REPORT DIGEST

 

ILLINOIS STUDENT ASSISTANCE COMMISSION

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2007

 

Summary of Findings:

Total this audit††††††††††††††††††††† 9

Total last audit††††††††††††††††††††† 7

Repeated from last audit†††††† 3

 

 

Release Date:

April 30, 2008

 

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 and Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

INTRODUCTION

†††††

††††† This report digest covers both the Financial Audit and the State Compliance Examination of the Illinois Student Assistance Commission for the year ended June 30, 2007.The Financial Audit Report contains four findings (numbers 1-4).The State Compliance Report contains five findings (numbers 7-11).

 

 

SYNOPSIS

 

 

®      The Illinois Student Assistance Commission (Commission) did not have sufficient controls over the financial reporting process of the Illinois Designated Account Purchase Program or the Illinois Prepaid Tuition Program.

®      The Commission was late in filing quarterly reports for locally held funds with the Illinois Office of the Comptroller.

®      The Commission was delinquent in reporting required revenue bond activity to the Illinois Office of the Comptroller.

 

 

 

 

 

 

 

 

 

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


ILLINOIS STUDENT ASSISTANCE COMMISSION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2007 (In Thousands)

 

EXPENDITURE STATISTICS

FY 2007

FY 2006

FY 2005

        Total Expenditures (All Appropriated Funds)................................................

†††††

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

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

 

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

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

††††† Other Payroll Costs (FICA, Retirement).....

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

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

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

Telecommunications.....................................

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

††††† Lump Sums.................................................

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

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

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

 

AWARDS & GRANTS TOTAL......................

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

 

††††† Grant Awards to Eligible Students................

††††††††††† % ofAwards and Grants......................

††††† Federal Guarantee Distributions...................

††††††††††† % ofAwards and Grants......................

††††† All Other Grants and Awards......................

††††††††††† % ofAwards and Grants......................

        Net Cost of Property and Equipment.....

 

$682,702,890

†††

$45,520,183

††††††††††† 6.7%

 

$15,056,423

††††††††† 33.1%

     $6,773,259

†††††††††††† 14.9%

†††† $7,348,227

††††††††††† 16.1%

††††† $566,009

††††††††††† 1.2%  $15,369,479

†††††††† 33.8%

††††† $406,786

††††††††††† 0.9%

 

$637,182,707

††††††††† 93.3%

 

$354,259,525

55.6%

$179,771,154

28.2%

$103,152,028

16.2%

$14,182,000

 

$593,316,928

†††

$36,960,061

††††††††††† 6.2%

 

†  $16,306,231

††††††††† 44.1%

$6,958,439

†††††††††††† 18.8%

$8,367,276

††††††††††† 22.6%

††††† $509,526

††††††††††† 1.4%

††† $4,425,410

††††††††† 12.0%

††††† $393,179

††††††††††† 1.1%

 

$556,356,867

††††††††† 93.8%

 

$345,770,562

62.1%

$164,041,982

29.5%

$46,544,323

8.4%

$14,766,000

 

$560,715,797

†††

$38,821,071

††††††††††† 6.9%

 

$16,079,432

††††††††† 41.4%

††† $7,386,992

††††††††††† 19.0%

††† $9,231,575

††††††††††† 23.8%

††††† $688,023

††††††††††† 1.8%

††† $4,739,883

††††††††† 12.2%

†††††† $695,166

††††††††††† 1.8%

 

$521,894,726

††††††††† 93.1%

 

$330,838,777

63.4%

$142,428,538

27.3%

$48,627,411

9.3%

$15,238,000

 

SELECTED ACTIVITY MEASURES

FY 2007

FY 2006

FY 2005

        Total Receipts per Comptroller (All Funds)..

        Expenditures of Federal Awards..................

        Average Number of Employees...................

        Number Students Receiving MAP Award*..

        Number of Loans Guaranteed*....................

* Unaudited

$388,171,000

$295,928,000

501

146,635

199,272

$323,124,000

$276,103,000

519

146,853

222,981

$297,736,000

$221,596,000

532

150,311

227,896

AGENCY DIRECTOR(S)

 

 

 

During Audit Period:Larry E. Matejka (to 12/31/06); Andrew Davis (from 1/1/07)

Currently: Mr. Andrew Davis


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insufficient controls

 

 

 

Noted disclosures were not properly calculated

 

 

 

 

 

 

 

Commission officials agree with auditors

 

 

 

 

 

 

 

 

Insufficient controls

 

 

 

Numerous errors

 

 

 

 

 

 

 

 

 

Assets were misstated by $1.1 million

 

 

Investment disclosures pertaining to $77 million were not included

 

 

$3.1 million arbitrage liability under-recorded

 

Incorrect interest rate on variable rate debt results in $5.6 million understatement

 

 

 

 

 

 

 

 

 

 

 

 

 

Commission officials agree with auditors

 

 

 

 

 

 

 

Locally held funds reports filed late

 


Final report was 156 days late

 

 

 

 

Commission officials agree with auditors

 

 

 

 

 

 

 

 

12% of bond notices were delinquent

 

 

 

 

 


Commission officials agree with auditors

 

 

 

 

 

 

INTRODUCTION

 

††††† The Illinois Student Assistance Commission (Commission) was created to establish and administer a system of financial assistance through loan guarantees, scholarships, grant awards and a prepaid tuition program for residents of the State of Illinois to enable them to attend qualified public or private institutions of their choice.

 

 

 

FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

 

 

CONTROLS OVER FINANCIAL REPORTING OF THE ILLINOIS PREPAID TUITION PROGRAM NEED IMPROVEMENT

 

††††† The Illinois Student Assistance Commission (Commission) does not have sufficient controls over the financial reporting process of the Illinois Prepaid Tuition Program.

 

††††† During our review of the draft financial statements of the Illinois Prepaid Tuition Program (the Program), we noted the disclosures related to the multiple ratings of securities were not properly calculated by the Commission. These disclosures were subsequently corrected and are properly disclosed on the final financial statements. The Programís investments subject to these disclosures totaled approximately $994 million.

 

††††† The Commission stated that they rely on their contractual investment advisor to prepare this information.(Financial Report: Finding 1, page 76).

 

††††† Commission officials agreed with our recommendation to strengthen internal controls over financial reporting and stated it would implement quality control procedures.

 

 

 

CONTROLS OVER FINANCIAL REPORTING OF THE DESIGNATED ACCOUNT PURCHASE PROGRAM NEED IMPROVEMENT

 

††††† The Commission does not have sufficient controls over the financial reporting process of the Illinois Designated Account Purchase Program.

 

††††† Numerous errors/adjustments were identified during the audit of the Illinois Designated Account Purchase Program (IDAPP) and review of underlying records. Some of the more significant adjustments/errors were as follows:

 

  • The financial statements provided to the auditors required several corrections and revisions. Presentation of certain financial statement items was not accurate and several disclosures were missing.For example:

3      Restricted net assets were understated by approximately $1.1 million, and unrestricted net assets were overstated by the same amount.

3      Supplementary schedules of outstanding debt did not agree to the financial statements or footnotes.

3      Investment disclosures pertaining to $77 million in money market accounts were not included in the footnotes.

 

  • The Commission under-recorded its arbitrage rebate liability by approximately $3,133,000.

 

  • The Commission did not obtain the correct interest rate on its variable rate debt resulting in an understatement of $5.6 million in interest payments over the life of the debt.††††

 

††††† Commission officials stated IDAPP went through a major re-organization of personnel, including senior level management and also underwent a major restructuring of its student loan portfolio. This contributed to delays and inaccuracies in the preparation and reporting of financial statements.(Financial Report:Finding 3, pages 78-79)

 

 

††††† We recommended that the Commission improve controls over financial reporting to ensure accurate presentation and disclosure in its financial statements.

 

††††† Commission officials agreed with our recommendation and stated that it would ensure that processes and procedures are put in place to improve internal controls and prevent delays and inaccuracies in the financial reporting process.

 

 

DELINQUENT FILING OF QUARTERLY RECEIPTS AND DISBURSEMENTS OF LOCALLY HELD FUNDS

 

††††† The Commission was late in filing quarterly accounting reports of receipts and disbursements for locally held funds with the Illinois Office of the Comptroller.

 

††††† During our testing, we noted that 3 of the 4 required quarterly form C-17 reports were delinquent.The reports were ranged from 17 to 49 days late. The fourth quarter filing, due July 31, 2007 was initially filed 49 days late and was subsequently amended twice. The final report was filed 156 days after it was due.(Compliance Report: Finding 8, page 9).

 

††††† Commission officials agreed with our recommendation to work with its external business partners to accelerate monthly reporting of locally held fund activity so that the form C-17 reports can be filed timely as required.†††

 

NEED TO IMPROVE REVENUE BOND REPORTING

 

††††† The Commission was delinquent in reporting required revenue bond activity to the Illinois Office of the Comptroller for the year ended June 30, 2007.

 

††††† During our review of the quarterly reports of delinquent revenue bond reporting prepared by the Illinois Office of the Comptroller, we noted that 37 out of the 312 (12%) required C-08 forms, ďNotice of Payment of Bond Interest and/or PrincipalĒ to be reported to the Comptrollerís Office were delinquent for the fiscal year ended June 30, 2007.(Compliance Report: Finding 9, page 10).

 

††††† Commission officials agreed with our recommendation to work with its trustees to ensure all required revenue bond reporting to the Comptrollerís Office is completed on a timely basis.

 

 

OTHER FINDINGS

 

††††† Other findings are reportedly being given attention by Commission management.We will review progress toward implementation of our recommendations in our next financial audit and compliance examination.

 

 

AUDITORSí OPINION

 

††††† Our auditors stated the June 30, 2007 financial statements of the Illinois Student Assistance Commission are fairly presented in all material respects.

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:JAF:pp

 

AUDITORS ASSIGNED

 

††††† McGladrey & Pullen, LLP were our special assistant auditors for this engagement.