REPORT DIGEST ILLINOIS STATE TOLL HIGHWAY AUTHORITY FINANCIAL AUDIT FOR THE YEAR ENDED DECEMBER 31, 2021 Release Date: October 19, 2022 FINDINGS THIS AUDIT: 4 CATEGORY: NEW -- REPEAT – TOTAL Category 1: 1 -- 1 -- 2 Category 2: 1 -- 1 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 2 -- 4 FINDINGS LAST AUDIT: 4 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 This digest covers the Illinois State Toll Highway Authority’s (Tollway) Financial Audit as of and for the year ended December 31, 2021. SYNOPSIS • (21-01) The Tollway failed to implement controls necessitated by the terms of our communication letter that required timely notification to its external auditor, that one of our employees was seeking employment with the Tollway, increasing the impact of an independence breach and resulting in a waste of the State’s resources as defined in Government Auditing Standards, §6.21. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS FAILURE TO IMPLEMENT CONTROLS TO COMPLY WITH A COMMUNICATION LETTER REQUIREMENT The Illinois State Toll Highway Authority (Authority) failed to implement controls necessitated by the terms of our communication letter that required timely notification to its external auditor, that one of our employees was seeking employment with the Authority, increasing the impact of an independence breach and resulting in a waste of the State’s resources as defined in Government Auditing Standards, §6.21. As initially contracted for by the Auditor General and our firm on November 10, 2021, we were engaged to perform the Authority’s financial audit and State compliance examination for Calendar Year 2021. In the communication letter from our firm dated November 23, 2021, the Authority’s Executive Director (representing management) and the Authority’s Audit Committee Chair (representing governance) signed a written agreement acknowledging the scope of the financial audit and State compliance examination, our role and responsibilities, and the Authority’s role and responsibilities during the engagements which included the following requirement: To help ensure both the Office of the Auditor General and CliftonLarsonAllen LLP do not have an independence impairment under the Code of Professional Conduct published by the American Institute of Certified Public Accountants, you agree to inform [the appointed representatives of Auditor General and our firm] before discussing any potential employment with any of our personnel. In December 2021, a staff member of our engagement team intended to seek employment with the Authority and then actually applied to two open positions within the Authority’s Internal Audit Department, which violated the legal and ethical requirements imposed on our staff members and firm to maintain our independence in fact and appearance with respect to the Authority. On February 22, 2022, the impaired staff person began charging time to the Authority’s compliance examination, which included some limited testing used to support the Authority’s financial audit. On March 29, 2022, a committee at the Authority, including the Authority’s Chief Internal Auditor, held an interview with our impaired staff person for the first position, eventually extending an employment offer to our impaired staff person which was ultimately turned down. On April 25, 2022, the impaired staff person took part in an interview for the second position at the Authority, which also included the Chief Internal Auditor, accepted the offer that followed on May 31, 2022, and subsequently notified our firm’s team leader they had accepted an offer of employment from the Authority on June 2, 2022. In recognition of this breach of our firm’s independence and, after consulting with the Office of the Auditor General, our national office, and an independent national expert on auditor independence, we identified a remedy to cure the breach of the independence rules for the financial audit, which was ultimately concurred with by the Authority’s Board of Directors on July 20, 2022. However, unlike the financial audit, the breach was pervasive to the State compliance examination and the professional judgment, integrity, objectivity, and professional skepticism of our engagement team was so compromised that we resigned from the State compliance examination engagement. As a result, the Authority will undergo a new State compliance examination covering Calendar Year 2021 as part of a future engagement covering the two years ending December 31, 2022. During the audit, we noted the following: • The Authority did not implement the controls necessary to comply with a Communication Letter requirement to timely inform the Auditor General that our employee had applied for employment with the Authority. • The Authority’s Chief Internal Auditor knew, or should have known, our impaired staff person was a member of our engagement team when the Chief Internal Auditor served on the committees interviewing our impaired staff person and did not immediately report this matter to the appointed representatives of the Auditor General and our firm to limit the extent of the breach of the independence requirements by our impaired staff person. By failing to inform us prior to discussing any potential employment with our staff person as agreed-to by the Authority’s Audit Committee Chair and Executive Director, we were unaware of the breach until June 2, 2022, resulting in a waste of State resources expended to provide us with routine activities, responses, and documentation to support our Calendar Year 2021 State compliance examination. Additionally, failure to notify us prior to discussing any potential employment with our staff person resulted in reperformance of limited audit work to support our Calendar Year 2021 financial audit that could have been avoided had we been notified sooner. (Finding 1, pages 83-85) We recommended the Authority implement controls to ensure employment applications received are timely screened for individuals with current or previous employment with the Authority’s external audit firm or the Auditor General, with any such individuals immediately reported to the appointed representatives of the Auditor General or the Authority’s external audit firm. Authority officials agreed that it failed to timely advise the external audit firm and the Auditor General that a member of the firm’s audit team improperly sought employment with the Authority while the audit was ongoing. OTHER FINDINGS The remaining findings are reportedly being given attention by the Tollway. We will review the Tollway’s progress towards the implementation of our recommendations in our next financial audit. AUDITOR’S OPINION The auditors stated the financial statements of the Tollway as of and for the year ended December 31, 2021 is fairly stated in all material respects. This financial audit was conducted by CliftonLarsonAllen LLP. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:TLK