Illinois Housing Development Authority. Financial Audit For The Year Ended June 30, 2011

              Office of the Auditor General, Iles Park Plaza, 740 E. Ash St., Springfield, IL 62703 • Tel: 217-782-6046 or TTY 888-261-2887
This Report Digest and a Full Report are also available on the internet at www.auditor.illinois.gov
ILLINOIS HOUSING DEVELOPMENT AUTHORITY
Financial Audit Summary of Findings:
For the Year Ended: June 30, 2011
Release Date: November 3, 2011
Total this audit:
Total last audit:
Repeated from last audit:
363
SYNOPSIS
 The Authority has inconsistencies in the process for monitoring problem loans and in rating loans that are
deemed uncollectible in the multi-family loan program.
 The Authority has loan balances in the multi-family program recorded in their financial statements that
should be removed due to the loans being uncollectible.
 The Authority’s accounts payable master vendor list has duplicate vendors.
{Expenditures and ActivityMeasures are summarized on the reverse page.}
3
Over reserve of $408,000
Authority agrees with the auditors
$7.6 million allowance for loan loss
estimate
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
INCONSISTENCIES IN THE LOANMONITORING
AND LOAN RATING SYSTEM
The Illinois Housing Development Authority (Authority)
had inconsistencies in the process for monitoring problem
loans and inconsistencies in rating loans that are deemed
uncollectible in the multi-family loan program.
The Authority has established a comprehensive loan rating
system to establish appropriate loan loss reserve amounts for
the multi-family loan program. We conducted three separate
loan reviews testing current, delinquent and “watch list” loans.
A total of 87 multi-family program loans were tested for
compliance with the Authority’s loan rating policy.
During our tests we noted that 2 of the 87 (2%) loans
reviewed were not properly reserved for in accordance with
the Authority’s loan rating policy, resulting in an over reserve
in the Administrative Fund of approximately $408,000.
(Finding 1, Page 66) This finding was first reported in 2008.
We recommended that the Authority implement policies
and procedures to ensure changes to loan ratings are updated
consistently in order to ensure an accurate calculation of the
allowance for loan loss.
Authority officials concurred with the recommendation
and believe that the policies and procedures that were
implemented during fiscal years 2010 and 2011 have helped to
strengthen internal controls. (For the previous Authority
response, see Digest footnote #1.)
LOAN RECEIVABLE ALLOWANCE FOR LOAN LOSS
BALANCES OVERSTATED
The Illinois Housing Development Authority (Authority)
has loan balances in the multi-family program recorded in
their financial statements that should be removed due to the
loans being uncollectible.
During our audit of the Authority’s allowance for loan
loss estimate, we noted 38 loans totaling approximately $7.6
million were recorded on the Authority’s financial statements
for which a 100% allowance reserve was recorded. The
Authority anticipates that most of these loans will ultimately
be written off. (Finding 2, Page 67) This finding was first
reported in 2008.
4
Authority agrees with the auditors
502 duplicate vendors in the master
vendor list
Authority agrees with the auditors
We recommended that the Authority work with the
Attorney General’s Office to get approval to write-off the
uncollectible loan balances.
Authority officials concurred with the recommendation
and stated that they continue to work with the Attorney
General’s office to acquire timely approvals of submitted loan
writeoff requests. (For the previous Authority response, see
Digest footnote #2.)
DUPLICATE VENDORS IN THE ACCOUNTS
PAYABLE MASTER VENDOR LIST
The Illinois Housing Development Authority’s
(Authority) accounts payable master vendor list has duplicate
vendors.
During our testing of the master vendor list, we noted of
the 2,658 vendor records there were 502 duplicate records
(19%) representing 52 vendors. The vendors had the same
name but were given different vendor identification numbers
in the accounts payable system. Below is a breakdown of
instances of duplication:
 2 vendors were in the system 10 times or more
 15 vendors were in the system 5 to 9 times
 167 vendors were in the system 2 to 4 times
Without adequate procedures to prevent multiple vendors
from being created in the accounts payable system or to detect
and purge multiple vendors in the accounts payable system,
there exists the risk of an accounting error or a
misappropriation of assets. (Finding 3, Page 68-69)
We recommended that the Authority implement
procedures to assign one vendor identification number per
vendor to prevent multiple vendors from being created on the
system. We also recommended that the Authority implement
procedures to review the master vendor list regularly and
purge duplicate vendor names from the system.
Authority officials concurred with the recommendation
and stated that they have established a procedure as of January
2011 that requires a form W-9 to be on file for new and
existing vendors which requires a valid TIN. The TIN will be
used as a unique number to identify active vendors within the
accounts payable system and is required to add any new
vendors to the master vendor list.
5
AUDITORS’ OPINION
Our auditors state the June 30, 2011 financial statements
of the Illinois Housing Development Authority are presented
fairly in all material respects.
___________________________________
WILLIAM G. HOLLAND
Auditor General
WGH:TLK:PP
SPECIAL ASSISTANT AUDITORS
McGladrey & Pullen LLP were our Special Assistant Auditors
for this engagement.
DIGEST FOOTNOTES
#1 –Inconsistencies in the Loan Monitoring and Loan Rating System –
Previous Authority Response
The Authority concurs with the recommendation. Management will review
the current policies and procedures and make any revisions as needed to
ensure that the “watch list” reports are complete and accurate for all loans.
In addition management will review the policies and procedures for
uncollectible loans to ensure that the amounts to be reserved are accurate
and consistent with established policies for loan loss reserves.
#2 –Loan Receivable Balance and Allowance for Loan Loss Balance
Overstated – Previous Authority Response
The Authority concurs with the recommendation and will continue to work
with the Attorney General’s Office to get approval for write-off of
uncollectible loan balances through periodic inquiries on the status of
submitted requests.