REPORT DIGEST

 

EAST ST. LOUIS FINANCIAL ADVISORY AUTHORITY

 

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

AND

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2008

 

Summary of Findings:

Total this audit                    7

Total last audit                    7

Repeated from last audit     3

 

 

Release Date:

April 2, 2009

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

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 the full report are also available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

 

 

 

SYNOPSIS

 

 

 

¨      The Authority did not appropriately reconcile its investment statements to the general ledger.

 

¨      The Authority lacks adequate segregation of duties in its accounting and financial procedures.

 

¨      A locally held fund of the Authority was in excess of the federally insured limit.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the reverse page.}


 

                             EAST ST. LOUIS FINANCIAL ADVISORY AUTHORITY

                          FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

                                             For the Two Years Ended June 30, 2008

 

EXPENDITURE STATISTICS

FY 2008

FY 2007

 

........... Total Expenditures...........................................

 

            Locally Held Funds Total.....................................

                        % of Total Expenditures..........................

 

            Appropriated Funds Total....................................

                        % of Total Expenditures..........................

 

             Expenditures from the Lump Sum

             Appropriations:

             Personal Services...............................................

             Contractual Services...........................................

             Travel.................................................................

             Commodities......................................................

             Printing...............................................................

             Equipment..........................................................

             Electronic Data Processing..................................

             Telecommunications............................................

                           Total..............................................................

 

$228,236

 

$11,878

5%

 

$216,358

95%

 

 

 

$158,873

44,510

4,962

5,694

193

0

0

2,126

$216,358

 

$249,865

 

$12,414

5%

 

$237,451

95%

 

 

 

$200,074

27,208

2,628

3,204

90

324

67

3,856

$237,451

                                               

SUMMARY OF SIGNIFICANT ACCOUNTS

FY 2008

FY 2007

Cash and Cash Equivalents..............................................

Investments.....................................................................

Property and Equipment..................................................

$6,515,886

$0

$59,580

$351,073

$5,953,273

$58,027

Ending Balance – Locally Held Fund (Accrual Basis)........

$6,518,305

$6,304,346

 

SUPPLEMENTARY INFORMATION

FY 2008

FY 2007

Average Number of Authority Employees.....................

3

4

 

EXECUTIVE DIRECTOR

During Audit Period:  Mr. W. Kenneth Gearhart (Retired October 31, 2006)

Ms. Melinda Carlton (November 1, 2006 to October 3, 2007)

Ms. Patrice R. Rencher, Interim (October 4, 2007 to March 31, 2008)

Currently:  Ms. Patrice R. Rencher (April 1, 2008 through present)


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounting records not updated monthly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal control weakness

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


$5,984,690 in excess of the FDIC insured amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

      This report presents our Financial Statement audit for the year ended June 30, 2008 and a State Compliance Examination of the East St. Louis Financial Advisory Authority’s (Authority) operations for the two years ended June 30, 2008.

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

INADEQUATE RECONCILIATION OF INVESTMENT STATEMENTS TO GENERAL LEDGER

 

      The Authority prepares investment analyses on a quarterly basis for reporting purposes and enters the investment data into the general ledger.  However, the Authority does not update its accounting records to reflect the monthly change in fair market value amounts.  The investment balance at June 30, 2007 was $5,890,652.  During fiscal year 2008, the Authority’s Treasury bill investments matured and were not reinvested.  At June 30, 2008 all money received from the matured U.S. Treasury Bill investments was held in a money market account.

 

Authority personnel stated that they rely on their trustee to prepare the quarterly reconciliations.  The Authority then records increases or decreases in the general ledger.

 

We recommended the investment account be reviewed and reconciled monthly to the general ledger so that the ending balance of the investment statement agrees to the ending balance per the general ledger. In addition, we recommend the Authority review the reconciliations prepared by their trustee.  (Finding 1, page 10)  This finding was first reported in 2004.

 

      The Authority agreed with our recommendation, and stated that they will review and reconcile monthly statements to the general ledger.  (For previous Authority responses, see Digest Footnote)

 

 

INADEQUATE SEGREGATION OF DUTIES

 

      The Authority lacks segregation of duties in its accounting and financial procedures.  The Authority currently has three employees.  In addition, the Authority has had significant turnover in the past two years, occasionally resulting in only one staff member in the office.  Because of the limited number of personnel, the Authority’s cash and investment receipts and disbursements procedures often require that one individual be responsible for duties that should be performed by at least two people.  Total assets for the Authority were $6,520,800 at June 30, 2008.

 

      We recommended that the Authority segregate the duties of receipts and disbursements to enhance internal controls over the process.  In addition, as a compensating control the Board of Directors should be involved in reviewing transactions and monthly financial reports. (Finding 2, page 11)

 

      Authority officials agreed with our recommendation and stated that when accounting and financial procedures are performed, all three employees are involved with the process.

 

 

BANK FUNDS IN EXCESS OF FEDERALLY INSURED LIMIT

 

      The Authority had a locally held fund that was in excess of the Federally insured limit during the two years ended June 30, 2008.  In September 2007, approximately $3,000,000 of the Authority’s U.S. Treasury Note investments matured, and in March 2008, the remaining balance of U.S. Treasury Notes was redeemed.  None of these funds were reinvested into U.S. Treasury Notes.  All money received from the U.S. Treasury Notes at redemption was placed into a money market account.  At June 30, 2008, the Authority held $6,384,690 in a money market account that was $5,984,690 in excess of the Federally insured limit of $400,000.

 

      We recommended the Authority reduce its risk by obtaining collateral for the amounts in excess of the federal insurance or invest in government backed obligations.  (Finding 7, page 16)

 

      Authority officials agreed with our recommendation and stated that they will obtain collateral for the amounts in excess of federal insurance or invest in government backed obligations.

 

OTHER FINDINGS

 

      With regard to the other findings noted in our report, Authority officials responded that corrective action has been or will be taken.  We will review the Authority’s progress towards the implementation of all our recommendations in our next audit.

 

AUDITORS’ OPINION

     

      Our auditors state the financial statements of the East St. Louis Financial Advisory Authority as of and for the year ended June 30, 2008 are fairly presented in all material respects.

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:HJY:pp

 

 

 

AUDITORS ASSIGNED

 

      Schorb & Schmersahl, LLC were our special assistant auditors for this audit.

 

 

 

DIGEST FOOTNOTE

 

INFREQUENT PERFORMANCE OF  INVESTMENT RECONCILIATIONS   – Previous Authority Response

 

2006: Authority officials agreed with our recommendation, and stated that monthly reconciliations of the investment account are now being performed.