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The Authority paid $289,149 in incentive compensation
pay to 25 employees
Management stated it has a legal opinion that it is
exempt from the Personnel Code
The Authority accepted the recommendation but did not
accept the finding
Auditors’ comment
Letter sent to the Attorney General by the Authority
did not seek an opinion
Lender and borrower loan application missing
Application fee not paid
Loan term of 25 years exceeded statutory limit of 15
years
Travel and marketing vouchers lacked receipts
Lack of supporting documents
Duplicate payment
One form used for dual purposes
Some case receipts were not deposited timely or date
stamped
Some refunds were not deposited timely
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INTRODUCTION
The mission of the Authority
is to foster economic development to the public and private institutions that
create and retain jobs, and improve the quality of life in Illinois by
providing access to capital.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
NONCOMPLIANCE WITH PERSONNEL
CODE – INCENTIVE BASED COMPENSATION
The Authority
paid $289,149 in incentive compensation pay during fiscal year 2006 to 25
employees based on an Incentive Based Compensation Plan that is not allowable
under the Personnel Code.
The Authority made payments to 25 employees based on the
Authority’s Incentive Based Compensation Plan. The Incentive Based Compensation Plan is calculated based on
individual performance and the Authority’s performance. The Plan’s administrative policies contain
a schedule of ranges and percentages for determining the incentive pay. There was no provision in the Personnel Code during the period
under examination for the payment of incentive pay or bonuses.
Management indicated the Authority has a legal opinion that
the Illinois Finance Authority is exempt from the Personnel Code, therefore,
allowing the Incentive Based Compensation Plan. Management further stated that during the current fiscal year
they have used outside legal counsel to continue to research the issue and
had not yet sought an opinion from the Attorney General. (Finding 1, pages 9-10)
We continued
to recommend that the Authority conform its personnel practices to governing
law and seek an opinion from the Attorney General to determine if they are
exempt from the Personnel Code.
Authority
officials accepted the auditors’ recommendation but did not accept the
finding. The Authority stated that
the Illinois Finance Authority Act (20 ILCS 3501/801-1) exempts the Authority
from the Personnel Code because it requires the Authority to establish its
own system of personnel administration.
The Authority indicated it had sent a letter dated February 8, 2007 to
the Attorney General’s office regarding the applicability of the Personnel
Code to the Authority.
In an
auditors’ comment the auditors stated they continue to believe that absent
specific exemption in either the Illinois Finance Act or the Personnel Code,
all positions of employment in the service of the State of Illinois are
subject to the Personnel Code (20 ILCS 415/4). The letter sent February 8, 2007 referenced in the Authority’s
response does not seek an opinion,
but rather requests information from the Attorney General on the process
necessary to seek an opinion.
MISSING AND
INCOMPLETE DOCUMENTS IN STATE GUARANTEED AGRICULTURAL LOANS
The Authority
did not have all required documents for State Guaranteed Agriculture Loans.
We examined
the loan files of all fiscal year 2006 state agricultural guaranteed loans
and noted the following exceptions:
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2 out of 13
(15%) state guaranteed loans totaling $568,850 for existing farmer debt
did not have a lender and borrower application on file;
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1 out of 5
(20%) state guaranteed loans totaling $425,000 for specialized livestock
did not have lender and borrower applications on file;
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1 out of 5
(20%) state guaranteed loans for specialized livestock did not pay the
$300 application fee to the Authority;
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1 out of 5
(20%) state guaranteed loans totaling $212,500 for specialized livestock
had a loan duration of 25 years, which exceeded the statutory
requirement of 15 years.
Management
indicated that proper documentation procedures were not followed in file
closings. (Finding 3, page 12)
We recommended
the Authority strengthen its controls over the agricultural loan approval
process.
Authority
officials accepted our recommendation and indicated it had strengthened
controls over the agricultural loan files by implementing a file checklist to
help ensure that all loan files are complete at closing.
APPROVAL OF
INCOMPLETE TRAVEL AND MARKETING REIMBURSEMENT FORMS
The Authority
approved and reimbursed travel and marketing expenses when reimbursement
forms were incomplete.
During our
detailed testing of 32 vouchers totaling $45,128 for travel and marketing
expenses, we noted the following exceptions:
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8 vouchers
(25%) totaling $639 did not include an itemized receipt for meals, thus,
claims for non-reimbursable expenses could not be determined. Auditors were unable to determine
whether these reimbursement requests were for travel or for marketing
expenses.
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2 vouchers
(6%) totaling $538 were approved for reimbursement of cell phone
charges. We noted the Authority
paid the entire cell phone bill including the regular monthly fee
without any supporting documents for the detail calls.
During our
detailed testing of 30 vouchers totaling $16,321 for marketing expenses, we
noted one voucher totaling $502 was submitted and reimbursed twice.
We also noted
that the Authority processes both travel and marketing expense reimbursements
on the same form and charges these expenses to the same general ledger
account in the books and records of the Authority. The design of the form, however, makes it difficult to
distinguish whether the employee is seeking reimbursement for travel expenses
or marketing expenses.
Marketing
expenses are subject to the Authority’s internal policy outlining the
allowable expenses reimbursable as marketing expenses. For example, some meal expenses are
allowable at a slightly higher rate for business development (marketing)
breakfast or luncheons. This policy
differs from the Governor’s Travel Control Board Regulations. (Finding 5, pages 15-16)
We recommended
the Authority redesign the travel and marketing expense reimbursement form to
clearly distinguish whether the reimbursement request is for travel or for
marketing expenses and separately track travel and marketing expenses in its
general ledger. Further, the
Authority should carefully review employee travel and marketing expense
reimbursement forms for proper documentation, mathematical accuracy and
duplicate payment prior to approval of the reimbursement claim.
Authority
officials accepted our recommendation and indicated that it would redesign
the travel and marketing expense reimbursement form, will separately track
travel and marketing expenses in the general ledger, and would more carefully
review the forms for proper documentation, mathematical accuracy and
duplicate payment.
INADEQUATE
PROCESSING AND UNTIMELY DEPOSIT OF CASH RECEIPTS AND REFUNDS
The Authority did not
adequately process or timely deposit cash receipts or refunds.
During our detailed
testing, we selected 25 cash receipts and noted the following exceptions:
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5 out of 25
receipts (20%) totaling $24,464 were not deposited timely. On average, these receipts were
deposited 6 days late by the Authority.
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5 out of 25
receipts (20%) totaling $111,877 were not date stamped. Therefore, we could not determine the
date the Authority received the cash or if the cash was deposited
timely.
During our detailed
testing of all cash refunds received by the Authority, we noted the
following:
-
5 out of 10
(50%) refunds totaling $1,206 were not deposited timely. On average, these were deposited 7 days
late by the Authority. (Finding
6, page 17)
We recommended that the
Authority strengthen its controls over the processing and of cash receipts
and refunds and timely deposit receipts and refunds in accordance with
statutory requirements.
Authority officials
accepted our recommendation and indicated that it would strengthen controls
over the processing of cash receipts and refunds.
OTHER FINDINGS
The remaining findings are reportedly being
giving attention by the Authority. We
will review progress toward implementing our recommendations in our next
examination.
AUDITORS’ OPINION
We conducted a compliance examination of the Authority for
the year ended June 30,2 006 as required by the Illinois State Auditing
Act. A financial audit covering the
year ending June 30, 2006 was issued separately.
____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:JAF:pp
SPECIAL ASSISTANT AUDITORS
McGladrey & Pullen, LLP were our special assistant
auditors for this engagement.
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