ANNUALREPORT

INADEQUATE CONTROLS OVER REVENUE PROCESSING AT THE DIVISION OF BANKS AND REAL ESTATE

The Department of Financial and Professional Regulation (Department) Division of Banks and Real Estate (Division) did not have adequate controls over its revenue processing.

The Division was comprised of the following four Bureaus:

1. Bureau of Banks and Trust Companies

2. Bureau of Real Estate Professions

3. Bureau of Residential Finance, and

4. Bureau of Administration

Each of these Bureaus processes revenues to varying degrees which are ultimately sent to Fiscal in the Bureau of Administration for final processing and posting to the general ledger. The Division collected approximately $46,357,633 through 27 different fee categories in fiscal year 2005.

We noted the following deficiencies with revenue processing:

• Checks are not logged immediately after receipt inall bureaus.

• Daily receipt logs, if maintained, are not reconciledto deposits or entries in the Credentialing Licensing Enforcement and Regulation (CLEAR) system.

• Receipts entered into the CLEAR system are notreconciled to the general ledger.

• Fees assessed are not reconciled to fees collected.

• General policies and procedures for revenue processing with the CLEAR system have not been developed to make the CLEAR system more user friendly for Department staff.

Division personnel stated that some of the deficiencies are due to the decentralized nature of receipt processing at the Division. However, many of the deficiencies are due to the revenue system (CLEAR) not providing the information needed to perform many areas of revenue processing that would normally be done with more user-friendly software.

We recommended that the Division of Banks and Real Estate develop and implement adequate and consistent internal controls over the processing of revenues within the Division. Further, the Division should implement the accounting software used by the other three legacy agencies within the Department for more consistency in tracking revenues received by the Department.

Department officials concurred with our recommendation, and indicated that in recent months the Division of Banking has implemented policies and procedures to address the revenue processing issue.

FAILURE TO BILL RESIDENTS IN A TIMELY MANNER

The Department of Human Services Central Office (Department) did not bill residents in State mental health and developmental facilities in a timely manner, resulting in significant lost revenue to the State and inaccurate Department account receivable balances.

Of the 17 State-operated facilities that provide services to recipients of mental health or developmental disability care, 5 were noted as being significantly delinquent in their billings. Department personnel further stated there may be billing delinquency problems at almost all facilities. Unbilled amounts could not be determined due to significant weaknesses in the controls, but Department estimates of unbilled services range from $3 million to $9 million.

Failure to record receivables as services are provided is poor internal control and ineffective cash management, and is in non-compliance with the Fiscal Control and Internal Auditing Act.

We recommended the Department allocate sufficient staff resources to each facility to process all delinquent billings and process all future billings in a timely manner.

LACK OF DOCUMENTATION IN CONTRACT FILES

The Department of Transportation (Department) contract files lacked basic information such as individual scoring sheets, documentation to support the award to a particular vendor based on criteria delineated in the Request for Proposal (RFP), and other decision documentation to adequately document the evaluation, selection and contracting process. We reviewed ten procurements awarded by the Department in FY05, totaling a maximum award amount of $45 million. Among the conditions noted by the auditors:

• In 7 of 10 procurement files reviewed, we foundno evidence of individual scoring sheets. October 2004 guidance from the Department of Central Management Services states, “An evaluation form must be completed by each committee member for each proposal…”

• For the procurement of public relations services forthe Dan Ryan/Kingery Expressway Project, a Department official who was not on the Selection Committee was involved in the selection process. For the same procurement, the Department awarded the project to multiple vendors. Each vendor had bid on the entire project. The Department made an award to two vendors, each award exceeding the proposed costs that each had originally bid to do the entire project.

• For a procurement estimated at $900,000, theDepartment could not locate the contract file or the working files for the procurement.

• For a procurement estimated at $625,000, the decision recommendation lists two cost scenarios proposed by the winning vendor. However, neither scenario went into the actual contract and the

Department had no documentation to show how this changed during contract negotiations.

• For another procurement estimated at $1,370,000,some elements from the scope of services section of the RFP were excluded from the contract with the vendor, and no documentation existed to show why.

We recommended the Department maintain adequate supporting documentation in the procurement files. The Department responded by agreeing, agreeing in part, and disagreeing with various elements of the finding. For instance, the Department maintains that individual scoresheets were not required under the Department procedure applicable to procurements, and that use of a non-member facilitator in the selection committee process was standard. For all elements, the Department indicated corrective action would be taken to address the finding and recommendation.

INADEQUATE INTERNAL CONTROL OVER TRANSIT BENEFIT PROGRAM

The Regional Transportation Authority (Authority) (RTA) did not have adequate internal controls over its Transit Benefit Program.

The Authority administers a Transit Benefit Program whereby businesses can provide their employees an opportunity to purchase transit vouchers for transit fares on a pre-tax basis. Businesses purchase the transit vouchers from the RTA, then resell transit fare to employees on a pre-tax basis. The volume of transit vouchers issued on an annual basis is in excess of $50 million.

The Transit Benefit Program is not meant to generate profits for the RTA. It is a “break even” service provided by the RTA to facilitate transit in the region. Accordingly, the accounting for the Transit Benefit Program is primarily a “pass-through” to the service boards with no significant impact on the income or expenses of the Authority. The only income generated from the program is when transit vouchers expire after 13 months. At that time expired transit vouchers are no longer considered a liability and are recognized as income. A third-party service provider is paid $1,000,000 annually to administer the Transit Benefit Program. All internal staff costs of administering the program are charged to RTA operations and are not separately identified.

During our audit testing we noted several internal control issues relating to the Transit Benefit Program, including:

• The third-party service organization did not have a SAS 70 Service Auditor’s Report to provide some assurance that internal controls are in place and operating effectively, and the RTA did not perform any testing of the internal controls of the service organization.

• In an apparent conflict of interest, the third-partyservice organization acts as an administrator of the program for some companies purchasing the transit checks and cards.

• During our audit of the account balances relating tothe Transit Benefit Program, there was a write down of approximately $96,000 in the ending balance of transit voucher inventory. The cause of this problem is unknown and is currently being investigated by the RTA.

• The transit-check liability was understated by approximately $200,000 and the transit-check account receivable balance was overstated by $2.2 million. An audit adjustment was necessary to correct the financial statements. It appears from the limited audit evidence available to date that this misstatement arose from a lack of control over the processing of expired transit checks by the internal Transit Card Department. Essentially, it appears that RTA has been recognizing income for expired transit vouchers that have been subsequently paid or replaced.

• The policy in effect during the audit period permitted the RTA to “shred” expired transit checks with no accounting for the numbers of the shredded documents. Accordingly, if a voucher was not shredded, it could be subsequently presented and honored as if it were cash. This would not be detected by current procedures at RTA.

The Authority’s management stated that it receives inadequate reports from the service organization, the bank and the internal Transit Card Department. The reports received were difficult to reconcile due to timing differences and a lack of coordination among the three entities. The entries made by the RTA Controller Department are based on assumptions of other account activities.

We recommended that internal control testing be performed at the third-party service organization. The RTA should coordinate with the third-party service organization and the bank to implement procedures to provide the Controller Department with relevant and reliable information for proper recording and reconciliation of transactions relating to the Transit Benefit Program.

RTA officials accepted our recommendation and stated that arrangements have been made to perform internal control testing at the third-party service organization, and that it should coordinate with the third-party service organization and the bank to implement procedures to improve proper recording and reconciliation of transactions relating to the Transit Benefit Program.

INADEQUATE CONTROLS OVER GATES AND PARKING ADMISSION

The Department of Agriculture (Department) did not have adequate control over gate/parking admissions at the Illinois State Fair (Fair).

The Department sells parking space at the Fair each year. Total gate admissions for the 2004 and 2005 fairs were $943,612 and $958,353, respectively.

During the gate observations for the 2004 Fair, the following exceptions were noted:

• One gate was unmanned for over 30 minutes.

• Unsold tickets were left unattended.

• A volunteer at one gate was observed taking cash from two different groups of pedestrians for the purchase of a ticket, however, they were not tearing off a ticket and placing it in the appropriate collection box.

• Four gates were understaffed, causing the volunteer to sell and take tickets.

INADEQUATE PROCEDURES REGARDING STATE VEHICLES

The Secretary of State did not have adequate procedures over its State vehicles. We noted accidents involving State vehicles were not reported in a timely manner, receipts supporting gasoline usage were not maintained, employees were driving motor pool vehicles for extended periods and not reporting commuting mileage, and personally assigned vehicles were not promptly reported to the Office’s Payroll Department so the value of the commuting fringe benefit could be added into the employees’ income.

Specific problems noted were as follows:

• During our review of accidents involving State vehicles, we tested 10 of 35 accidents and noted 5 of the 10 accidents selected for testing were not reported to the Department of Central Management Services (DCMS) on a timely basis. The DCMS “Vehicle Guide” states that accident reports are “to be submitted to (DCMS) Risk Management no later than seven calendar days following the accident.” We noted the reports were submitted between 5 and 532 days late.

• Secretary of State employees assigned State vehicles were not properly completing monthly Automotive Cost Reports and not providing receipts supporting their gasoline usage. We reviewed two Monthly Automotive Cost Reports for a sample of 25 employees assigned State vehicles. We noted 2 of the 25 employees submitted reports that had missing gas receipts, 4 employees submitted reports with missing information (miles driven for the month), and one employee did not submit a report for either month.

• Chicago motor pool vehicles were used by six Secretary of State employees consecutively from 1 to 5 months without adjustment of the employees’ wages for the value of the personal use of those vehicles. As a result, the six employees had not filed a “Personal Use of State Vehicle” form. Without a properly completed form, the Secretary of State is unable to compute an appropriate gross income upon which to base withholding and results in the employees not paying taxes on the additional benefit they derive from using a State vehicle.

• During our review of 25 vehicle assignments, wenoted 6 instances (24%) where the Office’s Payroll Department was not notified on a timely basis of the personal use of the vehicle, and thus was not including the value of the fringe benefit in the employee’s income. The delay in notifying Payroll ranged from 28 to 287 days following the personal

assignment of the vehicles to the employees.

We recommended the Secretary of State strengthen its controls regarding State vehicles as follows:

• Communicate the requirement to file accidentreports in a timely manner to those employees whose jobs involve travel. We also recommended the Vehicle Coordinator monitor the submission of accident reports to ensure the DCMS requirements are being followed.

• Enforce the requirement that employees file properly completed Monthly Automotive Cost Reports with all required documentation in a timely manner.

• Monitor the Chicago motor pool activity to ensure that motor pool vehicles are not treated as personally assigned vehicles without following the appropriate procedures.

• Implement controls to ensure the PayrollDepartment is immediately notified of all personally assigned vehicles.

Agency officials accepted our recommendation and stated that the Secretary of State has established the Automotive Administration and Maintenance Department to coordinate, monitor and enforce policies and procedures pertaining to the use of Secretary of State Vehicles. In December 2005, the Illinois Secretary of State’s Motor Vehicle Policy Manual went into effect, which details all of the rules pertaining to Secretary of State vehicle usage. In addition, agency officials stated that every Secretary of State employee is now required to complete and submit to the Automotive Administration and Maintenance Department a form signed by the employee’s Department Director indicating the date(s) that he or she will be claiming “personal use” of a State vehicle. This form must be completed and submitted before the employee is allowed to take possession of the vehicle.

WEAKNESSES IN CONTROL PROCEDURES RELATING TO SOCIAL SECURITY NUMBER VERIFICATION

The Illinois Department of Employment Security (Department) has several weaknesses in the control procedures relating to the social security number verification for new claimants.

Once the Department has identified an invalid social security number as a result of the Social Security Administration match process, a manual adjustment to the claimant’s record must be made to stop the unemployment compensation payments. A clerical employee of the Department is required to access the claimant’s computerized record, manually input a stop payment code on the account, and enter a date to specify the length of time the stop payment is to continue. We also noted during our testing that the code entered into the system to stop payment due to a social security code mismatch is not unique.

In our testing of this control procedure, we sampled 60 claimants whose social security numbers were initially identified as invalid. Of the 60 items tested, we noted 12 (20%) instances in which the system failed to stop payment. Of the 12 instances noted, 3 were due to data entry errors and 9 where no apparent action was taken to stop unemployment benefit payments.

Because of the frequency of errors noted in our sample testing, we expanded our procedures to obtain information on all 1,364 claims with invalid social security numbers. The additional testing indicated the Department paid 411 claimants (30%) with invalid social security numbers benefits totaling $1.1 million.

We recommended the Department eliminate the need for human intervention and look for a potential automated approach to stopping claim payments to recipients with invalid social security numbers. In the meantime, under the current manual data entry system, we recommended the Department strengthen the supervisory review of this key internal control to improve the timeliness and accuracy of data entered into the benefit payment system. Further, we recommended the code entered into the system to create the stop payment should be unique to the social security number mismatch and contain an indefinite stop, which would eliminate the necessity to enter stop payment dates into the system.

Department officials accepted our recommendation and stated the process of identifying invalid social security numbers would be automated, and that it would establish a unique code to identify social security number discrepancies.

INADEQUATE DOCUMENTATION TO SUPPORT THE VALIDATION OF SAVINGS

The Department of Central Management Services (Department) awarded over $69 million during FY04 to outside vendors for contracts intended to achieve savings as part of the efficiency initiatives. In some cases, contracts were awarded based on the vendors’ ability to show they could meet savings goals stated in the RFP, vendor proposal and/or contract. Where savings are a specific goal, the Department should ensure it has in place a valid and reliable system to track savings achieved by the vendors.

During the prior audit period, the Department did not maintain adequate documentation to support the validation of many of the savings that the Department attributes to its various efficiency initiatives. Furthermore, savings goals stated in the Request for Proposals (RFP), vendor proposals, and/or contracts were not always realized or documented.

After the April 2005 release of our FY04 Compliance Examination of CMS, the Department established the Initiative Savings Validation Project. According to the Project Charter for the Initiative Savings Validation Project, the purpose of the Project was “to identify and validate State of Illinois savings resulting from actions and/or activities attributable to CMS’ consolidation and savings initiatives beginning in FY03.” While the Project was comprised primarily of Department staff, in June 2005, the Department entered into a contract with a vendor to provide assistance in the validation efforts. This contract was valued at an estimated $995,000. An Executive Advisory Council, comprised of CMS management, the vendor, and Governor’s Office representatives, was also created to monitor the validation effort.

As of September 14, 2005, the Department had reduced its fiscal year 2004-2005 estimated savings to $545 million; down from the $621 million it reported when the Auditor General’s FY04 compliance examination report was released in April 2005.

Our testing on this finding concluded in September 2005. In October 2005, the Department issued “State of Illinois Savings Validation Results”. This October 2005 report further reduced the estimated savings to $529 million. The Department’s October 2005 report was not reviewed or verified as part of this current audit. However, it should be noted that the $529 million savings figure reported by the Department in the October 2005 report does not include any costs the Department incurred related to its initiatives, which are estimated to exceed $72 million.

We recommended that the Department continue to develop and maintain adequate supporting documentation to support the validation of savings billed to agencies and captured by vendors.

The Department agreed with the recommendation.

FAILURE TO REVIEW COMPUTERIZED INFORMATION SYSTEMS CONTROLS FOR THIRD-PARTY VENDORS

The Illinois Student Assistance Commission (Commission) did not obtain independent reviews of an externally controlled computerized system used to service portions of its student loan portfolio. Without a review, the Commission did not have complete assurance that the information system controls necessary to prevent errors or irregularities from occurring were established and operating effectively at all times.

The Commission utilized seven third-party service providers to service a significant portion of its student loan portfolio. Each of the service providers used their own system to record accrued interest, cash collections and adjustments, and to ensure that the program is in compliance with the Department of Education regulations for the Federal Family Education Loan Program.

Of the total student loan portfolio of $3.56 billion in 2005, $2.36 billion (67%) was serviced by the seven third-party service providers. The Commission did not obtain nor did it review reports (i.e. SAS 70 Report on the Internal Controls in Place and Tests of Operating Effectiveness) to determine if controls were effective for one of the seven service providers who serviced approximately $670 million for the Commission during fiscal year 2005.

The Commission stated that they have been in contact with the service provider, requiring them to provide a SAS 70 report. Based on our review, the SAS 70 has not been received and was also not provided during the prior audit for the period ending June 30, 2003.

We recommended the Commission obtain and adequately review a copy of an independent review of computer systems maintained by its third-party service providers on an annual basis.

The Commission agreed with our recommendation and stated that the servicer is waiting for the final report to be issued. Further, the Commission will review its approach for obtaining the independent reviews of the computer systems for third-party servicers to ensure more timely submission of the reports.

INADEQUATE CONTROLS OVER THE CALCULATION AND SUBMISSION OF CAPITAL ASSET INFORMATION FOR GAAP REPORTING PURPOSES

The Department of Natural Resources’ (Department) preparation and submission of yearend accounting reports (GAAP Package Forms) to the Office of the State Comptroller related to the capital asset account were not prepared accurately, causing significant financial reporting delays. We noted the following problems with the Department’s fiscal year 2005 Statewide Accounting Management System to GAAP Reconciliation - Capital Assets (SCO 537) and the Capital Asset Summary (SCO 538) submission to the State Comptroller:

• Previous audits noted numerous errors regardingthe SCO 537 and 538 at June 30, 2002, 2003 and 2004 in order to meet reporting requirements under GASB 34. As of June 30, 2005, the Department still had not agreed the ending recalculations with the Department’s Common Inventory System (CIS), including asset categorization and related accumulated depreciation amounts.

• Due to the incompleteness of CIS records, theDepartment could not obtain ending balances for each capitalization category from property control

records. Without these amounts, it cannot be

determined if ending balances are reasonably

stated. Extensive reconciliation and testing proce

dures were performed to verify ending balances.

• Accumulated depreciation was calculated incorrectly and individual transaction amounts were not substantiated.

• The Department was unable to provide adequate documentation of actual additions, deletions and transfers. The Department was also unable to provide a complete listing of all consolidations and other adjustments.

• The Department did not consistently record historical treasures, works of art and other collections in their records.

• The Department still has not included Department of Transportation managed projects, totaling approximately $26 million, related to bikeways on its property control records.

• The Department still has not included Office of Water Resources sites, totaling approximately $39 million, on its property control records.

• The Department was unable to properly calculate capital asset accounts payable. The Department materially overstated payables related to equipment and infrastructure, but failed to properly calculate any payables related to multi-year construction projects, resulting in significant audit adjustments.

• Due to the complexity of the above issues, revisedamounts related to capital assets and accumulated depreciation were not available until April 6, 2006, more than seven months after the initial due date and more than nine months after the end of the fiscal year.

We recommended the Department implement procedures to ensure capital assets are reported in an accurate and complete manner, and reconcile the Common Inventory System to capital asset reporting amounts to ensure the property control system can be utilized for capital asset reporting. We further recommended the Department review, and revise as necessary, its current system of gathering property control information to improve the accuracy of the

TIMELY AND ACCURATE ACCOUNT RECONCILIATIONS

The Illinois State Toll Highway Authority (Tollway) is not completing timely reconciliations for some of their significant general ledger accounts.

During our audit, we noted that certain significant general ledger account balances were not reconciled on a timely basis to supporting documentation or subsidiary ledgers. As a result, adjustments to the books and records were being recorded more than six months after the Tollway’s fiscal year-end. In addition, numerous corrections were being made to the general ledger as the audit was being conducted. This led to inefficiencies and delays in completing the audit. We noted the following:

• Book adjustments to cash of approximately $28 million were posted after the draft financial statements were provided to the auditors. Some of the adjustments were posted as late as July 2006, seven months after year-end.

• Adjustments to investments of approximately $2.8 million were identified by the auditors.

• Adjustments to accrued interest receivable amounting to approximately $9.4 million were identified by the auditors and recorded in July 2006. The adjustment related to deep discount investments that were reported at fair value and had a reported amount for accrued interest receivable. The adjustment was necessary to correct the accrued interest receivable for these non-interest paying investments.

• The balance reported as “Other Accrued Expenses” in the general ledger, consisting principally of construction related liabilities, was overstated by approximately $2.5 million compared to the supporting documentation provided during the audit.

• During our review of Accounts Payable we noted three “Stale Dated Warrant” accounts totaling

$528,595, which were not substantiated with support.

• In addition, the Tollway has a balance of approximately $1.5 million in the “Due to From” account (a component of accounts payable in the financial statements) that was unsubstantiated as of December 31, 2005.

We recommended the Tollway assign responsibility for reconciling all significant balance sheet accounts. Significant accounts would include those that are quantitatively significant and those that are qualitatively significant or susceptible to fraud (cash and investments). All adjustments that result from the reconciliation process should be approved by supervisory personnel prior to posting them to the general ledger. Supervisory approval should be documented in writing. Adjustments that are only recorded at year-end in connection with producing the audited financial statements should also be reviewed and approved by supervisory personnel. Also, the Tollway should maintain detailed support for all balance sheet accounts, and review and reconcile the account detail on a monthly basis in order to ensure accurate financial reporting, safeguard Tollway assets, and strengthen internal controls over financial reporting. Further, the Tollway should investigate all balances recorded in the “Stale Dated Warrants” account balances and remit appropriate unclaimed property to the State in accordance with the Uniform Disposition of Unclaimed Property Act.

Tollway officials agreed with our recommendations and stated that they have implemented new processes.

LACK OF DETECTION CONTROLS FOR IMPROPER TRANSPONDER USE

The Illinois State Toll Highway Authority (Tollway) 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 that was 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.

Tollway officials agreed with our recommendation to implement controls to identify violations resulting from improper transponder usage. Further, they expect implementation with the completion of Open Road Tolling and plaza reconstruction in 2007.

CAPITAL ASSET SYSTEM

The Illinois State Toll Highway Authority’s (Tollway) practices and procedures for recording and maintaining capital asset records needs improvement.

During our audit of the capital asset records, we noted the following:

• Beginning of the year accumulated depreciation forinfrastructure capital assets was overstated by approximately $45.6 million. During fiscal years 2003 and 2004, depreciation expense was recorded for infrastructure assets that were already fully depreciated. As a result of this error, the December 31, 2004 net assets of the Tollway required a $45.6 million restatement (increase in net assets).

• Although the Tollway has a formal written capitalization policy addressing items such as the capitalization threshold and useful lives, there are no detailed written processes and procedures documenting other aspects of capital asset reporting and controls.

• Under current Tollway practice, capital asset additions are added to an electronic spreadsheet in pools. Each year a new pool is created for each category of capital asset additions (infrastructure, infrastructure facilities, Fiber Optics system, buildings and machinery and equipment). Deletions

of capital assets are not assigned to these annual pools. Instead they are applied to the category as a whole (i.e. machinery and equipment). The Tollway depreciates its assets using pools rather than as a detailed level. As a result, there is not a detailed listing of capital assets on hand as of year-end that supports the amounts reported on the year-end financial statements.

• The Tollway does not have an effective system to identify completed construction projects that should be moved from construction in progress to depreciable infrastructure. There are items on the construction in progress (CIP) listing and included in the reported CIP balance, that are substantially complete and in use. At December 31, 2005, these amounts totaled approximately $65 million, out of approximately $520 million total CIP, or 12%. Since these projects are essentially complete and the assets are in use, these infrastructure assets should be depreciated. The estimated amount of unrecorded depreciation expense for December 31, 2005 is $3.1 million.

• The supporting documentation for the beginning balance reported for accumulated depreciation did not agree to the amount reported as ending accumulated depreciation in the 2004 financial statements. The beginning balance per the 2005 financial statements was $1,085,065 million less than the depreciation roll forward schedule provided to the auditors for 2005. In addition, depreciation expense reported in the roll forward schedule varied from amounts recorded in the financial statements by $453,785 (roll forward was understated). Year-end accumulated depreciation per the roll forward schedule was understated by $631,280 compared to the financial statements. The Tollway was unable to account for the difference.

• The Tollway is capitalizing assets with a historical cost less than $5,000; however their policy states that only capital assets with a cost in excess of $5,000 should be capitalized.

We recommended the Tollway prepare a formal written process and procedure document to clearly define the criteria for capitalization of individual capital assets for financial reporting purposes in accordance with generally accepted accounting principles. The processes and procedures document should be approved by management. Further, the

VIOLATION PENALTIES RECEIVABLE AND SERVICE ORGANIZATION ACTIVITIES

The Illinois State Toll Highway Authority (Tollway) does not maintain a detailed record of the outstanding violation penalties receivable. In addition, the Tollway’s service provider did not engage an independent auditor to review the control objectives and control activities in place at the outside service provider.

The Tollway currently uses an outside service provider to maintain all records pertaining to violation penalties. Tollway management indicated that the violation system does not currently have the ability to generate a report that produces the detail to support the summarized aged receivable, which would include the individual’s name, transaction date and amount. The receivable, net of the allowance for uncollectible amounts as of December 31, 2005, was approximately $21 million.

We recommended that the Tollway maintain a detail record of all receivables, including the violation penalties. The detail records should be reviewed by a supervisor on a monthly basis, with supervisor approval clearly documented in writing.