REPORT DIGEST

OFFICE OF THE STATE TREASURER –
COLLEGE SAVINGS PROGRAM

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  March 20, 2018

FINDINGS THIS AUDIT:  2

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

FINDINGS LAST AUDIT: 0

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

• (2017-001)	The Office did not have an
adequate process to identify and eliminate
intra-fund activity within its financial
statements.  As a result, the Statement of
Changes in Fiduciary Net Position overstated
Participant Program Contributions and
Participant Program Distributions.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

OVERSTATEMENT OF PARTICIPANT CONTRIBUTIONS
AND DISTRIBUTIONS

The Office of the Treasurer, College Savings
Program (Office) did not have an adequate
process to identify and eliminate intra-fund
activity within its financial statements.  As
a result, the Statement of Changes in
Fiduciary Net Position overstated Participant
Program Contributions and Participant Program
Distributions.

The Office did not eliminate intra-fund
activity for exchanges and transfers of
participant funds between investment
portfolio options, resulting in an
overstatement of Participant Program
Contributions and Participant Program
Distributions by $3.59 billion and $1.69
billion for the fiscal years ended June 30,
2017 and 2016, respectively.  The
overstatement was identified during
analytical procedures when the auditors noted
a significant increase in program
contributions and program distributions from
fiscal year 2016 to 2017.  The significant
change was due to a restructuring of
portfolios and an increase in the number of
age windows within target portfolios causing
an increase in exchange activity. Net
Position at June 30, 2017 and 2016 of $9.5
billion and $8.1 billion, respectively, was
properly stated as the overstatement of
Participant Program Contributions and
Distributions, resulting from the intra-fund
activity, offset in the Statement of Changes
in Fiduciary Net Position.  The Governmental
Accounting Standards Board (GASB) was
consulted for guidance related to the proper
accounting treatment of fiduciary fund intra-
fund activity prior to eliminating the
exchange transactions in the financial
statements.   (Finding 2017-001, pages
107-108).

We recommended the Office establish a process
to identify intra-fund activity and eliminate
the activity within the financial statements.

The Office agreed with the recommendation.

OTHER FINDING

The remaining finding is reportedly being
given attention by the Office.  We will
review the Office’s progress towards
implementation of our recommendation in our
next engagement.

AUDITOR’S OPINION

The auditors stated the Office of the
Treasurer, College Savings Program financial
statements as of and for the year ended June
30, 2017, are fairly stated in all material
respects.

This financial audit was conducted by Crowe
Horwath 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:SJS