REPORT DIGEST

ILLINOIS STUDENT ASSISTANCE COMMISSION

COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2006

Summary of Findings:

Total this audit                     7

Total last audit                     9

Repeated from last audit      3

Release Date:

April 5, 2007

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

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Springfield, IL 62703

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This Report Digest and Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

¨      The Illinois Designated Account Purchase Program (IDAPP), a program of the Commission, did not comply with several bond indentures that require IDAPP to deliver audited financial statements to the Trustees within 120 days after year-end. 

¨      The Commission did not adequately review and approve general journal entries for the IDAPP prior to posting them to the general ledger.

¨      The Commission failed to perform certain internal audits of its major systems of internal accounting and administrative controls.

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

EXPENDITURE STATISTICS

FY 2006

FY 2005

FY 2004

·  Total Expenditures (All Funds)................

OPERATIONS TOTAL................................

   % of Total Expenditures...............................

Personal Services........................................

   % of Operations Expenditures................

Other Payroll Costs (FICA, Retirement).....

   % of Operations Expenditures................

Contractual Services....................................

   % of Operations Expenditures................

Telecommunications.....................................

   % of Operations Expenditures................

Lump Sums.................................................

   % of Operations Expenditures................

All Other Operations Items..........................

   % of Operations Expenditures................

AWARDS & GRANTS TOTAL.............

% of Total Expenditures...............................

Grant Awards to Eligible Students................

   % of  Awards and Grants......................

Federal Guarantee Distributions...................

   % of  Awards and Grants......................

All Other Grants and Awards.......................

   % of  Awards and Grants......................

·Cost of Property and Equipment.............

$593,316,928

$36,960,061

            6.2%

    $16,306,231

          44.1%

      $6,958,439

             18.8%

      $8,367,276

            22.6%

      $509,526

            1.4%

    $4,425,410

          12.0%

      $393,179

            1.1%

$556,356,867

          93.8%

$345,770,562

62.1%

$164,041,982

29.5%

$46,544,323

8.4%

$23,600,000

$560,715,797

$38,821,071

            6.9%

    $16,079,432

          41.4%

      $7,386,992

             19.0%

      $9,231,575

            23.8%

      $688,023

            1.8%

    $4,739,883

          12.2%

        $695,166

            1.8%

$521,894,726

          93.1%

$330,838,777

63.4%

$142,428,538

27.3%

$48,627,411

9.3%

$23,471,000

$551,635,580

$52,053,783

9.4%

$14,398,878

27.7%

$6,062,185

11.7%

$10,220,897

19.6%

$950,352

1.8%

$19,698,839

37.8%

$722,632

1.4%

$499,581,797

90.6%

$332,426,758

66.5%

$115,703,005

23.2%

$51,452,034

10.3%

$23,527,000

SELECTED ACTIVITY MEASURES

FY 2006

FY 2005

FY 2004

·  Total Receipts per Comptroller (All Funds)..

· Expenditures of Federal Awards..................

· Average Number of Employee.....................

· Number Students Receiving MAP Award*..

· Number of Loans Guaranteed*....................

* Unaudited

$323,124,000

$276,103,000

519

146,853

222,981

$297,736,000

$221,596,000

532

150,311

227,896

$292,797,000

$164,908,000

536

140,989

223,661

AGENCY DIRECTOR(S)

During Audit Period:  Mr. Larry E. Matejka

Currently: Mr. Andrew Davis

Financial statements are due trustees within 120 days after year-end

Audited financial reports had not been delivered as of the end of fieldwork November 15, 2006

33% of journal entries tested were correcting data entry errors

Major areas not examined by internal auditor

Internal auditor vacancy contributed to required audits not being performed

INTRODUCTION

      The Illinois Student Assistance Commission (Commission) was created to establish and administer a system of financial assistance through loan guarantees scholarships and grant awards, and a prepaid tuition program for residents of the State of Illinois to enable them to attend qualified public or private institutions of their choice. 

FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

NON-COMPLIANCE WITH BOND INDENTURE

      The Illinois Designated Account Purchase Program (IDAPP) did not comply with several bond indentures that require IDAPP to deliver audited financial statements to the Trustees no later than 120 days after year-end (October 28^th).  The fiscal year 2006 audited financial report had not been delivered as of the end of fieldwork November 15, 2006. 

      According to IDAPP management, while IDAPP has become more efficient in the financial statement preparation process, certain information from external parties was not received timely which lead to a delay in recording and reconciliation prior to finalizing the financial statements.  (Finding 1, page 10)  This finding was first reported in 2001. 

      We recommend IDAPP continue to work to complete the IDAPP financial report on a timelier basis. 

      Commission officials agreed with our recommendation and stated that they would work with external parties to obtain information in a more timely manner.  (For previous Commission response, see Digest Footnote #1.) 

CONTROLS OVER POSTING GENERAL JOURNAL ENTRIES NEEDS IMPROVEMENT

      The Commission did not adequately review and approve general journal entries for the IDAPP prior to posting them to the general ledger.

      During our audit of general journal entries posted to the general ledger during the audit period, we noted that five of the fifteen journal entries selected for testing (33%), were correcting entries for data entry errors.  These data entry errors were detected and corrected by IDAPP personnel during the reconciliation process.   (Finding 2, page 11)

      We recommend that the Commission implement a process whereby IDAPP general journal entries are reviewed and approved by someone other than the preparer, prior to posting to the general ledger, in order to reduce the number of data entry errors and to make the reconciliation process more efficient.

      Commission officials agreed with our recommendation and stated that the current finding was related to a large project that occurred in fiscal year 2006.  Further, procedures are now in place that call for each journal entry to be reviewed by a second staff member before posting. 

THE COMMISSION FAILED TO PERFORM INTERNAL AUDITS OF MAJOR SYSTEMS

      The Illinois Student Assistance Commission (Commission) failed to perform internal audits of its major systems of internal accounting and administrative controls within the last two years. 

      We noted the Commission did not complete all internal audits of major systems of internal accounting and administrative controls within the last two years.  The following areas were not reviewed:

·                    IDAPP cash and receivables

·                    Loan servicing / Federal Interest Benefit / special allowance

·                    General expenditure control

·                    Contractual services

·                    Payroll and personal services

·                    Data center and information systems

      Commission officials stated that due to the vacancy of the agency’s internal audit position, the Commission was unable to complete the anticipated internal audit schedule.  The agency did contract with an external firm for $19,999 to complete some of the required internal audits for fiscal year 2006.  (Finding 3, Pages 12-13)

      We recommend the Commission complete internal audits of its major systems of internal accounting and administrative controls on a timely basis.

      Commission officials agreed with our recommendation and stated that for fiscal year 2007 the Commission has contracted with an external firm to complete the required audits. 

OTHER FINDINGS

      Other findings are reportedly being given attention by Commission management.  We will review progress toward implementation of our recommendations in our next examination.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JAF:pp

AUDITORS ASSIGNED

      McGladrey & Pullen, LLP were our special assistant auditors for this engagement.

DIGEST FOOTNOTES

#1 – NON-COMPLIANCE WITH BOND INDENTURE – Previous Commission Response

2005:  Agree. IDAPP will work to improve the timeliness of completion of the annual financial statements to better meet the reporting requirements of those older indentures that have a filing date requirement.  Since 1996, newer indentures have been written in a manner to provide more flexibility that better suits the timing of the current process.  As the older bonds that had indentures containing unrealistic requirements are retired, the impact of this issue should decrease over time.