REPORT DIGEST

 

CAPITAL DEVELOPMENT BOARD

 

FINANCIAL AUDIT

For the One Year Ended:

June 30, 2006

And

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2006

 

Summary of Findings:

Total this audit†††††††††††††             7

Total last audit†††††††††††††             6

Repeated from last audit†††††††††† 1

 

Release Date:

April 19, 2007

 

 

Sate of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

 

To obtain a copy of the Report contact:

Office of the Auditor General

Attn:Records Manager

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (217) 524-4646

 

This Report Digest and Full Report are also available on

the worldwide web at www.auditor.illinois.gov

 

 

 

 

 

 

 

SYNOPSIS

 

 

®      Adequate controls were not maintained over the collateralization of construction retention trust accounts.

 

®      Architect/engineer firms did not certify that expenses on pay submittals were in accordance with requirements.

 

®      Post-construction site visits were not conducted for all required school construction projects.

 

®      Requirements of the Art-in-Architecture Program were not met.

 

 

 

 

 

 

 

 

 

 

 

 

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


 

 

CAPITAL DEVELOPMENT BOARD

FINANCIAL AUDIT

For the Year Ended June 30, 2006

COMPLIANCE EXAMINATION

For the Two Years Ended June 30, 2006

 

EXPENDITURE STATISTICS

FY 2006

FY 2005

FY 2004

        Total Expenditures (All Funds)*.......

 

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

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

††††† Personal Services.........................

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

††††††††††† Average No. of Employees.....

††††† Other Payroll Costs (Retirement,

††††† Social Security, Group Insurance)..

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

††††† Contractual Services....................

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

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

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

 

CONSTRUCTION TOTAL............

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

 

        Cost of Property and Equipment.....

        Cost of Construction in Progress....

$466,490,466

†††††††††††††††††††††

$10,959,319

2.3%

$6,582,567

60.1%

136

 

$2,607,630

23.8%

$354,121

3.2%

$1,415,001

12.9%

 

$455,531,147

97.7%

 

$2,309,051

$26,494,174

$564,526,722

 

$12,329,908

2.2%

$6,808,178

55.2%

126

 

$3,304,186

26.8%

$352,871

2.9%

$1,864,673

15.1%

 

$552,196,814

97.8%

 

$2,311,081

$32,222,167

$811,215,675

 

$12,085,718

1.5%

$6,718,519

55.6%

147

 

$2,787,089

23.0%

$454,793

3.8%

$2,125,317

17.6%

 

$799,129,957

98.5%

 

$2,384,338

$113,256,362

SELECTED ACTIVITY MEASURES (unaudited)

FY 2006

FY 2005

FY 2004

Number of Active Construction Projects...

Number of Design Contracts Processed....

Average Variation from Planned Schedule:††

Design Phase.....................................

Construction Phase...........................

Number of Change Orders...................

Percent of Change Orders to Contract Value

School Construction Grants Awarded....

443

39

 

34.8%

31%

1,808

6.87%

0

495

37

 

32.2%

26.6%

1,950

5.21%

0

599

142

 

40.5%

67.9%

2,470

5.54%

71

* Appropriated funds and CDB Contributory Trust Fund (#617)

 

EXECUTIVE DIRECTORS

During Audit Period: ††† Janet Grimes, Executive Director (10/1/05 through present)

††††††††††††††††††††††††††††††††††† Janet Grimes, Acting Executive Director (1/3/05 through 9/30/05)

††††††††††††††††††††††††††††††††††† Anthony Rossi, Executive Director (7/1/04 through 1/2/05)

Currently:                     Janet Grimes, Executive Director


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$9.412 million were uninsured and uncollateralized

 

 

Lack of a deposit policy for custodial credit risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

92% of pay requests reviewed did not include a certification

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Site visits were not performed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No projects had proof of installment insurance for artists

 

Some projects did not have minutes fromcommittee meetings

 

42% of the Public Arts Advisory Committee positions were vacant

 

 

The program was not consistently applied to school construction projects

 

 

 

 

 

INTRODUCTION

 

The Capital Development Board serves as the non-road, construction management arm of the Illinois government.

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

INADEQUATE INTERNAL CONTROL FOR UNINSURED AND UNCOLLATERALIZED DEPOSITS

 

††††† The Board did not maintain adequate controls over the collateralization of locally held construction retention trust accounts.

 

††††† At June 30, 2006, the Board had a total bank balance of $12.69 million held in local funds as retainage on open construction projects, including $9.412 million which was uninsured and uncollateralized.We noted:

 

        Board personnel did not require banks to pledge allowable securities to collateralize deposits in excess of $100,000 as required by the State Officers and Employees Money Disposition Act.

 

        The Board did not have a deposit policy for custodial credit risk as required by the Public Funds Investment Act. (Finding 1, pages 11-12)

 

††††† We recommended that the Board require banks to pledge securities for deposits in excess of the $100,000 FDIC limit and adopt a deposit policy.Further, the Board should seek legislative remedy if the statutory requirements are deemed unnecessary or inappropriate for construction retention trust accounts.

 

††††† Board officials agreed with the finding and responded that banks will be required to insure the entire value of construction retention trust accounts.

†††††

 

ARCHITECT/ENGINEER CERTIFICATION

 

††††† The Board failed to obtain certification from Architect/Engineer (A/E) firms that expenses were in accordance with the provisions of the Appropriation Act and the terms of the Intergovernmental Agreement.

 

††††† We noted that 23 of 25 (92%) pay requests reviewed did not include a certification from the Architect/Engineer.(Finding 2, Page 13)

 

††††† We recommended the Board revise the intergovernmental agreement to include the provision that the architect certifies each payment submittal.Further, the Board should refuse payment for any submission not certified by the A/E.

 

††††† Board officials agreed with the finding and responded the grant agreements will include the certification requirement by the design firms.

 

 

††††† POST CONSTRUCTION VISITS

 

††††† The Board did not visit school construction projects upon completion.

 

††††† Board policy requires that a school construction project verification survey be conducted on 25 percent of the projects closed out.We tested six completed school projects, which the Board selected for site visits, and noted that three (50%) were not performed.These three projects accounted for a total of $25,039,300 in State expenditures.(Finding 3, Page 14)

 

††††† We recommended that each site chosen for a post-construction survey be visited within a reasonable period after the final payment date.

 

††††† Board officials agreed with our finding and recommendation.

†††††

 

ART-IN-ARCHITECTURE PROGRAM NONCOMPLIANCE

 

††††† The Board did not comply with all the requirements set forth by the Art-in-Architecture Program.

 

††††† The Capital Development Board Act (Act) mandates that through the Art-in-Architecture Program, the Board spend one-half of one percent of the construction appropriation for State-funded building or renovation projects on the purchase of artwork for these projects.The Act applies to all State-financed buildings that are accessible to the general public.(20 ILCS 3105/14)

 

††††† We tested 20 Art-in-Architecture projects and noted:

 

        None had proof of installment insurance for artists used in the projects.

        Of eight projects, which included a Fine Arts Review Committee, three (37.5%) did not have minutes from the committee meetings as required by the Open Meetings Act.

        The Public Arts Advisory Committee had seven members instead of twelve as required by the Act.Further, the Committee Chairman position had been vacant for several years.The Act requires the committee choose a Chairman and requires committee members be appointed by the Governor and the General Assembly.

        The Board did not consistently apply the requirements of the Art-in-Architecture Program to locally governed and State owned school construction projects.The program was applied to State run schools, community colleges, and public universities, but not local elementary and secondary school projects, which received State grant funds.(Finding 7, Pages 19-20)

††††† We recommended that the Board ascertain that all Art-in-Architecture project requirements are met.Further, we recommended that:

 

        The installment insurance form or documentation that no insurance is needed should be maintained.

        Committees should maintain minutes of each meeting.

        The Board should continue communication with the Governor and General Assembly to request vacant committee positions be filled.

        A chairman should be appointed to the Public Arts Advisory Committee.

        The Board should apply the requirements of the Art-in-Architecture Program to all school construction projects, document and consistently apply their interpretation of the statute, or seek legislation to exempt such projects from the requirement.

 

††††† Board officials agreed with our finding and recommendations.Further, officials responded that the appointment of committee members is under the control of the Governorís Office, the House, and the Senate.Officials stated they have reminded and will continue to remind those bodies of the vacancies.Board officials also stated they will strengthen the Boardís procedures to clearly define those buildings in which art shall be placed and they will seek legal advice to clarify wording in the legislation.

†††††

OTHER FINDINGS

 

††††† The remaining findings are reportedly being given attention by the Board.We will review the Boardís progress toward the implementation of our recommendations in our next examination.

 

AUDITORSí OPINION

 

Our auditors stated the financial statements of the Capital Development Board for the year ended June 30, 2006 are fairly presented in all material respects.

 

†††††††††††††††††††††† ††††† ____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:LKW:pp

 

SPECIAL ASSISTANT AUDITORS

 

††††† Clifton Gunderson LLP were our special assistant auditors for this engagement.††