REPORT DIGEST

ILLINOIS INDEPENDENT TAX TRIBUNAL

COMPLIANCE EXAMINATION
FOR THE PERIOD FROM NOVEMBER 18, 2013,
THROUGH JUNE 30, 2015

Release Date:  June 30, 2016

FINDINGS THIS AUDIT:  9

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

FINDINGS LAST AUDIT: *

*Effective November 18, 2013, the Illinois
Independent Tax Tribunal was established
under the provisions of the Illinois
Independent Tax Tribunal Act of 2012. As
such, comparative data for periods prior
to November 18, 2013, is not available.

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
FRANK J. MAUTINO, 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

The Illinois Independent Tax Tribunal
(Tribunal) began on November 18, 2013,
when the Chief Administrative Law Judge
opened the Tribunal’s office in Chicago.
The Tribunal began accepting petitions
from taxpayers on January 1, 2014. The
Tribunal’s mission is to foster the
settlement of tax disputes to the extent
possible and, in cases where litigation is
necessary, provide taxpayers with a fair,
independent, and tax-expert forum to
resolve disputes between taxpayers and the
Department of Revenue.

SYNOPSIS

• (15-1) The Tribunal had inadequate
business rules, policies, and procedures
for using moneys within the Illinois
Independent Tax Tribunal Fund.

• (15-2) The Tribunal maintained
inaccurate internal accounting records.

• (15-4) The Tribunal did not handle
filing fees received with incorrectly
filed petitions in accordance with State
laws and regulations.

• (15-8) The Tribunal lacked required
staff, did not have an office in Sangamon
County, and did not have judges serving
proper terms.


FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO ADOPT FORMAL BUSINESS RULES FOR
USING MONEYS WITHIN THE ILLINOIS
INDEPENDENT TAX TRIBUNAL FUND

The Tribunal did not have adequate
business rules, policies, and procedures
for using moneys within the Illinois
Independent Tax Tribunal Fund.

During testing, the auditors noted the
following:

• The Tribunal did not have written
business rules to allocate the Tribunal’s
administrative and enforcement costs
between the Illinois Independent Tax
Tribunal Fund and the General Revenue
Fund.

• The Tribunal did not pay the costs
associated with developing its web-based
Electronic Docketing and Case Management
System, totaling $49,900, from the
Illinois Independent Tax Tribunal Fund.
The Tribunal charged this expenditure
against the Tribunal’s Fiscal Year 2014
General Revenue Fund appropriation.
(Finding 1, pages 10-11)

We recommended the Tribunal adopt written
business rules to allocate administrative
and enforcement costs between the Illinois
Independent Tax Tribunal Fund and the
General Revenue Fund and charge vouchers
against the proper appropriation.

Tribunal officials agreed with the
auditor’s recommendation.

NEED TO MAINTAIN ACCURATE ACCOUNTING
RECORDS

The Tribunal did not maintain accurate
internal accounting records.

During testing, some of the issues the
auditors noted included:

General Revenue Fund
• The Tribunal did not maintain its
records in accordance with the modified
accrual basis for shared funds.

– The Tribunal’s lapsed appropriation
balances of $135,795 and $336,714 were not
recorded at June 30, 2014, and June 30,
2015, respectively.

– The Tribunal did not ensure its
unexpended appropriations account and
corresponding payable accounts were
properly maintained during Fiscal Years
2014 and 2015. For example, the auditors
noted the Tribunal had created a secondary
“cash” account that ran negative balances
until amounts were transferred from the
unexpended appropriations account to the
“cash” account.

• The Tribunal did not account for
transactions during the State’s Lapse
Period within the correct fiscal year. As
an example, the auditors noted Fiscal Year
2014 transactions recorded in Fiscal Year
2015. Following a notification from the
auditors, the Tribunal identified net
errors of $54,595 in Fiscal Year 2014 and
$52,548 in Fiscal Year 2015.

Illinois Independent Tax Tribunal Fund

• The Tribunal did not properly account
for in-transit cash and cash on deposit
within the State Treasury. The auditors
noted the cash balance within the State
Treasury as recorded by the State
Comptroller did not agree to the cash
balance within the State Treasury as
recorded by the Tribunal at June 30, 2014,
and June 30, 2015. In following up on
these exceptions, the auditors identified
an in-transit cash amount of $3,000 at
June 30, 2014, and an in-transit cash
amount of $1,500 at June 30, 2015, was
incorrectly recorded.

The Tribunal prepared and posted adjusting
journal entries to attempt to correct the
majority of these errors within both the
General Revenue Fund and the Illinois
Independent Tax Tribunal Fund. The
auditors noted the following errors were
present within the Tribunal’s adjusting
journal entries:

• The Tribunal’s expenditures for Fiscal
Year 2014 for four detail object codes did
not reconcile to the final SA02 Report
from the State Comptroller. The total
amount in error was $4,959.

• The Tribunal’s records do not reflect
any payables at June 30, 2014, or June 30,
2015, for expenditures paid during the
State’s Lapse Period.

• The Tribunal adjusted its in-transit
cash amounts to $0 and reflected all cash
was on deposit in the State Treasury. This
erroneous adjustment increased the overall
in-transit error within the Tribunal’s
records to $8,000 at June 30, 2014, and
$3,500 at June 30, 2015. (Finding 2, pages
12-14)

We recommended the Tribunal implement
controls to provide assurance transactions
are properly recorded in accordance with
the modified accrual basis of accounting
and charged to the correct fiscal year. In
addition, the Tribunal should reconcile
its accounting records to the State
Comptroller’s records to identify and
correct errors.

Tribunal officials agreed with the
auditor’s recommendation.

FAILURE TO HANDLE CASH RECEIPTS IN
ACCORDANCE WITH THE STATE OFFICERS AND
EMPLOYEES MONEY DISPOSITION ACT

The Tribunal did not handle filing fees
received with incorrectly filed petitions
in accordance with State laws and
regulations.

During testing, the auditors noted the
Tribunal has the following typical
scenarios for petitions filed incorrectly:

1) The Tribunal receives petitions with
the required $500 filing fee where the
petition does not comply with its adopted
regulations, resulting in the Tribunal
dismissing the petition while granting the
taxpayer the ability to amend and refile
their petition by a later date. When this
occurs, the Tribunal would not deposit the
check or money order until after the
taxpayer has filed their amended petition.
In the event the taxpayer fails to meet
the Tribunal’s revised filing deadline,
the Tribunal would return the taxpayer’s
original $500 check or money order to the
taxpayer through the mail. This scenario
occurred in 21 of 388 (5%) of cases
received by the Tribunal from taxpayers
during Fiscal Year 2014 and Fiscal Year
2015.

2) The Tribunal receives a petition with
the required $500 filing fee from the
taxpayer; however, the Tribunal dismisses
the case without allowing the taxpayer to
refile the case. In this scenario, the
Tribunal would return the taxpayer’s
original $500 check or money order to the
taxpayer through the mail. This scenario
occurred in six of 388 (2%) of cases
received by the Tribunal from taxpayers
during Fiscal Year 2014 and Fiscal Year
2015.

The auditors noted the following
noncompliance:

• The Tribunal did not “pay into the State
Treasury the gross amount of money so
received” within the timeframes
established by the State Officers and
Employees Money Disposition Act.

• The Tribunal did not process refunds,
defined as repayments of fees paid in
excess or in error to the State, through
the standard voucher-warrant process.

• The Tribunal did not have appropriation
authority within the Illinois Independent
Tax Tribunal Fund to pay refunds due to
taxpayers in either Fiscal Year 2014 or
Fiscal Year 2015. (Finding 4, pages 22-23)

We recommended the Tribunal deposit all
remittances received into the State
Treasury and pay refunds, if necessary,
through the State’s voucher-warrant
process. Further, we recommended the
Tribunal request an appropriation to pay
refunds due.

Tribunal officials did not accept this
finding because, in their opinion, the
Tribunal cannot deposit checks for
petitions that are deficient and cannot
legally be accepted.

In an auditor’s comment, we noted the
issue within the finding is when a receipt
is considered received under the State
Officers and Employees Money Disposition
Act as opposed to when the Tribunal can
accept a petition given its limited
jurisdiction under the Illinois
Independent Tax Tribunal Act of 2012. As
received is defined within the Oxford
Dictionary as “to be given, presented
with, or paid,” the auditor’s position is
the Tribunal has received a receipt when
the mail is opened and a check or money
order is located with the incomplete
petition. At this moment, the State
Officers and Employees Money Disposition
Act requires the Tribunal to deposit the
entire remittance into the State Treasury.

If the Tribunal continues to disagree with
the auditor’s position, the Tribunal
should seek a formal written opinion from
the Attorney General.

NONCOMPLIANCE WITH THE ILLINOIS
INDEPENDENT TAX TRIBUNAL ACT OF 2012

The Tribunal lacked required staff, did
not have an office in Sangamon County, and
did not have judges serving proper terms.

During testing, the auditors noted the
following:

• The Tribunal did not appoint a clerk or
reporter.

• The Tribunal did not maintain a
principal office located within Sangamon
County.

• The Chief Administrative Law Judge’s
appointment was only for a four-year term.
In addition, the Administrative Law
Judge’s appointment was only for a term of
2.69 years. (Finding 8, pages 31-32)

We recommended the Tribunal appoint a
clerk and reporter and maintain an office
in Sangamon County, or seek a legislative
remedy. Further, the Tribunal should work
with the Governor to ensure appointees
receive the proper statutory term of
office.

Tribunal officials did not accept this
finding because, in their opinion, the
Tribunal cannot justify the additional
costs to the State from hiring additional
employees or securing permanent office
space in Springfield.

In an auditor’s comment, we noted the
General Assembly mandated the Tribunal to
have a principal office in Sangamon County
and required the Tribunal to appoint both
a reporter and a clerk to perform certain
duties at the Tribunal. The primary
responsibility of State agencies is to
administer the functions given to them by
the General Assembly in accordance with
State law as written. If the Tribunal
believes compliance with a statute would
result in an imprudent use of State
resources, the Tribunal should seek a
legislative remedy.

OTHER FINDINGS

The remaining findings pertain to (1)
inadequate control over personal services,
equipment, reconciliations, and the
Tribunal’s annual report to the General
Assembly and (2) inadequate segregation of
duties. We will review the Tribunal’s
progress towards the implementation of our
recommendations in our next examination.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Tribunal for the period
from November 18, 2013, through June 30,
2015, as required by the Illinois State
Auditing Act. The accountants qualified
their report on State compliance for
Findings 2015-001 through 2015-007. Except
for the noncompliance described in these
findings, the accountants stated the
Tribunal complied, in all material
respects, with the requirements described
within the report.

FRANK J. MAUTINO
Auditor General

FJM:djn

AUDITORS ASSIGNED

This examination was performed by the
Office of the Auditor General’s staff.