The Agency has not complied with several of its mandated duties and responsibilities.
Five instances of non-compliance with State mandated duties and responsibilities were
Agency's internal travel policy is not in compliance with the Governor's Travel Control
$225,338 in supervisory fees were not timely billed.
$884,513 of Treasurer's drafts were not ordered into the appropriate fund in a timely
Annual statements regarding business transactions or affiliations with licensees were
not obtained from board members.
Late fees were not assessed for late filing of annual audit reports.
Policies and procedures are not in place to ensure required reports are timely
submitted to the Agency.
Delinquency rate for one licensee not determined.
Detailed listing of accounts receivable could not be provided.
No procedures in place to address uncollectible accounts receivable.
Requested reports from the Real Estate Licensing Division could not be provided.
The transition of the Real Estate Licensing Division from the Department of
Professional Regulation resulted in the misplacement of records, and the inability to
compile data and produce reports.
Reconciliations were not prepared on a consistent monthly basis.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
OFFICE OF BANKS AND REAL ESTATE
NONCOMPLIANCE WITH STATE MANDATES
Various State mandates have not been fully addressed by the Agency, causing
noncompliance with State laws and reporting requirements. We selected a sample of the
State mandated duties and responsibilities applicable to the Agency to test for
compliance. Although in certain instances the Agency had made efforts to implement some of
the statutory requirements, the Agency had not complied with several of its State
We noted compliance deficiencies in each of the following mandates:
- The Illinois Electronic Funds Transfer Advisory Committee is mandated to hold at least
one meeting annually. The Committee has not met since October 27, 1994. According to
Agency personnel meetings have not been held due to numerous vacancies on the Committee.
- The Illinois Bank Examiners' Education Foundation Board of Trustees is mandated to hold
at least one meeting each calendar quarter. The Board of Trustees did not meet during 3
out of 8 quarters during fiscal years 1995 and 1996. According to Agency personnel, their
was not sufficient business to hold the quarterly meetings.
- Nonresident financial institutions that carry on the business of a financial institution
within the State are required to file an annual Financial Institution Activity Report.
Only 5 reports have been collected since the statute became effective. The statute does
not provide an enforcement mechanism as a means of requiring the financial institutions to
file the informational reports.
- The Illinois Bank Examiners' Education Foundation Board of Trustees is required to
submit an annual report to the Governor, General Assembly and all state chartered banks
concerning the Foundation's activities for the past year. The report for fiscal year 1995
was never completed. Agency personnel indicated the report was not completed as they were
attempting to change the format.
- Applications for permits to organize a state bank are to be acknowledged before an
officer authorized by law to acknowledge deeds. Our testing of 10 applications for permits
to organize a state bank identified that none of the applications had been acknowledged.
Agency personnel indicated they did not have a policy in place to evaluate this statutory
- We recommended the Agency allocate staff and resources necessary to ensure the mandates
applicable to the Agency are complied with or pursue legislation to have the mandates
rescinded. (Finding 2, page 11)
- The Agency concurred with the finding.
MILEAGE REIMBURSEMENT POLICY
The Agency's internal travel policy in effect during the audit period allowed
reimbursement for mileage from an employee's designated headquarters to the work site
regardless of the employee's actual mileage or whether they traveled through their
designated headquarters. The Governor's Travel Control Board rules provide that an
employee whose travel does not include travel through the headquarters may be reimbursed
for all mileage; however, if the employee must travel through the headquarters to reach a
destination, reimbursement is for mileage in excess of commuting mileage.
According to Agency personnel, this condition is the result of the Agency's oversight
of the policies established by the Governor's Travel Control Board. Failure to establish
internal travel policies in accordance with guidelines established by the Governor's
Travel Control Board, creates inconsistencies in reimbursement for travel expenses which
could result in the Agency and the State making unnecessary reimbursements for travel
We recommended the Agency revise its internal travel policy to bring it in line with
guidelines established by the Governor's Travel Control Board. (Finding 4, page 14)
The Agency concurred with the finding, and adopted a revised policy effective May 6,
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
COMMISSIONER OF SAVINGS AND RESIDENTIAL FINANCE
INADEQUATE CONTROLS OVER RECEIPTS PROCESSING
The Agency did not have adequate controls in place to ensure fees are billed timely and
for the correct amount, and drafts from the Treasurer's Office are transmitted to the
Comptroller's Office to be ordered into the appropriate funds in a timely manner. During
our testing we noted the following:
- Supervisory fees for savings and loans totaling $225,338 which should have been billed
June 30, 1995 were not billed until September 28, 1995.
- Treasurer's drafts for 2 of 20 (10%) miscellaneous receipts and 4 of 20 (20%) mortgage
banking receipts tested were not transmitted to the Comptroller's Office to be ordered
into the appropriate funds in a timely manner. The drafts were transmitted to the
Comptroller's Office as many as 120 days after they had been received by the Agency. In
addition, it was determined drafts totaling $884,513 were not transmitted to the
Comptroller's Office to be ordered into the Savings and Residential Finance Regulatory
fund in a timely manner. The drafts were transmitted to the Comptroller's Office as many
as 186 days after being received by the Agency.
- One of 20 (5%) receipts tested was billed for the wrong amount.
indicated this condition was the result of a change in staffing which created a backlog of
information to be processed. Good internal controls require receipts to be ordered into
the appropriate funds in a timely manner so they are available to pay operating
We recommended the successor Agency establish adequate controls to ensure fees are
billed timely and for the correct amounts, and that deposits are ordered into the
appropriate funds in a timely manner. (Finding 1, page 10)
Office of Banks and Real Estate officials concurred with our finding and indicated all
funds are now being billed, collected, and allocated to the appropriate fund in a timely
NONCOMPLIANCE WITH THE RESIDENTIAL MORTGAGE LICENSE ACT OF 1987
The Agency did not comply with various provisions of the Residential Mortgage License
Act of 1987. We noted the following exceptions:
- 205 ILCS 635/1-5, requires board members to file an annual statement of their business
transactions or affiliations with licensees. The Agency could not provide these
statements. According to Agency personnel, this condition is the result of an oversight.
- 205 ILCS 635/3-2(d)-(i), requires each residential mortgage licensee to submit an annual
audit report or acceptable substitute within 90 days of its fiscal year end. We noted in 4
out of 25 (16%) mortgage banking licensee files tested, an annual audit report or
acceptable substitute was not submitted within the required time frame, and a late fee was
not assessed. In another instance a late fee was assessed, but it could not be determined
if the fee was ever collected. According to Agency personnel this condition was the result
of an oversight.
- 205 ILCS 635/4-9, requires licensees to file an "Annual Report of Mortgage
Activity, Annual Report of Servicing Activity, and/or an Annual Report of Brokerage
Activity". Out of 25 mortgage banking files tested, we identified 6 (24%) did not
submit an annual filing, 1 ( 4%) submitted an incomplete filing, and 5 (20%) were filed
late. The Agency did not have adequate policies and procedures in place to ensure annual
reports are collected timely and to follow-up on reports that are not received.
- 205 ILCS 635/4-8(a-h), requires the Agency to determine each licensee's delinquency rate
annually and conduct examinations of those licensees having gross delinquency rates in
excess of statutory requirements. During our testing, the annual delinquency rate for 1 of
10 (10%) licensees could not be provided. According to agency personnel this was an
Nonperformance of these mandated requirements puts the Agency in violation
of State laws and regulations.
We recommended the successor Agency consistently enforce the provisions of the
Residential Mortgage Licensing Act of 1987. (Finding 2, page 11)
Officials of the Office of Banks and Real Estate concurred with the finding.
LACK OF CONTROLS OVER ACCOUNTS RECEIVABLE
The Agency did not maintain adequate controls over its accounts receivable. This was
identified as a material weakness in the Agency's internal control structure. We noted the
following control deficiencies:
- Agency personnel were unable to provide a detailed listing of accounts receivable.
- Quarterly accounts receivable reports that are required to be filed with the
Comptroller's Office were inaccurate and in some instances could not be provided.
- The Agency did not have any procedures in place to handle uncollectible accounts
- The Agency did not reconcile cash receipts to licensee accounts.
According to Agency personnel, this condition is the result of inadequate staffing.
Good internal controls require maintaining detailed accounts receivable information and
written procedures for writing off uncollectible accounts receivable.
We recommended the successor Agency review the accounts receivable system and develop
written procedures implementing strong internal controls such as reconciling collections
on accounts to cash receipts. We also recommended the successor Agency allocate sufficient
staff and resources to accounts receivable processing to allow implementation of these
procedures. (Finding 4, page 13) This finding has been repeated since 1992.
Officials of the Office of Banks and Real Estate concurred with the finding. They
indicated each of the Agency's operations divisions is working to correctly identify
outstanding accounts receivable, establish written procedures to maintain accurate records
in this area, and to determine uncollectible accounts. (For previous Agency responses, see
digest footnote #1).
AGENCY COULD NOT PROVIDE REQUESTED INFORMATION ASSOCIATED WITH THE REAL ESTATE
During testing, various reports were requested from the Real Estate Licensing Division
which could not be produced or the information available was only for the period after the
implementation of a new data base system in April 1996. Reports requested which have not
been produced by the current Real Estate Licensing Division are listings of all new and
renewal real estate licenses granted during fiscal year 1996.
The transition of the Real Estate Licensing Division from the Department of
Professional Regulation to the Office of the Commissioner of Savings and Residential
finance has resulted in the misplacement of records, inability to compile data, and the
inability to produce reports. Strong internal controls and good business practices require
sufficient records be maintained to support the activities of the Agency.
We recommended the successor agency review the database system to ensure it is capable
of producing all necessary reports for both management purposes and verification of
activities. In addition, all files supporting licensing functions should be maintained and
organized in a manner that allow the location of specific information in a timely,
efficient manner. (Finding 6, page 15)
Officials of the Office of Banks and Real Estate concurred with the finding, and
indicated the Agency was unable to get all the reports and information from the agency
that used to administer the program, the Department of Professional Regulation, as
requested. In addition, producing timely reports from the new data base will not be a
problem in the future.
AGENCY RECORDS NOT RECONCILED TO COMPTROLLER'S REPORTS ON A MONTHLY BASIS
The Agency did not consistently prepare reconciliations of Agency records to the
reports provided by the Comptroller's Office on a monthly basis. Based on our testing, we
identified the following:
- 25 of 30 (83%) of the required reconciliations of Agency records to the Comptroller's
Monthly Appropriation Ledger (336) were not performed.
- 23 of 24 (96%) of the required reconciliations of Agency records to the Comptroller's
Monthly Fund Ledger (633) were not prepared.
- 24 of 24 (100%) of the required monthly reconciliations of Agency records to the
comptroller's Monthly Receipts Ledger (630) were not prepared.
Sound internal control
policies and CUSAS procedures require monthly reconciliations of the Agency records to the
We recommended the successor Agency take steps to ensure the reconciliations are
performed on a monthly basis as required by CUSAS and sound internal control policies.
(Finding 11, page 22)
Officials of the Office of Banks and Real Estate concurred with the finding and
indicated steps are in process to "catch-up" on past reconciliations, and an
individual has been assigned the responsibility for performing future reconciliations in a
The remaining findings were less significant and are being given appropriate
attention by Agency management. We will review progress toward implementation of our
recommendations during our next audit.
Mr. Robert C. Thompson, Assistant Commissioner, Office of Banks and Real Estate,
provided responses to our recommendations.
Our auditors stated the financial statements of the Office of Banks and Real
Estate and Commissioner of Savings and Residential Finance as of and for the years ended
June 30, 1996 and 1995 are fairly presented in all material respects.
WILLIAM G. HOLLAND, Auditor General
SPECIAL ASSISTANT AUDITORS
Clifton Gunderson L.L.C. were our special assistant auditors on these audits.
- #1 LACK OF CONTROLS OVER ACCOUNTS RECEIVABLE - Previous Agency
- 1992: "The Office of the Commissioner of Savings and Residential
Finance accepts these recommendations. During this period, key staff did turnover in our
Office. The early retirement program of 1992 together with funding reductions caused
annual administrative staff hours to shrink from 15,600 to 9,750, a reduction of 5,850
hours per year. Additionally the loss of essential staff underscores the necessity of
having well defined written procedures available. Staff resources are being directed to
this effort and we hope to have the new procedures in place by January 31, 1994."
(Response continues with explanations concerning the Agency's accounts receivables.)
- 1994: "The Office concurs with this finding. The staffing structure
of the fiscal operations area has been reviewed and an additional staff person, an Account
Technician I, will begin work in the last half of March, 1995. This person will assist in
the reporting of accounts receivable and the monitoring and write-off of uncollectible
accounts. Accounts receivable procedures will be documented."