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INTRODUCTION
The mission of the Authority
is to foster economic development to the public and private institutions that
create and retain jobs, and improve the quality of life in Illinois by
providing access to capital.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
NONCOMPLIANCE WITH THE STATE OFFICERS AND MONEY DISPOSITION ACT
The Authority did not have
sufficient collateralization for cash deposits held at three financial
institutions.
The Authority had total
uncollateralized cash deposits at June 30, 2005 of $1,324,659. The Authority
had $400,839 of uncollateralized deposits at one bank for the entire fiscal
year, $900,000 of uncollateralized deposits at another bank for six months of
the fiscal year, and $23,820 of uncollateralized deposits at a third bank for
one month of the fiscal year.
The State Officers and
Employees Money Disposition Act (30 ILCS 230/2c) states, “Whenever funds
deposited with a bank or savings and loan association exceed the amount of
federal deposit insurance coverage, a bond, pledged securities, or other
eligible collateral shall be obtained.”
Management indicated that
the uncollateralized deposits at two of the banks were due to improper
collateral agreements when the funds were initially deposited and the
uncollateralized deposits at the third bank were due to a fluctuation in the
market value of the pledged securities.
(Finding 1, page 9)
We recommended the
Authority review the procedures for monitoring deposit collateralization and
implement controls to secure collateralization agreements prior to opening
deposit accounts with balances over the FDIC limit.
Authority management
accepted our recommendation and responded that they had identified the lack
of sufficient collateral on specific deposits and reported it to the auditors. Authority management reported that a
monthly review process has been implemented to help ensure that proper
collateral levels are maintained in compliance with applicable mandates.
NONCOMPLIANCE WITH THE PERSONNEL CODE – INCENTIVE BASED COMPENSATION
The Authority paid
$267,447 in bonuses during fiscal year 2005 to 23 employees based on an
Incentive Based Compensation Plan.
During our testing of
personal services, we determined that the Authority was making payments to 23
employees based on the Authority’s Incentive Based Compensation Plan. The Incentive Plan is calculated based on
individual performance and the Authority’s performance. The Plan’s administrative rules contain a
schedule of ranges and percentages for determining the incentive pay. The Authority paid a total of $267,447 for
fiscal year June 30, 2005 to 23 eligible employees according to the Incentive
Plan.
The Personnel Code “Increases in Pay” (80 Ill. Adm. Code
310.80) establishes the guidelines for increasing an employees pay. Approved methods include a satisfactory
performance increase, a superior performance increase, promotion and
reallocation, reevaluation and adjustments that require the prior approval of
the Director of Management Services (DCMS).
There is no provision in the Personnel Code for the payment of
incentive pay or bonuses. (Finding 2, pages 10-11)
Management indicated the
Authority is exempt from the Personnel Code, therefore, allowing the
Incentive Based Compensation Plan.
We recommended that the Authority
conform its personnel practices to governing law. Further, the Authority should seek an opinion from the Attorney
General to determine if the Authority is exempt from the Personnel Code.
Authority management
accepted our recommendation but did not accept our finding. Authority management stated that the
Illinois Finance Authority Act (20 ILCS 3501/801) exempts the Authority from
the Personnel Code because it grants the Authority its own power to establish
its own system of personnel administration.
However, Authority management accepted our recommendation to seek a
legal opinion from the Attorney General’s Office regarding the applicability
of the Personnel Code to the Authority.
In an auditors’ comment
the auditors stated that neither the Illinois Finance Act nor the Personnel
Code specifically excludes the Illinois Finance Authority from the Personnel
Code. Under the Personnel Code all
positions of employment in the service of the State of Illinois are subject
to the provisions of the Personnel Code unless exempted either in the
Personnel Code or in another law (20 ILCS 415/4). The auditors continue to believe such exemption must be express
and not implied. The auditors
continue to recommend the Authority seek a formal opinion from the Attorney
General if it continues to disagree.
FAILURE TO REPORT REVENUE BOND INFORMATION TO THE ILLINOIS OFFICE OF THE
COMPTROLLER
The Authority did not report required revenue bond
information to the Illinois Office of the Comptroller (Comptroller).
During the fiscal year
ended June 30, 2005, there were 818 conduit debt bonds with a total principal
balance outstanding of $20.4 million that were in the care of the Authority.
The Comptroller prepared a listing of revenue bonds that had delinquent reporting
activity. A review of that listing,
dated August 31, 2005, resulted in the following conditions being noted:
·
191 interest and
98 principal notice of payments were not reported in a timely manner.
·
385 interest and
68 principal notice of payments were past due and were not reported.
·
10 prospectuses
and 9 maturity schedules were not received in a timely manner.
Management indicated that
there was miscommunication between the bond trustees and the Authority in
regards to the reporting requirements of the bond trustees. (Finding 3, page 12)
We recommended the Authority improve communications with the bond
trustees and strengthen internal controls to ensure the Comptroller receives
the required revenue bond reporting information in a timely manner.
The Authority accepted our
recommendation and indicated that it has implemented a system to improve
reporting to the Comptroller.
NONCOMPLIANCE WITH THE ILLINOIS
PROCUREMENT CODE AND STATEWIDE ACCOUNTING MANAGEMENT SYSTEM PROCEDURES
The Authority did not have adequate procedures in place to
ensure compliance with the Illinois Procurement Code and Statewide Accounting
Management System (SAMS) procedures relating to purchasing, contractual
agreements and real estate lease agreements.
The Illinois Finance
Authority entered into 44 contractual agreements (contracts) during the audit
period. Of the 44 contracts we noted the following:
·
10 contracts
(23%) had missing required contract content, such as contracts were not dated
and signed by the contractor or contractors doing business under another name
that was not clearly specified in the contract;
·
6 contracts (14%)
required to be filed with the Illinois Office of the Comptroller
(Comptroller) were not filed with the Comptroller;
·
6 contracts (14%)
subject to competitive bidding were entered into without undergoing the
competitive selection process;
·
6 contracts (14%)
required to be published in the Illinois Procurement Bulletin were not
published;
·
Disclosures of
Financial Interest were not obtained for 8 contracts (18%) requiring such
disclosure;
During our detailed
testing of four real estate lease agreements (leases), we noted the
following:
·
1 out of 4
(25%) leases was not filed with the Comptroller;
·
1 lease (25%)
stated a rate of $13.91 per square foot, which was effective 04/01/05, while
the voucher that was processed reflected a $13.50 per square foot rate.
Management indicated that
many of the contracts subject to this finding were put in place before the
Authority had appropriate procedures in place to ensure all regulations were
followed. As these contracts expire, the newer contracts will be done within
appropriate procurement regulations.
(Finding 4, pages 13-14)
We recommended that the
Authority implement controls and procedures to ensure compliance with the
Illinois Procurement Code and SAMS procedures when procuring contractual
services.
The Authority accepted our
recommendation and stated that it has implemented procedures to comply with
the Procurement Code and has hired a Compliance Officer to ensure the
requirements of the Procurement Code are met.
UNTIMELY SUBMISSION OF RECEIPT DEPOSIT TRANSMITTALS WITH THE ILLINOIS
OFFICE OF THE COMPTROLLER
The Authority failed to
timely submit Receipt Deposit Transmittals (C-64 Form) with the Illinois
Office of the Comptroller (Comptroller).
During our examination of
revenues and receipts, we noted that the Springfield office of the Illinois
Finance Authority (Authority) did not forward any deposit receipts to the
Chicago office until April.
Therefore, the Authority did not submit Form C-64 to the Comptroller
for the deposit receipts between September 2004 and March 2005. A C-64 Form was submitted on April 26,
2005 to catch up for receipts from September 2004 through March 2005. The following are the monthly receipts that
were included on the C-64 submitted on April 26, 2005:
·
September - $2,283.54
·
October - $2,283.54
·
January - $20,229.25
·
March - $4,567.08
Authority personnel
stated that they were not aware of this filing requirement. (Finding
7, page 18)
We recommended that the
Authority implement procedures to ensure that all Receipt Deposit Transmittal
Form C-64’s are filed on time with the Office of the State Comptroller.
The Authority accepted our recommendation and
indicated that it has implemented procedures to file the C-64 Forms on a
timely basis.
VOUCHER PROCESSING CONTROLS NEED IMPROVEMENT
The Authority did not have adequate controls in place to
ensure all payment vouchers were processed in accordance with established
procedures. (Finding 5, pages 15-16)
We recommend that the
Authority document the receipt date on all incoming invoices and continue to
strengthen controls over voucher processing to ensure compliance with State
statute, administrative rule, Authority policies and procedures and generally
accepted accounting principles.
The Authority accepted our
recommendation and stated that it has implemented a more stringent process to
date invoices when they are received.
OTHER FINDINGS
The remaining findings are reportedly being
giving attention by the Authority. We
will review progress toward implementing our recommendations in our next
audit of the Authority.
Ms. Jill Rendleman, Acting
Executive Director of the Illinois Finance Authority, provided the
Authority’s responses.
AUDITORS’ OPINION
Our auditors state the financial statements of the Authority
as of and for the year ended June 30, 2005 are fairly presented in all
material respects.
____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:JAF:pp
SPECIAL ASSISTANT AUDITORS
McGladrey & Pullen, LLP were our special assistant
auditors on this audit.
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