REPORT DIGEST RAILSPLITTER TOBACCO SETTLEMENT AUTHORITY FINANCIAL AUDIT AND COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2018 Release Date: March 7, 2019 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 FINDINGS LAST AUDIT: 0 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, 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 Full Report are also available on the worldwide web at www.auditor.illinois.gov SYNOPSIS • (18-01) The Railsplitter Tobacco Settlement Authority did not ensure its financial reports were accurate and prepared in conformity with U.S. generally accepted accounting principles (GAAP). FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INACCURATE FINANCIAL STATEMENT PREPARATION The Railsplitter Tobacco Settlement Authority (Authority) did not ensure its financial reports were accurate and prepared in conformity with U.S. generally accepted accounting principles (GAAP). We noted the Authority did not perform a sufficient review of all accounts and amounts recorded within its financial statements and related footnotes. As a result, we noted the following errors during our testing: Fiscal Year Ended June 30, 2018 • The Authority incorrectly reported in its long-term obligations footnote the range of outstanding annual installments for the Authority’s Series 2010 revenue bonds as $66,325,000 to $78,360,000. Authority records indicate the remaining annual installments for these bonds range from $93,620,000 to $103,900,000. • The Authority overstated debt service expenditures for the fiscal year by $4.8 million in its long-term obligations footnote. The Authority reported debt service expenditures for Fiscal Year 2018 totaling $148.1 million, where actual debt service for the fiscal year totaled $143.3 million. • The Authority incorrectly reported debt issuance expenditures, totaling $4,796,174, as part of their debt service expenditures in its Statement of Activities and Governmental Revenues, Expenditures, and Changes in Fund Balance. Fiscal Year Ended June 30, 2017 • The Authority incorrectly reported in its receivables footnote tobacco settlement revenues receivable, totaling $251.0 million, gross of unsold assets, instead of netting the receivables against unsold assets, totaling $0.7 million. Correctly presented, the tobacco settlement revenues receivable for the year ended June 30, 2017, were $250.3 million. All of these noted errors were corrected by Authority management in its final financial statements (Finding 1, pages 11-12). We recommended the Authority implement procedures to ensure financial statements are reviewed for potential errors and misstatements and agree to underlying accounting records. The Authority accepted our recommendation and noted the errors were subsequently corrected. AUDITOR’S OPINIONS The auditors stated the financial statements of the Authority as of and for the years ended June 30, 2017, and June 30, 2018, are fairly stated in all material respects. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Authority for the two years ended June 30, 2018, as required by the Illinois State Auditing Act. The accountants stated the Authority complied, in all material respects, with the requirements described in the report. This financial audit and compliance examination was conducted by the Office of the Auditor General’s staff. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:cmd