting
this data to the plans actuary. In contrast,
responsibility for active members’ census
data during the current accumulation period
is split among the plan and each member’s
current employer(s). Initially, employers
must accurately transmit census data
elements of their employees to the plan.
Then, the plan must record and retain these
records for active employees and then
transmit this census data to the plan’s
actuary.

We noted the Office’s employees are members
of both the pension plan administered by the
System and the State Employees Group
Insurance Program (SEGIP) sponsored by the
State of Illinois which includes OPEB. In
addition, we noted these plans have
characteristics of different types of
pension and OPEB plans, including single
employer plans and cost-sharing multiple
employer plans.

During the performance of the OPEB census
examination (covering data as of June 30,
2021, used in the June 30, 2022 OPEB
actuarial valuation, for use in the
employer’s June 30, 2023 financial
statements), it was identified that:

• During backwards testing, the auditors
identified one of sixty (2%) employees
included on Office payroll reports with an
incorrect date of birth.

• The Office had not performed an initial
complete reconciliation of its census data
recorded by the System and State to its
internal records to establish a base year of
complete and accurate census data.

During the performance of the pension census
examination (covering data as of June 30,
2022, used in the June 30, 2022 pension
actuarial valuation, for use in the
employer’s June 30, 2023 financial
statements), it was identified that:

• During forwards testing, the auditors
identified one of sixty (2%) employees
included on Office payroll reports with an
incorrect gender.

• During the review of the Office’s
reconciliation of its census data recorded
by the System and State to its internal
records, it was noted that, as of March
2023, the reconciliation had not yet been
communicated to the System.

The result of the errors in each of the
first bullets above led to inaccurate census
data being utilized by the System and the
State in the performance of the annual
pension and OPEB actuarial valuation
processes. The independent actuaries
utilized by the System and the State of
Illinois for the pension and OPEB plans
deemed the errors immaterial to the plan
level valuations as a whole. (Finding 1,
pages 64-66)  This finding was first
reported in 2020.

We recommended the Office strengthen
controls to ensure accurate census data is
provided to the System and the State for use
in the annual actuarial valuation process.
If differences are noted between the
Office’s data and the System’s data, these
differences should be communicated timely
and rectified to ensure the actuarial
valuations are using accurate data.

Office officials accepted the
recommendation. In regards to the OPEB
related issues, Officials stated the Office
did perform the reconciliation of census
data but the System was miscalculating some
of the Office’s employee data.   Office
officials also stated they believe the
problem has been found and they will
continue to work with the System to perform
future reconciliations. In regards to the
pension related issues, Office officials
stated the Office did perform the
reconciliation of census data but it was
inadvertently sent late. Office officials
stated they will strengthen its internal
controls to meet the deadlines and continue
to work with the System to perform future
reconciliations.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Office as of and for the year ended
June 30, 2023 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