REPORT DIGEST

ILLINOIS RACING BOARD

COMPLIANCE AUDIT

For the Two Years Ended:

June 30, 2002

Summary of Findings:

Total this audit 10
Total last audit 1
Repeated from last audit 1

Release Date:
February 20, 2003

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046 or TDD (217) 524-4646
This Report Digest is also available on the worldwide web at http://www.state.il.us/auditor

 

 

 

 

SYNOPSIS

 

 

  • The Board did not obtain reviews of the computerized totalizator systems used at racetracks under the Board’s jurisdiction.
  • The Board failed to collect admission fees from inter-track wagering licensees (OTB parlors) within 48 hours.
  • The Board did not perform audits of major systems of internal accounting and administrative control at least once over the two-year period as required by State law.
  • The Board did not maintain adequate control over equipment.
  • The Board does not have adequate controls for its hiring of per diem employees.
  • The Board failed to establish procedures to determine if occupational licensees were also delinquent taxpayers of the State of Illinois.

 

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

 

 

ILLINOIS RACING BOARD
COMPLIANCE AUDIT
For The Two Years Ended June 30, 2002

EXPENDITURE STATISTICS

FY 2002

FY 2001

FY 2000

Total Expenditures (All Appropriated Funds)

OPERATIONS TOTAL
% of Total Expenditures
Personal Services
% of Operations Expenditures
Average No. of Employees:
Full-time
Per Diem
Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures
Contractual Services
% of Operations Expenditures
All Other Operations Items
% of Operations Expenditures
GRANTS - RACE TRACK
IMPROVEMENT FUND

% of Total Expenditures
Property and Equipment (at cost)

$7,653,862


$7,653,862
100%
$4,485,162
58.60%

38
57
$954,296
12.47%
$684,440
8.94%
$1,529,964
19.99%

N/A
N/A
$2,264,983

$7,598,131


$7,598,131
100%
$4,361,225
57.40%

39
65
$926,328
12.19%
$678,945
8.94%
$1,631,633
21.47%

N/A
N/A
$2,249,218

$10,382,645


$6,647,863
64.03%
$4,172,329
62.76%

39
68
$875,178
13.17%
$734,859
11.05%
$865,497
13.02%

$3,734,782
35.97%
$2,138,028

SELECTED ACTIVITY MEASURES

CY 2001

CY 2000

CY 1999

  • On Track Handle (millions)
  • Intertrack Handle (millions)
  • Off Track Handle (millions)
  • Total Illinois Handle (millions)
  • Post Race Drug Tests
  • Positive Tests for Prohibited Drug

$232.6
300.9
572.2
$1,105.7

21,186
23

$241.9
300.2
560.4
$1,102.5

24,267
47

$200.7
323.8
579.3
$1,103.8

22,430
47

EXECUTIVE DIRECTOR(S)
During Audit Period: Jack Kubik (4/1/99 – 10/12/01), Marc Laino (10/13/01 – 8/31/02), Walter Dudycz (9/1/02 – Present)
Currently: Walter Dudycz
 

 

 

 

 

 

 

 

 

Systems calculated annual wagers of $1.11 billion for 2001 and $1.1 billion for 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits were remitted between 2 and 16 days late

 

 

 

 

 

 

 

 

 

Internal auditor did not audit all the major systems within the two year period

 

 

 

 

 

 

 

 

 

 

Lack of control over equipment purchases and inaccruate quarterly reports

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees hired before results of background checks received

 

 

 

 

 

 

 

 

 

 

 

 

Procedures to determine if occupational licensees were also delinquent taxpayers lacking

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INDEPENDENT REVIEW OF COMPUTERIZED INFORMATION SYSTEMS ARE NOT CONDUCTED

The Board did not obtain reviews of the computerized totalizator systems used at racetracks under the Board’s jurisdiction.

According to the Board's Annual Reports, the totalizator systems calculated total calendar year wagers of $1.11 billion and $1.10 billion for 2001 and 2000, respectively. Of the total wagers, combined State and local government tax revenues received were approximately $26 million for calendar years 2001 and 2002.

These systems are the means for the racetracks to accept bets and cash winning tickets. These systems also are the Board’s primary source of information for monitoring tax revenues. The totalizator systems vendors have the responsibility to ensure that all processing is complete and accurate.

The Illinois Horse Racing Act of 1975 vests the Board with the power to prescribe reasonable rules and regulations to provide for the prevention of practices detrimental to the public and to promote the best interest of racing. It would be prudent to require the vendors to have an independent review performed on their information systems environment. (Finding 10, pages 28-30)

We recommended the Board obtain independent reviews of each of the totalizator system vendors. Board management agreed with the recommendation and said the two vendors are in the process of contracting with a third party to review the computerized systems.

UNTIMELY DEPOSITS OF INTER-TRACK WAGERING FACILITIES ADMISSION FEES

The Board failed to collect admission fees from inter-track wagering licensees (OTB parlors) within 48 hours.

During our testing of one month of inter-track wagering admission fees it was noted that deposits were remitted between two and 16 days late.

The Horse Racing Act requires that inter-track wagering location licensees that collected admission fees imposed by a municipality or county to remit such fees with 48 hours to the Board, which shall, pursuant to rule, cause the fees to be distributed to the county or municipality.

We recommended the Board ensure that all fees are remitted to the Board within 48 hours as required by law. Board management agreed with the recommendation and stated that the fees are currently being remitted within 48 hours. (Finding 4, page 17)

NON-COMPLIANCE WITH FISCAL CONTROL AND INTERNAL AUDITING ACT

The Board did not perform audits of major systems of internal accounting and administrative controls at least once every two years as required by State law. In addition, the internal auditor was performing operational duties, which is a violation of the Fiscal Control and Internal Auditing Act.

During our audit testing, we noted that 7 major areas had not been audited within the last two years. Also, the internal auditor was reviewing and summarizing annual financial statements submitted by organization licensees.

The Fiscal Control and Internal Auditing Act requires that all major systems be reviewed at least once every two years. In addition, the Act requires that the internal auditor be free of all operational duties. (Finding 1, pages 10-11)

We recommended the Board remove all operational duties from the internal auditor to ensure that a sufficient amount of time is available to complete the audits of all major systems. The Board agreed with the recommendation and stated the internal auditor will perform the required audits.

INADEQUATE CONTROLS OVER EQUIPMENT

The Board did not maintain adequate control over equipment. In addition, there is a lack of segregation of duties over equipment purchases.

During our audit testing we noted that equipment purchases were not recorded in the quarter that the property was purchased, and as a result, the quarterly reports filed with the State Comptroller had to be amended.

We also noted the property control officer was not always aware of new equipment purchases. Property was not timely entered on the property records. In addition, the fiscal officer, in some instances, ordered, received, recorded and approved equipment purchases. This does not allow for an adequate segregation of duties. (Finding 2, pages 12-14)

We recommended the Board allocate sufficient staff to ensure equipment purchases are timely and accurately recorded. We further recommended the Board implement the use of purchase requisitions, purchase orders and receiving reports to ensure proper segregation of duties. The Board accepted the recommendation and has created a purchase order form to document all phases of the purchase transaction.

LACK OF HIRING CONTROLS FOR PER DIEM EMPLOYEES

The Board does not have adequate controls for its hiring of per diem employees.

Per diem employees are hired at the discretion of a Board employee without approval of Board management. In addition, per diem employees are hired before the results of background checks are received. Also, the personnel director was not aware of the new employee until after they were hired.

A total of six new per diem employees were hired during the audit period. Good business practice calls for proper hiring and approvals on all new per diem employees. A lack of adequate controls over the hiring of per diem employees could result in employees with criminal records or insufficient experience in the regulation of the racing division. (Finding 7, pages 22-23)

We recommend Board management approve all new per diem employees and that the background checks be completed prior to the start of employment. The Board accepts the recommendation and has developed a new form to use when hiring per diem employees. This form requires management’s signatures, including the Executive Director and the Personnel Director.

FAILURE TO CROSS CHECK OCCUPATION LICENSEES WITH ILLINOIS DEPARTMENT OF REVENUE TAX STATUS

The Board failed to establish procedures to determine if occupational licensees were also delinquent taxpayers of the State of Illinois.

The Board received an Interagency agreement with the Illinois Department of Revenue to establish procedures to cross check delinquent taxpayers with the Board’s license records. The Board reviewed the agreement and decided not to enter into it.

Failure to establish procedures to cross check occupational licensees with the Illinois Department of Revenue weakens the ability of the State to collect tax revenues. (Finding 8, pages 24-25)

We recommend the Board review the Interagency Agreement with the Illinois Department of Revenue to establish procedures to cross check for delinquent taxpayers. The Board accepts the recommendation and will work with the Illinois Department of Revenue to establish an information sharing agreement.

OTHER FINDINGS

The remaining findings are less significant and are reportedly being given attention by the Board. We will review the Board’s progress toward the implementation of our recommendations in our next audit.

Ms. Catherine Larson, Internal Auditor of the Illinois Racing Board, provided the Board’s responses.

AUDITORS’ OPINION

We conducted a compliance audit of the Illinois Racing Board for the two years ended June 30, 2002 as required by the Illinois State Auditing Act. We have not audited any financial statements of the Board for the purpose of expressing an opinion because the Board does not, nor is it required to, prepare financial statements.

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

McGreal, Johnson, and McGrane were our special assistant auditors for this audit.