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$1,324,659 in deposits were uncollateralized at June 30,
2005
Management indicated the uncollateralized deposits were
due to improper collateral agreements and market fluctuations
$267,447 in bonuses were paid during the fiscal year
23 employees were paid under the Incentive Based
Compensation Plan
There is no provision in the Personnel Code for
incentive pay or bonuses
Authority management accepted our recommendation but
did not accept the finding
Auditors’ comment
576 interest and 166 principal payments of revenue
bonds were either not reported to the Comptroller or reported late
Management indicated that there was miscommunication
regarding bond reporting requirements
10 contracts had missing required contract content
6 contracts not filed with the Office of the
Comptroller
6 contracts subject to the competitive bidding
requirements did not go through the competitive bidding process
Disclosure of Financial Interest was not obtained for 8
contracts
The Authority did not forward Receipt Deposit
Transmittal forms to the Comptroller from September 2004 through March 2005
Receipt Transmittal Forms filed late totaled $29,363
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INTRODUCTION
The mission of the Authority
is to foster economic development to the public and private institutions that
create and retain jobs, and improve the quality of life in Illinois by
providing access to capital.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
NONCOMPLIANCE WITH THE STATE OFFICERS AND MONEY DISPOSITION ACT
The Authority did not have
sufficient collateralization for cash deposits held at three financial
institutions.
The Authority had total
uncollateralized cash deposits at June 30, 2005 of $1,324,659. The Authority
had $400,839 of uncollateralized deposits at one bank for the entire fiscal
year, $900,000 of uncollateralized deposits at another bank for six months of
the fiscal year, and $23,820 of uncollateralized deposits at a third bank for
one month of the fiscal year.
The State Officers and
Employees Money Disposition Act (30 ILCS 230/2c) states, “Whenever funds
deposited with a bank or savings and loan association exceed the amount of
federal deposit insurance coverage, a bond, pledged securities, or other
eligible collateral shall be obtained.”
Management indicated that
the uncollateralized deposits at two of the banks were due to improper
collateral agreements when the funds were initially deposited and the
uncollateralized deposits at the third bank were due to a fluctuation in the
market value of the pledged securities.
(Finding 1, page 9)
We recommended the
Authority review the procedures for monitoring deposit collateralization and
implement controls to secure collateralization agreements prior to opening
deposit accounts with balances over the FDIC limit.
Authority management
accepted our recommendation and responded that they had identified the lack
of sufficient collateral on specific deposits and reported it to the auditors. Authority management reported that a
monthly review process has been implemented to help ensure that proper
collateral levels are maintained in compliance with applicable mandates.
NONCOMPLIANCE WITH THE PERSONNEL CODE – INCENTIVE BASED COMPENSATION
The Authority paid
$267,447 in bonuses during fiscal year 2005 to 23 employees based on an
Incentive Based Compensation Plan.
During our testing of
personal services, we determined that the Authority was making payments to 23
employees based on the Authority’s Incentive Based Compensation Plan. The Incentive Plan is calculated based on
individual performance and the Authority’s performance. The Plan’s administrative rules contain a
schedule of ranges and percentages for determining the incentive pay. The Authority paid a total of $267,447 for
fiscal year June 30, 2005 to 23 eligible employees according to the Incentive
Plan.
The Personnel Code “Increases in Pay” (80 Ill. Adm. Code
310.80) establishes the guidelines for increasing an employees pay. Approved methods include a satisfactory
performance increase, a superior performance increase, promotion and
reallocation, reevaluation and adjustments that require the prior approval of
the Director of Management Services (DCMS).
There is no provision in the Personnel Code for the payment of
incentive pay or bonuses. (Finding 2, pages 10-11)
Management indicated the
Authority is exempt from the Personnel Code, therefore, allowing the
Incentive Based Compensation Plan.
We recommended that the Authority
conform its personnel practices to governing law. Further, the Authority should seek an opinion from the Attorney
General to determine if the Authority is exempt from the Personnel Code.
Authority management
accepted our recommendation but did not accept our finding. Authority management stated that the
Illinois Finance Authority Act (20 ILCS 3501/801) exempts the Authority from
the Personnel Code because it grants the Authority its own power to establish
its own system of personnel administration.
However, Authority management accepted our recommendation to seek a
legal opinion from the Attorney General’s Office regarding the applicability
of the Personnel Code to the Authority.
In an auditors’ comment
the auditors stated that neither the Illinois Finance Act nor the Personnel
Code specifically excludes the Illinois Finance Authority from the Personnel
Code. Under the Personnel Code all
positions of employment in the service of the State of Illinois are subject
to the provisions of the Personnel Code unless exempted either in the
Personnel Code or in another law (20 ILCS 415/4). The auditors continue to believe such exemption must be express
and not implied. The auditors
continue to recommend the Authority seek a formal opinion from the Attorney
General if it continues to disagree.
FAILURE TO REPORT REVENUE BOND INFORMATION TO THE ILLINOIS OFFICE OF THE
COMPTROLLER
The Authority did not report required revenue bond
information to the Illinois Office of the Comptroller (Comptroller).
During the fiscal year
ended June 30, 2005, there were 818 conduit debt bonds with a total principal
balance outstanding of $20.4 million that were in the care of the Authority.
The Comptroller prepared a listing of revenue bonds that had delinquent reporting
activity. A review of that listing,
dated August 31, 2005, resulted in the following conditions being noted:
·
191 interest and
98 principal notice of payments were not reported in a timely manner.
·
385 interest and
68 principal notice of payments were past due and were not reported.
·
10 prospectuses
and 9 maturity schedules were not received in a timely manner.
Management indicated that
there was miscommunication between the bond trustees and the Authority in
regards to the reporting requirements of the bond trustees. (Finding 3, page 12)
We recommended the Authority improve communications with the bond
trustees and strengthen internal controls to ensure the Comptroller receives
the required revenue bond reporting information in a timely manner.
The Authority accepted our
recommendation and indicated that it has implemented a system to improve
reporting to the Comptroller.
NONCOMPLIANCE WITH THE ILLINOIS
PROCUREMENT CODE AND STATEWIDE ACCOUNTING MANAGEMENT SYSTEM PROCEDURES
The Authority did not have adequate procedures in place to
ensure compliance with the Illinois Procurement Code and Statewide Accounting
Management System (SAMS) procedures relating to purchasing, contractual
agreements and real estate lease agreements.
The Illinois Finance
Authority entered into 44 contractual agreements (contracts) during the audit
period. Of the 44 contracts we noted the following:
·
10 contracts
(23%) had missing required contract content, such as contracts were not dated
and signed by the contractor or contractors doing business under another name
that was not clearly specified in the contract;
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