ILLINOIS STATE TOLL HIGHWAY AUTHORITY
FINANCIAL AND COMPLIANCE AUDIT
For the Year Ended:
December 31, 2003
Summary of Findings:
Total this audit 11
Total last audit 17
Repeated from last audit 7
July 15, 2004
State of Illinois
Office of the Auditor General
WILLIAM G. HOLLAND
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 TDD (217) 524-4646
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ILLINOIS STATE TOLL HIGHWAY AUTHORITY
FINANCIAL AND COMPLIANCE AUDIT
For The Years Ended December 31, 2003 and 2002
FINANCIAL OPERATIONS (GAAP BASIS)
Toll Evasion Recovery
Total Operating Revenue
Depreciation and Amortization
Services and Toll Collection
Insurance and Employee Benefits
Engineering and Maintenance of Roadway and Structures
Traffic Control, Safety Patrol, and Radio Communications
Total Operating Expenses
SIGNIFICANT ACCOUNT BALANCES (GAAP Basis)
Accounts Receivable (net)
Capital Assets (net)
Revenue Bonds Payable
During Audit Period: Mr. Jack Hartman
Currently: Mr. Jack Hartman
Cash reconciliations were not completed in a timely manner
Sick and vacation leave used was not recorded to subsidiary ledger in a timely manner
Receipts were not always deposited within the required time frame
Violation notices were not sent to all violators
Bank accounts were not reconciled in a timely manner
The Tollway did not monitor the provisions of their lease agreements
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
UNTIMELY TOLL REVENUE RECONCILIATIONS PERFORMED AND COLLECTOR WRITE-UPS NOT LOCATED
The Illinois State Toll Highway Authority did not complete reconciliations of toll revenue timely. Further, the Tollway was not able to locate collector write-ups (TC-32) for variances between actual cash deposited and calculated cash.
Reconciliations between cash deposited and the data from the lanes were not completed in a timely manner. Two reconciliations should occur for each revenue day. One for the automatic lanes and one for the manual lanes. During our testing of 25 revenue days for the automatic lanes, we noted that 10 (40%) of the revenue days were not reconciled in a timely manner. During our testing of 25 revenue days for the manual lanes, we noted that 7 (28%) of the revenue days were not reconciled in a timely manner.
In addition, we tested 5 revenue days and noted that the TC-32’s could not be located for 6 out of 22 (27%) instances where they were issued. A TC-32 is issued to a collector when variances between the actual cash deposited and the calculated cash were greater than the predetermined amounts used by Toll Audit. Both the toll collector and the supervisor are supposed to sign the TC-32 to indicate that the differences were discussed.
Timely reconciliations are required to find and correct any discrepancies between the data received compared to the actual cash collected. Missing documentation could result in an inaccurate evaluation of a collector’s performance since instances of misappropriation may be overlooked. (Finding 1, pages 13-14)
Tollway management agreed with our recommendation to complete reconciliations in a timely manner and to begin a tracking system to monitor TC-32’s.
SICK AND VACATION ACCRUAL NOT PROPERLY RECORDED
The Toll Highway Authority did not timely input sick and vacation time used for salaried employees to document absences and produce an accurate subsidiary ledger.
During our audit we noted that the Tollway’s subsidiary ledger for accrued sick and vacation leave contained errors in the amount of time used by salaried employees.
(Finding 2, page 15) This finding has been repeated since 2001.
Tollway officials agreed with our recommendation and stated that they have negotiated a contract with an outside vendor to implement an automated time and attendance system. This contract is currently pending approval by the Department of Central Management Services. (For previous Tollway responses, see Digest Footnote 1.)
UNTIMELY DEPOSIT OF VIOLATION ENFORCEMENT AND MISCELLANEOUS RECEIPTS
The Toll Highway Authority did not deposit moneys received in accordance with the time frames set forth in the Toll Highway Act (605 ILCS 10/24) and the Trust Indenture Bond Agreement. Receipts included earned revenue and violation enforcement toll revenue.
The Toll Highway Act states that all receipts shall, within three days after receipt thereof, be paid to the Treasurer of the State of Illinois. Additionally, the Tollway’s Trust Indenture Bond Agreement states that all revenues received by the Tollway, other than investment income, shall be delivered by the Tollway to the Treasurer, for deposit, not more than 5 business days after receipt.
During our audit we noted that 8 of 46 (17%) earned revenue receipts selected for testing were not deposited into the Treasury within 5 days of collection. In addition, we noted that 50 of 61 (82%) of violation enforcement toll revenue receipts were not deposited into the Treasury within 5 days of collection. (Finding 3, pages 16-17) This finding has been repeated since 1999.
Tollway officials agreed with our recommendation to implement procedures to ensure the deposit of receipts within the required time frame and stated that they have implemented procedures to address the underlying sources of delay. (For previous Tollway responses, see Digest Footnote 2.)
VIOLATION ENFORCEMENT SYSTEM NOT FULLY IMPLEMENTED
The Illinois State Toll Highway Authority did not send out violation notices for all lanes and did not timely follow up with violators who failed to tender payment or respond to the violation notices.
During our audit we noted that for violators who did not send in payment, request a hearing, or respond to the written violation notice sent, the Tollway did not exercise its post-judgment enforcement rights. Additionally, we noted that violation notices were not always sent although the information was collected. (Finding 4, pages 18-19)
This finding has been repeated since 2000.
We recommended the Tollway take necessary steps to capture all pursuable violations. In addition, we recommended the Tollway begin collection procedures for outstanding violation notices.
Tollway officials acknowledged that the violation enforcement system could be improved and expanded and stated that they are now issuing current violation notices and will continue to expand the program to cost –effectively collect outstanding fines. (For previous Tollway responses, see Digest Footnote 3.)
BANK RECONCILIATIONS NOT COMPLETED TIMELY
The Illinois State Toll Highway Authority did not complete bank reconciliations in a timely manner.
During our audit we noted that 75 of 120 (63%) bank reconciliations were not completed within 30 days of the month’s end. The reconciliations that were not performed timely ranged from 31 days to over 180 days after month’s end. (Finding 7, page 22)
Tollway officials concurred with our recommendation to follow established procedures to ensure all bank accounts are reconciled in a timely manner and stated that they are now completing the bank reconciliations in a more timely fashion.
INADEQUATE MONITORING OF LESSEES’ COMPLIANCE
The Illinois State Toll Highway Authority did not have an adequate system for monitoring its lessees’ compliance with their lease agreements.
The Tollway entered into lease agreements with two entities for fuel service and retail service. We noted several issues during our review of these lease agreements.
The Tollway billed the retail service lessee $82,141 on October 13, 2003 for real estate taxes that were paid by the Tollway for property the retail service lessee was using. According to the lease agreement, the lessee agreed, during the term of the agreement, to timely pay any fine, penalty, interest or cost which may be added thereto for the lessee’s non-payment of all real estate taxes. Reimbursement had not been received by the Tollway from the lessee as of December 31, 2003.
In addition, the Tollway did not verify, in a manner consistent with the lease agreement, the fuel service lessee’s compliance with the maximum allowable selling price charged by the lessee for non-diesel fuel. According to the lease agreement, the fuel service lessee was to select 5 non-system service stations to obtain an average fuel price. The actual amount charged by the fuel service lessee shall not be higher than the average computed from the 5 stations. Based on our review, we noted that Tollway inspectors periodically obtained price data, however it was unknown if the stations selected by the inspectors were the same as those chosen by the lessee.
According to the lease agreement, the number and identity of the stations were to be discussed by the fuel service lessee and approved by the Tollway.
Furthermore, the Tollway was supposed to set up a separate interest bearing Renewal Bank Account with the fuel service lessee as a cosigner. A total of $254,806 should have been deposited into this account for the fiscal year. The Tollway deposited the money into their maintenance and operations bank account. This error resulted in $2,875 in unpaid interest to the fuel service lessee.
Other monitoring deficiencies were also noted during our review of the lease agreements. The deficiencies noted follow:
We recommended the Tollway monitor lessees’ compliance and assess appropriate penalties.
Tollway officials stated that the newly created position of Oases Project Manager will work to ensure that the numerous departments involved in monitoring lease compliance are meeting the terms of the lease.
Other findings are reportedly being addressed by Tollway management. We will review progress toward implementation of all our recommendations during the next audit.
Responses to the recommendations were provided by Tina Smigielski, Controller.
Our auditors stated the Illinois State Toll Highway Authority’s financial statements as of, and for the years ended, December 31, 2003 and 2002 are presented fairly in all material respects.
WILLIAM G. HOLLAND, Auditor General
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were PTW & Co.
2002: "We concur and will perform routine reconciliations."
2001: "We agree. New monthly reporting has been implemented to correctly account for the sick leave accrual. Adjustments will be initiated for April 2002 and continue monthly."
2002: "We concur and have created new positions for a cashier supervisor and two additional cashiers to ensure timely deposit of miscellaneous revenue."
2001: "We agree. Less than 4% of the Authority total revenues are miscellaneous revenues. Authority management continues to inform personnel of the importance to remit all receipts immediately to Finance for timely deposit."
2000: "ISTHA agrees and is in the process of trying to centralize the receipt of miscellaneous revenues. We will endeavor to have all receipts deposited in a timely manner."
1999: "The Authority agrees with the recommendation. Ten new high-speed coin counting machines were purchased and installed. In addition, additional temporary summer employees have been hired to cover the increase demands of the summer traffic. The Authority is now current in all aspects of its money room operations."
2002: "The Authority has retained an outside vendor with national expertise in this field to issue notices to violators."
2001: "While the Authority agrees that violators were not billed timely during 2001, billing information has been compiled for future notification and collection efforts. The Authority has recently finalized negotiations to outsource the violator billing and collection process. Once the outsourcing services are initiated it is expected that violators will be billed timely, and the backlog of past violators will be processed."
2000: "While ISTHA agreed that violators were not billed timely during 2000, billing information has been compiled for future notification and collection efforts. ISTHA is currently negotiating with contractors to outsource the violator billing and collection process. Once outsourcing is complete it is expected that violators will be billed timely, and the backlog of past violators will be processed."