REPORT DIGEST

DEPARTMENT OF INNOVATION AND TECHNOLOGY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2023

Release Date:  May 2, 2024

FINDINGS THIS AUDIT: 4

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

FINDINGS LAST AUDIT: 0

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

• (23-02) The Department failed to exercise
adequate controls to ensure the new
standard, GASB Statement No. 96 –
Subscription-Based Information Technology
Arrangements, was properly implemented.

• (23-04) The Department did not adequately
review the billing rates utilized to bill
agencies for Information Technology and
Telecommunications services, and its
accounts receivable.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER THE IMPLEMENTATION
OF NEW STANDARD

The Department failed to exercise adequate
controls to ensure the new standard, GASB
Statement No. 96 – Subscription-Based
Information Technology Arrangements (SBITA),
was properly implemented.

During testing, we requested the Department
provide the population of SBITA contracts.
The Department provided the list of SBITA
contracts with the cut-off date of November
15, 2022, therefore the population provided
was not complete.

We used the contract listing from HANA Live
as of June 30, 2023, and performed testing
to determine whether the Department has
properly identified SBITA contracts and
accurately calculated and recorded
subscription liabilities and subscription
assets, including the assets’ amortization.

During testing, we noted the Department’s
process in identifying all contracts in the
calculation of GASB Statement No. 96 was not
adequate. The following issues were noted:

• The Department did not record 13 contracts
totaling, $24.386 million, as SBITA.
• The Department erroneously classified and
reported as SBITA two contracts. One
contract has an unamortized cost of $18
thousand, which is less than $25 thousand.
The other contract amounting to $280
thousand was erroneously included in Fund
304’s SBITA listing instead of Fund 141.
• The Department did not accurately report
the fixed payments for two contracts. The
Department cannot provide documentation to
support the initial amounts of fixed
payments.

After the Department was notified by the
auditors of the exceptions, the Department
re-evaluated the contracts and submitted the
Form SCO-560S to the Office of Comptroller
to include all SBITA contracts. The issues
above resulted in financial statement
accounts being incorrect, with the total Net
Position being understated by $3.868
million. The Department made the required
adjustments. (Finding 2, pages 28-30).

We recommended the Department exercise
adequate controls to ensure proper
implementation of the requirements of GASB
Statement No. 96.

The Department accepted the finding and
recommendation and stated they have already
strengthened relevant controls to ensure
SBITAs are recorded and reported in
accordance with GASB 96.

INADEQUATE REVIEW OF BILLING RATES AND
ACCOUNTS RECEIVABLE

The Department did not adequately review the
billing rates utilized to bill agencies for
Information Technology and
Telecommunications services, and its
accounts receivable.

During testing, we noted the following:

• The Department adds an administrative mark
up to the telecommunication rate; however,
we noted the Department had not developed a
methodology to determine the administrative
mark up.

• The Department had billed service rates
that differed from the approved rates.
Several rates were overstated from 11% to
19%, while some rates were understated by
1%.

• For five of 15 (33%) accounts receivable
confirmations received from State agencies,
there were unreconciled differences totaling
$2,146 thousand, therefore, we cannot
determine if accounts receivable and
revenues are fairly stated.

Due to the Department’s inability to
reconcile differences in the accounts
receivable confirmation replies from State
agencies, we were unable to determine
whether Fund 304’s financial statements are
fairly stated. Therefore, we are issuing a
qualified opinion over Fund 304’s Fiscal
Year 2023 financial statements. (Finding 4,
pages 33-34)

We recommended the Department develop a
methodology for determining the
administrative markup and ensure approved
rates are used to bill the client agencies
correctly. We also recommended the
Department ensure disputes over invoices are
timely resolved so auditors can determine
whether Department accounts receivable and
revenues are fairly stated.

The Department accepted the finding and
recommendation and stated they will review
the current methodology of administrative
mark up and billing to ensure accounts
receivable and revenues are fairly stated.

OTHER FINDINGS

The remaining findings pertain to weaknesses
in accounting and financial reporting and
inaccurate property records and capitol
assets reporting.  We will review the
Agency’s progress towards the implementation
of our recommendations in our next financial
audit.

AUDITOR’S OPINION

The auditors qualified their opinion on the
financial statements of the Department of
Innovation and Technology, Technology
Management Revolving Fund (Fund) as of and
for the year ended June 30, 2023.  Except
for the matter described in the Basis for
Qualified Opinion section in the report, the
financial statements of the Fund are fairly
stated in all material respects.

This financial audit was conducted by Roth &
Company 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

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