REPORT DIGEST CAPITAL DEVELOPMENT BOARD FINANCIAL AUDIT for the Year Ended June 30, 2014 Compliance Examination for the Two Years Ended June 30, 2014 Release Date: February 19, 2015 FINDINGS THIS AUDIT: 7 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 2 -- 5 -- 7 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 5 -- 7 FINDINGS LAST AUDIT: 9 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 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 and Full Report are also available on the worldwide web at www.auditor.illinois.gov SYNOPSIS • (14-1) The Board did not have adequate controls over its revenue and receipts. • (14-2) The Board failed to publish required procurement information. • (14-3) The Board had inadequate control over property and equipment. • (14-6) The Board did not process payroll accurately for employees who qualified for specialized skill pay. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER REVENUE AND RECEIPTS The Board did not have adequate controls over its revenue and receipts. During our review of 80 receipts totaling $32,021,453 we noted the following: • Receipts for 19 contract administration fees (CAF) were more than 3% of the contract amount and the excess totaled $296,069. • Five receipts totaling $293,000 were deposited 1 day late. (Finding 1, pages 11-12) We recommended the Board strengthen its controls over revenue and cash receipts to ensure fees are collected and deposited in accordance with State statute. Deposits should also be made on a timely basis to maximize interest earned. Board officials agreed with the finding and recommendation and stated that the Board has changed the method for calculating the CAF to ensure compliance with the statutory limit. Further, the Board continues to make every effort to ensure that deposits are made on a timely basis. REQUIRED PROCUREMENT INFORMATION NOT PUBLISHED The Board did not fully comply with the Illinois Procurement Code’s (Code) provisions for publishing procurement information in the Illinois Procurement Bulletin (Bulletin). We noted annual Business Enterprise Program reports were not posted on the online electronic Bulletin within 10 business days after submission of the report to the Business Enterprise Council for Minorities, Females, and Persons with Disabilities during fiscal years 2013 and 2014. The reports were posted 227 and 549 days late. (Finding 2, pages 13-14). This finding has been repeated since 2008. We recommended the Board work with the Chief Procurement Officer in implementing procedures to ensure complete and consistent procurement information is published as required by the Code. Board officials agreed with the finding and recommendation and stated that the Business Enterprise Program reports have been posted onto the Board’s electronic Bulletin. The Board will continue to work with the Chief Procurement Officer to ensure the reports are posted as required. (For the previous Board response, see Digest Footnote #1.) INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT The Board did not have adequate controls over its property and equipment. We noted the following: • The FY 2013 Annual Certification of Inventory did not include the supporting details of all equipment items costing over $500 which are required to be reported to the Department of Central Management Services (DCMS). Additionally, we noted 61 equipment items totaling $12,347 with acquisition costs under $500 but are highly subject to theft that were not identified and reported on the FY 2013 and FY 2014 Annual Certifications of Inventory. • During our review of 25 equipment deletions made during FY 2013 and FY 2014, we noted the following: ? 12 (48%) equipment items sampled with a total value of $44,648 were deleted from the Common System Inventory (CDB’s property records) 9 to 157 days prior to approval from DCMS. ? Four (16%) sampled equipment items which were traded in totaling $506,160 were not reported to and approved by DCMS. ? One (4%) sampled equipment item amounting to $1,525 for surplus was not properly reported to DCMS. ? One (4%) sampled equipment item which was transferred out amounting to $7,945 did not have the necessary information (historical cost, purchase price and date) reported to the receiving agency. • One (4%) of 25 equipment additions reviewed for FY 2014 and FY 2013 erroneously included rental charges amounting to $1,898 in the value of the property reported on the Common Inventory System and Quarterly Agency Report of State Property (C-15) sent to the Office of the State Comptroller. CDB Management subsequently updated the property records. (Finding 3, pages 15-17). We recommended Board management ensure submission of a complete inventory of equipment with DCMS. We also recommended Board management adhere to its procedures to ensure that property and equipment records are accurately maintained and updated. Periodic physical inventories should be conducted to ensure existence of equipment, and property records should be updated with results of the inventory. In addition, Board management should ensure proper completion of the quarterly C-15 Reports. Board officials agreed with the finding and recommendation and stated that the Board will strengthen controls to ensure the submission of a complete inventory of equipment with DCMS, to ensure that property and equipment records are accurately maintained and updated, and to ensure proper completion of the quarterly C-15 Reports. INADEQUATE CALCULATION OF SPECIALIZED SKILL PAYROLL The Board did not process payroll accurately for employees who qualified for specialized skill pay. Certain CDB employees with specialized skills are qualified to receive 5% of their monthly base salary in addition to their current rate of pay as set forth in a Memorandum of Understanding (MOU) with the Union. Commencing with the January 1, 2012 pay period, CDB began calculating the base salary for 5 employees with specialized skills differently than it had in the past. Rather than treating specialized skill pay as an add- on to base pay, CDB increased each employee’s base pay amount by the amount of specialized skill pay given in prior periods. This higher base pay amount then became the base used in calculating future specialized skill pay. This resulted in employees receiving an additional $84,938 during FY13 and FY14. In FY12 the employees received an additional $14,110. Further, in FY15 the employees received an additional $11,897. Upon notification by the auditors, Board personnel performed a recalculation of base pay and determined there were overpayments. (Finding 6, pages 21-22). We recommended the Board process payroll accurately. Board officials agreed with the finding and recommendation and stated that a process will be implemented to have the Fiscal Unit review the payroll calculations for all changes in employees’ earnings prior to their effective dates. Also, the Board has taken steps to address the overpayments noted. OTHER FINDINGS The remaining findings are reportedly being given by the Board. We will review the Board’s progress toward implementation of our recommendations during our next examination. AUDITOR’S OPINION Our special assistant auditors stated the Capital Development Board’s financial statements as of and for the year ended June 30, 2014 are fairly presented in all material respects. WILLIAM G. HOLLAND Auditor General WGH:MEG SPECIAL ASSISTANT AUDITORS Adelfia LLC were our Special Assistant Auditors for this engagement. DIGEST FOOTNOTES #1 – REQUIRED PROCUREMENT INFORMATION NOT PUBLISHED 2012 The Board agrees with the finding and recommendation. Procedures have been reviewed and processes implemented to ensure that complete and consistent procurement information is published as required.