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INTRODUCTION
The 2005 engagement of the Illinois Housing Development
Authority (Authority) is presented in two reports. The State compliance attestation examination is presented in
one report and the financial statement audit is presented in another
report. Our engagement was performed
in accordance with the Single Audit Act and OMB Circular A-133.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
INADEQUATE MONITORING OF SUBRECIPIENTS RECEIVING FEDERAL AWARDS
The Authority is not adequately monitoring subrecipients of
the HOME Investment Partnership Program (HOME). We tested all 29 subrecipients of the HOME program for fiscal
year 2005. We noted the following
exceptions:
·
Seventeen of the subrecipient OMB Circular A-133
reports were received from 15 to 268 days after the reports were due, and
there was no documentation of the Authority’s attempts to collect the
delinquent reports.
·
Six of the subrecipients had instances of
noncompliance in their reports, and the Authority did not follow-up on and
did not issue a management’s decision on these audit findings.
Authority
management indicated they followed up on delinquent audit reports via e-mail,
but failed to retain documentation of the follow-up. Management went on to note staff shortages
resulted in a lack of follow-up on the corrective action plans and audit
findings of subrecipients.
Failure to
adequately monitor all subrecipients could result in federal funds being
expended for unallowable purposes and/or subrecipients not properly
administering the federal program.
(Finding 1, pages 14-16) This
finding was first reported in 2002.
We recommended
the Authority document the monitoring and follow-up procedures on the
submission of OMB Circular A-133 reports from subrecipients. Additionally, we recommended Authority
management establish procedures to ensure decisions regarding findings in subrecipient
reports are issued within six months of receipt.
Authority management concurred with our recommendations and
noted a monthly supervisory and follow-up procedures is being implemented, a
staff member has been assigned to review audit tracking lists monthly and to
request all audits in a timely manner.
The monthly supervisor review will include procedures to ensure that
management decisions are issued within six months of receipt of the audit
reports. (For the previous Authority
response, see Digest footnote #1.)
INACCURATE CALCULATION AND
REPORTING OF MATCH EXPENDITURES
During our testing of the match calculations for the HOME
program, we selected 12 loans that comprised 50% of the match reported for
the HOME program. We noted 3 of the
12 loan match calculations used loan terms that did not agree to the final
loan documents, resulting in an over reporting of match funds of
approximately $165,258. In addition,
we noted there was no documentation of a supervisory review of the match
calculations or the HOME match report prior to submission.
Authority management stated the lack of a review of the
match calculation was due to staff shortages at the time of compiling the
reports.
Failure to accurately calculate match expenditures results
in the Authority providing incorrect information on their required annual
HOME match report. (Finding 3, pages
18-19)
We recommended the Authority implement procedures to ensure
match calculations are accurate, and the HOME match report is reviewed by a
supervisor prior to submission.
Authority management concurred with our recommendation
and indicated they will implement a procedure to ensure all loan document
revisions are communicated and a supervisor will review the match reports.
Failure to Obtain Suspension and Debarment Certifications for
Subrecipients
During
our testing of 29 subrecipients of the Home program, we noted the Authority
did not include a suspension and debarment certification in its subrecipient
agreements. Additionally, the
Authority did not perform a verification check with the “Excluded Parties
List System” (EPLS) maintained by the General Services Administration for any
of its subrecipients; however, as a result of our audit test work we noted
that none of the 29 subrecipients were suspended or debarred from
participation in Federal assistance programs.
Authority
management indicated the lack of the certification was an oversight.
Failure
to obtain the required certifications or perform verification procedures with
the EPLS could result in the awarding of Federal funds to subrecipients that
are suspended or debarred from participation in Federal assistance
programs. (Finding 5, pages 22-23)
We
recommended the Authority establish procedures to ensure grantees receiving
individual awards for $25,000 or more certify their organization is not
suspended or debarred or otherwise excluded from participation in Federal
assistance program.
Authority
management concurred with our recommendation and noted it is amending its
procedures so that all subrecipients will be required to provide the
Authority with the debarment certifications in conjunction with Authority’s
Conditional Commitment Letter for funding.
ACCOUNTING FOR PROGRAM LOANS
RECEIVABLE
During our testing
we noted the Affordable Trust Fund program loan balances recorded in the
Benedict system were not reconciled to the general ledger as of June 30,
2005. The variance totaled $347,360
and total loan balances for the Affordable Trust Fund program per the
Benedict system were $193,060,620 at June 30, 2005.
Additionally,
the Authority does not have an adequate process to ensure that new loans are
accurately entered into the Benedict system.
Specifically, we noted one individual is responsible for entering new
loan information into the Benedict system without a supervisory review of the
information added or changed.
Authority management stated the Benedict system did not
become fully linked to the general ledger until late in the fiscal year.
Without ensuring program loan balances are properly included
and updated in both the Benedict system and the general ledger the true
outstanding loan balance and activity will not be known by management and properly
reported in the financial statements.
This finding was first reported
in 2001. (Finding 8, pages
28-29)
We recommended the Authority establish and implement
procedures to reconcile the program loan balances reported per the Benedict
system to the general ledger on a monthly basis. We also recommended the Authority implement procedures to
include a supervisory review of new loans entered into the Benedict system to
ensure the loan terms agree to the final loan documents.
Authority officials concurred with our recommendation and
indicated an Accounting Department reorganization addressed both of these
issues and assigned specific individuals and supervisory personnel to
accomplish these tasks. The Authority
indicated they had started reconciling the Benedict system to the general
ledger during fiscal year 2006 and will work on doing so monthly. (For the previous Authority response, see
Digest footnote #2.)
TIME SHEETS NOT MAINTAINED IN
COMPLIANCE WITH THE STATE OFFICIALS AND EMPLOYEES ETHICS ACT
The Authority was not maintaining time sheets for its
salaried employees in compliance with the State Officials and Employees
Ethics Act (Act) during fiscal year 2005.
The Authority did not require time reports from its salaried employees
unless overtime hours are incurred.
The Act requires
the Authority to maintain a positive timekeeping process. The Act notes policies shall require State
employees to periodically submit time sheets documenting the time spent each
day on official State business.
Authority management
indicated they did not receive direction from the Governor’s Office until March 2005 and they
have amended their policies and procedures effective July 13, 2005 requiring
the maintenance of time sheets in compliance with the Act. (Finding 10, page 34)
We
recommended the Authority ensure its employees follow the new policy requiring them to maintain
time sheets in compliance with the Act.
Authority management concurred with our
recommendation and indicated on July 13, 2005 the Authority began to maintain
time sheets in compliance with the Act.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by the Authority. We will review the
Authority’s progress toward the implementation of our recommendations in our
next engagement.
Mr. James Kregor, Controller, provided the responses to our
recommendations.
AUDITORS’ OPINION
Our auditors state the Authority’s financial statements as of
and for the year ended June 30, 2005 were fairly presented in all material
respects.
___________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:RPU:pp
SPECIAL ASSISTANT AUDITORS
KPMG LLP were our special assistant auditor for this
engagement.
DIGEST FOOTNOTES
#1 - INADEQUATE MONITORING OF
SUBRECIPIENTS RECEIVING FEDERAL AWARDS
2004: The Authority concurs with the
recommendation to document the review of the financial audits performed in
accordance with OMB Circular A-133 for each subrecipient that has HOME
program expenditures and to document when the OMB Circular A-133 reports have
been received. The Authority will
develop a checklist to document the receipt and review of the reports, to
include the recommended procedures.
The Authority concurs
with the recommendation to add the CFDA number of the HOME Investment
Partnership program and the Federal agency name to correspondence with the
subrecipient.
#2 -
ACCOUNTING FOR PROGRAM LOANS RECEIVABLE
2004: The Authority concurs with the
recommendations to establish and implement procedures to reconcile the
program loan balances reported per the Benedict system to the general ledger
on a monthly basis. The Authority
plans to accomplish this for the review of the June 30, 2005 balances and
then apply this on a monthly basis going forward.
The Authority concurs with the recommendation to
include a supervisory review of new loans entered into the Benedict system to
ensure the loan terms agree to the final loan documents. The Authority will address the information
flow difficulties noted in the auditor’s comments and plans top re-organize
certain job responsibilities so that specialized loan set-up positions are
created and have supervisory review.
The Authority wishes to note that loan documents can be revised during
the term of a loan such as to incorporate work-out agreements, and that
revised procedures will be developed to ensure that any revised terms are
reflected in the Benedict system.
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