REPORT DIGEST

REPORT DIGEST

ENVIRONMENTAL PROTECTION AGENCY

FINANCIAL AUDIT

For the Year Ended:

June 30, 2003

Summary of Findings:

Total this audit* 1

Total last audit** 4

Repeated from last audit 0

*Financial Statement Audit only for year ended 6/30/03

**Compliance Audit for two years ending 6/30/02

Release Date:

March 4, 2004

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 TDD (217) 524-4646

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

INTRODUCTION

We performed a financial audit of the Water Revolving Fund of the Illinois Environmental Protection Agency for the year ended June 30, 2003. A two year compliance audit and a one year financial audit of the Water Revolving Fund will be performed for the period ended June 30, 2004.

SYNOPSIS

The Agency’s systems and procedures in place did not accurately calculate the federal grant receivable or the corresponding loans receivable from local governments and due to local governments payable balances in accordance with generally accepted accounting principles and federal regulations. We reported this finding as a material weakness.

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

ENVIRONMENTAL PROTECTION AGENCY

FINANCIAL AUDIT – WATER REVOLVING FUND

STATEMENTS OF NET ASSETS (Amounts in thousands)	FY 2003
Assets Current Assets Cash and Cash Equivalents Investments #9; Accrued interest on loans and investments Loans and notes receivable, net Due from federal government Restricted assets – loans receivables Total current assets Noncurrent Assets Investments Loans and notes receivable, net long-term Capital assets being depreciated, net Other noncurrent assets Restricted assets – loans receivable Total noncurrent assets TOTAL ASSETS Liabilities Current liabilities Accounts payable and accrued liabilities Intergovernmental payables Due to other funds Due to component units Current portion of long-term obligations Compensated absences, current Total current liabilities Noncurrent liabilities Noncurrent portion of long-term obligation Compensated absences, long-term Total noncurrent liabilities TOTAL LIABILITIES Net Assets Invested in capital assets Restricted for Debt Service Other purposes Unrestricted TOTAL NET ASSETS Operating Revenues Operating Expenses Operating Income Total Non-operating Revenues (Expenses) Income before transfers Transfers (to) from other funds Changes in net assets Total net assets, July 1, as originally reported Prior period adjustment Total net assets, July 1, as restated Total net assets, June 30	$306,243 2,904 32,120 66,100 38,000 23,445 $468,812 $70,554 917,451 170 630 233,945 1,222,750 $1,691,562 $2,638 51,019 98 57 8,350 338 $62,500 $146,685 559 147,244 $209,744 $170 73,458 1,286,394 121,796 $1,481,818 $38,169 9,719 $28,450 123,223 $151,673 20,467 $172,140 1,458,846 (149,168) $1,309,678 $1,481,818
AGENCY DIRECTOR(S)
During Audit Period and Currently: Renee Cipriano

Inadequate systems and procedures in place to accurately calculate federal receivable

FINDINGS, CONCLUSIONS, AND

RECOMMENDATIONS
CURRENT SYSTEMS AND PROCEDURES DID NOT ACCURATELY ESTIMATE FEDERAL RECEIVABLE

The Agency’s systems and procedures in place did not accurately calculate the federal grant receivable or the corresponding loans receivable from local governments and due to local governments payable balances in accordance with generally accepted accounting principles (GAAP) and federal regulations.

The federal grant receivable as calculated by the Agency’s Bureau of Water Infrastructure Assistance unit (BOW) as reported to the Illinois Office of the Comptroller in the original GAAP package for the Water Revolving Loan Fund was overstated by $112 million and the loans receivable and due to local governments payable balances were both understated by $51 million. Additionally, the Agency’s beginning of the year net assets was overstated by $149 million. The fund is a major proprietary fund of the State and is separately presented in the State’s basic financial statements.

We recommended the Agency revise its systems and procedures to determine the federal grant receivable and the corresponding loans receivable from local governments and due to local governments payable based on actual and estimated incurred costs as of the end of each fiscal year. We also recommended the Agency consider improving its system capabilities to track the necessary local government data incurred information on their computer system. (Finding 1, pages 24-26)

Agency officials accepted our recommendation and stated they will continue to monitor both the federal receivable/payable amounts to accurately report the amount on future financial statements. The Agency also agreed to investigate an automated system to provide verifiable data.

AUDITORS’ OPINION

Our special assistant auditors stated that the Water Revolving Fund of the Illinois Environmental Protection Agency as of and for the year ended June 30, 2003 is fairly stated in all material respects.

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WILLIAM G. HOLLAND, Auditor General

WGH:JSC:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were PTW & Co.