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INTRODUCTION
The Illinois Rural Bond Bank (the Bank) was created as a body
politic and corporate by the Rural Bond Bank Act (the Act) (30 ILCS 360/1-1
et seq.) for the purpose of providing adequate capital markets for borrowing
money by rural units of local government at a reduced cost. On July 17, 2003 the Governor signed
Public Act 93-0205. This Act repealed
the enabling legislation of the Bank and several other bonding authorities
effective January 1, 2004 and created the Illinois Finance Authority. The activities of each of the bonding
authorities, including the Bank, were transferred to the Illinois Finance
Authority on January 1, 2004. This is
the final audit of the Bank.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
NEED FOR FINANCIAL STATEMENT ADJUSTMENTS
The Agency made several errors in financial reporting that
required adjustments to the financial statements.
We noted the following errors in reporting in accordance with
generally accepted accounting principles (GAAP) during our audit of the
financial statements:
·
The Agency did not defer and amortize bond issuance
fees received of $596,733 and bond issuance costs of $349,613.
·
The Agency had not recognized six months of deferred
issuance fees and deferred issuance costs on the financial statements.
·
The Agency did not account for the activities of the
bond funds or the public projects construction note funds on its preliminary
financial statement.
CONTRACTS DID NOT INCLUDE ALL THE MINIMUM REQUIRED ELEMENTS
Contractual
services expenditures were examined as part of our overall testing. Four of the contractual services
expenditures met the $5,000 threshold for requiring a “written”
contract. Each of these contracts
entered into by the Agency, however, did not include some or all of the
following elements:
·
Bribery clause,
·
Default on repayment of educational loan
certification,
·
International boycott certification,
·
Right to audit records clause,
·
Bid rigging/Bid rotating certification, and
·
Contractor’s federal taxpayer identification number.
The Statewide Accounting Management System (SAMS) procedure
15.50.10 lists contents that are required to be included in all written
contracts entered into by State agencies.
Agency management stated that each of the contracts was a
multiyear contract that had been entered into in prior years but were not
amended during the six months ended December 31, 2003. The Agency stated they were not able to
update the contracts as they had indicated they would do in the prior year’s
response because the contracts were renewed before they were aware of the
finding and because they decided to defer amending the contracts pending the
consolidation of the Agency into the Illinois Finance Authority pursuant to
Public Act 93-0205. (Finding 2, pages
12-13) This finding was first
reported in 2002.
We recommended the Agency update their contractual agreements
to contain the required contract elements.
Agency officials agreed with the finding and stated in their
response that the Illinois Finance Authority began operation on January 1,
2004 with standard contract language that includes the terms outlined in SAMS
procedure 15.50.10. Existing
contracts for services provided to the former Illinois Rural Bond Bank, as
well as for services to other predecessor authorities, are updated to contain
the terms required under this procedure if and when each contract is
renewed. Many of these existing
contracts have an expiration date of June 30, 2004. (For previous Agency responses see Digest Footnote #1.)
ANNUAL REPORT NONCOMPLIANCE
The Agency submitted its 2003 annual report with outdated
financial statements and failed to maintain documentation that it submitted
the report by the due date.
We examined the 2003 annual report prepared by the Agency,
and noted that the annual report included a copy of the Agency’s 2001
financial statements instead of the 2003 financial statements. We also noted the Agency did not maintain
documentation that it submitted the annual report by the due date.
The Rural Bond Bank Act (30 ILCS 360/3-2) states “within 90
days after the end of each State fiscal year, the Bank shall make an annual
report of its activities to the Governor and the General Assembly. This report shall set forth a complete
operating and financial statement covering its operations during the year.”
Agency officials stated that the Agency financial statements
were not completed by September 28, so it included an older set of the
financial statements in its report.
They also stated that the reports were submitted by the deadline, but
no evidence of the submissions was retained.
(Finding 4, page 15)
We recommended the Agency timely prepare its financial
statements and include them in their annual report and that they maintain
documentation of the dates and government entities with whom the annual
reports are filed.
The Agency agreed with the finding and stated in their
response that an annual report for the Illinois Rural Bond Bank will not be
filed for fiscal year 2004 because the Bank did not exist after December 31,
2003, after which time the business operated as a part of the Illinois
Finance Authority.
Mr. Mike Pisarcik, Treasurer of the Illinois Finance
Authority, provided the Agency’s responses to our findings and
recommendations.
AUDITORS’ OPINION
Our
auditors state the Illinois Rural Bond Bank’s financial statements as of
December 31, 2003 and for the six months then ended are fairly presented in
all material respects.
___________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:JAF:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were
Nykiel-Carlin & Co., Ltd.
DIGEST FOOTNOTES
#1
CONTRACTS DO NOT INCLUDE ALL OF THE REQUIRED ELEMENTS – Previous Agency
Responses
2003: The
Illinois Rural Bond Bank assumed the intent of the finding last fiscal year
was in regard to any future contract(s) and not for current contractual
agreements awarded under prior management.
2002: The
Illinois Rural Bond Bank (IRBB) has updated its contractual agreements to
include required disclosures and certifications that were revealed in the
audit.
During
fiscal year 2002, the IRBB experienced turnover among Agency management. Although documented procedures existed,
new personnel may not have been aware of such procedures. An effort has been made to place
documented procedures in a centralized location in order to ensure that
current and future personnel will be in conformity with State mandates.
The
Statewide Accounting Management System (SAMS) procedure 15.50.10 has been
placed in the IRBB Fiscal Procedures Manual that Agency personnel will
utilize to obtain operational procedures and information.
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