REPORT DIGEST

 

OFFICE OF THE COMPTROLLER

FISCAL OFFICER RESPONSIBILITIES

 

FINANCIAL AUDIT and COMPLIANCE EXAMINATION
For the Year Ended: June 30, 2010

 

Summary of Findings:

Total this audit: 4

Total last audit:  2

Repeated from last audit: 1

 

Release Date: May 19, 2011

 

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

­­­­­­­­­­­____________________________

 

INTRODUCTION

 

This digest covers our financial audit and compliance examination of the State of Illinois Office of the Comptroller – Fiscal Officer Responsibilities for the year ended June 30, 2010. 

 

SYNOPSIS

 

• The State of Illinois Office of the Comptroller (Office) did not make all statutorily mandated transfers from the General Revenue Fund within established timeframes, as required.

 

• Pursuant to Public Act 96-44, the Office transferred general obligation bond proceeds from the Coal Development Fund for general operating expenses of the State of Illinois.  The transfer of the bond proceeds for operating expenses of the State represents noncompliance with the terms of the bond sale order related to the issuance of State of Illinois general obligation bonds.

 

• The Office did not record transfers from the Capital Projects Fund due to the General Revenue Fund at the statutorily required amounts as a result of insufficient revenues in the Capital Projects Fund.

 

• The Office did not repay loans totaling $275.7 million made from the Budget Stabilization Fund by June 30, 2010 as required, nor was a liability recorded in the General Revenue Fund for its obligation to repay the loans.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

LATE PAYMENT OF STATUTORILY MANDATED TRANSFERS

 

 

The Office of the Comptroller (IOC) did not make all transfers from the General Revenue Fund within the established timeframes, as required by statute.

 

The Office processed transfers between 31 to 525 days after the mandated transfer date for a total of $2.0 billion in FY10.  Failure to make inter-fund transfers within applicable timeframes is in noncompliance with State law and might result in delayed use of appropriated funds.

 

IOC officials stated the late payment of transfers occurred because of cash management decisions and prioritization required due to the lack of available cash in the State Treasury. (Finding No. 10-1, page 10)

 

We recommended the Office make transfers within timeframes established by law.  If there is a lack of available funds in the State Treasury, we recommended the Office of the Comptroller continue in its efforts to make transfers as timely as possible.

 

Office of the Comptroller officials concurred with the recommendation.

 

NONCOMPLIANCE WITH GENERAL OBLIGATION FINANCING PROVISIONS

 

In accordance with Public Act 96-44, the Office of the Comptroller transferred general obligation bond proceeds from the Coal Development Fund for general operating expenses of the State of Illinois (State), which represents noncompliance with the terms of the bond sale order related to the issuance of State of Illinois general obligation bonds.

 

As authorized by the General Obligation Bond Act (Bond Act) (30 ILCS 330/7) the State issued general obligation bonds to provide funds for coal and energy development as well as certain other capital purposes.  During fiscal year 2010, the State issued general obligation bonds totaling $400 million.  Pursuant to the Bond Act and the terms of the bond issuance, $20.7 million bond proceeds was deposited into the Coal Development Fund.  During fiscal year 2010, the Comptroller executed quarterly transfers totaling $320 thousand paid from the Coal Development Fund to the General Revenue Fund for operating expenses of the State.

 

The Comptroller made the above described transfers pursuant to the mandate from Public Act 96-44 which directed these, and other transfers be made “in order to maintain the integrity of special funds and improve stability in the General Revenue Fund”. Comptroller staff stated that they contacted the Governor’s Office of Management and Budget before the transfers were completed and discussed seeking authority to initiate a transfer reversal. The Comptroller also footnoted the transfers on its monthly bond reports. 

 

Use of bond proceeds for purposes not in compliance with and authorized by the Bond Act and the terms of the debt issuance could result in accelerated repayment if required by the bondholders and could also jeopardize the State’s ability to obtain future financing.

 

We recommended that the Office of the Comptroller coordinate with the Director of the Governor’s Office of Management and Budget regarding possible resolutions to the transfers made to the General Revenue Fund, and if necessary, seek a formal opinion from the Attorney General. (Finding Code No.10-2, pages 11-12)

 

Office of the Comptroller officials concurred with the recommendation.

 

NONCOMPLIANCE WITH MANDATE TRANSFER REQUIREMENT FOR THE CAPITAL PROJECTS FUND

 

The Office of the Comptroller did not record transfers from the Capital Projects Fund due to the General Revenue fund during the year ended June 30, 2010, at the statutorily required amounts as a result of insufficient revenues of the Capital Projects Fund.

 

During fiscal year 2010, the Capital Projects Fund was created and the legislation creating the fund (30 ILCS 105/6z-77) also required specific amounts of transfers to be made from the Capital Projects Fund to the General Revenue Fund.  For fiscal year 2010, $245,178,200 of transfers were mandated to be paid to the General Revenue Fund, however, only $110,294,550 were actually recorded and paid.  The remaining unpaid amount of $134,883,650 at June 30, 2010 was not recorded in the State’s accounting records as being owed from the Capital Projects Fund to the General Revenue Fund.

 

Comptroller personnel stated that the revenue sources of the Capital Projects Fund were not at the level anticipated when the legislation was enacted.  Two of the revenue sources for the Capital Projects Fund (legalized video gambling and expanded lottery sales) did not begin in fiscal year 2010 as originally anticipated.  Total revenue for the Capital Projects Fund for fiscal year 2010 was only $174.1 million.  (Finding Code No. 10-3, pages 13).

 

We recommend the Office of the Comptroller record all required Capital Projects Fund transfers as mandated by the General Assembly.

 

Office of the Comptroller officials concurred with the recommendation.

 

FAILURE TO REPAY BUDGET STABILIZATION FUND

 

The Office of the Comptroller (Comptroller) did not repay loans totaling $275.7 million made from the Budget Stabilization Fund (Fund) by June 30, 2010, as required, nor was a liability recorded in the General Revenue Fund for its obligation to repay the loans.

 

The Budget Stabilization Fund was established to provide resources as a means for addressing budgetary shortfalls.  The Comptroller is authorized to make transfers from the Fund to the General Revenue Fund to meet cash flow deficits resulting from timing variations between disbursements and the receipt of revenues.  All such transfers are required to be repaid by June 30 of each fiscal year (30 ILCS 105/6z-51).   Transfers from the Fund were deemed necessary and executed by the Comptroller for fiscal year 2010.  However, the Fund was not repaid the $275.7 million by June 30, 2010. Furthermore, a liability for the obligation of the General Revenue Fund to repay the Budget Stabilization Fund was not recorded in the Statewide Accounting Management System (SAMS).

 

Comptroller management stated that the Fund was not repaid because of the severe shortage of available funds with which to pay immediate obligations of the State.  The Budget Stabilization Fund was recorded in July, 2010 and repaid in December, 2010. (Finding Code No. 10-4, pages 14).

 

We recommended the Office of the Comptroller ensure that monies transferred from the Budget Stabilization Fund are repaid annually by June 30 as required.  Furthermore, the obligation to repay the loan should be reported in SAMS.

 

Office of the Comptroller officials concurred with the recommendation.

 

AUDITORS’ OPINION

 

We conducted a compliance examination of the Comptroller's Fiscal Officer Responsibilities for the year ended June 30, 2010 as required by the Illinois State Auditing Act.

 

Our auditors stated the fund balances at June 30, 2010, and the revenues and expenditures for the year then ended relating to the State of Illinois, Office of the Comptroller - Fiscal Officer Responsibilities’ Traditional Budgetary Financial Report, are fairly presented in all material respects.  The auditors noted the financial statements have been prepared on a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

 

The budgetary basis fund balance of the General Funds decreased by $2,421,273,151 during the fiscal year ended June 30, 2010.  At June 30, 2010, the budgetary basis fund balance of the General Funds was a deficit of $6,094,102,990.

 

 

WILLIAM G. HOLLAND

Auditor General

 

WGH:CML:cl

 

SPECIAL ASSISTANT AUDITORS

 

Sikich LLP were our Special Assistant Auditors for this engagement.