Illinois Housing Development Authority 2002 Audit

REPORT DIGEST

ILLINOIS HOUSING DEVELOPMENT AUTHORITY
FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Single Audit Act and OMB Circular A-133)

For the Year Ended:
June 30, 2002

Summary of Findings:

Total this audit 4
Total last audit 4
Repeated from last audit 2

Release Date:
June 12, 2003

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
Attn: Records Manager
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

SYNOPSIS

Illinois Housing Development Authority is not adequately monitoring subrecipients of the Section 8 program.
Procedures were not implemented to periodically reconcile data from individual computer systems to amounts recorded in the general ledger.

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

ILLINOIS HOUSING DEVELOPMENT AUTHORITY
FINANCIAL AND COMPLIANCE AUDIT

GOVERNMENTAL FUNDS REVENUE AND EXPENDITURES	FY 2002	FY 2001	FY 2000
Total Governmental Funds Revenue Real Estate Transfer Taxes % of Total Revenue Federal Home Funds % of Total Revenue Investment, Interest and Other Income % of Total Revenue	$62,868,582 $32,599,376 51.9% $26,459,592 42.1% $3,809,614 6.0%	$45,483,813 $28,893,530 63.5% $10,630,640 23.4% $5,959,643 13.1%	$45,105,121 $28,727,805 63.7% $11,596,124 25.7% $4,781,192 10.6%
Total Governmental Funds Expenditures & Transfers Grants % of Total Expenditures General and Administrative % of Total Expenditures Provision for Est. Loss on Loans Receivable % of Total Expenditures Operating Transfers % of Total Expenditures .	$19,152,905 $8,837,951 46.2% $3,464,954 18.1% $1,500,000 7.8% $5,350,000 27.9%	$19,494,711 $9,885,013 50.7% $3,255,209 16.7% $1,004,489 5.2% $5,350,000 27.4%	$17,685,912 $9,483,302 53.6% $2,852,610 16.1% $0 0.0% $5,350,000 30.3%
PROPRIETARY FUND REVENUE AND EXPENSES (ADMINISTRATIVE)
Total Administrative Fund Revenue Service Fees % of Total Revenue Interest and Investment Income % of Total Revenue Other Income % of Total Revenue Total Administrative Expenses Salaries and Benefits % of Total Expenses Average No. of Employees Professional Fees . % of Total Expenses Other General and Administrative Expenses % of Total Expenses Operating Transfers % of Total Expenses Financing Costs % of Total Expenses Net Value of Property and Equipment	$18,384,006 $8,337,965 45.3% $5,549,919 30.2% $4,496,122 24.5% $14,671,808 $7,525,312 51.2% 190 $1,607,244 11.0% $4,552,978 31.0% $1,638 .1% $984,636 6.7% $640,264	$17,724,527 $7,505,632 42.4% $7,060,852 39.8% $3,158,043 17.8% $12,825,949 $6,589,404 51.4% 177 $2,073,658 16.2% $3,764,435 29.4% $61,315 .5% $337,137 2.5 $931,283	$19,269,528 $7,388,296 38.4% $6,017,325 31.2% $5,863,907 30.4% $22,789,613 $6,695,434 29.4% 173 $1,526,563 6.7% $3,768,033 16.5% $10,416,212 45.7% $383,371 1.7% $1,213,508
SELECTED ACTIVITY MEASURES
Total Number of Bond Issues Outstanding Total Bond Issue Liability (in millions) Production of Housing Units Production of Low Income Housing Units % Low Income Housing Units to all Units	98 $1,888 144,620 127,198 88.0%	98 $2,010 136,102 121,037 88.9%	110 $2,054 129,239 97,938 75.8%
EXECUTIVE DIRECTOR
During Audit Period: Peter R. Dwars Currently: Kelly King Dibble

Note: Statistics above do not include bond activity.

Authority is not adequately monitoring all subrecipients of the Section 8 program

Subrecipients did not submit financial and HUD compliance reports as required

Authority management was not aware it was required to obtain the financial and HUD compliance reports

The Authority’s processing systems are not linked to the Authority’s general ledger

The Authority has not implemented procedures to reconcile all its processing information systems to the general ledger

Authority management has issued an RFP to assist in re-engineering its financial process

INTRODUCTION

These reports present our financial and compliance audit of the Illinois Housing Development Authority for the year ended June 30, 2002. Our audit was performed in accordance with the Single Audit Act and OMB Circular A-133.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE MONITORING OF SUBRECIPIENTS RECEIVING FEDERAL AWARDS

The Illinois Housing Development Authority (Authority) is not adequately monitoring all subrecipients of the Section 8 program. A portion of the Authority’s Section 8 program loans are passed through to subrecipients and are not included in the Authority’s loan portfolio. For those subrecipients, the Authority only provides contract administration. The Authority still has the responsibility to monitor the activities of the subrecipient as necessary to ensure the federal awards are used for the authorized purposes in compliance with laws, regulations and provisions of contracts or grant agreements and performance goals are achieved.

The auditors noted the following for the subrecipients for which the Authority performed only contract administration:

Four of ten subrecipients, with expenditures of $1,140,406, had not submitted both financial and HUD compliance reports to the Authority for their most recent fiscal year.

Three of ten subrecipients, with expenditures of $1,678,073, had not submitted HUD compliance reports to the Authority for their most recent fiscal year.

Authority management indicated they were not aware they were required to obtain and review the financial statements and HUD compliance reports for subrecipients for which they provide only contract administration. The failure to adequately monitor all subrecipients could result in federal funds being expended for unallowable purposes and/or subrecipients not properly administering the federal program. (Finding 1, pages16-18)

We recommended the Authority obtain financial and HUD compliance reports and perform their established procedures for uniform desk reviews for subrecipients for which they provide only contract administration. In addition, we also recommended the Authority follow-up with subrecipients who fail to submit the reports within the required timeframe.

Authority management indicated they will continue to attempt to obtain financial and HUD compliance reports from subrecipients for which it provides only contract administration. The Authority noted they will contact the subrecipients for which it provides only contract administration and notify them of the requirement that the Authority obtain financial and HUD compliance reports.

SYSTEM RECONCILIATION PROCEDURES

The Authority has not implemented periodic reconciliation procedures for data output processed by the Authority’s individual processing systems versus amounts recorded in the general ledger.

The Authority completed an implementation of four new computer application systems during fiscal year 2000: the upgraded general ledger system, the single family program system (AMOS), the investment system (CAMRA), and the multifamily, HOME and affordable trust fund loan programs billing and receivable system (Benedict). The systems are not integrated in the sense of simultaneously recording a single transaction within each of the individual systems and within the general ledger.

Authority management stated these systems do not interface with each other because the operational and reporting features inherent in the individual systems were not available to the Authority in an integrated system at the time of implementation. This results in the need to create interfaces between the three processing systems and the general ledger either electronically or manually in order to record transactions accurately, completely and consistently. The Authority has not yet implemented procedures to reconcile all data output produced by their individual processing systems versus amounts recorded in its general ledger.

Authority management acknowledged the importance of developing and implementing reconciling procedures. Various committees were established during fiscal year 2001 to oversee and assist in completing the reconciliation project for each individual operating system.

Authority management indicated they have contracted with the system vendor for additional enhancements that would resolve the system reporting issues and allow full linkage of the CAMRA system with the general ledger. It was noted a partial automatic linkage between the Benedict system and the general ledger has been placed in operation.

Authority management has issued a Request For Proposal (RFP) to assist in re-engineering its financial process. As of the end of audit fieldwork, a contract had not yet been awarded. Without periodic reconciliation procedures in place to ensure data output produced by the individual systems equate to amounts recorded in the general ledger, the risk exists the Authority’s general ledger may not include the most accurate and complete information. This finding has been repeated since 2000. (Finding 3, pages 21-22)

We recommended the Authority proceed with the re-engineering of its financial process.

Authority officials concurred with our recommendation and indicated they intend to award a contract for assistance with the re-engineering of its financial process in the near future. It was also noted the Authority has been addressing the system linkage issues. (For previous Authority responses, see Digest footnote #1.)

OTHER FINDINGS

The remaining findings are less significant and are reportedly being given attention by the Authority. We will review the Authority’s progress toward the implementation of our recommendations in our next audit.

Mr. James Kregor, Controller, provided the responses to our recommendations.

AUDITORS’ OPINION

Our auditors state the Authority’s financial statements as of and for the year ended June 30, 2002 are fairly presented in all material respects.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS
KPMG LLP were our special assistant auditors for this audit.

DIGEST FOOTNOTES
#1 SYSTEM RECONCILIATION PROCEDURES

2001: The Authority concurs with the recommendation to assign a project leader (or committee), which would have planning and oversight responsibilities for the entire reconciliation project. As noted above, the Authority is in the process of preparing an RFP for outside consulting to assist the Authority with its planning and reporting responsibilities relating to the reconciliation and other projects. The Authority will assign a project leader, or committee, to coordinate the efforts related to this project, and provide timely status updates to the Authority’s Executive Director and other Authority personnel.

2000: The Authority concurs with the recommendation that the Authority assign a project leader (or committee) with planning and reporting responsibilities for implementing reconciliation procedures between the Authority’s operating systems and its general ledger. Such a committee to address the linkage and reporting issues of the CAMRA system to the general ledger has been established and is operational. The Authority will establish similar arrangements to address linkage issues with the Benedict and AMOS systems.