The Illinois State Toll Highway Authority did not deposit moneys received in accordance with the time frames set by the Toll Highway Act and the Trust Indenture Bond Agreement.

During testing, we noted 12 of 30 (40%) earned revenue receipts selected for testing were not deposited into the Treasury within 5 days of collection. Receipts tested included concession fees and reimbursement of costs for construction projects. Receipts of $703,207 were deposited 6-7 days after collection, receipts of $2,084,695 were deposited 8-9 days after collection, and receipts of $67,280 were deposited 10 days after collection. Not depositing money in the required time frame results in loss of interest earnings, could affect the future bond rating of the Authority, and could lead to other penalties, misuse or loss of Authority funds. (Finding 5, page 18) This finding has been repeated since 1999.

The Authority agreed with our recommendation to implement procedures to ensure the deposit of receipts in the required time frame. (For previous Authority responses, see Digest Footnote 1.)

The Illinois State Toll Highway Authority's organization-wide procurement and payment procedures were not documented and consistently followed by all departments. As a result, Authority staff did not have a clear understanding of the approvals for procurements and payments.

During our testing we noted 9 of 185 (5%) invoices did not contain the proper approvals. Seven invoices did not have the Financial Services Manager or Controller approval on the invoice-voucher, one invoice did not contain department head approval and one invoice did not contain approval by the Chief of Information Technology.

Due to the lack of an organization wide procedure manual for the different types of procurements and payments, the procedures followed by the departments were not consistent throughout the Authority. (Finding 3, pages 15-16)

The Authority agreed with our recommendation to clearly outline procurement and payment procedures for all departments after obtaining approval by senior management.

The Toll Highway Authority did not reconcile the sick and vacation leave accrual recorded in the general ledger, which is the basis for the financial statements, to an accurate subsidiary ledger in a timely manner.

During our audit we noted that the Authority’s subsidiary ledger for accrued sick and vacation leave contained errors. Upon notification of the errors, the Authority corrected and produced a new subsidiary ledger. (Finding 10, page 23)

The Authority agreed with our recommendation to reconcile the general ledger to a subsidiary ledger that records the dollar amount of the accrued sick and vacation pay for all eligible employees. This ledger should be used as the basis for recording the financial statement amount for accrued sick and vacation time.

The Toll Highway Authority did not bill toll violators timely.

Toll violators were not being billed on a regular basis. No billings were sent during one month. For the other 11 months only limited billings were sent. In total, 895 invoices for $953,049 were sent to toll violators in calendar year 2002.

accounts receivable balance for toll violators as of December 31, 2002 was $2,358,901, representing amounts billed but uncollected as of that date. The allowance for bad debts for these receivables is $1,837,414, which equals the amounts over one year old. The net receivable balance was $521,487. Currently, the Authority has outsourced a portion of the violator billing and collection process. The backlog of past violators is being processed. (Finding 8, page 21) This finding has been repeated since 2000.

We recommended the Authority send out invoices on a monthly basis to all toll violators and pursue unpaid amounts.

The Authority responded that it has retained an outside vendor with national expertise in this field to issue notices to toll violators. (For previous Authority responses, see Digest Footnote 2.)

The Toll Highway Authority has not allocated sufficient staffing for the video surveillance department.

During the audit we noted that the video surveillance department has a total of 5 employees. Examples of the duties performed by this department include managing the contract for billing and collection of violations, reviewing billings, reviewing images that are not readable by the computer, handling customer service calls, scheduling hearings, preparing paperwork for cases, presenting cases, following up on fine collection and other administrative functions.

We also noted that hearings are not being scheduled in a timely manner. Authority staff stated resources were not allocated to provide adequate staffing. (Finding 9, page 22)

We recommended the Authority allocate sufficient resources to the video surveillance operation. The Authority responded that is has retained an outside vendor to operate the video surveillance equipment, identify violations, issue notices to violators, schedule hearings, prepare the case file, collect and post payments and various other administrative functions.

The Toll Highway Authority did not compute the arbitrage calculation for the 1996 Series A Bonds on a timely basis.

The total amount due to the Internal Revenue Service was $164,845. This amount included $150,613 of interest earned over the limit and an additional $14,232 of interest on the amount that was due.

Section 148(f) of the Internal Revenue Code provides that an issuer of tax-exempt bonds must pay to the United States: (1) the excess of (a) the amount earned on all "non-purpose investments" made with "gross proceeds" of an issue of tax-exempt bonds over, (b) the amount which would have been earned if such non-purpose investments had been invested at a rate equal to the yield on the issue (the "excess"), plus (2) any income attributed to the excess. (Finding 17, page 33)

We recommended the Authority complete the arbitrage calculation on a timely basis so that additional interest and penalties can be avoided.

The Authority responded that it agrees with the recommendation and will in the future perform the calculations in accordance with Internal Revenue Service regulations.

Other findings were less significant and are reportedly being addressed by Authority management. We will review progress toward implementation of all our recommendations during the next audit.

Responses to the recommendations were provided by Patricia Pearn, Chief Internal Auditor.

Our auditors stated the Illinois State Toll Highway Authority’s financial statements as of December 31, 2002 and 2001 are presented fairly in all material respects.

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WILLIAM G. HOLLAND, Auditor General

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Our special assistant auditors for this audit were FPT&W, Ltd.