Ill. Auditor General: 'Illinois Workers' Compensation Commission, Self-Insurer's Security Fund — Financial Audit'

SPRINGFIELD, Illinois, Feb. 17 -- The Illinois Auditor General issued the following financial audit on Feb. 15, 2024, involving Illinois Workers' Compensation Commission, Self-Insurer's Security Fund.

Here are excerpts:

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INTRODUCTION

This digest covers the financial audit of the Illinois Workers' Compensation Commission (Commission) - Self-Insurers Security Fund as of and for the year ended June 30, 2023, and the findings arising from the financial audit reported pursuant to Government Auditing Standards.

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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 Fund 940's balance of unearned security deposit account reported on the financial statements did not agree with the balance in the supporting schedule. The variance amounted to $14,880. In addition, current unearned security deposits were understated, while noncurrent unearned security deposits were overstated, by $92,457.

* The Fund 940's deferred outflow of resources pension and other postemployment benefits accounts were understated by $91,579 and $19,220, respectively.

* The Commission did not reverse the accrual for an expense incurred in prior year upon payment during the current fiscal year. The error overstated the accounts payable account by $14,924.

On October 11, 2023, the Commission provided new set of supporting schedules. During this process, some of the further problems found in assessment receivable and application/renewal fee receivable and related revenue accounts, included the following:

* Assessment receivable and revenue accounts.

* The Commission improperly recorded the collection of prior year assessment receivable as current year revenue, thereby, overstating both assessment revenue and receivable accounts by $38,180.

* The Commission made an erroneous entry to record the already recorded deposit in transit as assessment receivable, thereby, overstating both assessment receivable and revenue accounts by $12,325.

* The Commission had not accounted for the assessment revenue earned through a credit from a refund payable of $630, resulting to understatement of revenue account and overstatement of accounts payable account.

* The Commission deducted an erroneous debit memo of $6,083 from the assessment revenue, thereby, understating both assessment revenue and receivable accounts.

* The Commission had not accounted for $3,408 assessment receivable and revenue thereby understating both assessment receivable and revenue accounts.

* The Commission made several erroneous entries to correct the prior year error of recording a collection for Fund 685 as a revenue of Fund 940. The errors resulted in overstatement of both assessment receivable and revenue accounts totaling $5,530.

* Application/renewal fee receivable and revenue accounts.

* The Commission made an erroneous entry by recording the already recorded deposit in transit as receivable, thereby, overstating both application/renewal receivable and revenue accounts by $14,000.

* The Commission had not accounted for $22,000 application/renewal receivable and revenue accounts, thereby, understating both application/renewal receivable and revenue accounts.

* The Commission erroneously recorded the transfer of the Self-Insurers Administration Fund cash balance amounting to $24,452 to the Fund 940's application/renewal revenue instead of recording the transaction to unrestricted net position account.

* The Commission did not properly set up a miscellaneous receivable account during the year prior to crediting to the account its collections from excess insurance carrier for reimbursement of claim administration and prorated fees, as a result, the miscellaneous receivable account had a negative ending balance of $3,754, and the claims processing revenue account was understated by the same amount.

We proposed, and the Commission posted, adjusting entries to correct these errors in Fund 940's final financial statements. (Finding 1, pages 52-54)

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.

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OTHER FINDINGS

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.

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AUDITOR'S OPINION

The auditors stated the financial statements of the SelfInsurers Security Fund as of and for the year ended June 30, 2023, are fairly stated in all material respects.

This financial 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/FY23-IWCC-SISF-Fin-Digest.pdf