REPORT DIGEST

ILLINOIS RACING BOARD

FINANCIAL AND COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1996

Summary of Findings:

Release Date:
June 11, 1997

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• The Board did not perform monthly reconciliations of various financial activities which resulted in inaccurate accounting records or differences between Board records and Comptroller records. Inaccurate accounting records or differences between Board records and Comptroller records occurred for the following financial activities:

cash receipts from admission taxes, organization fees, and off-track betting parlor admission taxes;

 

cash receipts for the Race Track Improvement Fund; and

 

payments to municipalities from off-track betting parlor receipts.

• The Board did not properly account for licensing agreements for computer software which resulted in expenditures from the wrong appropriations line and an overstatement of Board property.

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

FY 1996

FY 1995

FY 1994

• Total Expenditures (All Appropriated Funds)

OPERATIONS TOTAL
% of Total Expenditures

 

Personal Services
% of Operations Expenditures

 

Average No. of Employees:
Full-time
Per Diem

 

Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures

 

Contractual Services
% of Operations Expenditures

 

All Other Operations Items
% of Operations Expenditures

 

GRANTS - RACE TRACK
IMPROVEMENT FUND
% of Total Expenditures

• Property and Equipment (at cost)

$9,745,085

$5,961,810
61.18%

$3,855,916
64.68%

47
67

$616,087
10.33%

$730,453
12.25%

$759,354
12.74%

$3,783,275
38.82%

$2,093,528

$8,846,625

$5,682,080
64.23%

$3,677,464
64.72%

45
66

$558,111
9.82%

$680,919
11.98%

$765,586
13.48%

$3,164,545
35.77%

$1,937,915

$9,906,737

$5,429,816
54.81%

$3,567,215
65.70%

46
71

$555,163
10.22%

$602,864
11.10%

$704,574
12.98%

$4,476,921
45.19%

$2,554,163

CY 1995

CY 1994

CY 1993

• On Track Handle (millions)
• Intertrack Handle (millions)
• Off Track Handle (millions)
• Total Illinois Handle (millions)
• Post Race Drug Tests
• Positive Tests for Prohibited Drug

$330.0
306.4
565.6
$1,202.0
30,246
38

$420.8
294.1
523.9
$1,238.8
30,979
82

$452.8
313.6
515.6
$1,282.0
30,392
58

EXECUTIVE DIRECTOR(S)

During Audit Period: Joseph J. Sinopoli
Currently: Joseph J. Sinopoli

The lack of timely reconciliations resulted in differences in monthly balances

In Fiscal Year 1995 the Comptroller showed an RTIF balance which was $135,487 more than the Board balance and in Fiscal Year 1996 the difference was $120,386.

The Board made incorrect payments to the municipality because it did not reconcile its cash receipts to payments.

Software licensing agreements were paid for from equipment appropriations and listed as a fixed asset.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

INADEQUATE RECONCILIATIONS OF MONTHLY RECEIPTS LEDGER

The Board did not perform monthly reconciliations of cash receipts from admission taxes, organization fees, and off-track betting parlor admission taxes. This resulted in inaccurate Board accounting records.

During our audit fieldwork, the Board reconciled their records for the previous two years; our review of these reconciliations demonstrated the importance of performing this function in a timely manner. For example, the reconciliations showed:

• $12,618 in admission taxes were not recorded on the Board's books;
• $9,162 in off-track betting parlor admission taxes were credited but not actually received by the Board; and
• $1,239 in organization fees were credited to admission tax accounts.

Because the Board did not notify the Comptroller of these errors, differences in Comptroller monthly balances and Board monthly balances ranged from $768 to $14,936 with net differences of $650 in Fiscal Year 1996 and $7,115 in Fiscal Year 1995. Board personnel stated that monthly reconciliations were not performed because the race tracks remit cash receipts electronically to a depository bank. (Finding 1, page 15)

We recommended the Board comply with Comptroller's Uniform Statewide Accounting System (CUSAS) procedures and reconcile cash receipts from admission taxes, organization fees, and off-track betting parlors on a monthly basis. The Board responded by stating that monthly reconciliations are now performed.

LACK OF CASH RECEIPT RECONCILIATIONS FOR THE RACE TRACK IMPROVEMENT FUND

The Board did not perform reconciliations between its records and Comptroller records for cash received from race tracks and deposited into the Race Track Improvement Fund (RTIF).

Illinois race tracks submit receipts to the Department of Revenue for deposit into the RTIF. The Board then requests the Treasurer to distribute monies to the racetracks for improvement projects. The Board, however, does not receive verification of the amount received by the Department of Revenue. As a result, the Board cannot reconcile its receipt records with Comptroller records. The effect has been Comptroller balances which are greater than Board balances. In Fiscal Year 1995 the Comptroller showed an RTIF balance which was $135,487 more than the Board balance and in Fiscal Year 1996 the difference was $120,386. (Finding 4, pages 21 and 22)

We recommended the Board obtain from the Department of Revenue documentation to show actual amounts deposited into the RTIF.

The Board responded that the discrepancies in balances stem from a 1978 court decision which effectively denied funds to a defunct race track association. After the court decision Board records were adjusted while Comptroller records were not revised. The Board agreed to advise the Comptroller of adjustments made by the Board.

LACK OF RECONCILIATIONS FOR PAYMENTS MADE TO MUNICIPALITIES

The Board did not reconcile payments made to a municipality with cash receipts remitted by off-track betting parlors. By statute, the Board receives admission taxes from off-track betting parlors and then makes payments to the municipality.

In Fiscal Years 1995 and 1996, the payments to a municipality did not agree to the cash receipts remitted by the off-track betting parlors in four of eight instances resulting in incorrect payments to the municipality. (Finding 5, page 23)

We recommended the Board reconcile its receipts from off-track betting parlors with payments made to the municipality to ensure accurate payments. The Board indicated that reconciliations are now being performed.

IMPROPER ACCOUNTING TREATMENT FOR COMPUTER SOFTWARE LICENSES

The Board paid for software from its equipment appropriation and listed software on its equipment inventory. Proper treatment of software licensing agreements requires the Board to pay for software from the contractual services appropriation and not list software as an asset.

In Fiscal Year 1996, the Board made two purchases which included the purchase of software licensing agreements. For the purchases, one invoice listed software costs at $15,000 while the other only indicated that software was included in the purchase price. The Board paid for the invoices with equipment appropriations and recorded the entire purchase on its fixed asset inventory. CUSAS (Procedure 11.50.30) requires agencies to purchase software from the contractual services appropriation. In addition, since the Board did not own the software, it should not have been listed on the Board's property listing. (Finding 3, pages 18-20)

We recommended the Board perform detailed reviews of purchases to ensure the proper payment and recording of computer software agreements. The Board disagreed with this finding noting compliance with the recommendation will be difficult or impossible in many cases since it is difficult to break out software costs in complex purchases.

OTHER FINDINGS

The remaining findings were less significant and are being given appropriate attention by the Board. We will review progress toward implementing all recommendations in our next audit.

AUDITORS' OPINION

The auditors state that the financial statements of the Fingerprint License Fund and the Racing Board Charity Fund as of June 30, 1995 and 1996 are fairly presented. The auditors qualified their opinion on the financial statements of the Race Track Improvement Fund as of June 30, 1995 and 1996 because they were unable to determine year-end cash balances.

____________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

McGreal, Johnson, and McGreal were our special assistant auditors for this audit.