REPORT DIGEST

ILLINOIS STATE TOLL HIGHWAY AUTHORITY

FINANCIAL AUDIT
FOR THE YEAR ENDED DECEMBER 31, 2020

Release Date:  October 26, 2021

FINDINGS THIS AUDIT:  4

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

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

INTRODUCTION

This digest covers the Illinois State
Toll Highway Authority’s (Tollway)
Financial Audit as of and for the year
ended December 31, 2020.  The
Tollway’s Compliance Examination
covering the year ended December 31,
2020 will be issued under separate
cover.

SYNOPSIS

• 20-01 The Tollway did not identify
an allocation error within its other
postemployment benefits (OPEB) amounts
recorded in its financial statements,
resulting in a 	beginning balance
restatement which reduced the
Tollway’s unrestricted net position by
$505,692,050.

• 20-02 The Tollway needs to update
the duties, roles, functions, and
responsibilities within its
Intergovernmental Agreement with the
Illinois State Police.

• 20-03 The Tollway did not ensure its
repayment of the pro rata share of
certain retiree costs incurred by the
State Employees Group Insurance
Program (SEGIP) administered by the
State of Illinois, Department of
Central Management Services (CMS) was
complete and accurate.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

SIGNIFICANT UNDERSTATEMENT OF OPEB
BALANCES

The Tollway did not identify an
allocation error within its other
postemployment benefits (OPEB) amounts
recorded in its financial statements,
resulting in a beginning balance
restatement which reduced the
Tollway’s unrestricted net position by
$505,692,050.
During testing, we noted employee-
related costs incurred by the Tollway
include both Tollway employees and
staff of the Illinois State Police
(ISP) consisting of four groups, as
defined and further described below:

1) “True Tollway Employees” work for
the Tollway, including its
administrative, engineering, traffic,
construction, and maintenance staff.
These employees are paid on Tollway
payroll vouchers and participate in
the Tollway’s own group insurance
program.  Upon retirement, they
transition to the State Employees
Group Insurance Program (SEGIP)
administered by the State of Illinois,
Department of Central Management
Services (CMS) for their OPEB.  SEGIP
does not receive a “retiree-load”
charge (a charge added to
contributions for current employees to
obtain cash to pay benefit costs for
retirees on a pay-as-you-go basis) for
these employees’ current benefits
provided by the Tollway’s own group
insurance plan.

2) “ISP District 15 State Troopers”
consist of two groups providing
personal services within ISP District
15, which patrols the highways and
facilities which encompass the
Tollway’s operations.

a. The majority of these employees
participate in the SEGIP for both
their current employee benefits and
OPEB during retirement.

b. Master sergeants, however, can opt-
out of SEGIP for healthcare benefits
and participate in the Teamsters Local
No. 727 Health and Welfare Benefits
Fund (union plan) for health insurance
along with SEGIP for vision, dental,
and life insurance benefits as an
employee and then transition to SEGIP
for all of their OPEB at retirement.

All troopers are paid on ISP’s payroll
vouchers which are charged against the
Tollway’s agency number and accounts.
These vouchers include contributions
to SEGIP for all troopers’ SEGIP-
provided benefits.  In addition, CMS
prepares supplemental billings charged
to the Tollway’s accounts for SEGIP to
recover the healthcare costs paid to
the union plan along with the
associated “retiree-load” for SEGIP.

3) “ISP District 15 Support Staff” are
Tollway employees supporting the
troopers assigned to ISP District 15.
These employees are paid on Tollway
payroll vouchers and participate in
the Tollway’s own group insurance
program until they transition to SEGIP
for their OPEB at retirement.  SEGIP
does not receive a “retiree-load”
charge calculated on these employees’
current benefits from the Tollway’s
own group insurance plan.

Because the “True Tollway Employees”
and “ISP District 15 Support Staff”
participate in the Tollway’s group
insurance program until retirement,
CMS has not charged the “retiree-load”
built into active-employee SEGIP
contributions to fund pay-as-you-go
costs associated with retirees
participating in SEGIP.  Rather, the
Tollway reimburses SEGIP for the pro
rata share of the cost of providing
retiree benefits to those retirees who
had service in “True Tollway
Employees” and “ISP District 15
Support Staff” positions compared to
their total service credit to the
State as determined by the State
Employees’ Retirement System of
Illinois (SERS), as required by the
State Employees Group Insurance Act of
1971 (Act) (5 ILCS 375/11).

During our review of the SEGIP
allocation, we noted CMS only
considered current employee
contributions (accounted for within
detail object code 1180 group
insurance contributions) to SEGIP
within its allocation methodology.
Both CMS and the Tollway failed to
identify the pro rata share for “True
Tollway Employees” and “ISP District
15 Support Staff” had not been
considered in SEGIP’s State Fiscal
Year 2019 allocation, which supported
the Tollway’s opening balances for
Calendar Year 2020.

After bringing this matter to the
attention of officials at both the
Tollway and CMS, CMS corrected these
errors and reallocated SEGIP’s total
Fiscal Year 2019 OPEB liability and
determined the Tollway’s OPEB balances
at January 1, 2020, should have been:

OPEB Liability……….$610,337,772
OPEB-related Deferred Inflows of
Resources……….$66,818,243
OPEB-related Deferred Outflows of
Resources……….$22,095,550

Additionally, Tollway officials
recalculated the Tollway’s subsequent
contributions to SEGIP for all four
groups after considering each group’s
unique OPEB characteristics and the
impact of the error described in
Finding 2020-003, estimating the
Tollway’s subsequent contributions to
SEGIP balance at January 1, 2020,
should have been:

OPEB-related Deferred Outflows of
Resources……….$19,180,890

Failure to identify an error in the
allocation of SEGIP’s OPEB activity to
the Tollway resulted in a material
misstatement of the Tollway’s Annual
Comprehensive Financial Report (ACFR)
and negatively impacted the allocation
of the State’s OPEB balances among the
governmental activities, business-type
activities, and component units
reported in the State’s ACFR.
(Finding 1, pages 81-84)

We recommended the Tollway communicate
with CMS so both parties have a
complete understanding of the
Tollway’s various employee groups so
the factors unique to each group can
be considered in preparing SEGIP’s
separately-stated liability for “True
Tollway Employees” and “ISP District
15 Support Staff” and proportionate
allocation of OPEB balances related to
“ISP District 15 State Troopers” among
the State’s other funds and public
universities.  In addition, the
Tollway and CMS should develop
internal controls to reconcile the
active and inactive “True Tollway
Employees” and “ISP District 15
Support Staff” recorded within the
SERS’ records to the Tollway’s records
by focusing on the incremental changes
from the prior reconciliation to
ensure SEGIP’s separately-stated OPEB
balances associated with the Tollway
are determined using complete and
accurate data.  Finally, the Tollway
and CMS should implement internal
controls to ensure the pro rata share
estimate of future retiree benefits
for “True Tollway Employees” and “ISP
District 15 Support Staff” is prepared
using a three-year rolling average of
the pro rata share of current retirees
and this average is complete and
accurate. (For more information see
Finding 3)

The Tollway concurs with the auditor’s
recommendation.  At all times on and
after the OPEB standard was
established, the Tollway utilized an
audited allocation report provided by
CMS, the SEGIP plan administrator, and
relied upon external auditors.  Also,
the Tollway advised CMS of its group
insurance arrangements and of the fact
that the Tollway was not contributing
to SEGIP for active employees.
Further, based upon historical
contributions for Tollway retirees,
the OPEB liability allocated to the
Tollway appeared reasonable.  The
Tollway will work with CMS to develop
an ongoing reconciliation process to
ensure the Tollway’s share of the net
OPEB liability is properly allocated.
In an Auditors’ Comment we noted the
Clarified Statements on Auditing
Standards (AU-C § 200.05) published by
the American Institute of Certified
Public Accountants states:

The financial statements subject to
audit are those of the entity,
prepared and presented by management
of the	entity with oversight from
those charged with governance. … The
audit of the financial statements does
not relieve management or those
charged with governance of their
responsibilities.

As noted in the finding, Tollway
officials were responsible for
understanding SEGIP’s allocation
methodology and communicating with CMS
officials about how the Tollway’s
unique group insurance program and
governing provision within Section 11
of the Act impacted SEGIP’s allocation
and Tollway’s OPEB balances.
Meanwhile, CMS officials were solely
responsible for preparing a complete
and accurate allocation schedule for
SEGIP, and the Tollway’s governing
board and management were solely
responsible for preparing complete and
accurate financial statements and the
Tollway.

The fact audits occurred, which were
only designed to obtain a high, but
not absolute, level of assurance
SEGIP’s schedules and the Tollway’s
financial statements were not
materially misstated, does not relieve
the Tollway’s governing board and
management nor CMS’ officials of their
responsibilities under the
professional standards.

NEED TO ENHANCE RELATIONSHIP WITH THE
ILLINOIS STATE POLICE

The Illinois State Toll Highway
Authority (Tollway) needs to update
the duties, roles, functions, and
responsibilities within its
Intergovernmental Agreement (IGA) with
the Illinois State Police (ISP).

The State Police Act (20 ILCS 2610/20)
notes ISP and the Tollway may enter
into an IGA to provide for policing of
toll highways, including remuneration
of police services, which comprise of
(1) compensation and training of
troopers and clerical employees, (2)
uniforms, equipment, and supplies used
by the ISP in patrolling the Tollway,
and (3) reimbursements for injuries or
occupational illnesses suffered by ISP
personnel in the line of duty.  In
accordance with this IGA, ISP has
assigned troopers to District 15 who
police the Tollway’s highways and
facilities, while also allowing for
troopers to be diverted to or from
District 15 in emergency situations.
This IGA was last updated on July 17,
2012.

During testing, we noted the
following:

• The IGA does not address how the
Tollway and ISP will implement a
census data reconciliation process for
the troopers directly paid for by the
Tollway to provide assurance census
data submitted to the State Employees’
Retirement System of Illinois (SERS)
for pension benefits and the State
Employees Group Insurance Program
administered by the State of Illinois,
Department of Central Management
Services (CMS) for the troopers’ other
postemployment benefits (OPEB) is
complete and accurate.  Under the
current process, we noted:

1) ISP maintains each trooper’s
personnel records;
2) ISP is responsible for updating
each trooper’s personnel records;
3) the Tollway is responsible for
transmitting the census data within
each trooper’s personnel records to
SERS and CMS through the Tollway’s
transmission of payroll data to the
Office of the Comptroller to actually
pay the troopers for their work; and,
4) the Tollway is responsible for
subsequently ensuring the information
transmitted to SERS and CMS agrees
with the records maintained by ISP
which support the pension and OPEB
balances recorded in the Tollway’s
financial statements.

• The Tollway and ISP have not fully
established proper procedures and
mutual understanding of what books and
records should be shared between the
Tollway and ISP to enable complete and
accurate financial reporting within
the IGA.  For example, we noted an
instance where Tollway requests for
ISP to produce records necessary to
determine the completeness and
accuracy of OPEB amounts as part of
the Tollway’s efforts to correct the
conditions noted in Finding 2020-001
was denied by ISP.  After follow-up by
the Office of the Auditor General and
the Governor’s Office of Management
and Budget, the ISP would only provide
this requested information to us and
not to the Tollway’s officials.
Ultimately, we had to design
alternative procedures to address not
receiving this request.  This type of
routine interaction should be
addressed by the IGA as opposed to
requiring intervention by other State
officials.

While the IGA (Part IV, Section B)
notes ISP shall supply, upon the
request of the Tollway, additional
books and records related to the cost
or efficiency of providing police
services to the Tollway, the IGA does
not establish what and how financial
and non-financial records needed to
prepare financial information are to
be supplied between Tollway and ISP
officials.

• The Tollway and ISP do not appear to
have active communication protocols to
address financial matters within the
IGA.  We identified several instances
of confusion about the
responsibilities of the parties and no
clear assigned point of contact at
both the Tollway and ISP who would
oversee their respective party’s
interactions with the other party
within the IGA.

• The IGA does not address the
Tollway’s need for promptness in
responses by the ISP, which can
negatively impact the Tollway’s
ability to have its financial
statements audited and posted on the
Municipal Securities Rulemaking
Board’s Electronic Municipal Market
Access system by the deadlines
established within the Tollway’s
continuing disclosure agreements for
its bond issues.  Further, Concepts
Statement No. 1 of the Governmental
Accounting Standards Board, Objectives
of Financial Reporting (paragraph 66),
states, “If financial reports are to
be useful, they must be issued soon
enough after the reported events to
affect decisions.”  Finally,
Government Finance Officers
Association guidance notes governments
should complete and file their Annual
Comprehensive Financial Report (ACFR)
no later than six months after the end
of a government’s fiscal year to be
eligible to receive a Certificate of
Excellence in Financial Reporting
award.

• The ISP has not been able to
maintain a minimum staffing level of
175 troopers assigned to District 15.

The IGA (Part II, Section K) requires,
subject to budget availability and
certain reassignments and/or
diversions allowed for by the IGA, the
ISP maintain, at least, 175 troopers
with a goal of 196 troopers assigned
to District 15.

Failure to ensure the IGA between the
Tollway and ISP reflects up-to-date
duties, roles, functions, and
responsibilities and covers all areas
of internal control hinders the
ability of the Tollway to timely
prepare its ACFR and could result in
noncompliance with the Tollway’s
continuing disclosure requirements for
its bond issues.  Further, failure to
ensure compliance with the minimum
number of troopers could hinder
efforts to provide timely police
services and adequate protection of
the Tollway’s highways and facilities.
(Finding 2, pages 85-90)

We recommended the Tollway work with
ISP to update its IGA to allow for:

1) performing an initial complete
reconciliation of ISP’s census data
recorded by SERS and CMS to ISP’s
internal records to establish a base
year of complete and accurate census
data;
2) developing 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
ISP’s internal supporting records;
3) establishing proper procedures and
mutual understanding of what books and
records can be shared between the
Tollway and ISP to facilitate each
party’s operations;
4) establishing active communication
protocols to address financial
matters; and,
5) establishing deadlines for
responses reflective of the Tollway’s
need to release its ACFR within six
months after the end of its fiscal
year.

Further, we recommend the Tollway and
ISP work together to ensure District
15 has, at least, the minimum number
of troopers assigned as required by
the IGA.

The ISP accepted the recommendation
and stated they are currently working
with the Tollway to update the IGA and
will ensure the recommendations are
addressed accordingly.  Additionally,
there is a cadet class in process for
the Tollway which will increase the
number of officers above the minimum
number of troopers assigned to
District 15.

The Tollway agreed with
recommendations 1 through 5, but
disagrees that the IGA unconditionally
requires a minimum staffing level.

In an Auditors’ Comment we noted the
Tollway has not provided any evidence
to indicate Tollway officials had a
separate agreement with ISP officials
or that budget availability,
reassignments, or diversions as
allowed for by the IGA occurred during
the period resulting in less than 175
troopers being assigned to ISP’s
District 15.  In fact, as noted in the
finding, ISP officials pointed to
several ISP-wide issues as being the
root cause of not having 175 troopers
assigned to District 15, which did not
include any of the conditions noted in
the response from the Tollway’s
officials.  We continue to recommend
the Tollway work with the ISP to
maintain the minimum number of
troopers at District 15.

NONCOMPLIANCE WITH THE STATE EMPLOYEES
GROUP INSURANCE ACT OF 1971

The Illinois State Toll Highway
Authority (Tollway) did not ensure its
repayment of the pro rata share of
certain retiree costs incurred by the
State Employees Group Insurance
Program (SEGIP) administered by the
State of Illinois, Department of
Central Management Services (CMS) was
complete and accurate.

As further described in Finding 1,
employee-related costs incurred by the
Tollway include both Tollway employees
and staff of the Illinois State Police
(ISP) and consist of four groups.  The
“True Tollway Employees” and “ISP
District 15 Support Staff” groups are
paid on Tollway payroll vouchers and
participate in the Tollway’s group
insurance program until they
transition to SEGIP for their OPEB at
retirement.  As these groups
participate in the Tollway’s group
insurance program until retirement,
CMS has not collected the “retiree-
load” charge (a charge added to
contributions for current employees to
obtain cash to pay benefit costs for
retirees on a pay-as-you-go basis)
built into active-employee SEGIP
contributions to fund costs associated
with retirees participating in SEGIP.
Rather, the State Employees Group
Insurance Act of 1971 (Act) (5 ILCS
375/11) requires the Tollway reimburse
SEGIP for the pro rata share of the
cost of providing retiree benefits to
those retirees who had service in
“True Tollway Employees” and “ISP
District 15 Support Staff” positions
compared to their total service to the
State.

To enable the Tollway and CMS to
accomplish this mandate during
Calendar Year 2020, the State
Employees’ Retirement System of
Illinois (SERS) sent the Tollway a
monthly extraction of Tollway-
associated retirees along with each
retiree’s total SERS’ service credit
months and months of total service at
the Tollway from SERS’ records.
Further, this extraction included the
State-paid OPEB costs for retirees,
except for the State’s costs for “CMS
Direct Bill” retirees, which SERS had
previously extracted from the
Department’s third-party administrator
of SEGIP benefits for another purpose.
The totality of this report was
imported into the Tollway’s systems to
generate a monthly invoice, which was
sent to and approved by CMS.  These
monthly invoices were then aggregated
together across the calendar year for
one cash contribution to SEGIP by the
Tollway in February 2021.

Under Section 11 of the Act, the
Tollway and CMS are solely responsible
for ensuring compliance with this
mandate.  While SERS has some of the
historical records necessary for the
Tollway and CMS to fulfill this
mandate, neither CMS nor the Tollway
have communicated with nor entered
into a written agreement with SERS so
SERS officials could understand the
information needs of the Tollway and
CMS.  As a result, the following
occurred:

• Each retiree’s service months to the
Tollway were not calculated on the
same basis as SERS’ total months of
service credit.  After consultation
with officials at CMS with input from
SERS officials, it was determined
SEGIP benefits are processed based on
the service credit granted by SERS.
As such, a month of Tollway service
should only be included on the monthly
extraction if SERS also granted
service credit with the associated
month of service.

• The monthly extraction from SERS did
not include all retirees from the
“True Tollway Employees” and “ISP
District 15 Support Staff” groups,
while some retirees from the Tollway’s
other groups were incorrectly included
within the monthly extraction.

• The monthly extraction from SERS did
not include the State’s costs for “CMS
Direct Bill” retirees.  These
retirees, as their pension is too
small to cover their retiree
contribution to SEGIP for their
benefits, receive a supplemental
billing from the Department for
balance due.

• Officials at the Tollway and CMS
failed to demonstrate the amounts
remitted by the Tollway for the pro
rata share of its retirees from the
“True Tollway Employees” and “ISP
District 15 Support Staff” groups to
SEGIP were complete and accurate.

After bringing these problems to the
attention of officials at the Tollway,
SERS, and CMS, SERS prepared a new
data extraction of OPEB costs
associated with retirees from the
“True Tollway Employees” and “ISP
District 15 Support Staff” groups for
the months of June 2018, June 2019,
and June 2020.  The amounts due to
SEGIP from these months were used to
estimate the total amount due to SEGIP
from the 42-month period starting on
July 1, 2017, through December 31,
2020.  This 42-month period was
selected as OPEB records were not
timely made available from SERS due to
a system conversion at CMS for periods
which occurred before July 1, 2017.
Tollway officials estimated the
Tollway had a net underpayment of
contributions to SEGIP for the
retirees from the “True Tollway
Employees” and “ISP District 15
Support Staff” groups during this 42-
month period of $18,438,839.  The
Tollway recorded an adjustment for
this error in the Tollway’s final
financial statements.  In addition,
the impact of this change on the
estimated OPEB-related deferred
outflows of resources for subsequent
contributions to SEGIP was considered
in calculating the adjustment further
described in Finding 1. (Finding 3,
pages 91-93)

We recommended the Tollway communicate
with CMS and SERS so all parties have
a complete understanding of both the
overall process and Tollway’s various
employee groups so the factors unique
to each group can be considered in
calculating the Tollway’s monthly
retiree OPEB cost repayment pursuant
to Section 11 of the Act.  When an
understanding has been reached, the
parties should enter into a formal,
written interagency agreement to
memorialize each party’s roles and
responsibilities to fulfill this
mandate.  At a minimum, officials at
the Tollway and the Department should
agree their records for the amount due
to SEGIP at June 30 and December 31
each year.

In addition, the Tollway should work
with CMS and SERS to calculate the
total amount past due to SEGIP which
can be ascertained or, if necessary,
soundly estimated based on available
records and contribute this amount to
SEGIP as soon as practicable.

If, after investigation, the Tollway
and CMS determine it is not possible
and/or not practicable to comply with
Section 11 of the Act both for past
periods and future periods, the
Tollway and CMS should work with the
Governor and the General Assembly to
develop a legislative remedy that
addresses both the financing needs of
SEGIP and facilitates financial
reporting in accordance with generally
accepted accounting principles.

The Tollway concurred with the
auditor’s recommendation.  The Tollway
will work with CMS and SERS to develop
an acceptable method to determine the
annual payment due to SEGIP for
Tollway retirees.

OTHER FINDINGS

The remaining finding pertains to the
Tollway not having a reconciliation
process to provide assurance census
data submitted to its pension and OPEB
plans are complete and accurate.  We
will review the Tollway’s progress
towards the implementation of our
recommendations in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Tollway as of and
for the year ended December 31, 2020
is fairly stated in all material
respects.

This financial audit was conducted by
CliftonLarsonAllen 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:TLK