REPORT DIGEST

OFFICE OF THE TREASURER –
ILLINOIS SECURE CHOICE SAVINGS PROGRAM

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  April 15, 2020

FINDINGS THIS AUDIT:  1

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

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

• (19-01) The Office did not have an adequate
process in place to determine the proper
financial reporting of seed money (and
earnings on the seed money) for the Secure
Choice Savings Program and was noncompliant
with the Illinois State statute related to the
seed money.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS IN PLACE FOR FINANCIAL
STATEMENT REPORTING AND NONCOMPLIANCE WITH
STATE STATUTE

The Office did not have an adequate process in
place to determine the proper financial
reporting of seed money (and earnings on the
seed money) for the Secure Choice Savings
Program and was noncompliant with the Illinois
State statute related to the seed money.

The Secure Choice Savings Program officially
launched July 1, 2018. Seed money was added to
the Secure Choice funds by either the Program
Manager or a Portfolio Custodian to set the
Net Asset Value (NAV) and ensure a sufficient
balance in each fund to buy and sell shares.
The seed money was invested the same as
participant funds and earned investment
income. Once an individual fund had a
sufficient balance, the seed money and any
related investment income was returned to the
entity which provided the funds. As identified
in Note 4 to the financial statements, the
seed money and related earnings was returned
in all instances except two fund options by
June 30, 2019.

The Office improperly reported seed money and
related earnings in the Secure Choice Savings
Program financial statements. The Net Position
Held in Trust for Participants was overstated
by $10,445 (0.33% of Net Position) and the
Seed Money Payable was understated by $10,445
(0.33% of Net Position) on the Statement of
Fiduciary Net Position. Program Contributions
were overstated by $75,000 (2.39% of Net
Position), Program Withdrawals were overstated
by $69,150 (2.21% of Net Position) and
investment expenses were understated by $4,595
(0.15% of Net Position) on the Statement of
Changes in Fiduciary Net Position due to the
improper inclusion of seed money.  With the
exception of assets, all financial statement
account categories were misstated by varying
amounts due to the inclusion of seed money and
related earnings/expenses.  The Office updated
the financial statements to adjust for these
misstatements.

The Office did include a note to the financial
statements indicating seed money and earnings
of $10,445 were included in total assets on
the Statement of Fiduciary Net Position by
Portfolio as of June 30, 2019, but the note
did not specifically disclose the inclusion of
seed money and earnings within Net Position
Held in Trust for Participants, Program
Contributions, and Program Withdrawals on the
financial statements. The note also did not
disclose the exclusion of seed money and
related earnings from liabilities.  The Office
revised the seed money footnote when the
financial statements were revised for the
misstatements. The seed money does not
represent eligible participants funds related
to retirement savings for Illinois workers who
do not have access to an employer-sponsored
retirement plan and thus does not qualify for
reporting within the Statement of Fiduciary
Net Position, as restricted for participants,
nor for reporting within the Statement of
Changes in Fiduciary Net Position as Program
Contributions and Withdrawals.  (Finding 1,
pages 40-41)

We recommended the Office strengthen its
financial reporting internal controls to
ensure new activity is properly analyzed and
researched prior to the submission of
financial statements to properly report the
activity within the financial statements and
notes.  The Office should also perform a
detailed review of applicable statutes to
ensure compliance.

The Office accepted the finding. The Office
did not view the inclusion of the seed money
to have a material effect on the financial
statements and determined that the elimination
of the seed money was unnecessary based on the
Office’s materiality threshold. Despite the
lack of materiality, the Office noted the
inclusion of the seed money in the financial
statement footnotes to allow for full
disclosure to any users.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Office of the Treasurer, Illinois
Secure Choice Savings Program as of and for
the year ended June 30, 2019, are fairly
stated in all material respects.

This financial audit was conducted by Crowe
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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