REPORT DIGEST

ENVIRONMENTAL PROTECTION AGENCY -
WATER REVOLVING FUND

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  June 1, 2022

FINDINGS THIS AUDIT:  2

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

FINDINGS LAST AUDIT: 1

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

INTRODUCTION

SYNOPSIS

• (21-01) The Agency failed to
exercise adequate controls over
financial reporting to ensure the
draft financial statements of the
Water Revolving Fund, (Fund 270),
provided to the auditors were properly
supported and free of errors.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

INADEQUATE CONTROLS OVER FINANCIAL
REPORTING

The Agency failed to exercise adequate
controls over financial reporting to
ensure the draft financial statements
of the Water Revolving Fund, (Fund
270), provided to the auditors were
properly supported and free of errors.

During testing, we noted the
following:

• The loan data file generated from
the Agency’s loan tracking system, as
of June 30, 2021, was not adjusted to
correctly classify loans based on the
December 2020 bond issuance. This
resulted in the overstatement of Loans
and Notes Receivable, Long-Term by
$1.036 billion and a corresponding
understatement of Restricted Assets –
Loans and Notes Receivable, Long-Term
by the same amount. An adjusting entry
was required.

• The Agency recorded capitalized
interest for three loans which were
not yet completed and due to be
amortized as of June 30, 2021.  This
resulted in an overstatement of Loans
and Notes Receivable, Long-Term by
$405 thousand and Restricted Assets –
Loans and Notes Receivable, Long-Term
by $1,097 thousand and overstatement
of Interest and Other Investment
Income by $1,502 thousand.  An
adjusting entry was required.

• Three of 18 (17%) disclosures in the
draft Notes to Financial Statements
did not agree to supporting
documentation. (Finding 1, pages
53-54)

We recommended the Agency strengthen
its internal controls over the
financial reporting process, including
an adequate review of financial
statements, notes to the financial
statements, and its supporting
documentation to ensure accurate
submission of financial data.

Agency officials agreed with the
finding and stated the issue was
resolved with management’s
implementation of a written procedure.

OTHER FINDING

The remaining finding pertains to the
lack of a reconciliation of the
Agency’s census data submitted to its
pension and other postemployment
benefits plans that were used in the
fund financial statements.  We will
review the Agency’s progress towards
the implementation of our
recommendations in our next financial
audit.

AUDITOR’S OPINION(S)

The auditors stated the financial
statements of the Agency’s Water
Revolving Fund as of and for the year
ended June 30, 2021, are fairly stated
in all material respects.

This financial audit was conducted by
Roth and Company, 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:PH