REPORT DIGEST

OFFICE OF THE COMPTROLLER

FISCAL OFFICER RESPONSIBILITIES

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2004

Summary of Findings:

Total this audit                          1

Total last audit                          0

Repeated from last audit           0

Release Date:

May 10, 2005

State 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

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

·        The Office of the Comptroller did not disburse proceeds from the Pension Contribution Fund in accordance with Public Act 93-0002.

{Financial Information and Activity Measures are summarized on the next page.}

Fiscal Year 2004

Fiscal Year 2003

FUND BALANCE (Amounts in Thousands)

Cash

Balance

Budgetary Balances*

Cash

Balance

Budgetary

Balance*

APPROPRIATED FUNDS

General Funds...........................

Highway Funds.........................

Special State Funds..................

Bond Financed Funds..............

Debt Service Funds................

Federal Trust Funds................

Revolving Funds....................

State Trust Funds...................

$182,437

521,657

2,618,303

199,083

623,819

187,267

126,816

169,717

$(410,295)

411,795

2,114,134

124,987

623,819

(48,788)

84,817

143,267

$316,654 

700,982

11,101,614

252,115

1,049,997

226,206

47,592

272,976

$(1,093,722)

598,466

10,662,488

209,345

1,049,997

15,869

12,982

246,220

          Sub-total....................

$4,629,099

$3,043,736

$ 13,968,136

$11,701,645

NON-APPROPRIATED FUNDS

Federal Trust Funds...................

State Trust Funds......................

$5,173

1,186,362

$4,522

1,143,803

$10,723

1,027,619

$10,305

978,958

            Sub-total....................

GRAND TOTAL - ALL FUNDS...

*  Budgetary Balances represent the balances remaining after reduction of Cash Balances at June 30 by expenditures made during the lapse period.

FINANCIAL HIGHLIGHTS (Amounts in Thousands)

YEAR ENDED

JUNE 30, 2004

YEAR ENDED

JUNE 30, 2003

Total Receipts - All Funds

$86,735,042

$84,522,054

Total Expenditures - All Funds

$95,233,891

$75,369,725

Net Change In Budgetary Fund Balance - All Funds

$(8,498,849)

$  9,152,329   

Interest Paid on Late Vendor Payments (unaudited)

$3,513

$866

STATE COMPTROLLER

During Audit Period: Honorable Daniel W. Hynes

Currently:  Honorable Daniel W. Hynes

Authorization to issue $10 billion in general obligation bonds

Transfers out of the Pension Contribution Fund

An additional $69,254,977 FY 03 related expenditures paid from $1.86 billion bond proceeds reserved for FY 04 required State contributions

$3,848,437 transfer should not have been made out of the Pension Contribution Fund

$7,000,000 should have been transferred from the Pension Contribution Fund to the General Revenue Fund

INTRODUCTION

      Our 2004 Financial Audit and Compliance Examination of the Comptroller's Fiscal Officer Responsibilities is presented in two parts.  The compliance part is presented in one report and the financial part is presented in the State Comptroller's "Traditional Budgetary Financial Report."  Our opinion on the Statewide basic financial statements prepared in accordance with generally accepted accounting principles is contained in the separately issued Comprehensive Annual Financial Report.

FINDING, CONCLUSION, AND RECOMMENDATION

PAYMENTS FROM PENSION CONTRIBUTION FUND NOT IN ACCORDANCE WITH STATE LAW

      The Office did not disburse proceeds from the Pension Contribution Fund in accordance with State law.

      Public Act 93-0002 (Act) authorized the State to issue $10 billion in general obligation bonds to be used for the purpose of making contributions to the State’s retirement systems.  The Act required $1.86 billion of the bond proceeds to be reserved in the Pension Contribution Fund to make payments for the required State contributions during fiscal year 2004 to the State’s retirement systems (30 ILCS 330/7.2(c)).  The Act states, “whenever any payment of required State contributions for State fiscal year 2004 is made to one of the designated retirement systems, the Comptroller and Treasurer shall, as soon as practicable, transfer from the Pension Contribution Fund to the General Revenue Fund an amount equal to the amount of that payment to the designated retirement system.”  However, the following problems were noted with the Office of the Comptroller’s (Office) related transfers out of the Pension Contribution Fund.

·    In accordance with Public Act 93-0002, $300 million was transferred from the bond proceeds to refund the General Revenue Fund for the final quarter of fiscal year 2003 required State contributions.  This transfer appropriately occurred prior to the reservation of $1.86 billion of bond proceeds for fiscal year 2004 required State contributions.  However, an additional $69,254,977 of fiscal year 2003 pension related expenditures paid during the fiscal year 2003 lapse period were paid from the $1.86 billion bond proceeds reserved for fiscal year 2004 required State contributions.  The total amount was transferred from the Pension Contribution Fund to the General Revenue Fund.

·    The Office considered a total of $3,848,437 of payments in fiscal year 2004 from the General Revenue Fund and various other funds to the Retirement Systems to be part of the required State contribution.  The total amount was transferred from the Pension Contribution Fund to the General Revenue Fund.  Because these expenditures were not from those appropriated for the required State contributions, the transfer should not have been made out of the Pension Contribution Fund.

·    The Office did not include a total of $7,000,000 of payments in fiscal year 2004 from the Common School Fund to the Teachers’ Retirement System as required State contributions.  This amount should have been included as a required State contribution and as such, transfers totaling $7,000,000 should have been made from the Pension Contribution Fund to the General Revenue Fund.  However, these transfers were not made. 

Because the transfers noted above exhausted all remaining monies in the Pension Contribution Fund, the Office was unable to make a required transfer from that fund in the amount of $65,769,356 for fiscal year 2004 required State contributions to the State Employees Retirement System.  (Finding 1, page 11-12)

We recommended the Office perform sufficient research in the future to ensure that transfers are only made in accordance with the applicable legislation and appropriations.

Office officials stated that in fiscal year 2004, the Office understood that one of the reasons Public Act 93-0002 was implemented was to alleviate the cash shortage in the General Revenue Fund in the most consistent and uniform manner throughout the fiscal year.  The Office agreed to take appropriate measures in the future to ensure that transfers are only made in accordance with legislation and appropriations.

AUDITORS’ OPINIONS

      Our auditors state the Statement of Fund Balances – Budgetary Basis and Statement of Receipts and Expenditures – Budgetary Basis as of and for the year ended June 30, 2004 were fairly presented in all material respects. 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:TLD:pp

SPECIAL ASSISTANT AUDITORS

      The firm of Sleeper, Disbrow, Morrison, Tarro & Lively, LLC were our special assistant auditors.