Illinois Auditor General: 'Illinois Workers' Compensation Commission, Self-Insurers Security Fund – Financial Audit'

SPRINGFIELD, Illinois, Aug. 19 (TNSRep) -- The Illinois Auditor General issued the following financial audit on Aug. 18, 2022, involving Illinois Workers' Compensation Commission, 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 amounts recorded within Fund 940's financial statements did not internally tie out among the various statements. These errors included:

* Fund 940's ending net position within its Statement of Net Position and Statement of Revenues, Expenses, and Changes in Net Position did not agree by $4,066.

* Fund 940's operating income(loss) within its Statement of Cash Flows and Statement of Revenues, Expenses, and Changes in Net Position did not agree by $40,151.

After completing our testing to identify the causes of these problems, we determined the Commission made the following eight accounting and three classification errors:

* The Commission did not record deferred outflows of contributions to the State Employees Retirement System of Illinois (SERS), totaling $4,352, paid during the State's Lapse Period.

* The Commission made a duplicate entry for a refund from SERS of excess Fiscal Year 2019 contributions, totaling $411.

* The Commission made a duplicate entry for a refund payable of an overpayment of an assessment by a selfinsurer, totaling $3,366.

* The Commission did not properly account for the settlement of a prior period refund payable to an excess insurer during the current period, totaling $4,396.

* The Commission did not identify and record all of Fund 940's miscellaneous accounts receivable, totaling $1,284.

* 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 was not completely accurate. Also, the Commission did not consider whether events subsequent to June 30, 2021, which provided new evidence about the Fund's estimated liabilities, were reflected in Fund 940's draft financial statements as of and for the year ended June 30, 2021. The net effect of these errors was an overstatement of four accounts, including total unpaid claims by $784,224, total unearned security deposits by $152, benefit claims expense by $779,612, and excess insurance receivable by $4,764.

* The Commission made a duplicate entry for the collection of a miscellaneous receivable, totaling $2,057.

* The Commission did not record the settlement of $59 due to the Rate Adjustment Fund from Fund 940 during Fiscal Year 2021.

* The Commission did not properly classify current and noncurrent liabilities within Fund 940. We noted the following:

* The current net other postemployment (OPEB) liability was overstated and the noncurrent net OPEB liability was understated by $640,803.

* Current unearned security deposits were understated, while noncurrent unearned security deposits were overstated, by $6,829.

* Current unpaid claims were understated, while noncurrent unpaid claims were overstated, by $86,990.

We proposed, and the Commission posted, adjusting entries to correct these errors in Fund 940's final financial statements.

(Finding 1, pages 50-52)

We recommended the Commission continue its efforts to fully understand and appropriately record and report transactions and events impacting Fund 940. Further, 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, the Commission should 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. Finally, the Commission should monitor and consider whether events subsequent to the end of the fiscal year that occur before the dating of the auditor's report provide new evidence about estimates used to develop Fund 940's draft financial statements which should be adjusted for prior to the issuance of Fund 940's final financial statements. Commission officials agree Commission officials agreed with our recommendation.

OTHER FINDING

The remaining finding pertains to census data reconciliations. 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 Fund as of and for the year ended June 30, 2021, are fairly stated in all material respects.

This financial audit was conducted by Roth&Co.

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The report is posted at www.auditor.illinois.gov/Audit-Reports/Compliance-Agency-List/IWCC/FY21-IWCC-Self-Ins-Fund-940-Fin-Digest.pdf