REPORT DIGEST

ILLINOIS HOUSING DEVELOPMENT AUTHORITY

Single Audit and State Compliance Examination
For the Year Ended June 30, 2014

Release Date:  March 26, 2015

FINDINGS THIS AUDIT:  11

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  2 -- 0 -- 2
Category 2:  7 -- 2 -- 9
Category 3:  0 -- 0 -- 0
TOTAL:  9 -- 2 -- 11

FINDINGS LAST AUDIT: 10

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
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 Single Audit and
Compliance Examination of the Illinois Housing
Development Authority for the year ended June
30, 2014.  A separate Financial Audit as of
and for the year ended June 30, 2014, was
previously released on December 4, 2014.  In
total, this report contains 11 findings, two
of which were reported in the Financial Audit.

SYNOPSIS

• (14-3)  The Authority’s on-site monitoring
policies and procedures were not followed for
subrecipients of the Section 8 Project Based
Cluster Program.
• (14-6)  The Authority lacked adequate
reviews of OMB Circular A-133 audit reports
received from its subrecipients for the
Community Development Block Grant Cluster and
Home Investment Partnerships Program.
• (14-10)  The Authority failed to adequately
monitor cash deposits held at individual banks
to ensure sufficient collateral was obtained
for those funds that were not covered by the
Federal Deposit Insurance Corporation.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO FOLLOW ESTABLISHED SUBRECIPIENT
PROCEDURES FOR THE SECTION 8 PROJECT BASED
CLUSTER PROGRAM

The Authority did not follow its established
policies and procedures for monitoring
subrecipients of the Section 8 Project Based
Cluster Program.

During our testwork over on-site review
procedures performed for 25 subrecipients
(with expenditures of $49,703,246) of the
Section 8 Cluster Program, we noted the
Authority did not follow its established on-
site monitoring procedures as follows:
• The Authority did not receive timely written
responses (within 60 days) to the findings of
the on-site reviews for 9 subrecipients (with
expenditures of $22,066,857) and appropriate
follow-up action was not taken.  Delays in
obtaining the written responses ranged from 12
to 266 days after the required timeframe.
• The Authority did not timely close out
(within 90 days) the on-site review for seven
subrecipients (with expenditures of
$18,324,164).  Delays in closing out the on-
site reviews ranged from 1 to 236 days.
• The Authority did not have evidence in the
on-site monitoring review file that a findings
notification letter was sent out for one
subrecipient (with expenditures of
$2,230,741).
• The Authority did not receive written
responses to the findings after communicating
the on-site review findings for two
subrecipients (with expenditures of
$2,440,305). (Finding 3, pages 24-25) This
finding has been repeated since 2011.

We recommended the Authority ensure on-site
monitoring reviews are performed and
documented for subrecipients in accordance
with established policies and procedures.  We
also recommended the Authority review its
process for reporting and following up on
findings relative to subrecipient on-site
monitoring reviews to ensure timely corrective
action is taken.

Authority officials agreed with the finding
and recommendation and stated the Asset
Management department will work to alleviate
delays by providing asset managers with
reminder emails as the required tasks near the
deadlines required in the policies and
procedures.  (For the previous Authority
response, see Digest Footnote #1.)

INADEQUATE REVIEW OF OMB CIRCULAR A-133 AUDIT
REPORTS

The Authority did not adequately review OMB
Circular A-133 audit reports received from its
subrecipients for the Community Development
Block Grant (CDBG) Cluster and Home Investment
Partnerships Program (Home).

Subrecipients who receive more than $500,000
in federal awards are required to submit an
OMB Circular A-133 audit report to the
Authority.  The Authority is responsible for
reviewing these reports and working with
program personnel to issue management
decisions on any findings applicable to the
Authority’s programs.

During our testwork over 10 subrecipients of
the CDBG Cluster Program (with expenditures of
$6,620,904), we noted the following
exceptions:
• For 6 of the 10 subrecipients (with
expenditures of $4,361,674), an A-133 report
was not obtained and reviewed during the
fiscal year.
• For 4 of the 10 subrecipients (with
expenditures of $2,259,230), an A-133 report
was obtained but a review of the report was
not documented during the fiscal year.

Additionally, during our testwork over 19
subrecipients of the Home Program (with
expenditures of $7,484,768), we noted for 8
subrecipients (with expenditures of
$2,538,522) the Authority did not review audit
reports in a timely manner or issue management
decisions on reported findings within six
months of receiving the audit reports as
required.  The reviews were completed between
11-71 days after the due date for the review.
Accordingly, management decisions were late.
(Finding 6, pages 30-32)

We recommended the Authority establish
procedures to ensure:  (1) subrecipient A-133
audit reports are obtained and reviewed within
established deadlines, (2) management
decisions are issued for all findings
affecting its federal programs in accordance
with OMB Circular A-133, and (3) follow up
procedures are performed to ensure
subrecipients have taken timely and
appropriate corrective action.

Authority officials agreed with the finding
and recommendation and stated the Authority is
restructuring its Financial Portfolio
Management Division to improve efficiencies,
establish clearer tracking mechanisms and
reduce staff turnover in an effort to complete
its reviews within the specified time
requirements.

NEED TO IMPROVE MONITORING OF CASH
COLLATERALIZATION REQUIREMENTS

The Authority has not established adequate
internal controls to ensure sufficient
collateral is obtained to secure public funds
held at a bank or savings and loan association
where those funds are not covered by the
Federal Deposit Insurance Corporation (FDIC).

During our audit, we noted the Authority had
cash deposits in the amount of $297,102,546.
However, the Authority does not have a
monitoring process in place to ensure cash
deposits held at individual banks that
exceeded the FDIC coverage limit of $250,000
were secured with adequate collateral at June
30, 2014.  We noted the Authority had not
performed an analysis to evaluate whether cash
deposits in excess of the FDIC coverage limit
were sufficiently collateralized.
(Finding 10, pages 39-40)

We recommended the Authority review its
current procedures to monitor cash deposits
held at banking institutions where those
deposits exceed the FDIC coverage limit to
ensure sufficient collateral is obtained,
and/or put preventative measures in place to
keep such accounts from exceeding FDIC
coverage.

Authority officials agreed with the finding
and recommendation and stated that they will,
under newly created procedures, receive and
review monthly collateral statements from each
of its depository institutions.  In addition,
the Authority will establish guidelines under
its financial management policy to address the
collateralization requirements of depository
accounts as applicable.

OTHER FINDINGS

The remaining findings are reportedly being
given attention by Authority officials. We
will review progress toward implementation of
our recommendations in our next audit.

AUDITOR’S OPINION

The financial audit report was previously
released.  The auditors stated the financial
statements of the Illinois Housing Development
Authority as of and for the year ended June
30, 2014, are fairly stated in all material
respects.

The auditors also conducted a Single Audit of
the Authority as required by OMB Circular
A-133.  Our auditors stated the Authority
complied, in all material respects, with the
types of compliance requirements that could
have a direct and material effect on each of
the Authority’s major federal programs for the
year ended June 30, 2014.
ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Authority for the year
ended June 30, 2014, as required by the
Illinois State Auditing Act.  The auditors
stated the Authority complied, in all material
respects, with the requirements described in
the report.

WILLIAM G. HOLLAND
Auditor General

WGH:TLK

SPECIAL ASSISTANT AUDITORS

KPMG LLP were our Special Assistant Auditors.

DIGEST FOOTNOTES

#1 – Need to Follow Established Subrecipient
Procedures for the Section 8 Project Based
Cluster Program

2013:	Authority management concurs with the
recommendations and will continue to update
its internal procedures for monitoring the
Section 8 Program. With regard to Management
Reviews, the Authority will implement a
process of rescheduling and staff realignment
to accommodate unexpected staffing changes
that resulted in delayed Management Review and
tenant File Review follow-up communications.
The Authority implemented a process of
prioritizing the review of Audited Financial
Statements in FY2013 that may cause some
reviews to take more than 30 days. The
Authority will fully document these changed
procedures as well as any exceptions to
deadlines that are approved by Asset
Management Senior Staff. The Authority has
implemented an email reminder procedure for
the collection of Estimated Residual Receipts
and the backup documentation. While this will
not ensure full compliance by affected owners,
it will ensure that all owners are alerted
multiple times in advance of deadlines for
submission and that delinquent submissions are
followed-up.