REPORT DIGEST

OFFICE OF THE TREASURER - NONFISCAL
OFFICER RESPONSIBILITIES

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2019

Release Date:  June 25, 2020

FINDINGS THIS AUDIT:  5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 0 -- 1
Category 2:  1 -- 3 -- 4
Category 3:  0 -- 0 -- 0
TOTAL:  2 -- 3 -- 5

FINDINGS LAST AUDIT: 3

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

The independent accountant’s report on
State compliance, on internal control
over compliance and on supplementary
information for State compliance purposes
on the Office of the Treasurer for the
two years ended June 30, 2019 includes a
scope limitation.  Accountants were
unable to examine the unclaimed property
division of the Office of the Treasurer
at the request of law enforcement and
investigatory authorities in order to
avoid interference with an ongoing
investigation and related legal
proceedings.

SYNOPSIS

• (19-1) The Office of the Treasurer did
not maintain adequate controls over
external service providers.
• (19-2) The Office of the Treasurer did
not maintain adequate controls over
monthly appropriation, contract, and
obligation reconciliations.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

LACK OF ADEQUATE CONTROLS OVER THE REVIEW
OF INTERNAL CONTROLS OVER SERVICE
PROVIDERS

The Office of the Treasurer (Office) did
not maintain adequate controls over
external service providers.

The Office uses service providers and
vendors to carry out various programs and
operational activities.  At the request
of the auditors, the Office compiled a
listing of service providers and
summarized its monitoring efforts over
the providers.  In reviewing the
documentation related to monitoring of
service providers, the auditors noted the
following:
• The Office did not review the Service
Organization Control (SOC) report for the
Illinois Department of Innovation and
Technology, the organization which
provides the payroll application for
Office employees.  As a result, the
Office did not identify deficiencies in
the SOC report which may require
mitigating controls be implemented by the
Office.
• The Office utilized third-party service
providers as the custodian of the
Illinois Funds Program and as payment
processors for the E-Pay Program.  The
service providers utilized external
subservice organizations to perform
certain significant services.  The Office
did not perform adequate monitoring
efforts over significant subservice
organizations utilized by the service
providers.
• The Office utilized a service provider
to manage the Achieving a Better Life
Experience Program, which utilized an
external subservice organization to
perform certain significant services.
During testing, the auditors noted the
Office performed procedures designed to
understand the external subservice
organization’s process and controls, but
did not properly assess the sufficiency
of the procedures related to financial
reporting controls.  In addition, the
procedures performed were not
sufficiently documented.

In addition, we noted the Office did not
maintain a formal, centralized vendor
management program which documented its
evaluation of new service providers and
vendors and its monitoring of existing
service providers and vendors. (Finding
1, pages 9-10)

We recommended the Office identify all
service providers and determine and
document if a review of controls is
required.  If required, the Office
should:

• Obtain SOC reports (or perform
independent reviews) of internal controls
associated with outsourced systems at
least annually.
• Either obtain and review SOC reported
for subservice organizations or perform
alternative procedures to satisfy itself
that the usage of the subservice
organizations would not impact the
Office’s internal control environment.
• Document its review of the SOC reports
and review all significant issues with
subservice organizations to ascertain if
a corrective action plan exists and when
it will be implemented, any impacts to
the Office, and any compensating
controls.

In addition, we recommended the Office
implement a formal and centralized vendor
management program to determine the
degree of monitoring required for each
vendor and the appropriate complementary
controls the Office should implement for
each vendor.

The Treasurer’s Office accepted our
recommendation and stated they have
started to develop a centralized vendor
management program as part of a
comprehensive updating of financial
systems for the Office.  The Office also
stated they already obtain SOC reports of
the outsourced systems deemed necessary,
on an annual basis and in the one
instance this was not done, it involved a
State agency providing a service.
Additionally, the Office stated SOC
reports are obtained for the subservice
organizations when deemed necessary and
reviews of these reports are documented,
to include all significant issues,
corrective action plans and compensating
controls.

LACK OF CONTROLS OVER MONTHLY
RECONCILATIONS

The Office of the Treasurer (Office) did
not maintain adequate controls over
monthly appropriation, contract, and
obligation reconciliations.

The Office expended $3.777 billion and
$5.710 billion in Fiscal Years 2018 and
2019, respectively.  During our sample
testing of Fiscal Year 2018 and 2019
reconciliations between Illinois Office
of the Comptroller (IOC) records and
Office records, we noted the following:

• The Office did not perform
reconciliations of the Agency Contract
Report (SC14) during the examination
period.

• Two of five (40%) Monthly Obligation
Activity Report (SC15) reconciliations
tested were not performed within 60 days.
The reconciliations were completed 77-98
days after month-end.

• One of five (20%) Monthly Appropriation
Status Report (SB01) reconciliations
tested was not performed within 60 days.
The reconciliations was completed 75 days
after month-end.

• One of five (20%) Object Expense/
Expenditures by Quarter Report (SA02)
reconciliations tested was not performed
within 60 days.  The reconciliations was
completed 75 days after month-end.

• One of five (20%) Monthly Appropriation
Transfer Report (SB03) reconciliations
tested was not performed within 60 days.
The reconciliations was completed 75 days
after month-end.  (Finding 2, pages
11-12)

We recommended the Office develop
controls to ensure monthly
reconciliations are being completed and
reviewed in a timely manner.

The Treasurer’s Office accepted our
recommendation and stated they will
review reconciliation processes with the
objective of strengthening internal
controls to ensure monthly
reconciliations are completed and
reviewed in a timely manner.

OTHER FINDINGS

The remaining findings pertain to the
noncompliance with personnel policies and
procedures, lack of controls over agency
fee imposition reports and noncompliance
with vehicle policies and procedures.  We
will review the Agency’s progress towards
the implementation of our recommendations
in our next compliance examination.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Office for the two
years ended June 30, 2019, as required by
the Illinois State Auditing Act.  The
accountants qualified their report on
State compliance due to a scope
limitation and Finding 2019-001.
Accountants were unable to examine the
unclaimed property division of the Office
at the request of law enforcement and
investigatory authorities in order to
avoid interference with an ongoing
investigation and related legal
proceedings.  Except for the scope
limitation and the material deviation
from the specified requirements described
in the report on State compliance, the
accountants stated the Office complied,
in all material respects, with the
requirements described in the report.

This compliance examination 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:SKM