Ill. Auditor General: 'Department of Central Management Services, Community College Health Insurance Security Fund — Financial Audit'

SPRINGFIELD, Illinois, Feb. 17 -- The Illinois Auditor General issued the following financial audit on Feb. 15, 2024, involving the Department of Central Management Services, Community College Health Insurance Security Fund -- Financial Audit.

Here are excerpts:

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INTRODUCTION

This digest covers the Department of Central Management Services (Department), Community College Health Insurance Security Fund financial audit as of the year ended June 30, 2023.

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FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FAILURE TO DETERMINE PREMIUMS THAT ALLOW FOR ESTABLISHMENT OF ACTUARIAL SOUND RESERVE

The Department of Central Management Services (Department) failed to determine premiums that will allow for the establishment of an actuarially sound reserve for the Community College Health Insurance Program (Program).

In the Fiscal Year 2018 and 2019 compliance examination, we first reported the Department had failed to determine premiums that would allow for the establishment of an actuarially sound reserve. During Fiscal Year 2023 testing, we continued to identify exceptions, as noted below:

* The State Employees Group Insurance Act of 1971 (Act) (5 ILCS 375/6(e)(2)) states the balance of the rate of insurance, including the entire premium for any coverage for community college dependent beneficiaries that has been elected, shall be paid by deductions authorized by the community college benefit recipient. During testing, we noted the Fund covered 13.42% of the total insurance rate for benefit recipients. The projected total additional cost to the Fund was $340,388.

* The Act (5 ILCS 375/6.9(e)) requires the Department to determine premiums that will allow for the establishment of an actuarially sound reserve for the Program. As of June 30, 2023, the Program had a fund deficit of $107.107 million. The Program does not have an actuarially sound reserve. (Finding 1, pages 25-26) This finding has been reported since 2021.

We recommended the Department ensure premium rates meet the requirements established by the Act. Additionally, we recommended the Department either comply with the law by working with the Governor's Office of Management and Budget to obtain the necessary appropriation to supplement the Program or seek legislative relief from the statutory requirement.

The Department agreed with the finding and has worked with the Governor's Office of Management and Budget (GOMB) to enact legislation that will allow for increases to the contributions provided by active employees, districts, and the General Revenue Fund. Additionally, the department stated it worked with GOMB to provide for an additional $50 million in transfers to the fund which was used to reduce the payment back log. Lastly, the Department stated that these two remedies, based upon current projections, are expected to completely eliminate the back log by Fiscal Year 2032. Subsequently, revenues will be accrued in order to establish a sound reserve balance.

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AUDITOR'S OPINION

The auditors stated the financial statements of the Department of Central Management Services, Community College Health Insurance Security Fund as of and for the year ended June 30, 2023, are fairly stated in all material respects.

This financial audit was conducted by Sikich LLP.

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The report is posted at: www.auditor.illinois.gov/Audit-Reports/Compliance-Agency-List/CMS/CCHISP/FY23-CMS-CCHISF-Fin-Digest.pdf