REPORT DIGEST ILLINOIS FINANCE AUTHORITY FINANCIAL AUDIT For the Year Ended: June 30, 2009 Summary of Findings: Total this year 1 Total last year 2 Repeated from last year 0 Release Date: March 3, 2010 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 of the Illinois Finance Authority for the year ended June 30, 2009. A State and Federal compliance examination covering the year ended June 30, 2009 will be issued separately. SYNOPSIS ¨ The Authority has not had an independent valuation of its venture capital investments since fiscal year 2006. {Revenue, Expenditures and Activity Measures are summarized on the next page.}

ILLINOIS FINANCE AUTHORITY

FINANCIAL AUDIT

YEAR ENDED JUNE 30, 2009

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS	For The Year Ended June 30, 2009	For The Year Ended June 30, 2008
Operating revenues: Interest on loans........................................... Administrative service fees........................... Annual fees.................................................. Other operating revenue................................ Total operating revenues........................ Operating expenses: Interest expense........................................... Employee related expenses........................... Professional services.................................... Other operating expense............................... Total operating expenses........................ Operating income ................................. Nonoperating revenues (expenses): Interest and investment income...................... Net appreciation (depreciation) in the fair value of investments.................................... Grants.......................................................... Transfers from (to) primary government........ Total nonoperating revenues (expenses), net...................................... Change in net assets....................................... Net assets – beginning of year............................ Net assets – end of year..................................	$10,941,522 4,885,211 761,197 231,856 $16,819,786 $14,457,696 3,275,386 1,284,861 1,381,421 $20,399,364 $(3,579,578) $5,878,031 286,945 - (26,329,923) (20,164,947) $(23,744,525) $112,817,493 89,072,968	$10,121,129 7,140,725 1,128,340 359,393 $18,749,587 $15,401,759 3,444,591 1,837,280 1,176,130 $21,859,760 $(3,110,173) $8,942,648 (54,213) 2,000,000 13,000,000 23,888,435 $20,778,262 $92,039,231 112,817,493
Selected Statement of Net Asset Accounts · Cash and investments................................... · Receivables, net........................................... · Bonds payable and long-term debt................. · Net assets....................................................	$188,852,629 $234,716,760 $301,789,773 $89,072,968	$211,846,209 $239,244,933 $324,327,855 $112,817,493
AGENCY EXECUTIVE DIRECTOR
During Audit Period: Kym Hubbard (7/1/08-7/15/08); Mr. John Filan (11/17/08-6/30/09) Currently: Mr. Christopher Meister

Authority has not had an independent valuation of its venture capital investments since 2006 Authority should develop a process for determining the fair value measurements and disclosures Authority agrees with auditors

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 FAILURE TO HAVE AN INDEPENDENT VALUATION OF VENTURE CAPITAL INVESTMENTS The Authority has not had an independent valuation of its venture capital investments since fiscal year 2006. The Authority maintained a portfolio of the venture capital investments valued at $5.4 million as of June 30, 2009. Venture capital investments are not a readily marketable investment. As part of fulfilling its responsibility of making the fair value measurements and disclosures included in the financial statements, management should establish an accounting and financial reporting process for determining the fair value measurements and disclosures, select valuation methods, identify and adequately support any significant assumptions used and prepare the valuation. Authority management indicated that due to budget constraints, the cost benefit analysis of engaging an independent firm’s valuation was contemplated during fiscal year 2009; however, a valuation was not performed. (Finding 1, page 43) We recommended the Authority obtain an independent valuation of the venture capital investment portfolio periodically in order to support the amounts recorded and disclosed in the Authority’s financial statements. Authority officials accepted our recommendation and indicated they have begun the solicitation process to procure an independent firm’s valuation services. The Authority expects the procurement and execution of the services to be finalized by June 30, 2010. AUDITORS’ OPINION The auditors stated the financial statements for the Illinois Finance Authority for the year ended June 30, 2009 were fairly stated in all material respects. ____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:JAF:pp SPECIAL ASSISTANT AUDITORS McGladrey & Pullen, LLP were our special assistant auditors for this engagement.