REPORT DIGEST CAPITAL DEVELOPMENT BOARD FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2018, AND COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2018 Release Date: February 27, 2018 FINDINGS THIS AUDIT: 6 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 1 -- 4 -- 5 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 4 -- 6 FINDINGS LAST AUDIT: 6 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, AUDITOR GENERAL To obtain a copy of the Report contact: Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703 (217) 782-6046 or TTY (888) 261-2887 This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov SYNOPSIS • (18-1) The Board did not identify or prevent misstatements in the GAAP reporting package submitted to the Office of the State Comptroller and the draft financial statements provided to the auditors. • (18-2) The Board did not fully comply with the Illinois Procurement Code’s provisions for publishing procurement information in the Illinois Procurement Bulletin. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS OVERSTATEMENT OF REAPPROPRIATED PROJECTS’ ACCOUNTS PAYABLE AND EXPENDITURES The Capital Development Board (Board) did not identify or prevent misstatements in the Generally Accepted Accounting Principles (GAAP) reporting package submitted to the Office of the State Comptroller and the draft financial statements provided to the auditors. The Board records the accounts payable reappropriated projects and related expenditures in its financial statements based on vouchers processed after the fiscal year. The amounts are pro-rated for the period covering the current fiscal year by applying an estimation multiplier derived from methodologies and historical analyses performed by the Board. During our testing of the accounts payable for reappropriated projects for the Capital Development Fund (Fund 141), we noted the Board did not properly pro-rate the base amounts used for estimation related only to the number of service days in Fiscal Year 2018. Instead, the full amount of vouchers processed after June 30, 2018, which included Fiscal Year 2019 service days, was used as the base amount for the estimation multiplier. This resulted in an overstatement of accounts payable and related expenditures for Fund 141 of $2,702,241 for the GAAP reporting package and financial statements originally submitted by the Board to the Office of the Comptroller. Subsequent to our audit testing, the Board revised the Fund 141 GAAP reporting package, Capital Asset Summary (Form SCO-538) related to capital expenditures, and the financial statements to the Office of the State Comptroller to include the adjustments and information necessary to apply the appropriate Generally Accepted Accounting Principles. (Finding 1, pages 14-15) We recommended the Board establish procedures to ensure that transactions and reporting are carefully reviewed for proper accounting and disclosure. As necessary, accounting and reporting guidance should be from technical resources to ensure conformity with GAAP. Board officials accepted our recommendation and stated it plans to implement changes to address the issues contained within the finding, including a review of GAAP preparation procedures and hiring more staff to allow for additional preparation and review to ensure conformity with GAAP. FAILURE TO PUBLISH REQUIRED PROCUREMENT INFORMATION TIMELY The Board did not fully comply with the Illinois Procurement Code’s provisions for publishing procurement information in the Illinois Procurement Bulletin (Bulletin). Based on our review of procurement information on the Board’s website, we noted the annual Business Enterprise Program reports reflecting Fiscal Year 2017 and 2016 activities were not posted on the Bulletin within 10 business days after submission of the report to the Business Enterprise Council for Minorities, Women, and Persons with Disabilities during Fiscal Years 2018 and 2017, respectively. The reports were posted 44 and 100 days late. (Finding 2, pages 16-17) This finding has been repeated since 2008. We recommended the Board ensure required procurement information is published timely as required by the Illinois Procurement Code. Board officials agreed with our recommendation and stated they will ensure future reports are posted in a timely manner. (For the previous Department response, see Digest Footnote #1.) OTHER FINDINGS The remaining findings pertain to State vehicles not properly maintained, performance evaluations not completed, untimely approval and payment of vouchers, and failure to return unexpended funds for construction projects. We will review the Board’s progress towards the implementation of our recommendations in our next compliance examination. AUDITOR’S OPINION The auditors stated the financial statements of the Board as of and for the year ended June 30, 2018 are fairly stated in all material respects. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Board for the two years ended June 30, 2018, as required by the Illinois State Auditing Act. The accountants qualified their report on State compliance for Finding 2018-001. Except for the noncompliance described in this finding, the accountants stated the Board complied, in all material respects, with the requirements described in the report. This financial audit and compliance examination was conducted by Adelfia LLC. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:MEG DIGEST FOOTNOTES #1 – FAILURE TO PUBLISH REQUIRED PROCUREMENT INFORMATION TIMELY – Previous Board Response 2016: The Capital Development Board agrees with the finding and recommendation. CDB will develop a report suitable for posting to CDB’s website and post it to the electronic bulletin within 10 calendar days of its submission to the Council.