REPORT DIGEST

 

ILLINOIS STATE TOLL HIGHWAY AUTHORITY

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

 

For the Year Ended:

December 31, 2004

 

Summary of Findings:

Total this audit                        10

Total last audit                        11

Repeated from last audit           5

 

Release Date:

July 13, 2005

 

 

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 is also available on

the worldwide web at

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

 

 

 

 

 

 

SYNOPSIS

 

 

¨      The Toll Highway Authority did not have the proper internal controls in place to classify all I-PASS transactions properly in some of the lanes.

 

¨      The Toll Highway Authority did not have a detailed reconciliation process related to service organization activities.

 

¨      The Toll Highway Authority did not reconcile the violation receivable recorded in the general ledger to an accurate subsidiary ledger on a monthly basis.

 

¨      The Toll Highway Authority did not complete bank reconciliations in a timely manner and the cash balance was not reconciled with the Comptroller’s cash report.

 

¨      The Toll Highway Authority did not accurately input the sick and vacation records used to document absences for salaried and hourly employees into the system to produce an accurate subsidiary ledger. 

 

 

 

 

 

 


ILLINOIS STATE TOLL HIGHWAY AUTHORITY

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended December 31, 2004

 

 

FINANCIAL OPERATIONS (GAAP BASIS)

2004

2003

 

Operating Revenue

  Tolls..............................................................................

  Toll Evasion Recovery....................................................

  Concessions..................................................................

  Miscellaneous.................................................................

   Total Operating Revenue...............................................

 

Operating Expenses

  Depreciation and Amortization.........................................

  Services and Toll Collection.............................................

  Insurance and Employee Benefits....................................

  Engineering and Maintenance of Roadway and Structures.

  Traffic Control, Safety Patrol, and Radio Communications.

  Procurement, IT, Finance and Administration...................

   Total Operating Expenses..............................................

 

$391,586,232

21,034,678

2,654,668

      3,445,212

$418,720,790

 

 

$165,623,349

83,913,805

47,756,919

32,579,707

15,340,985

  20,933,265

$366,148,030

 

$377,453,858

48,768,407

3,701,249

      3,571,209

$433,494,723

 

 

$162,785,493

83,412,447

41,343,365

35,274,963

16,147,314

  19,524,219

$358,487,801

SIGNIFICANT ACCOUNT BALANCES (GAAP Basis)

2004

2003

 

Cash (Unrestricted)..........................................................

Cash (Restricted).............................................................

Accounts Receivable (net)................................................

Investments (Restricted)...................................................

Capital Assets (net)..........................................................

Revenue Bonds Payable..................................................

$366,674,672

59,151,196

31,738,214

29,571,262

1,805,709,188

656,974,338

$350,543,438

60,113,992

26,986,824

58,938,121

1,830,137,079

696,862,204

 

EXECUTIVE DIRECTOR

During Audit Period and Currently: Mr. Jack Hartman

 

 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certain violations would not be detected

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Monthly bank reconciliations performed did not detect the irregularities

 

 

 


A service organization employee was able to divert $45,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


An adjustment for $2,609,497 was necessary due to an error by the vendor

 

 

 


Unapplied cash receipts totaled $985,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

 

LACK OF DETECTION CONTROLS FOR IMPROPER TRANSPONDER USE

 

      The Illinois State Toll Highway Authority did not have the proper internal controls in place to classify all I-PASS transactions properly in some of the lanes.

 

      Some of the lanes are equipped with vedet loops that are embedded in the ground.  Vedet loops count masses of metal as they pass through the lane.  The lane equipment is able to read the I-PASS transponder and collects the revenue based on the classification of the transponder as it was originally issued.  The number of axles determines the classification of the vehicle.  The toll collection and I-Pass system reports the transaction by the original transponder class.

 

      A violation is only recorded in the lanes affected if there is no transponder to read or if a transponder read was identified as insufficient, invalid, lost or stolen.  A violation would not be recorded if a vehicle passed through the lane with a transponder that does not correlate to the class of the vehicle.

     

      Good internal controls require that all lanes contain equipment to identify the classification of vehicles in order to collect the correct toll revenue.  (Finding 3, Page 14) This finding was first reported in 2002.

 

      Tollway officials agreed with our recommendation to implement controls to identify any violations resulting from improper transponder usage and stated that by the end of 2005, the automatic vehicle classification system will be operational in 109 out of 161 lanes, with completion of the remainder in 2006. (For the previous Tollway response, see Digest Footnote # 1.)

 

 

LACK OF DETAILED RECONCILIATION FOR SERVICE ORGANIZATION ACTIVITIES

 

      The Toll Highway Authority did not have a detailed reconciliation process related to service organization activities.

 

      During our audit we noted that the Tollway did not have an adequate reconciliation process in place to detect irregularities in transactions performed by the service organization.  The service organization performs I-PASS transactions and customer service activities.

 

      Monthly bank reconciliations performed at the Tollway did not detect inappropriate credit card transactions processed by an employee at the service organization.  The transactions did not appear to be properly investigated by the Tollway while performing the bank reconciliations.

 

      A service organization employee was able to divert $45,984 over a period of several months.  The unusual activity was discovered by the Tollway’s credit card processor.  The Tollway has been reimbursed all the funds from the service organization. (Finding 4, Pages 15-16)

 

      We recommended the Tollway perform detailed reconciliations on a timely basis and review the internal controls associated with the service organization.  We further recommended that the Tollway should review the feasibility of obtaining SAS 70 reports from its service organizations.

 

      Tollway officials concurred with our recommendation and stated that they have already implemented procedures to prevent this type of irregularity from occurring and that they will examine the feasibility of obtaining SAS 70 reports from their service organizations.

                 

VIOLATION RECEIVABLE NOT RECONCILED

 

      The Toll Highway Authority did not reconcile the violation receivable recorded in the general ledger, which is the basis for the financial statements, to an accurate subsidiary ledger on a monthly basis.

 

      During our audit we noted that the Tollway’s subsidiary ledger for recording receivables pertaining to violations was not reconciled to the general ledger on a monthly basis.  The subsidiary ledger was only reconciled to the general ledger at year-end.

 

      The subsidiary ledger should be the basis for the amount reported in the financial statements. Adjustments were required to the vendor’s subsidiary ledger of violators.  An adjustment for $2,609,497 was necessary due to an error made by the vendor within the subsidiary ledger as well as an adjustment for $161,536 due to non-sufficient fund checks posting twice.

 

       In addition, there is an unapplied category of cash receipts totaling $985,545.  This amount represents cash received by the Tollway over a 2 year period but not applied to individual accounts due to insufficient information supplied by violators when sending payment.  As a result, credits to the proper account may be delayed.

 

      We recommended that the Tollway reconcile the general ledger to a subsidiary ledger that accurately identifies the actual dollar amount of the violation receivable on a monthly basis. (Finding 5, Pages 17-18) This finding was first reported in 2003.

 

      Tollway officials concurred with our recommendation and stated that their vendor has implemented a programming change to eliminate the problem from future reports.  Tollway officials stated that they hope to have the problem corrected by December 31, 2005. (For the previous Tollway response, see Digest Footnote 2.)

     

BANK RECONCILIATIONS NOT COMPLETED TIMELY AND CASH REPORT NOT RECONCILED

 

      The Toll Highway Authority did not complete bank reconciliations in a timely manner and the cash balance was not reconciled with the Comptroller’s SB05 cash report.

 

      During our testing we noted that 32 of 82 (39%) bank reconciliations were not completed within 30 days of the month's end. 

      Additionally, the Tollway did not reconcile the ending cash balances with the available cash as reported in the Comptroller’s SB05 report. (Finding 6, Pages 19-20)  This finding was first reported in 2003.

 

      We recommended the Tollway follow established procedures to ensure all bank accounts are reconciled in a timely manner.

 

      Tollway officials concurred with our recommendation but stated that due to system limitations, they could not accomplish this within the 30 days in the first quarter of the year. (For the previous Tollway response, see Digest Footnote 3.)

 

SICK AND VACATION ACCRUAL NOT PROPERLY RECORDED

 

      The Toll Highway Authority did not accurately input the sick and vacation payroll records used to document absences for salaried and hourly employees into the system to produce an accurate subsidiary ledger.

 

 During our audit we noted that the Tollway’s subsidiary ledger for accrued sick and vacation leave contained errors in the amount of time used by salaried and hourly employees. (Finding 7, Pages 21-22) This finding has been repeated since 2001.

 

      Tollway officials concurred with our recommendation to input all absences accurately to produce an accurate subsidiary ledger and stated that they are testing an automated timekeeping system that will eliminate the need for manual input of leave time utilized. (For the previous Tollway response, see Digest Footnote 4.)

 

 

OTHER FINDINGS

 

      Other findings are reportedly being addressed by Tollway management.  We will review progress toward implementation of all our recommendations during the next audit.

 

      Responses to the recommendations were provided by Patricia Pearn, Enterprise Control & Compliance Unit.

 

 

 

AUDITORS’ OPINION

 

      Our auditors stated the Illinois State Toll Highway Authority’s financial statements as of December 31, 2004 and for the year then ended were presented fairly in all material respects.

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:TLK:pp

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors for this audit were Crowe Chizek and Company LLC.

 

DIGEST FOOTNOTE

 

1.        LACK OF DETECTION CONTROLS FOR IMPROPER TRANSPONDER USE – (Previous Tollway Response)

 

2003:       We concur with the recommendation, and have begun                           implementing a solution for this matter.

 

2.        VIOLATION RECEIVABLE NOT RECONCILED – (Previous Tollway Response)

 

2003:       We concur and are working with the outside contractor to make                  modifications to the reports used as the violation receivable                  subsidiary ledger to ensure a higher level of accuracy.

 

3.        BANK RECONCILIATIONS NOT COMPLETED TIMELY AND SB05 REPORT NOT RECONCILED – (Previous Tollway Response)

 

2003:       Tollway management concurs, and is now completing bank                 reconciliations in a more timely fashion.  The finance staff is                 now done processing the large volume of funds that came in                 after the implementation of the violation enforcement program                 and payment plan offer and has resolved this matter.

 

4.        SICK AND VACATION ACCRUAL NOT PROPERLY RECORDED – (Previous Tollway Response)

2003:       Tollway management concurs with the recommendation but                  notes that improvements were made toward rectifying this                  finding during 2003.  The current paper-based system is only                  applicable to salaried employees as the hourly employee                    timekeeping was automated through the ITIME system.                     Salaried employee wages account for approximately one third of                   total payroll expenses.  The Tollway has negotiated a contract                   with an outside vendor to implement automated time and                   attendance authority wide, and intends to proceed with the                   contract pending approval by the Department of Central                   Management Services.  As an interim solution, the Tollway has                   made modifications to the internal payroll accrual reports so that                   large variances may be identified more easily.  Lastly, the                   impact of the accruals is limited to financial statement reporting                   only; the Payroll Division gathers and recalculates benefit time                   prior to payout of terminated employees to ensure no 

                  overpayment is made.