REPORT DIGEST

CAPITAL DEVELOPMENT BOARD

FINANCIAL AUDIT
For the One Year Ended:
June 30, 1996
and
COMPLIANCE AUDIT
(In accordance with the Single Audit Act of 1984 and OMB Circular A-128)
For the Two Years Ended:
June 30, 1996

Summary of Findings:

Release Date:
May 21, 1997

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• Public Building Fund money was used to pay $496,315 in expenses which did not appear to be allowable uses of this fund.

{Expenditures and Activity Measures are summarized on the next page.}

(in thousands)

FY 1996

FY 1995

FY 1994

• Total Revenues
• Total Expenditures
• Other Sources (Uses) of Financial
  Resources
  Appropriations, Net of Amount Reappropriated
  for Future Year and Net of Amounts Lapsed
  Operating Transfers Out, Net
  Other

$23,806
$252,129



$359,318
$(111,238)
$(19,645)

$11,704
$205,818



$325,164
$(151,409)
$21,719

$14,467
$163,068



$260,949
$(115,032)
$4,122

1996

1995

1994

• ASSETS
  Cash and Cash Equivalents
  Receivables, Net
  Property, Plant, and Equipment

• LIABILITIES
  Payables
  Amounts Retained from Payments to
  Contractors
  Liability for Employee Compensated Absences
  

$25,669
$6,406
$82,517

$46,640

$22,858
$1,286

$20,759
$3,727
$62,017

$63,282

$18,382
$1,142

$16,660
$3,048
$41,501

$43,416

$14,435
$1,017

1996

1995

1994

$354,188
2,343
41
162

$320,623
2,293
41
156

$256,812
2,109
41
156

AGENCY DIRECTOR(S)

Public Building Fund was used to pay unrelated expenses

Agency claims spending authority as the successor agency to the Illinois Building Authority.

Auditors state different law should control

FINDINGS, CONCLUSIONS, AND
RECOMMENDATION

USE OF PUBLIC BUILDING FUND-409

The Capital Development Board (CDB) used $496,315 of Public Building Fund monies to pay unrelated expenses.

The Public Building Fund contains escrow money for the defeased Illinois Building Authority bonds. According to the Capital Development Board Act, the money in this fund may be used only for defeasance of the bonds and related administrative and insurance expenses. Remaining funds are to be transmitted to the State Treasurer who, in turn, is required to transfer any remaining balances into the General Revenue Fund each calendar quarter.

The CDB used this fund to pay unrelated expenses including personal services, travel, statistical services, operation of auto and equipment.

We recommended the CDB spend Public Building Fund money only for the purpose for which the money is intended. (Finding 1, page 8) We first reported a finding in this area in 1994.

According to the response, CDB officials do not agree with our interpretation of the law. Citing a different section of the law, CDB officials hold that the CDB should be allowed to use excess interest for its own administrative costs, since it is the successor agency to the Illinois Building Authority. The response indicates the CDB will continue to operate under this assumption until the revenue source (for the Public Building Fund) is depleted at the end of fiscal year 1997.

Our auditors note that the law cited in the CDB response pertains to the establishment of charges, fees, and rentals on facilities built with bond proceeds. That law would permit the CDB to "pay the principal of and interest on the bonds and a proportion of the administrative expenses of [the agency] as provided for by each lease" (emphasis added). Currently, however, there are no leases. The bonds have been net defeased and the related buildings are no longer administered by the CDB.

As stated by our auditors, we believe a different section of the law [20 ILCS 3105/10.01A (c) and (d)] would now control; The law we cite pertains specifically to the defeased bond escrow account. It would not permit the fund to be used to pay any operating expenses that are unrelated to the administration of the escrow account.

OTHER FINDINGS

The remaining finding and recommendation was less significant and has been given appropriate attention by Agency management. We will review progress toward implementation of our recommendation during our next audit. Agency responses were provided by Ms. Sharon Stapleton, chief auditor.

AUDITORS' OPINION

Our auditors stated that the financial statements of the Capital Development Board for the year ended June 30, 1996 are fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:JHL:pp

SPECIAL ASSISTANT AUDITORS

Sikich Gardner & Co, LLP were our special assistant auditors for this engagement.

DIGEST FOOTNOTE

#1 USE OF PUBLIC BUILDING FUND - Previous Agency Responses

1994: (response as provided for the 1994 audit report) The CDB was faced with the prospect of a 2 percent appropriation transfer bill to cover the shortfalls within (certain) appropriation lines items in the General Revenue and Revolving funds or simply using the Public Building Fund money. Given that the end of the fiscal year was approaching, it was determined that using the Public Building Fund money would provide a more timely means of paying the expenditures and simplify administrative matters.

1994: (updated response to the 1994 finding, as provided in the Legislative Audit Commission Review No. 3768): " CDB's enabling legislation provides for the CDB to assume all the duties and powers of the Illinois Building Authority (the Authority) (including the power to) pay the principal of and interest on the bonds and a proportion of the administrative expenses of the Authority. Therefore, as the CDB assumed all of the Authority's duties and the Authority was allowed to use the excess interest for administrative costs, the CDB in turn is allowed to use the excess interest for administrative costs. Thus, the expenditures noted in the finding were legitimate costs."