REPORT DIGEST

ILLINOIS HOUSING DEVELOPMENT AUTHORITY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  February 27, 2020

FINDINGS THIS AUDIT:  3

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 2 -- 2
Category 2:  0 -- 1 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 3 -- 3

FINDINGS LAST AUDIT: 3

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 Housing
Development Authority (Authority) Financial
Audit as of and for the year ended June 30,
2019.  The Authority’s Compliance Examination
(including the Single Audit) covering the year
ended June 30, 2019 will be issued in a
separate report at a later date.

SYNOPSIS

• (19-1) The Authority has not established
adequate internal controls over the financial
reporting process and has not established
adequate internal controls over the recording
of financial transactions within its books and
records.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INACCURATE FINANCIAL REPORTING

The Illinois Housing Development Authority
(Authority) has not established adequate
internal controls over the financial reporting
process and has not established adequate
internal controls over the recording of
financial transactions within its books and
records.

During the year ended June 30, 2019, the
Authority made a number of changes in the
financial reporting process in an effort to
address the deficiencies in internal control
over financial reporting which were identified
and reported in previous audits.  The
Authority has a complex financial reporting
process/structure and the Authority has
imposed an aggressive fiscal year-end
financial reporting timeline and deadline.
The Authority did not amend its year-end
financial reporting process or reporting
deadlines to permit personnel to be adequately
prepared or to provide adequate time to
complete all necessary financial reporting
activities.

Additionally, the Authority did not establish
additional oversight or monitoring procedures
to ensure the financial statements were
properly prepared and presented. As a result,
the draft financial statements prepared by
management contained several errors which
required adjustment to the financial
statements or reporting to those charged with
governance.

During our audit of the financial statements
as of and for the year ended June 30, 2019,
some of the items we noted during the audit
are as follows:

• The Authority incorrectly reported program
loans receivable disbursements, repayments,
and net program loan receivable amounts within
footnote 5 of the financial statements for the
Illinois Affordable Housing Trust Fund (IAHT),
Home Program Fund (HOME) and Mortgage Loan
Program Fund (MLP). The loan repayments and
net program loans receivable were incorrectly
reported by ($2,041,000) in the IAHT, the loan
repayments and net program loans receivable
were incorrectly reported by ($3,551,000) and
($3,552,000) respectively, in the HOME and the
loan disbursements, loan repayments and net
program loans receivable were incorrectly
reported by $557,000, ($2,873,000) and
($2,316,000) respectively, in the MLP.  A
proposed adjustment for these differences was
recorded by the Authority.

• The Authority incorrectly reported scheduled
receipts of principal on gross program loans
receivable in the Illinois Affordable Housing
Trust Fund in the fiscal years subsequent to
June 30, 2019 and thereafter, within footnote
5 of the financial statements. The fiscal year
2020 difference was $1,404,000 and for the
fiscal years after 2024 the difference was
$29,125,000.   A proposed adjustment for these
differences was recorded by the Authority.

• The Authority incorrectly reported scheduled
receipts of principal on gross program loans
receivable in the ARRA Fund in the fiscal
years after 2024 within footnote 5 of the
financial statements with a difference
totaling $44,611,000. A proposed adjustment
for this difference was recorded by the
Authority.

• The Authority incorrectly reported
$14,173,346 of fiscal year 2019 revenue to
Nonmajor Governmental Funds as unearned
revenue.  A proposed adjustment for this error
was recorded by the Authority.

• The Authority incorrectly reported the
fiscal year 2019 debt activity of additions
and deductions for Federal Home Loan Bank
Advances within footnote 8 of the financial
statements for the Administrative Fund.
Specifically, additions and deductions were
both overstated by $14,000,000.  As a result,
proceeds from the sale of bonds and notes and
principal paid on bonds and notes were
overstated on the statement of cash flows.  A
proposed adjustment for this difference was
recorded by the Authority.

• The Authority incorrectly classified
$22,580,000 of Housing Bonds Payable in the
Mortgage Loan Program Fund as a noncurrent
liability.  The balance should be classified
as a current liability as the related
liquidity agreement expires within one year of
June 30, 2019.  A proposed adjustment for this
difference was recorded by the Authority.

• The Authority incorrectly recorded an
adjustment of $466,662 to HOME federal funds
revenue, resulting in an understatement of
federal funds revenue within the HOME Program
Fund and an overstatement of federal funds in
the Nonmajor Governmental Funds for the year
ended June 30, 2019.  A proposed adjustment
for this difference was recorded by the
Authority.

• The Authority did not properly reconcile
cash accounts and accounts payable suspense
accounts at year end.  As a result, cash was
overstated by $892,282, service fee revenue
was understated by $113,680, accrued
liabilities and other was overstated by
$999,212, and other current assets was
understated by $6,750 for the Administrative
Fund.  A proposed adjustment for these
differences was not recorded by the Authority.

In addition, the following amounts were
incorrectly reported within footnote 5 related
to risk sharing loans:

• The Authority originally reported the number
of risk sharing loans as 50 while the correct
amount was 43 resulting in a difference of (7)
loans.

• The Authority originally reported the total
dollar amount of risk sharing loans as
$293,555,629 while the correct amount was
$243,509,219 resulting in a difference of
($50,046,410).

• Total loans financed within the
Administrative Fund was originally reported by
the Authority as $12,282,036 while the correct
amount was $12,336,070 resulting in a
difference of $54,034.

• The Authority originally reported the number
of participation loans as 29 when the correct
number was 22 resulting in a difference of (7)
loans.

• The Authority originally reported the total
dollar amount of participation loans as
$170,055,851 while the correct amount was
$119,955,406 resulting in a difference of
($50,100,445).

• The Authority originally reported the total
dollar amount of beneficial ownership
interests in loans sold to the Federal
Financing Bank as $113,980,000 while the
correct amount was $111,930,000 resulting in a
difference of ($2,050,000).

A proposed adjustment for these differences
was recorded by the Authority.

The Authority incorrectly classified interest
paid on revenue bonds and notes within the
statement of cash flows as an operating
activity rather than as a noncapital financing
activity in the amounts of ($982,880),
($10,023,029) and ($22,241,291) for the
Administrative Fund, Mortgage Loan Program
Fund, and Single Family Program Fund,
respectively.  Additionally, the Authority
incorrectly classified bank note cash
collateral as an adjustment to reconcile
operating income to net cash used in operating
activities rather than as a noncapital
financing activity in the amount of
($14,950,000) for the Administrative Fund.  A
proposed adjustment for these differences was
recorded by the Authority.  (Finding 1, pages
86-93) This finding has been repeated since
2015.
We recommended the Authority review its
current internal control policies and
procedures to ensure financial transaction are
accurately reported in the general ledger and
the financial statements, including footnote
disclosures.

Authority officials accepted the
recommendation and stated they will implement
appropriate internal controls and procedures
to address the conditions noted within this
finding.

OTHER FINDINGS

The remaining findings pertain to inaccurate
financial reporting of investments and
inadequate allowance for loan loss methodology
and loan rating review process.  We will
review the Authority’s progress towards
implementation of our recommendations in our
next financial audit.

AUDITOR’S OPINION

Our auditors stated the financial statements
of the Authority as of June 30, 2019, and for
the year then ended, are fairly stated in all
material respects.

The financial audit was conducted by KPMG 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