REPORT DIGEST

DEPARTMENT OF CENTRAL MANAGEMENT SERVICES -
STATE EMPLOYEES GROUP INSURANCE PROGRAM

COMPLIANCE EXAMINATION – SCHEDULE OF
ALLOCATION
FOR THE YEAR ENDED JUNE 30, 2023

Release Date:  Aug. 1, 2024

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

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

INTRODUCTION

This digest covers the Compliance
Examination of the Schedule of Employer
Allocations by Fund, the Schedule of
University Special Funding Situations, the
Schedule of Other Post Employment Benefit
(OPEB) Amounts by Fund, and the Schedule of
Deferred Amounts by Measurement Year of the
State Employee Group Insurance Program
(SEGIP) as of and for the year ended June
30, 2023, and the related notes to the
Schedules.

The Department of Central Management
Services (Department), with the assistance
of the public retirement systems sponsored
by the State, is the administrator of this
single-employer defined benefit OPEB plan
not administered through a trust. The plan
was established to provide health, dental,
vision, and life insurance benefits for
certain retirees and their dependents.
Certain agencies and funds of the State of
Illinois present financial statements in
accordance with generally accepted
accounting principles (GAAP) and those
agencies and fund employers must recognize
their proportionate share of the collective
OPEB amounts for OPEB provided to members
through the SEGIP plan in order to present
their financial statements in accordance
with GAAP. The Governmental Accounting
Standards Board (GASB) Statement 75,
Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions
requires the participating entities that
prepare financial statements in accordance
with Generally Accepted Accounting
Principles (GAAP) to recognize their
proportionate share of certain collective
OPEB amounts in their financial statements,
which includes the net OPEB liability.

Prior to the implementation of GASB
Statement 75, the portion of the Plan’s
liability not covered by assets was not
allocated among the agencies and funds for
financial reporting purposes. GASB Statement
75 changed previously followed financial
reporting requirements and as a result
agencies and funds are required to report
their portion of the collective OPEB amounts
in their GAAP basis financial statements.

Due to the agencies and funds needing to
report their proportionate share of the
collective OPEB amounts in their financial
statements prepared in accordance with GAAP,
the Department has prepared the Schedule of
Employer Allocations by Fund, the Schedule
of University Special Funding Situations,
the Schedule of OPEB Amounts by Fund, and
the Schedule of Deferred Amounts by
Measurement Year which provide the necessary
financial information for each entity to
report their proportionate share of the
collective OPEB amounts in their financial
statements. By having these schedules
examined it also ii provides the entities
and the State’s auditors an Independent
Accountant’s Opinion on the allocations and
collective OPEB amounts reported in the
Schedules.

The SEGIP net OPEB liability at July 1, 2022
was $17.1 billion. At June 30, 2023, the
SEGIP net OPEB liability was $17.2 billion.

SYNOPSIS

• (23-01) The Department of Central
Management Services (Department) charged all
State agencies and State Universities
(employers) with employees enrolled in the
Consumer Driven Health Plan (CDHP) incorrect
group insurance reimbursement rates, which
resulted in various misstatements.

• (23-02) The Department did not ensure
complete and accurate census data was
utilized in the Other Post-Employment
Benefits (OPEB) actuarial valuation.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FAILURE TO CHARGE AND COLLECT ACCURATE GROUP
INSURANCE REIMBURSMENTS

The Department of Central Management
Services (Department) charged all State
agencies and State Universities (employers)
with employees enrolled in the Consumer
Driven Health Plan (CDHP) incorrect group
insurance reimbursement rates, which
resulted in various misstatements in the
Schedule of Employer Allocations by Fund,
Schedule of University Special Funding
Situations, Schedule of Other Post
Employment Benefit Amounts by Fund and
Schedule of Deferred Amounts by Measurement
Year (Schedules) during Fiscal Year 2023.

During OPEB allocation (employer’s
proportionate share of the collective total
OPEB liability) testing it was noted that
all individuals enrolled in the CDHP were
charged the incorrect employer group
insurance reimbursement rates. The
reimbursement rates charged for the CDHP
matched the rates for the Quality Care
Health Plan. This resulted in a monthly
overcharge ranging from $266.18 to $770.90
(based on number of dependents and if
Medicare eligible) per employee. During
Fiscal Year 2023, 1,968 employees were
enrolled in CDHP.

The Department indicated they became aware
of the issue in February 2023, but continued
to charge incorrect group insurance
reimbursement rates for the remainder of
Fiscal Year2023. At the end of Fiscal Year
2023, the use of incorrect group insurance
reimbursement rates resulted in an
overcharge of $8,128,944 based on the
Department’s internal analysis. Department
management indicated it made credits for the
overcharge available to agencies in the
third party benefits solution application,
but failed to communicate the situation to
the agencies or provide instructions on how
to obtain and apply the credits.

Through analysis of the $8,128,944
overcharge, we determined the population of
employees impacted included those paid from
exempt funds. Employers do not make group
insurance reimbursement payments out of
exempt funds. Credits that should have been
issued by theDepartment for the overcharge
totaled $4,515,233. (Finding 1, pages
243-245)

We recommended the Department implement a
process to ensure group insurance
reimbursement charges agree to published
rates. Additionally, we recommended the
Department implement a mechanism to track
credits, which takes in account the funds
the employees are paid from and work with
the employers to ensure that the credits
owed are utilized by the employers.

The Department accepted the finding and
recommendation and indicated they have put
testing measures in place to ensure all rate
updates sent are tested to verify they are
loading to the benefit deduction files
correctly going forward.

INACCURATE AND INCOMPLEETAE CENSUS DATA

The Department did not ensure complete and
accurate census data was utilized in the
Other Post-Employment Benefits (OPEB)
actuarial valuation.

During testing of changes reported to the
State Employees Group Insurance Program
(SEGIP) from the previous valuation report
compared to the current valuation report, we
noted the health care plan did not agree to
the actuary report for 19 of 25 (76%) SEGIP
members. The retiree census data as of June
30, 2022, had an incorrect healthcare plan
code for some of the records. In addition,
it was noted 363 retirees and survivors over
75 with dental only enrollment were
inadvertently excluded from the valuation.

The independent actuary regenerated the OPEB
liability with the updated census data
amounts and noted the errors resulted in an
overstatement of the actuarially determined
OPEB liability of $9,907,000. The
overstatement was deemed to be immaterial to
the Schedule of Other Post Employment
Benefit Amounts by Fund and the Department
has passed on making the adjustment.
(Finding 2, pages 246-247)

We recommended the Department ensure that
complete and accurate census data is
utilized by the actuary.

The Department accepted the finding and
recommendation and indicated they will
ensure that complete and accurate data is
sent to the actuary.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of specified requirements
regarding the Schedule of Employer
Allocations by Fund, the Schedule of
University Special Funding Situations, the
Schedule of Other Post Employment Benefit
Amounts by Fund, and the Schedule of
Deferred Amounts by Measurement Year of the
State Employees Group Insurance Program as
of and for the year ended June 30, 2023, and
the related notes to the Schedules. The
accountants stated the Agency complied, in
all material respects, with the criteria set
forth in Notes D through M of the Notes to
the Schedules in the report.

This compliance examination 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: MEG: KRP