REPORT DIGEST CAPITAL DEVELOPMENT BOARD FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2021 Release Date: June 2, 2022 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT – TOTAL Category 1: 0 -- 0 -- 0 Category 2: 0 -- 2 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 2 -- 2 FINDINGS LAST AUDIT: 2 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 This digest covers the Capital Development Board’s (CDB) financial audit as of and for the year ended June 30, 2021. SYNOPSIS • (21-01) The Capital Development Board (CDB) failed to provide appropriate oversight over certain accounts for which it has fiduciary responsibility. • (21-02) 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 INADEQUATE FIDUCIARY OVERSIGHT The CDB failed to provide appropriate oversight over certain accounts for which it has fiduciary responsibility. During the audit of CDB’s June 30, 2021 financial statements, we noted 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. Through testing, we noted approximately $326,724 in retainage related to two projects 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 these errors immaterial and did not revise its financial statements. (Finding 1, pages 54-55) 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 financial reporting process, including its fiduciary responsibilities over the retention trust accounts. The CDB accepted our recommendation and stated it continues to make every effort to ensure that retention trust account balances are accurate. The CDB also stated the discrepancies have been addressed and CDB is now performing retention trust confirmations on a quarterly basis to ensure accounts reconcile. INADEQUATE INTERNAL CONTROLS OVER CENSUS DATA 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. Census data is demographic data (date of birth, gender, years of service, etc.) of the active, inactive, or retired members of a pension or OPEB plan. The accumulation of inactive or retired members’ census data occurs before the current accumulation period of census data used in the plan’s actuarial valuation (which eventually flows into each employer’s financial statements), meaning the plan is solely responsible for establishing internal controls over these records and transmitting this data to the plan’s actuary. In contrast, responsibility for active members’ census data during the current accumulation period is split among the plan and each member’s current employer(s). Initially, employers must accurately transmit census data elements of their employees to the plan. Then, the plan must record and retain these records for active employees and then transmit this census data to the plan’s actuary. We noted the CDB’s employees are members of both the State Employees’ Retirement System of Illinois (SERS) for their pensions and the State Employees Group Insurance Program sponsored by the State of Illinois, Department of Central Management Services (CMS) for their OPEB. In addition, we noted these plans have characteristics of different types of pension and OPEB plans, including single employer plans and cost-sharing multiple-employer plans. During testing, we noted 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. We noted the CDB had not performed a Fiscal Year 2019 reconciliation. A partial reconciliation was performed of Fiscal Year 2020, but because CDB utilized the SERS data as of September 15, 2020, not all categories were reconciled. A full reconciliation was performed for Fiscal Year 2021. (Finding 2, pages 56-57) We recommended the CDB continue to work with SERS on reconciling its census data from its underlying records to a report from each plan of census data submitted to the plan’s actuary. The CDB accepted our recommendation and stated it continues to work with SERS toward reconciliation. AUDITOR’S OPINION The auditors stated the financial statements of the CDB, as of and for the year ended June 30, 2021, 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