REPORT DIGEST

CAPITAL DEVELOPMENT BOARD

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  June 16, 2021

FINDINGS THIS AUDIT:  2

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  2 -- 0 -- 2
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  2 -- 0 -- 2

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

• (20-01) The Capital Development Board
(CDB) did not identify or prevent
misstatements in the Generally Accepted
Accounting Principles (GAAP) reporting
packages submitted to the Office of the
State Comptroller and the draft financial
statements provided to the auditors.
Additionally, CDB failed to provide
appropriate oversight over certain
accounts for which it has fiduciary
responsibility.
• (20-02) The CDB did not have adequate
internal control over reporting its
census data and did not have a
reconciliation process to provide
assurance census data submitted to its
pension and other postemployment benefits
(OPEB) plans was complete and accurate.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

FINANCIAL REPORTING WEAKNESSES

The Capital Development Board (CDB) did
not identify or prevent misstatements in
the Generally Accepted Accounting
Principles (GAAP) reporting packages
submitted to the Office of the State
Comptroller and the draft financial
statements provided to the auditors.
Additionally, CDB failed to provide
appropriate oversight over certain
accounts for which it has fiduciary
responsibility.

During the audit of the CDB’s June 30,
2020 financial statements, we noted the
following errors regarding the reporting
of financial information.

• CDB records accounts payable
reappropriated projects and related
expenditures in its financial statements
based on vouchers processed after the
fiscal year end.  The amounts are pro-
rated for the period covering the current
fiscal year by applying an estimation
multiplier derived from methodologies and
historical analyses performed by the CDB.
During our testing of the completeness of
CDB’s accounts payable estimate, we
determined CDB failed to record $10.325
million of liabilities related to fiscal
year 2020 processed after June 30, 2020.
The failure to recognize these vouchers
in its accounts payable calculation
resulted in an under accrual of accounts
payable in CDB’s GAAP reporting forms and
draft financial statements, as well as an
adjusting entry proposed by the auditors.
CDB recorded the adjustment to account
for the additional accounts payable at
June 30, 2020.

• During our testing of significant
journal entries, we noted the following
entries were made by the Illinois Office
of Comptroller (IOC) during its review
and acceptance of CDB’s submitted GAAP
reporting forms. An error associated with
the prior year reporting of transfer
activity within the CDB Special Projects
Fund (0170) was identified and corrected
in fiscal year 2020. Rather than restate
the beginning net asset balances within
the fund, the correction was recorded as
fiscal year 2020 activity as an
adjustment of $5 million to reverse a
prior year reimbursement type transaction
that was misclassified as a transfer, and
prematurely recorded in fiscal year 2019.
The Department recorded the adjustment to
reverse the entry made during fiscal year
2020 and restate the beginning net assets
at July 1, 2019 for this activity.

• CDB allows contractors for projects
that meet certain criteria to establish a
trust agreement in which the retainage
withheld for that project is deposited
into a bank account that can only be
accessed by CDB. Throughout testing, we
noted approximately $1.8 million in
retainage related to one project had been
erroneously deposited into the
contractor’s operating account rather
than the retention trust account. The
retention trust accounts are reported on
CDB’s financial statements as cash and
cash equivalents in the nonmajor
governmental funds. CDB determined this
error immaterial and did not revise its
financial statements. (Finding 1, pages
51-53)

We recommended the CDB implement
procedures to ensure GAAP reporting
packages and financial statements are
prepared in a complete and accurate
manner. These procedures should address
all elements of CDB’s financial reporting
process.

CDB accepted the recommendation and
stated it continues to make every effort
to ensure that GAAP reporting packages
and financial statements are prepared in
a complete and accurate manner.

INADEQUATE INTERNAL CONTROLS OVER CENSUS
DATA

CDB did not have adequate internal
control over reporting its census data
and did not have a reconciliation process
to provide assurance census data
submitted to its pension and other
postemployment benefits (OPEB) plans was
complete and accurate.

During testing, some of the more
significant issues we noted included the
following:

1) The CDB had not performed an initial
complete reconciliation of its census
data recorded by SERS and CMS to its
internal records to establish a base year
of complete and accurate census data.

2) One of 80 (1%) employees tested did
not contribute the proper contribution
rate to SERS during Fiscal Year 2019, the
census data accumulation year for SERS’
actuarial valuation used to prepare the
CDB’s Fiscal Year 2020 financial
statements. We noted the employee was
contributing 12.5% of their total
compensation under the alternative
retirement formula for employees without
Social Security, as opposed to 4% of
their total compensation under the
regular retirement formula for employees
with Social Security. We considered the
impact of this error and determined it
did not materially impact the CDB's
financial statements.

3) One of 80 (1%) employees tested had a
discrepancy between the employee's
compensation where the CDB's records
reflected wages of $4,780 per month as
opposed to SRS' records of $5,067 per
month. We considered the impact of this
discrepancy and determined it did not
materially impact the CDB's financial
statements. (Finding 2, pages 54-56)

We recommended the CDB implement controls
to ensure employee contributions to SERS
are complete, accurate, and in accordance
with the Illinois Pension Code. In
addition, we recommended the CDB
implement controls to ensure total
compensation paid to each employee is
fully documented and supported within the
CDB’s records.  Further, we recommend the
CDB work with SERS and CMS to develop an
annual reconciliation process of its
active members’ census data from its
underlying records to a report from each
plan of census data submitted to the
plan’s actuary. After completing an
initial full reconciliation, the CDB may
limit the annual reconciliations to focus
on the incremental changes to the census
data file from the prior actuarial
valuation, provided no risks are
identified that incomplete or inaccurate
reporting of census data may have
occurred during prior periods.

CDB accepted the recommendations.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Board as of and for the
year ended June 30, 2020, are fairly
stated in all material respects.

This financial audit was conducted by
Sikich LLP.

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:MEG