REPORT DIGEST GOVERNOR’S OFFICE OF MANAGEMENT AND BUDGET COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2017 Release Date: March 6, 2018 FINDINGS THIS AUDIT: 3 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 2 -- 1 -- 3 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 1 -- 3 FINDINGS LAST AUDIT: 2 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 SYNOPSIS • (17-1) The Governor’s Office of Management and Budget (Office) did not exercise adequate controls over the collection of federal interest subsidy receipts. • (17-2) The Office did not submit accurate Locally Held Fund reports to the State Comptroller and did not make accurate monthly disclosures on the Office’s website. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROL OVER COLLECTION OF FEDERAL INTEREST SUBSIDY RECEIPTS The Governor’s Office of Management and Budget (Office) did not exercise adequate controls over the collection of federal interest subsidy receipts. • One expected rebate totaling $2,426,928, due March 1, 2016, was not received from the federal government and there was no documentation to support collection efforts. • Five of 22 (23%) rebate receipts tested were not received in full from the federal government. The expected total of these rebates was $27,120,870, but the Office only received partial payments totaling $26,937,818 and failed to pursue the additional $183,052. (Finding 1, pages 9-10) We recommended the Office pursue the collection of outstanding interest subsidy receipts on a timely basis. Office officials agreed with the recommendation and stated they have established a protocol that outlines a timeframe for following up on Build America Bonds rebates and requires written documentation to record the date, time and method of those efforts. INACCURATE LOCALLY HELD FUND REPORTS The Office did not submit accurate locally held fund reports (C-17s) to the Office of the State Comptroller and did not make accurate monthly disclosures on the Office’s website. • One of 56 (2%) C-17s tested, prepared on the cash basis of accounting, improperly included $40,344 of accrued investment income. • Eight of 56 (14%) Office monthly website disclosures tested were inaccurate. Four of the disclosures reported incorrect amounts; misstatements totaled between $55 and $28,943,883. The Office also failed to post four disclosures for Certificates of Participation, which totaled $16,644 at December 31, 2015. (Finding 2, pages 11-12) This finding was first reported in 2011. We recommended the Office implement procedures to review all C-17s for accuracy prior to submission. We also recommended the Office implement procedures to review all monthly disclosures for accuracy prior to posting to the Office’s website and ensure all required disclosures are posted. Office officials agreed with the recommendation and stated they have implemented corrective action. (For the previous Office response, see Digest Footnote #1.) OTHER FINDING The remaining finding pertains to not obtaining all statutorily required information related to subcontractors. We will review the Office’s progress towards the implementation of our recommendations in the next compliance examination. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Office for the two years ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants stated the Office complied, in all material respects, with the requirements described in the report. This compliance examination was conducted by West and Company, LLC. 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:PH DIGEST FOOTNOTES #1 – INACCURATE LOCALLY HELD FUND REPORTS 2015 – We concur with the auditor’s recommendation. The Office has fully implemented corrective action to resolve the finding including: established new procedures for the preparation of the C-17 and monthly disclosure reports; established a supervisory review control to approve both reports before they are filed or released; developed a new monthly disclosure reporting format; trained staff to prepare the reports; and trained staff to review and approve the reports. All mistakes on the C-17 reports during the audit period were corrected in the subsequent quarter or at the end of the fiscal year prior to the office submitting its GAAP package to the State Comptroller.