REPORT DIGEST
ILLINOIS GAMING BOARD
FINANCIAL AUDIT OF THE STATE GAMING FUND AND COMPLIANCE EXAMINATION
For the Year Ended June 30, 2010
Release Date: June 28, 2011
Summary of Findings:
Total this audit: 8
Total last audit: 0
Repeated from last audit: 0
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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(217) 782-6046 or TTY (888) 261-2887
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SYNOPSIS
• The Board did not have formal written procedures and
supporting documentation detailing the calculation for the transfers made to
the Education Assistance Fund. Actual
transfers made totaled $383,000,000 during fiscal year 2010.
• Board employees who evaluated the proposals for the
Central Communications System failed to provide evidence of the date
evaluations were conducted.
• Board procurement files did not contain adequate records
to evidence that the Evaluation Committee for the Central Communications System
procurement met. Additionally, there was
no documentation to show that significant scoring differences were discussed by
committee members.
• Lack of review for the scoring of pricing in the
evaluation process of the Central Communications System procurement resulted in
the award to a vendor that was not the highest ranked.
• The Board did not maintain sufficient controls over the
accuracy and reporting of its property.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
LACK OF CONTROLS GOVERNING THE TRANSFER REQUIRED BY THE
ILLINOIS ADMINISTRATIVE CODE
The Board did not have formal written procedures and
supporting documentation detailing the calculation for the transfers made to
the Education Assistance Fund (EAF). In
addition, the Board did not have adequate segregation of duties to approve the
final amount transferred to the EAF.
Actual transfers made totaled $383,000,000 during Fiscal year 2010.
The auditors noted that while the Board did use the required
formula to prepare its Fund Balance Report (Report), which is used to determine
the amount that is to be transferred to the EAF, none of the actual transfers
made during FY10 reconciled to the Reports prepared by Board personnel. As a
result, the statutory mandated transfers could be potentially understated by
$9,300,000 for FY10.
We recommended the Board implement formal documented
procedures regarding the calculation of the transfer. We further recommended the Board designate an
individual to review the transfer documentation who is independent of the
transfer calculation and transfer initiation documents. (Finding 1, pages
12-13)
Board officials accepted the recommendation and stated the
Board has already formalized procedures regarding the calculation of the
transfer. In addition, another
management employee now reviews, approves and authorizes the transfer
documentation who is independent of the calculation of the transfer initiation
documents.
CENTRAL COMMUNICATIONS SYSTEM PROCUREMENT - LACK OF
EVALUATION CERTIFICATION
The Board employees who evaluated the proposals for the
Central Communications System (CCS) failed to provide evidence of the date
evaluations were conducted.
During our review of the procurement processes utilized by
the Board in selecting a vendor to provide a CCS, we examined the procurement
files maintained by the Board. We found:
• Administrative Review:
The Board’s Administrative Review Form provides sections for the
reviewer to sign and date the review.
While the reviewer did sign the Form, none of the five reviews indicated
the date that the reviewer performed the review.
• Mandatory System Requirements Review: The Board’s Mandatory System Requirements
Form provides sections for the reviewer to determine whether requirements were
met or not, comment on the ratings, and to date when the evaluation was
conducted. There were six reviewers and
five proposals to review. Sixty-seven
percent of the reviews (20 of 30) were not dated by the reviewers. Additionally, for one proposal, 4 of the 6
reviewers did not complete the evaluation and one of those forms did not even
identify who the reviewer was. None of
the Forms have a section where the reviewer can certify the ratings via
reviewer signature.
• Technical Evaluation Review: The Board’s Technical Review Form provides
sections for the reviewer to assign a point value to specific criteria and
provide comments for those ratings. The
Form does not provide a section for the reviewer to identify when the review
was completed. None of the 24
evaluations conducted by the evaluation team indicated when the review took
place. None of the Forms have a section
where the reviewer can certify the ratings via reviewer signature.
We recommended the
Board direct staff that review procurement opportunities to date the
evaluations to increase transparency in the process. Additionally, the Board should revise
evaluation forms to include a section for the reviewer to certify the ratings
with their signature. (Finding 2, pages 14-15)
Board officials
accepted the recommendation. In future procurements, the Gaming Board will
direct staff that review procurements to date their evaluations. The Gaming Board will further revise its
evaluation forms for future procurements to include a section for the reviewer
to certify the ratings with their signature.
CENTRAL COMMUNICATIONS SYSTEM PROCUREMENT - LACK OF DOCUMENTATION
The Board procurement
files did not contain adequate records to evidence that the Evaluation
Committee for the Central Communications System (CCS) procurement met. Additionally, there was no documentation to
show that significant scoring differences were discussed by committee
members.
During our review of the procurement processes utilized by the Board in selecting a vendor to provide a CCS, we examined the procurement files maintained by the Board. The file did contain a summary memo dated April 29, 2010, stating, “The committee met on multiple occasions.” However, there was no documentation in the file to support those meetings, either who attended or what topics were discussed.
The Board reported that “although the procurement files
maintained by the Board with respect to the FY10 CCS RFP do not adequately
document the dates the Evaluation Team met, who was present and what was
discussed, the Evaluation Team did meet on multiple occasions and discussed all
aspects of the proposals, including scoring and differences in scoring. The Evaluation Team’s evaluation sheets
reflect those discussions.”
We recommended the Board document evaluation committee
meetings including dates, who attended, and what was discussed. Additionally, the Board should follow CMS
Guidelines and ensure that: major
differences in scores are discussed to determine if an error was made or an
evaluator missed or misinterpreted a vendor’s proposal; and rating points are
supported with thorough and appropriate comments. (Finding 3, pages 16-17)
Board officials accepted the recommendation and stated that
the Board will direct the Evaluation Team to document its meetings including
dates, who attended and what was discussed.
The Gaming Board will also direct any future Evaluation Teams to support
their points through more thorough comments.
CENTRAL COMMUNICATIONS SYSTEM PROCUREMENT - LACK OF REVIEW
Lack of review for the scoring of pricing in the evaluation
process of the Central Communications System (CCS) procurement resulted in the
award to a vendor that was not the highest ranked. The Board reported they have since vacated
the award, terminated the contract and rebid the solicitation. Further, the legislation authorizing the
Board to seek a central communications system is currently under review by the
Illinois Supreme Court.
During our review of the procurement processes utilized by
the Board in selecting a vendor to provide a CCS, we examined the procurement
files maintained by the Board, including the technical and pricing evaluation
scoring of the proposals. We found:
• A Board staff member, who was not part of the team that
scored the technical aspect of the procurement, was responsible for opening the
pricing component of the proposals and completing a scoring matrix with the
assignment of points.
• No one from the Board reviewed the ratings assigned to the
pricing component, resulting in only one set of eyes reviewing and interpreting
the pricing information.
• A calculation error resulted in Intralot’s 2nd scenario
proposal to be overstated by $11 million.
• The Board incorrectly added in subcontractor payments on
the Intralot pricing proposals resulting in an overstated total contract
price.
• The Board allowed one vendor (Scientific Games) to submit
pricing based on 12,500 site locations while the other two vendors priced
10,000 site locations – the Board did not clarify the different figure with
Scientific Games.
• Other areas existed in pricing where assumptions had to be
made by the Board employee (i.e., calculating Scientific Games price over 66
months as opposed to 72 months for the other vendors), which he did not clarify
with the vendor prior to completing the assignment of pricing points.
• The Board was not aware of the price scoring problems
until Intralot submitted its 5th protest of the award on September 3,
2010. The Board forwarded the information
to officials at CMS for them to review.
A CMS official responded to this inquiry on September 9, 2010.
A Board employee, who performed the pricing calculations for
the procurement, indicated that the Board was under pressure to move forward with
the contract and that any steps backward would have been “frowned upon.” Additionally, the RFP did not make it clear
how the proposers were to provide the responses.
We recommended the Board develop procedures for oversight
review of scoring evaluations for procurement activity completed by the
Board. (Finding 4, pages 18-20)
Board officials accepted the recommendation and stated that
it should develop procedures for oversight review of scoring evaluations for
procurement activity completed by the Board.
However, the Board did not agree that “pressure” was an underlying cause
for either the lack of review, the miscalculation or any assumptions that were
made and stated it cannot document whether the wrong vendor was awarded the
contract.
INADEQUATE RECONCILIATION AND REPORTING OF PROPERTY
The Board did not maintain sufficient controls over the
accuracy and reporting of its property.
Some of the conditions noted follow:
• The Board did not adequately reconcile its property
control records to the Agency Report of State Property (C-15) filed with the
Comptroller.
• The auditor was unable to determine reconciling
differences between the Board prepared C-15’s and Property Listing. The Board could not provide support for
numbers presented on the C-15.
• The Board’s property listing contained inadequate and
inaccurate information.
• The Board did not properly record pieces of equipment on
its property listing.
• The Board did not timely record equipment on its property listing.
We recommended the Board establish controls over property
reporting and implement procedures to ensure:
• Equipment is entered timely and accurately on the property
listing;
• Equipment additions are reconciled to purchases made by
the Board;
• Quarterly reports are reconciled to property listings,
reviewed for accuracy and adequate documentation is maintained;
• Property listings include all the required information in
accordance with the Administrative Code;
• The Board should work with the IOC to correct or properly adjust the discrepancies noted in their Quarterly and annual reporting to the IOC. (Finding 5, pages 21-24)
Board officials accepted the recommendation and stated that
the Board has addressed the discrepancies the auditor noted and is working to
correct/adjust the discrepancies in our Quarterly and Annual reports to the
IOC. In addition, the Board will draft
formal policies and procedures to ensure compliance with the Property Control
Act, Administrative Code and SAMS requirements.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by the Board. We will review the Board’s
progress towards the implementation of our recommendations in our next engagement.
AUDITORS’ OPINION
Our auditors stated the State Gaming Fund Financial
Statements of the Illinois Gaming Board as of and for the year ended June 30,
2010 are fairly stated in all material respects.
WILLIAM G. HOLLAND
Auditor General
WGH:CL:jv
AUDITORS ASSIGNED
The financial audit and attestation engagement was performed by the Office of the Auditor General’s staff.