STATE OF ILLINOIS

State of Illinois Office of the Treasurer Nonfiscal Officer Responsibilities

Compliance Examination For the Two Years Ended June 30, 2019

Performed as Special Assistant Auditors for the Auditor General, State of Illinois

State of Illinois Office of the Treasurer Nonfiscal Officer Responsibilities

Compliance Examination For the Two Years Ended June 30, 2019

Table of Contents

Schedule Page

Treasurer's Office Officials

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Management Assertion Letter

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Compliance Report Summary Independent Accountant's Report on State Compliance, on Internal Control Over Compliance, and on Supplementary Information for State Compliance Purposes Schedule of Findings Current Findings ? State Compliance

Supplementary Information for State Compliance Purposes Fiscal Schedules and Analysis Schedule of Appropriations, Expenditures and Lapsed Balances: Fiscal Year 2019 Fiscal Year 2018 Comparative Schedule of Net Appropriations, Expenditures and Lapsed Balances Comparative Schedule of Cash Receipts and Reconciliation of Cash Receipts to Deposits Remitted to the State Comptroller Schedule of Locally Held Funds Schedule of Changes in State Property Analysis of Operations (Not Examined) Agency Functions and Planning Program (Not Examined) Analysis of Significant Variations in Expenditures (Not Examined) Analysis of Significant Variations in Cash Receipts (Not Examined) Analysis of Significant Lapse Period Spending (Not Examined) Average Number of Employees (Not Examined) Emergency Purchases (Not Examined)

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State of Illinois Office of the Treasurer Nonfiscal Officer Responsibilities

Compliance Examination For the Two Years Ended June 30, 2019

Treasurer's Office Officials

Treasurer

The Honorable Michael W. Frerichs

Chief of Staff Chief of Staff Chief of Staff

Mr. G. Allen Mayer (June 7, 2018 to Present) Vacant (January 6, 2018 to June 6, 2018) Mr. Justin Cajindos (through January 5, 2018)

Deputy Treasurer

Mr. Jay Rowell (through June 30, 2018)

Deputy Treasurer & Chief Investment Officer

Chief Investment Officer ? Chief Financial Officer*

Mr. Rodrigo Garcia (March 18, 2018 to Present) Mr. Rodrigo Garcia (through March 17, 2018)

General Counsel & Ethics Officer General Counsel & Ethics Officer (Acting) General Counsel & Ethics Officer Interim General Counsel & Ethics Officer General Counsel & Ethics Officer General Counsel & Ethics Officer

Ms. Laura Duque (December 1, 2019 to Present) Mr. Chris Flynn (April 22, 2019 to November 30, 2019) Ms. Gwendolyn Drake (July 1, 2018 to April 21, 2019) Mr. G. Allen Mayer (June 7, 2018 to June 30, 2018) Mr. G. Allen Mayer (December 1, 2017 to June 6, 2018) Mr. Keith Horton (through December 8, 2017)

Executive Inspector General for the Illinois State Treasurer (Acting)

Executive Inspector General for the Illinois State Treasurer

Mr. Dennis Rendleman (February 18, 2020 to Present)

Vacant (January 1, 2020 to February 17, 2020) Mr. Raymond Watson (through December 31, 2019)

Chief Internal Auditor

Ms. Leighann Manning

Director of State Investment and Banking

Ms. Elizabeth Turner

Director of Fiscal Operations

Ms. Deborah Miller

*Chief Financial Officer title merged into Chief Investment Officer title on March 18, 2018. Treasurer's Office Locations

The Office of the Treasurer had the following office locations during the year:

Executive Office State Capitol 219 State House Springfield, Illinois 62706

Operations Division Illinois Business Center 400 West Monroe Street, Suite 401 Springfield, Illinois 62704

Chicago Office Legal / Programmatic James R Thompson Center 100 West Randolph Street, Suite 15-600 Chicago, Illinois 60601

Unclaimed Property Division Myers Building 1 W. Old State Capitol Plaza, Suite 400 Springfield, Illinois 62701

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May 28, 2020

Crowe LLP 3601 Wabash Avenue Suite 201 Springfield, Illinois 62711

Ladies and Gentlemen:

We are responsible for the identification of, and compliance with, all aspects of laws, regulations, contracts, or grant agreements that could have a material effect on the operations of the State of Illinois, Office of the Treasurer (Office), Non-Fiscal Officer Responsibilities. We are responsible for and we have established and maintained an effective system of internal controls over compliance requirements. We have performed an evaluation of the Office's compliance with the following specified requirements during the two-year period ended June 30, 2019. Based on this evaluation, we assert that during the years ended June 30, 2018, and June 30, 2019, the Office has materially complied with the specified requirements listed below.

A. The Office has obligated, expended, received, and used public funds of the State in accordance with the purpose for which such funds have been appropriated or otherwise authorized by law.

B. The Office has obligated, expended, received and used public funds of the State in accordance with any limitations, restrictions, conditions, or mandatory directions imposed by law upon such obligation, expenditure, receipt, or use.

C. The Office has complied, in all material respects, with applicable laws and regulations, including the State uniform accounting system, in its financial and fiscal operations.

D. State revenues and receipts collected by the Office are in accordance with applicable laws and regulations and the accounting and recordkeeping of such revenues and receipts is fair, accurate, and in accordance with law.

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Signed Original on File Signed Original on File Signed Original on File Signed Original on File

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State of Illinois Office of the Treasurer Nonfiscal Officer Responsibilities

Compliance Examination For the Two Years Ended June 30, 2019

Compliance Report

Summary

The compliance testing performed during this examination was conducted in accordance with Government Auditing Standards and in accordance with the Illinois State Auditing Act.

Accountant's Report

The Independent Accountant's Report on State Compliance, on Internal Control Over Compliance and on Supplementary Information for State Compliance Purposes does not contain disclaimers, but does contain a modified opinion on compliance and identifies material weaknesses over internal control over compliance. Additionally, the Independent Accountant's Report on State Compliance, on Internal Control Over Compliance and on Supplementary Information for State Compliance Purposes contains a scope limitation on compliance and internal control over Unclaimed Property.

Summary of Findings Number of

Current Report

Prior Report

Findings Repeated findings Prior recommendations implemented or not repeated

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3

3

2

0

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Item No. 2019-001 2019-002 2019-003 2019-004 2019-005

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Schedule of Findings

Last Reported

Description

Findings (STATE COMPLIANCE)

New

Lack of Adequate Controls Over Review of Internal Controls of External Service Providers

2017

Lack of Controls over Monthly Reconciliations

2017

Noncompliance with Office Personnel Policies and Procedures

New

Lack of Controls over Agency Fee Imposition Reports

2017

Noncompliance with Office Vehicle Policies and Procedures

Finding Type

Material Weakness and Material

Noncompliance

Significant Deficiency and

Noncompliance Significant Deficiency

and Noncompliance Significant Deficiency

and Noncompliance Significant Deficiency

and Noncompliance

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State of Illinois Office of the Treasurer Nonfiscal Officer Responsibilities Compliance Examination For the Two Years Ended June 30, 2019 Exit Conference The findings and recommendations appearing in this report were discussed with Office personnel at an exit conference on April 21, 2020. Attending were: Office of the Treasurer G. Allen Mayer, Chief of Staff Deborah Miller, Director of Fiscal Operations Leighann Manning, Chief Internal Auditor Eric Williams, Senior Internal Auditor Wes Howerton, Deputy Director of Fiscal Operations Office of the Auditor General Sara Metzger, Audit Manager Crowe LLP Chris Mower, Partner Brandon Reed, Senior Manager

The responses to the recommendations were provided by Leighann Manning, Chief Internal Auditor, in correspondence dated May 5, 2020 and May 13, 2020.

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Independent Accountant's Report on State Compliance, on Internal Control Over Compliance, and on Supplementary Information for State Compliance Purposes

Honorable Frank J. Mautino Auditor General State of Illinois

Compliance

As Special Assistant Auditors for the Auditor General, we have examined compliance by the State of Illinois (State), Office of the Treasurer, NonFiscal Officer Responsibilities' (Office) with the specified requirements listed below, as more fully described in the Audit Guide for Financial Audits and Compliance Attestation Engagements of Illinois State Agencies (Audit Guide) as adopted by the Auditor General, during the two years ended June 30, 2019. Management of the Office is responsible for compliance with the specified requirements. Our responsibility is to express an opinion on the Office's compliance with the specified requirements based on our examination.

The specified requirements are:

A. The Office has obligated, expended, received, and used public funds of the State in accordance with the purpose for which such funds have been appropriated or otherwise authorized by law.

B. The Office has obligated, expended, received, and used public funds of the State in accordance with any limitations, restrictions, conditions or mandatory directions imposed by law upon such obligation, expenditure, receipt or use.

C. The Office has complied, in all material respects, with applicable laws and regulations, including the State uniform accounting system, in its financial and fiscal operations.

D. State revenues and receipts collected by the Office are in accordance with applicable laws and regulations and the accounting and recordkeeping of such revenues and receipts is fair, accurate and in accordance with law.

E. Money or negotiable securities or similar assets handled by the Office on behalf of the State or held in trust by the Office have been properly and legally administered and the accounting and recordkeeping relating thereto is proper, accurate, and in accordance with law.

Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants; the standards applicable to attestation engagements contained in Government Auditing Standards issued by the Comptroller General of the United States; the Illinois State Auditing Act (Act); and the Audit Guide. Those standards, the Act, and the Audit Guide require that we plan and perform the examination to obtain reasonable assurance about whether the Office complied, with the specified requirements in all material respects. An examination involves performing procedures to obtain evidence about whether the Office complied with the specified requirements. The nature, timing and extent of the procedures selected depend on our judgment, including an assessment of the risks of material noncompliance with the specified requirements, whether due to fraud or error. We believe that

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