Ill. Auditor General: 'Ill. Workers' Compensation Committee, Self-Insurers Security Fund – Financial Audit'

SPRINGFIELD, Illinois, March 24 -- The Illinois Auditor General issued the following financial audit on March 16, 2023, involving the Illinois Workers' Compensation Committee, Self-Insurers Security Fund.

Here are excerpts:

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FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

ACCOUNTING AND FINANCIAL REPORTING PROBLEMS

The Illinois Workers' Compensation Commission (Commission) did not ensure all events and transactions impacting the Self-Insurers Security Fund (Fund 940) were appropriately recorded in its internal accounting records and presented fairly in its financial statements.

During initial testing, we noted the following:

* The Commission's supporting schedule for cash activity and interest allocations within each insolvent self-insurer's security deposits account, Fund 940's account, and excess insurance activity were not accurate. Furthermore, the claims paid in excess of one insolvent self-insurer's security were erroneously charged by the Commission to the unearned security deposit account instead of the Fund 940's account. The net effect of these errors were understatements of total unpaid claims by $66,047, total unearned security deposits by $93,775, benefit claims expense by $161,485 and interest income by $1,728, and overstatement of total security deposit by $65.

* The Commission did not record the accrual for an expense incurred during the Fiscal Year, totaling $14,924.

* The Commission made an erroneous entry to record the reversal of deposit in transit, thereby, overstating Cash and Cash Equivalent account and understating Excess Insurance Receivable by $1,165.

* The Commission did not include all of Fund 940's miscellaneous accounts receivable, totaling $1,284, in recording the beginning balances entry.

* In addition to the errors noted above, the Commission did not properly classify the cash activities in the financial statement of cash flows. The net effect of these errors to the ending balance was $1,164.

We proposed, and the Commission posted, adjusting entries to correct these errors in Fund 940's final financial statements. (Finding 1, pages 52-53)

We recommended the Commission ensure all transactions and events impacting Fund 940 are recorded and reported in strict adherence with the generally accepted accounting principles applicable to Fund 940. Additionally, we recommended the Commission ensure an independent supervisory review by an individual with sufficient skills, knowledge, and experience to identify and correct errors is performed during the preparation of Fund 940's supporting schedules, journal entries, and financial statements.

Commission officials agreed with our recommendation.

OTHER FINDING

The remaining finding pertains to inaccurate census data. We will review the Commission's progress towards the implementation of our recommendation in our next financial audit.

AUDITOR'S OPINION

The auditors stated the financial statements of the SelfInsurers Security Fund as of and for the year ended June 30, 2022, are fairly stated in all material respects.

This financial audit was conducted by Roth & Co., LLP.

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The report is posted at: www.auditor.illinois.gov/Audit-Reports/Compliance-Agency-List/IWCC/IWCC-Self/FY22-IWCC-Self-Ins-Fin-Digest.pdf