REPORT DIGEST

CAPITAL DEVELOPMENT BOARD

FINANCIAL AUDIT

For the Year Ended:

June 30, 2007

Summary of Findings-

Government Auditing Standards:

Total this audit                   2

Total last audit                   1
Repeated from last audit    1

Release Date:

January 31, 2008

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

·        Adequate controls were not maintained over the collateralization of locally held construction retention trust accounts.

·        An adequate review of liabilities was not conducted.

{Selected financial information is summarized on the reverse page.}

FINANCIAL INFORMATION – (In thousands)

FY 2007

FY 2006

REVENUES

      Federal capital grants...........................................................

      Licenses and fees.................................................................

      Other charges for services....................................................

Other capital grants………………………………………. 

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

Total revenues................................................................

EXPENDITURES

      Education.............................................................................

      General government.............................................................

      Debt service - principal........................................................

      Debt service – interest..........................................................

      Capital outlays.....................................................................

            Total expenditures..........................................................

OTHER SOURCES (USES)

      Appropriations from State resources.....................................

      Reappropriations to future year(s).........................................

      Lapsed appropriations..........................................................

      Receipts collected and transmitted to State Treasury.............

      Net change in liabilities for reappropriated accounts..............

      Operating transfers out.........................................................

            Total other sources (uses)...............................................

FUND BALANCE

      Change in fund balance.........................................................

      Fund balance, July 1.............................................................

      Fund balance, June 30.........................................................

$21,066

4,835

18,960

           622

              2

   $45,485

$(188,279)

(45,915)

             -

-

  (118,259)

$(352,453)

$1,806,287

(1,287,667)

(201,123)

(132)

(7,799)

       (358)

 $309,208

$2,240

  4,999

 $7,239

$17,794

5,273

19,498

        -

               9

    $42,574

$(280,693)

(27,713)

(25)

(1)

    (81,175)

$(389,607)

$2,052,439

(1,618,193)

(13,186)

(79)

(71,830)

          (497)

   $348,654

$1,621

  3,378

$4,999

SELECTED ACCOUNT BALANCES – (In thousands)

FY 2007

FY 2006

Cash equity with State Treasurer.................................................

Cash and cash equivalents..........................................................

Intergovernmental receivables.....................................................

Due from other State funds.........................................................

Accounts payable and accrued liabilities......................................

Intergovernmental payables.........................................................

Deferred revenue.......................................................................

$18,719

$10,586

$1,115

$2,949

$46,052

$701

$13,918

$17,030

$12,690

$1,835

$2,015

$57,051

$776

$11,813

EXECUTIVE DIRECTORS

During Audit Period:  Janet Grimes

Currently:  Janet Grimes

Local funds of $5.232 million were uninsured and uncollateralized

INTRODUCTION

The Capital Development Board serves as the non-road, construction management arm of the Illinois government.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE INTERNAL CONTROL FOR UNINSURED AND UNCOLLATERALIZED DEPOSITS

      The Board did not maintain adequate controls over the collateralization of locally held construction retention trust accounts.

      At June 30, 2007, the Board had a total bank balance of $10.586 million held in local funds as retainage on open construction projects, including $5.232 million which was uninsured and uncollateralized.  The Board did not obtain additional collateral for some deposit amounts exceeding the Federal Deposit Insurance Corporation coverage of $100,000.  (Finding 1, pages 34-35)  This finding was first reported in 2005.

      We recommended the Board design monitoring procedures to ensure that bank accounts are collateralized adequately.

      Board officials agreed with our finding. The Board responded that a new policy will be implemented January 1, 2008 that new retention trust agreements will be allowed only if the bank complies with collateralization requirements.

INADEQUATE REVIEW OF LIABILITIES

      The Board did not adequately review the accuracy of retainage payables and related contractor accounts payable balances.

Accounts payable overstated by $147,029

Retainage balance of $64,515 incorrectly reported

Our review of the contract retainage balances report as

of June 30, 2007 identified the following:

·         Accounts payable were overstated by $147,029 due to retainage incorrectly reported as outstanding for a contract, although the retainage amounts had already been paid to the retention trust account.

·        A retainage balance of $64,515 was incorrectly reported as outstanding for a contract that was fully settled through a court judgment. (Finding 2, Pages 36-37)

We recommended that the Board perform a review of retainage payables and related contractor accounts payable balances at year-end to ensure that liabilities exist and represent only valid amounts due to contractors. We further recommended the Board design procedures to identify special circumstances affecting retainage balances.

      Gus Behnke, Administrator of the Office of Fiscal Management, provided the responses to our recommendations.

AUDITORS’ OPINION

We performed a financial audit of the Capital Development Board for the year ended June 30, 2007.  A two-year compliance examination and a one-year financial audit will be performed for the period ended June 30, 2008.

Our auditors stated the financial statements of the Capital Development Board for the year ended June 30, 2007 are fairly presented in all material respects.