FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INDEPENDENT REVIEW OF COMPUTERIZED INFORMATION SYSTEMS ARE NOT CONDUCTED
The Board did not obtain reviews of the computerized totalizator systems used at
racetracks under the Board’s jurisdiction.
According to the Board's Annual Reports, the totalizator systems calculated total
calendar year wagers of $1.11 billion and $1.10 billion for 2001 and 2000, respectively.
Of the total wagers, combined State and local government tax revenues received were
approximately $26 million for calendar years 2001 and 2002.
These systems are the means for the racetracks to accept bets and cash winning tickets.
These systems also are the Board’s primary source of information for monitoring tax
revenues. The totalizator systems vendors have the responsibility to ensure that all
processing is complete and accurate.
The Illinois Horse Racing Act of 1975 vests the Board with the power to prescribe
reasonable rules and regulations to provide for the prevention of practices detrimental to
the public and to promote the best interest of racing. It would be prudent to require the
vendors to have an independent review performed on their information systems environment.
(Finding 10, pages 28-30)
We recommended the Board obtain independent reviews of each of the totalizator system
vendors. Board management agreed with the recommendation and said the two vendors are in
the process of contracting with a third party to review the computerized systems.
UNTIMELY DEPOSITS OF INTER-TRACK WAGERING FACILITIES ADMISSION FEES
The Board failed to collect admission fees from inter-track wagering licensees (OTB
parlors) within 48 hours.
During our testing of one month of inter-track wagering admission fees it was noted
that deposits were remitted between two and 16 days late.
The Horse Racing Act requires that inter-track wagering location licensees that
collected admission fees imposed by a municipality or county to remit such fees with 48
hours to the Board, which shall, pursuant to rule, cause the fees to be distributed to the
county or municipality.
We recommended the Board ensure that all fees are remitted to the Board within 48 hours
as required by law. Board management agreed with the recommendation and stated that the
fees are currently being remitted within 48 hours. (Finding 4, page 17)
NON-COMPLIANCE WITH FISCAL CONTROL AND INTERNAL AUDITING ACT
The Board did not perform audits of major systems of internal accounting and
administrative controls at least once every two years as required by State law. In
addition, the internal auditor was performing operational duties, which is a violation of
the Fiscal Control and Internal Auditing Act.
During our audit testing, we noted that 7 major areas had not been audited within the
last two years. Also, the internal auditor was reviewing and summarizing annual financial
statements submitted by organization licensees.
The Fiscal Control and Internal Auditing Act requires that all major systems be
reviewed at least once every two years. In addition, the Act requires that the internal
auditor be free of all operational duties. (Finding 1, pages 10-11)
We recommended the Board remove all operational duties from the internal auditor to
ensure that a sufficient amount of time is available to complete the audits of all major
systems. The Board agreed with the recommendation and stated the internal auditor will
perform the required audits.
INADEQUATE CONTROLS OVER EQUIPMENT
The Board did not maintain adequate control over equipment. In addition, there is a
lack of segregation of duties over equipment purchases.
During our audit testing we noted that equipment purchases were not recorded in the
quarter that the property was purchased, and as a result, the quarterly reports filed with
the State Comptroller had to be amended.
We also noted the property control officer was not always aware of new equipment
purchases. Property was not timely entered on the property records. In addition, the
fiscal officer, in some instances, ordered, received, recorded and approved equipment
purchases. This does not allow for an adequate segregation of duties. (Finding 2, pages
12-14)
We recommended the Board allocate sufficient staff to ensure equipment purchases are
timely and accurately recorded. We further recommended the Board implement the use of
purchase requisitions, purchase orders and receiving reports to ensure proper segregation
of duties. The Board accepted the recommendation and has created a purchase order form to
document all phases of the purchase transaction.
LACK OF HIRING CONTROLS FOR PER DIEM EMPLOYEES
The Board does not have adequate controls for its hiring of per diem employees.
Per diem employees are hired at the discretion of a Board employee without approval of
Board management. In addition, per diem employees are hired before the results of
background checks are received. Also, the personnel director was not aware of the new
employee until after they were hired.
A total of six new per diem employees were hired during the audit period. Good business
practice calls for proper hiring and approvals on all new per diem employees. A lack of
adequate controls over the hiring of per diem employees could result in employees with
criminal records or insufficient experience in the regulation of the racing division.
(Finding 7, pages 22-23)
We recommend Board management approve all new per diem employees and that the
background checks be completed prior to the start of employment. The Board accepts the
recommendation and has developed a new form to use when hiring per diem employees. This
form requires management’s signatures, including the Executive Director and the
Personnel Director.
FAILURE TO CROSS CHECK OCCUPATION LICENSEES WITH ILLINOIS DEPARTMENT OF REVENUE TAX
STATUS
The Board failed to establish procedures to determine if occupational licensees
were also delinquent taxpayers of the State of Illinois.
The Board received an Interagency agreement with the Illinois Department of Revenue to
establish procedures to cross check delinquent taxpayers with the Board’s license
records. The Board reviewed the agreement and decided not to enter into it.
Failure to establish procedures to cross check occupational licensees with the Illinois
Department of Revenue weakens the ability of the State to collect tax revenues. (Finding
8, pages 24-25)
We recommend the Board review the Interagency Agreement with the Illinois Department of
Revenue to establish procedures to cross check for delinquent taxpayers. The Board accepts
the recommendation and will work with the Illinois Department of Revenue to establish an
information sharing agreement.
OTHER FINDINGS
The remaining findings are less significant and are reportedly being given
attention by the Board. We will review the Board’s progress toward the implementation
of our recommendations in our next audit.
Ms. Catherine Larson, Internal Auditor of the Illinois Racing Board, provided the
Board’s responses.
AUDITORS’ OPINION
We conducted a compliance audit of the Illinois Racing Board for the two years
ended June 30, 2002 as required by the Illinois State Auditing Act. We have not audited
any financial statements of the Board for the purpose of expressing an opinion because the
Board does not, nor is it required to, prepare financial statements.
____________________________________
WILLIAM G. HOLLAND, Auditor General
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SPECIAL ASSISTANT AUDITORS
McGreal, Johnson, and McGrane were our special assistant auditors for this
audit.
