REPORT DIGEST ENVIRONMENTAL PROTECTION AGENCY WATER REVOLVING FUND FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2019 Release Date: February 11, 2020 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 FINDINGS LAST AUDIT: 0 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 This digest covers the financial audit of the Agency’s Water Revolving Fund as of and for the year ended June 30, 2019. Our next engagement will include a State Compliance Examination of the entire Agency for the two years ending June 30, 2020. SYNOPSIS • (19-01) The Agency failed to exercise adequate controls over financial reporting to ensure 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 Illinois Environmental Protection Agency (Agency) failed to exercise adequate controls over financial reporting to ensure draft financial statements of the Water Revolving Fund, Fund 270, provided to auditors are properly supported and free of errors. During our testing, we noted the following: • The Agency made an incorrect entry to reverse prior year accrual entries to the General and Administrative Expenses. The entry resulted in an understatement of General and Administrative Expenses by $1,613 thousand, an understatement of Interest and Investment Income, Non-Operating by $859 thousand and an overstatement of Other Expenses by $754 thousand. An adjusting entry was required. Additionally, $626 thousand of this journal entry was not adequately supported. • Three of 16 (19%) disclosures in the draft Notes to Financial Statements did not agree to supporting documentation. We recommended the Agency strengthen its internal controls over the financial reporting process, including a timely and adequate review of financial statements and notes to the financial statements, to ensure accurate submission of financial data. Agency officials agreed with the recommendation and stated the Agency will assure a more proactive approach to quarterly financial statements and will assure established GAAP financial procedures are followed. AUDITOR’S OPINION The auditors stated the financial statements of the Agency’s Water Revolving Fund as of and for the year ended June 30, 2019 are fairly stated in all material respects. This financial audit was performed by E.C. Ortiz & Co. 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