FY11-Finance-Auth-Fin-Full

              STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
FINANCIAL AUDIT
For the Year Ended June 30, 2011
Performed as Special Assistant Auditors
for the Auditor General, State of Illinois
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
FINANCIAL AUDIT
For the Year Ended June 30, 2011
TABLE OF CONTENTS
Page
Agency Officials 1
Financial Statement Report
Summary 2
Independent Auditors’ Report 3
Management’s Discussion and Analysis 5
Basic Financial Statements
Statement of Net Assets 10
Statement of Revenues, Expenses, and Changes in Fund Net Assets 12
Statement of Cash Flows 13
Notes to Basic Financial Statements 14
Supplementary Information:
Combining Statement of Net Assets - Nonmajor Funds 47
Combining Statement of Revenues, Expenses, and Changes in Fund
Net Assets - Nonmajor Funds 50
Combining Statement of Cash Flows - Nonmajor Funds 53
Independent Auditors’ Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards 56
Prior Finding Not Repeated 58
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
AGENCY OFFICIALS
Executive Director Mr. Christopher Meister
Chairman - Board of Directors Mr. William Brandt, Jr.
Chief Financial Officer (07/01/2010 - 08/20/2010) Ms. Yvonne Towers
Assistant Chief Financial Officer Ms. Ximena Granda
Chief Human Resources Officer (07/01/2010 - 07/19/2011) Mr. Arthur Friedson
General Counsel (07/13/2010 – 12/09/2011) Mr. Brendan Cournane
Acting General Counsel (12/10/2011 – present) Ms. Pamela Lenane
Members of the Illinois Finance Authority Board during the period were as follows:
Dr. William Barclay Terrence O’Brien
Ronald DeNard (07/01/2010 - 05/06/2011) Juan Rivera (07/01/2010 - 10/12/2010)
Michael Goetz John Durburg
Dr. Roger Herrin (07/1/2010 - 05/12/2011) Bradley Zeller
Edward Leonard Sr. Joseph McInerney (07/01/2010 - 03/23/2011)
James Fuentes Roger Poole
Roderick Bashir (07/01/2010 - 07/16/2010) Gila Bronner (10/08/2010 - present)
Heather Parish (08/25/2010 - present) Norman Gold (09/14/2010 - present)
Barrett Pedersen (05/09/2011 - present)
Agency offices are located at:
Chicago Office Mount Vernon Office
180 North Stetson Avenue, Suite 2555 2929 Broadway Street #7B
Chicago, Illinois 60601 Mount Vernon, Illinois 62864
Springfield Office Peoria Office
500 East Monroe Street 3rd Floor 100 South West Water Street
Springfield, Illinois 62701 Peoria, Illinois 61602
1
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
FINANCIAL STATEMENT REPORT
SUMMARY
The audit of the accompanying basic financial statements of the State of Illinois, Illinois Finance
Authority (Authority) was performed by E.C. Ortiz & Co., LLP.
Based on their audit, the auditors expressed an unqualified opinion on the Authority’s basic
financial statements.
2
Honorable William Holland
Auditor General
State of Illinois
and
Ms. Gila Bronner
Honorable Chairman of the Audit Committee
of the Board of Directors
Illinois Finance Authority
As Special Assistant Auditors for the Auditor General, we have audited the accompanying
financial statements of the business-type activities, each major fund and the aggregate remaining
fund information of the State of Illinois, Illinois Finance Authority, a component unit of the State
of Illinois, as of and for the year ended June 30, 2011, which collectively comprise the State of
Illinois, Illinois Finance Authority's basic financial statements as listed in the table of contents.
These financial statements are the responsibility of the State of Illinois, Illinois Finance
Authority's management. Our responsibility is to express opinions on these financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the business-type activities, each major fund and the
aggregate remaining fund information of the State of Illinois, Illinois Finance Authority, as of
June 30, 2011, and the respective changes in financial position and cash flows, where applicable,
for the year then ended in conformity with accounting principles generally accepted in the United
States of America.
In accordance with Government Auditing Standards, we have also issued a report dated
March 9, 2012 on our consideration of the State of Illinois, Illinois Finance Authority's internal
control over financial reporting and on our tests of its compliance with certain provisions of
laws, regulations, contracts, and grant agreements and other matters. The purpose of that report
is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing and should be considered in assessing the results our
audit.
The Management's Discussion and Analysis on pages 5 through 9 is not a required part of the basic
financial statements but is supple1nentary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information
and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the State of Illinois, Illinois Finance Authority's basic financial statements.
The accompanying supplementary information as listed in the table of contents is presented for
purposes of additional analysis and is not a required part of the basic financial statements. The
accompanying supplementary information has been subjected to the auditing procedures applied
the audit of the basic financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
March 9, 2012
4
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
MANAGEMENT DISCUSSION ANALYSIS
JUNE 30, 2011
Basic Financial Statements
In general, the purpose of financial reporting is to provide external parties that read financial
statements with information that will help them make decisions or draw conclusions about an
entity. There are many external parties that read the Illinois Finance Authority’s basic financial
statements; however, these parties do not always have the same specific objectives.
To assure these objectives are met for different parties, GASB 34 generally requires that basic
Financial Statements for governmental entities include both government-wide and fund financial
statements. However, for governmental entities which are engaged only in business-type
activities accounted for in enterprise funds, GASB 34 requires presentation of fund financial
statements only. Governmental reporting standards require an enterprise fund be used to account
for an activity if the pricing policies of the activity establish fees and charges designed to recover
its costs. Accordingly, as all of the Authority's activities are business-type activities accounted
for as enterprise funds, the Authority’s basic financial statements present only the fund financial
statements and not government-wide financial statements.
Enterprise fund financial statements are prepared using the accrual method of accounting and
consist of a statement of net assets, a statement of revenues, expenses, and changes in fund net
assets, and a statement of cash flows.
The Statement of Net Assets presents the financial position of the Authority as of June 30, 2011
and includes all assets and liabilities of the Authority.
The Statement of Revenues, Expenses and Changes in Fund Net Assets present the Authority’s
results of operations. The Authority’s revenues and expenses are classified into three categories:
operating; nonoperating; or Fund transfers.
The Statement of Cash Flows provides additional information about the Authority’s financial
results by reporting the major sources and uses of the Authority’s cash.
The Authority’s financial statements also include notes to basic financial statements, which
provides more detailed financial data and further explains some of the information reported in
the basic financial statements.
5
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
MANAGEMENT DISCUSSION ANALYSIS
JUNE 30, 2011
Condensed Financial Information
The following tables summarize the Authority’s financial position and operating results for the
past two years:
STATEMENT OF NET ASSETS (IN MILLIONS)
Business-type
Activities
2011 2010
Current assets $ 106.96 $ 101.71
Noncurrent assets other than capital assets 269.99 305.33
Capital assets .11 .05
Total assets 377.06 407.09
Current liabilities 40.46 41.11
Noncurrent liabilities 245.62 277.74
Total liabilities 286.08 318.85
Invested in capital assets .11 .05
Restricted 24.74 24.48
Unrestricted 66.13 63.71
Total net assets $ 90.98 $ 88.24
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
(IN MILLIONS)
Business-type
Activities
2011 2010
Operating revenues $ 14.55 $ 16.07
Operating expenses 17.45 19.17
Operating loss (2.90) (3.10)
Nonoperating revenue 5.64 2.27
Change in net assets $ 2.74 $ (.83)
6
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
MANAGEMENT DISCUSSION ANALYSIS
JUNE 30, 2011
Analysis of Overall Financial Position and Results of Operations
The decrease in total assets and total liabilities in fiscal year 2011 occurred because the
Authority used the proceeds from maturing investments to make a portion of the principal
payments due during the year on its long-term debt.
Operating revenues declined in 2011 due to reduced interest receipts from participants on their
loans borrowed from the Authority and reduced service fees earned by the Authority for making
loans. The variance in interest receipts was expected since the principal payments received from
the borrowers have exceeded the amount of new loans over the past several years. The reduction
in service fees was caused by the reduced demand for the Authority’s services due to the
economic downturn. Similarly the Authority’s operating expenses also declined in 2011 due to a
reduction in interest payments from fiscal year 2010 due to the Authority’s redemption of its
long-term debt, and a reduction in employee related expenses.
The increase in nonoperating income in fiscal year 2011 was primarily due to a $2.86 million
decline in value reported in the Authority’s Venture Capital investments in fiscal year 2010
compared to a $.87 million appreciation reported in fiscal year 2011. This valuation was
conducted as part of the Authority’s program assessment procedures.
Financial Analysis of the Authority’s Funds
The Authority has two major enterprise funds.
General Operating Fund - The operating fund of the Authority which receives all revenues from
program applications. All administrative expenses for establishing and monitoring the
Authority’s programs are paid out of this fund. During fiscal year 2011 the net assets in this
fund increased by $2.74 million to $43.63 million. The major reasons for this increase in net
assets was due to better than expected results in the Authority’s operations and a transfer of
$1.17 million from the Authority’s Venture Investment Fund.
Bond Fund - The purpose of the fund is to collect bond proceeds, purchase participating
institutions securities and remit bond issuance costs paid for with bond proceeds. The fund also
collects interest and principal payments from the participating institutions and makes payments
and interest on the bonds payable. During fiscal year 2011 the restricted fund net assets in this
fund increased by $0.09 million to $1.85 million. This increase was due to the fact that the
Authority received services fees of $.06 million which were retained within the bond fund.
In accordance with Generally Accepted Accounting Principles the Authority also reports the
aggregate net assets, revenues, expenses and changes in fund nets assets and cash flows of its
nonmajor funds. During fiscal year 2011 these funds together reported a decrease in fund net
7
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
MANAGEMENT DISCUSSION ANALYSIS
JUNE 30, 2011
assets of $.09 million. This decrease was due to the transfer of funds from the Venture
Investment Fund to the General Fund. This transfer exceeded the total of operating income and
nonoperating revenue.
As of June 30, 2011 the Authority’s nonmajor funds in aggregate reported unrestricted net assets
of $22.62 million and restricted net assets of $22.89 million. The majority of the restricted net
assets held by the Authority’s nonmajor funds were restricted to secure the state loan guarantees.
Discussion of Significant Capital Assets and Long-term Debt Activity
Capital Assets
The Authority has established a policy of capitalizing assets as described in Note 2(j) to the basic
financial statements. The Authority’s investment in capital assets, net of accumulated
depreciation, for business-type activities as of June 30, 2011 was $.11 million.
Additional information about capital assets can be found in Note 12 to the financial statements.
Long-term Debt
Long-term debt is incurred only to raise the capital necessary to provide low cost financing to
businesses, agribusinesses, health care facilities, educational facilities, municipalities, and other
organizations in order to stabilize and strengthen the Illinois economy in areas of job creation
and job retention. The majority of the Authority’s debt is classified as conduit debt. Under
Generally Accepted Accounting Principles conduit debt refers to certain limited-obligation
revenue bonds issued for the express purpose of providing capital financing for a specific third
party. All of the Authority's conduit debt is payable solely from revenues or funds pledged or
available for their repayment as authorized by the Illinois Finance Authority Act. Neither the
faith and credit nor the taxing power of the State of Illinois is pledged to the payment of the
principal or interest on these bonds. In accordance with Generally Accepted Accounting
Principles the Authority’s conduit debt obligations are not reported as liabilities in the
Authority’s basic financial statements. The Authority issued 45 separate conduit debt issues in
fiscal year 2011 with an aggregate principal amount of $2.58 billion. As of June 30, 2011, the
aggregate amount of conduit debt outstanding is approximately $25.49 billion.
The Authority also issues revenue bonds for the purpose of providing loans to other agencies and
component units of the State of Illinois. Although similar to conduit bonds, since these bonds
are issued for the benefit of third parties that are part of the Authority’s financial reporting entity,
they do not meet the definition of conduit debt under Generally Accepted Accounting Principles
and thus are reported as liabilities on the Authority’s basic financial statements. As of
June 30, 2011 the aggregate amount of intra-state debt outstanding is $203.10 million.
8
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
MANAGEMENT DISCUSSION ANALYSIS
JUNE 30, 2011
The Illinois Finance Authority Act also allows the Authority to issue revenue bonds with the
State’s moral obligation attached. This pledge states that in the event that money will not be
available for the payment of principal and interest of these obligations, the Governor is to request
the shortfall amount be appropriated by the General Assembly. The Authority did not issue any
revenue bond with the State’s moral obligation in fiscal year 2011. As of June 30, 2011 the
aggregate amount of revenue bonds with the State’s moral obligation attached is $46.90 million.
In addition to its revenue bonds the Authority also has outstanding loans with the U.S.
Department of Agriculture for $.60 million and with the State of Illinois for $18.32 million.
These loans were incurred to provide the funding for the Authority’s Rural Development Loan
Program and the Fire Truck and Ambulance Revolving Loan Programs.
Additional information about long-term debt can be found in Note 2(o), Note 9 and Note 10 to
the basic financial statements.
Relevant Current Economic Factors, Decisions and Conditions
In an effort to reduce costs and build reserves available for core mission purposes, the Authority
initiated efforts to appropriately divest its existing venture capital program assets.
The Authority faces a number of existential, regulatory and economic challenges on the horizon,
including but not limited to the following:
 Continued national decline in volume of tax-exempt municipal bond issuances (including
general obligation issuers). First quarter 2011 was the lowest volume of municipal
federally tax-exempt issuance in a decade;
 Continuing discussion at the federal level regarding the reduction or elimination of the
federal tax-exemption;
 Efforts by the Securities and Exchange Commission to regulate appointed board
members of municipal issuers such as the Authority as “municipal advisors”;
 Uncertainty over the impact of federal healthcare reform on not-for-profit hospital
borrowers (67.7% of Authority issuance volume since 2004); and
 Increased potential competition from out-of-state issuers and local development
authorities that avoid the full cost of accountability and transparency measures.
Although the Authority has a strong balance sheet to survive these unprecedented challenges and
any major changes in tax-exempt financing, the Authority initiated a strategic planning process
in July 2011 to evaluate potential additional revenue-generating opportunities that leverage the
Authority’s organizational strengths. The strategic planning process is proceeding.
9
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Statement of Net Assets
June 30, 2011
General
Operating Bond Nonmajor
Fund Fund Funds Total
Assets
Current assets:
Cash and cash equivalents - unrestricted $ 30,918,208 $ - $ 16,124,911 $ 47,043,119
Investments - unrestricted 85,000 - - 85,000
Restricted current assets
Cash and cash equivalents - 12,300,824 3,213,749 15,514,573
Securities lending collateral equity with State Treasurer - - 6,888,608 6,888,608
Accrued interest receivable - 1,660,410 4,914 1,665,324
Restricted investments - 16,954,066 - 16,954,066
Bonds and notes receivable - 3,259,700 - 3,259,700
Bonds and notes receivable from primary government - 9,992,500 - 9,992,500
Bonds and notes receivable from component units of State - 756,661 - 756,661
Loans receivable - - 1,592,704 1,592,704
Allowance for doubtful accounts - - (91,484) (91,484)
Current portion of deferred issuance costs - 18,584 - 18,584
Receivables:
Accounts 58,660 20,000 - 78,660
Allowance for doubtful accounts (18,993) - - (18,993)
Loans receivable 1,837,111 - 1,028,103 2,865,214
Interest and other 71,506 - 1,271 72,777
Current portion of deferred issuance costs 50,736 - - 50,736
Prepaid expenses and deposits 228,012 - - 228,012
Total current assets 33,230,240 44,962,745 28,762,776 106,955,761
Noncurrent assets:
Restricted noncurrent assets
Cash and cash equivalents - - 18,314,514 18,314,514
Interest receivable - - 7,837 7,837
Guarantee payments receivable - - 822,411 822,411
Allowance for doubtful accounts - - (822,411) (822,411)
Deferred issuance costs, net of accumulated amortization - 83,247 - 83,247
Investments - 74,249,933 - 74,249,933
Bonds and notes receivable - 35,400,174 - 35,400,174
Bonds and notes receivable from primary government - 54,467,191 - 54,467,191
Bonds and notes receivable from component units of State - 51,615,718 - 51,615,718
Loans receivable - - 18,789,938 18,789,938
Allowance for doubtful accounts - - (20,920) (20,920)
Investments in partnerships and companies - - 2,247,981 2,247,981
Loans receivable 15,410,646 - 3,218,422 18,629,068
Allowance for doubtful accounts (4,038,477) - - (4,038,477)
Capital assets, at cost 503,444 - - 503,444
Accumulated depreciation (390,364) - - (390,364)
Deferred issuance costs, net of accumulated amortization 246,607 - - 246,607
Total noncurrent assets 11,731,856 215,816,263 42,557,772 270,105,891
Total assets 44,962,096 260,779,008 71,320,548 377,061,652
See accompanying notes to basic financial statements.
10
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Statement of Net Assets (continued)
June 30, 2011
General
Operating Bond Nonmajor
Fund Fund Funds Total
Liabilities
Current liabilities:
Accounts payable 360,125 37,972 - 398,097
Accrued expenses 244,032 - - 244,032
Obligation under securities lending of State Treasurer - - 6,888,608 6,888,608
Accrued interest payable - 4,411,695 3,014 4,414,709
Due to employees 95,450 - - 95,450
Due to primary government 200,000 418,224 1,376,537 1,994,761
Bonds payable, current - 4,210,000 - 4,210,000
Bonds payable, primary government - 19,985,000 - 19,985,000
Bonds payable, components units of State - 1,240,000 - 1,240,000
Current portion of long-term debt - - 57,644 57,644
Deferred loss on early extinguishment of debt - (8,801) - (8,801)
Unamortized issuance premium, current - 864,583 - 864,583
Deferred revenue, net of accumulated amortization 71,394 - - 71,394
Total current liabilities 971,001 31,158,673 8,325,803 40,455,477
Noncurrent liabilities:
Noncurrent portion of long-term debt - - 545,493 545,493
Accrued expenses - 111,299 - 111,299
Bonds payable, noncurrent - 42,690,000 - 42,690,000
Bonds payable, primary government - 126,325,000 - 126,325,000
Bonds payable, componets units of State - 55,547,008 - 55,547,008
Deferred revenue, net of accumulated amortization 363,636 - - 363,636
Due to primary government - - 16,942,284 16,942,284
Unamortized issuance premium - 3,163,885 - 3,163,885
Deferred loss on early extinguishment of debt - (66,584) - (66,584)
Total noncurrent liabilities 363,636 227,770,608 17,487,777 245,622,021
Total liabilities 1,334,637 258,929,281 25,813,580 286,077,498
Net Assets
Invested in capital assets 113,080 - - 113,080
Restricted - 1,849,727 22,886,280 24,736,007
Unrestricted 43,514,379 - 22,620,688 66,135,067
Total net assets $ 43,627,459 $ 1,849,727 $ 45,506,968 $ 90,984,154
See accompanying notes to basic financial statements.
11
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Statement of Revenues, Expenses, and Changes in Fund Net Assets
For the Year Ended June 30, 2011
General
Operating Bond Nonmajor
Fund Fund Funds Total
Operating revenues:
Interest on loans $ 862,432 $ - $ 68,219 $ 930,651
Interest on loans (security for revenue bonds) - 7,847,383 - 7,847,383
Application fees 68,100 - - 68,100
Annual fees 582,036 54,195 - 636,231
Administrative service fees 4,736,371 - - 4,736,371
Bad debt recoveries 203,548 - 25,676 229,224
Miscellaneous 91,781 - 8,858 100,639
Total operating revenues 6,544,268 7,901,578 102,753 14,548,599
Operating expenses:
Employee related expenses 2,079,082 - - 2,079,082
Professional services 1,285,797 80,646 9,804 1,376,247
Depreciation 29,446 - - 29,446
Occupancy costs 345,249 - - 345,249
Interest expense - 12,312,522 6,318 12,318,840
General and administrative 325,378 - - 325,378
Loan loss provision 942,150 - 28,402 970,552
Total operating expenses 5,007,102 12,393,168 44,524 17,444,794
Operating income (loss) 1,537,166 (4,491,590) 58,229 (2,896,195)
Nonoperating revenues:
Interest and investment income 29,208 4,578,084 159,659 4,766,951
Gain on sale of investments - - 871,767 871,767
Total nonoperating revenues 29,208 4,578,084 1,031,426 5,638,718
Transfers
Transfers from other funds 1,175,543 - - 1,175,543
Transfers to other fund - - (1,175,543) (1,175,543)
Total transfers 1,175,543 - (1,175,543) -
Change in net assets 2,741,917 86,494 (85,888) 2,742,523
Net assets - beginning of year 40,885,542 1,763,233 45,592,856 88,241,631
Net assets - end of year $ 43,627,459 $ 1,849,727 $ 45,506,968 $ 90,984,154
See accompanying notes to basic financial statements.
12
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Statement of Cash Flows
For the Year Ended June 30, 2011
General
Operating Bond Nonmajor
Fund Fund Funds Total
Cash flows from operating activities:
Cash received for fees and other $ 5,432,072 $ 59,195 $ 31 $ 5,491,298
Cash payments for employee services (2,143,321) - - (2,143,321)
Cash payments to suppliers for goods and services (2,616,450) (59,068) (9,804) (2,685,322)
Net cash provided by (used in) operating activities 672,301 1 27 (9,773) 662,655
Cash flows from noncapital financing activities:
Bonds and notes principal payments - (29,661,242) (57,073) (29,718,315)
Interest payments - (13,859,248) (6,602) (13,865,850)
Principal paid to State - - (2,075,740) (2,075,740)
Due from other funds (116,555) - (87,293) (203,848)
Due to other funds 115,695 - 88,153 203,848
Transfers from other funds 1,175,543 - - 1,175,543
Transfers to other fund - - (1,175,543) (1,175,543)
Net cash provided by (used in) noncapital financing activities 1,174,683 (43,520,490) (3,314,098) (45,659,905)
Cash flows from capital and related financing activity:
Purchase of capital assets (93,805) - - (93,805)
Net cash used in capital and related financing activity (93,805) - - (93,805)
Cash flows from investing activities:
Purchase of investments - (161,204,843) - (161,204,843)
Maturity and sales of investments - 180,497,740 1,136,703 181,634,443
Interest and dividends on investments 30,007 2,371,589 157,820 2,559,416
Cash received for interest on loans 913,767 8,080,281 68,205 9,062,253
Cash received on loan receivables and guarantees 5,904,673 19,842,585 2,443,275 28,190,533
Cash payments for loan receivables and guarantees - (1,083,471) (28,402) (1,111,873)
Net cash provided by investing activities 6,848,447 48,503,881 3,777,601 59,129,929
Net increase in cash and cash equivalents 8,601,626 4,983,518 453,730 14,038,874
Cash and cash equivalents at beginning of year 22,316,582 7,317,306 37,199,444 66,833,332
Cash and cash equivalents at end of year $ 30,918,208 $ 12,300,824 $ 37,653,174 $ 80,872,206
Reconciliation of operating income (loss) to net cash provided by
(used in) operating activities:
Operating income (loss) $ 1,537,166 $ ( 4,491,590) $ 58,229 $ (2,896,195)
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities:
Depreciation 29,446 - - 29,446
Interest on loans (862,432) (7,847,383) (68,219) (8,778,034)
Interest expense - 12,312,522 6,318 1 2,318,840
Amortization of bond issuance costs 59,304 22,157 - 81,461
Amortization of deferred revenue (82,537) - - ( 82,537)
Bad debt recoveries (203,548) - (25,676) (229,224)
Loan loss provision 942,150 - 2 8,402 970,552
Changes in assets and liabilities:
Accounts receivable 51,021 5,000 (8,827) 47,194
Other liabilities (707,455) - - ( 707,455)
Prepaid expenses and deposits (171,765) - - ( 171,765)
Accounts payable and accrued expenses 147,335 (579) - 1 46,756
Due to employees (66,384) - - ( 66,384)
Net cash provided by (used in) operating activities $ 672,301 $ 127 $ (9,773) $ 662,655
Noncash investing activities
Change in fair value of investments $ - $ 162,108 $ - $ 162,108
See accompanying notes to basic financial statements.
13
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(1) ORGANIZATION
The Illinois Finance Authority (Authority) is a body politic and corporate created
July 17, 2003 by Public Act 93-205, effective January 1, 2004. Public Act 93-205
consolidated seven of the State’s existing finance authorities into the Authority. The
Authority succeeded to the rights and duties of the existing finance authorities as of
January 1, 2004. Public Act 93-205 also repealed the existing finance authorities’
authorizing legislation.
The mission of the Authority as statutorily defined in the Illinois Finance Authority Act (20
ILCS 3501/801 et. Seq.) 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.
The Authority is a body corporate and politic, of the State of Illinois. The Authority is
governed by a 15-member board of directors, appointed by the Governor with the advice
and consent of the Senate. As specified in the Illinois Finance Authority Act the amount of
bonds issued by the Authority cannot exceed $28,150,000,000.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Authority have been prepared in accordance with
accounting principles generally accepted in the United States of America (GAAP), as
prescribed by the Governmental Accounting Standards Board (GASB). To facilitate the
understanding of data included in the financial statements, summarized below are the more
significant accounting policies.
(a) Financial Reporting Entity
As defined by GAAP, the financial reporting entity consists of a primary government,
as well as its component units, which are legally separate organizations for which the
elected officials of the primary government are financially accountable. Financial
accountability is defined as:
(1) Appointment of a voting majority of the component unit’s board and either (a) the
primary government’s ability to impose its will on the component unit or (b) the
possibility that the component unit will provide a financial benefit to or impose a
financial burden on the primary government; or
(2) Fiscal dependency on the primary government.
14
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
For financial reporting purposes, the Authority is a component unit of the State of
Illinois. The Authority does not treat any other reporting entities as component units.
(b) Basis of Presentation
The accounts of the Authority are organized on the basis of funds, each of which is
considered a separate accounting entity. The operations of each fund are accounted
for with a separate set of self-balancing accounts that comprise its assets, liabilities,
net assets, revenues, and expenses, as appropriate. The emphasis on fund financial
statements is on a major proprietary fund (enterprise); each is displayed in a separate
column. All remaining proprietary funds are aggregated and reported as nonmajor
funds. All agency administered funds are non-appropriated. The Authority has the
following major proprietary funds:
General Operating Fund - The operating fund of the Authority which receives all
revenues from program applications. All administrative expenses for establishing
and monitoring the Authority’s programs are paid out of this fund as set forth in
Public Act 93-205.
Bond Fund - Each bond issue is comprised of several accounts as required by the
bond indenture. The accounts of all the issues have been aggregated and reported
as the Bond Fund. These are non-appropriated accounts maintained by the
trustee. The purpose of the fund is to collect bond proceeds, purchase
participating institutions securities and remit bond issuance costs paid for with
bond proceeds. The fund also collects interest and principal payments from the
participating institutions and makes payments and interest on the bonds payable.
(c) Basis of Accounting
The Authority financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded at the time liabilities are incurred, regardless of
when the related cash flow takes place.
Private-sector standards of accounting and financial reporting issued prior to
December 1, 1989, generally are followed in the proprietary fund financial statements
to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. The Authority also has the option of
following subsequent private-sector guidance for their enterprise funds, subject to this
same limitation. The Authority has elected not to follow subsequent private-sector
guidance.
15
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(d) Cash and Cash Equivalents
For the purposes of the statements of cash flows, all highly liquid investments with a
maturity of three months or less when purchased are considered cash equivalents.
(e) Restricted Assets
Certain resources have been classified as restricted assets on the statement of net
assets because their use is limited by applicable bank and loan agreements. See notes
on cash and investments (Note 3), long-term obligations (Note 9), revenue bonds
payable (Note 10) and commitments and contingencies (Note 13) for additional
disclosures.
(f) Investments
Investments in marketable securities are reported at fair value based on quoted market
prices. Investments in venture capital companies are reported at fair value based upon
the lower of cost or estimated market value. Investment contracts are considered to be
Guaranteed Investment Contracts. These contracts are reported at fair value based on
quoted market prices.
(g) Deferred Issuance Costs, Issuance Premium and Deferred Revenue
The Authority is amortizing issuance costs, issuance premiums and fee revenue from
bond issues over the life of the bond issues using the approximate effective interest
method. Amounts are presented net of accumulated amortization in the Statement of
Net Assets.
(h) Deferred Loss on Early Extinguishment
The Authority is amortizing a loss on the refunding of several of its non-asset bonds
in the Bond Fund over the lesser of the term of the old debt or the new debt using the
straight-line method. The unamortized loss is presented as a contra liability to the
new debt.
(i) Interfund Transactions
The Authority has the following types of interfund transactions:
16
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Loans and Advances - amounts provided with a requirement for repayment. Interfund
loans are reported as interfund receivables (i.e. due from other funds) in lender funds
and interfund payables (i.e. due to other funds) in borrower funds.
Reimbursements - repayments from the funds responsible for particular expenditures
or expenses to the funds that initially paid for them. Reimbursements are reported as
expenditures in the reimbursing fund and as a reduction of expenditures in the
reimbursed fund.
Transfers - Amounts provided to other funds which will not be repaid.
(j) Capital Assets
Capital assets, which include property and equipment, are reported at historical cost.
Capital assets are depreciated using the straight-line method. Depreciation of
property and equipment used by the Authority is charged as an expense against the
Authority’s General Operating Fund. Capital assets and accumulated depreciation is
reported in Note 12 to the financial statements.
Capitalization thresholds and the estimated useful lives are as follows:
Furniture and equipment $500 5 years
Computer equipment $5,000 5 years
Software $10,000 3 years
(k) Vacation and Sick Leave
Employees earn vacation and sick leave pay. Earned vacation days are allowed to
be carried over but must be used during the ensuing fiscal year or it will be paid out
at a rate of 50% of the value during the fiscal year in which it was earned. Earned
vacation days are accrued at year-end for financial statement purposes and recorded
as due to employees in the Statement of Net Assets under the General Operating
Fund. Sick leave earned by employees has to be taken during the fiscal year and
cannot be accumulated and carried over to the next fiscal year.
17
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Activity related to accrued vacation leave for the year ended June 30, 2011,
consisted of the following:
Balance Balance Due Within
June 30, 2010 Earned Paid June 30, 2011 One Year
$ 78,973 $ 92,770 $ 76,293 $ 95,450 $ 95,450
(l) Net Assets
In the financial statements, net assets are displayed in three components as follows:
Invested in Capital Assets - This consists of capital assets, net of accumulated
depreciation, less the outstanding balances of any bonds, mortgages, notes or other
borrowings that are attributable to the acquisition, construction, or improvement of
these assets.
Restricted - This consists of net assets that are legally restricted by outside parties or
by law through constitutional provisions or enabling legislation. When both restricted
and unrestricted resources are available for use, generally it is the Authority’s policy
to use restricted resources first, then unrestricted resources when they are needed. As
of June 30, 2011, the Authority had restricted net assets of $24,736,007 of which
$17,704,601 is restricted by enabling legislation.
Unrestricted - This consists of net assets that do not meet the definition of
“restricted” or “invested in capital assets.”
(m) Classification of Revenues
The Authority has classified its revenues as either operating or nonoperating.
Operating revenue includes activities that have the characteristics of exchange
transactions including interest on loans, application fees, annual fees, and
administrative service fees. Nonoperating revenue includes activities that have the
characteristics of nonexchange transactions or activities that are ancillary to the
operations of the Authority including interest and investment income.
(n) Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
18
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(o) Conduit Debt Obligations
In accordance with Illinois Compiled Statutes, the Authority issues limited obligation
revenue bonds and participate in lending and leasing agreements to provide low cost
financing to businesses, agribusinesses, health care facilities, educational facilities,
municipalities, and other organizations in order to stabilize and strengthen the Illinois
economy in areas of job creation and job retention. The bonds and leases are secured
by the property financed. Upon repayment of the debt, ownership of the acquired
facilities transfers to the entity served by the issuance. Neither the Authority, State,
nor any political subdivision thereof is obligated in any manner for repayment of the
debt. Accordingly, the bonds and leases are not reported as liabilities in the
Authority’s basic financial statements. As of June 30, 2011, the aggregate amount of
conduit debt outstanding is approximately $25.49 billion.
(p) Adoption of New Accounting Principles
The Authority implemented the following Governmental Accounting Standards
Board (GASB) Statements effective July 1, 2010: Statement No. 54, Fund Balance
Reporting and Governmental Type Definitions, Statement No. 59, Financial
Instruments Omnibus.
(3) CASH AND INVESTMENTS
Cash and Investments as of June 30, 2011 are classified in the accompanying basic
financial statements as follows:
Cash and cash equivalents - unrestricted $ 47,043,119
Cash and cash equivalents - restricted current assets 15,514,573
Cash and cash equivalents - restricted noncurrent assets 18,314,514
Investments - unrestricted 85,000
Investments - restricted current assets 16,954,066
Investments - restricted noncurrent assets 74,249,933
Investments in partnerships and companies 2,247,981
Total $174,409,186
19
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Cash and investments as of June 30, 2011 consist of the following:
Deposits with financial institutions $ 4,154,482
Deposits with State of Illinois Treasurer 17,696,763
Investments 152,557,941
Total $ 174,409,186
The Authority is permitted by Illinois Statutes and by its investment policy to invest any of
its funds in:
(a) Federal Government Securities, including securities of the federal agencies.
(b) Securities guaranteed by the federal government.
(c) Savings accounts, certificates of deposit, time deposits in banks or savings and loans
insured by the Federal Deposit Insurance Corporation (FDIC) and any deposits in
excess of amounts insured by the FDIC are collateralized.
(d) Short-term obligations of U.S. corporations with assets exceeding $500,000,000 and
rated investment grade and which mature not later than 180 days from the date of
purchase, provided that such obligations do not exceed 10% of the corporation’s
outstanding obligations and no more than one-third of the Authority’s funds are
invested in such obligations.
(e) Money market mutual funds registered under the Investment Company Act of 1940
provided the portfolio is limited to either U.S. government or government-backed
securities.
(f) Shares of other forms of securities legally issued by savings banks or savings and loan
associations, if such securities are insured by the FDIC.
(g) Dividend-bearing share accounts, share certificate accounts or class of share accounts
of a credit union, if insured under applicable law.
(h) The Illinois Public Treasurer’s Investment Pool.
(i) A fund managed, operated, and administered by a bank, subsidiary of a bank, or
subsidiary of a bank holding company or uses the services of such an entity to hold and
invest or advise regarding the investment.
(j) Repurchase agreements of government securities.
In addition, the Authority is authorized by its enabling legislation to invest in obligations
issued by any State, unit of local government, or school district that carry investment
grade ratings, and equity securities of a registered investment company.
20
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
The Authority’s investment policy excludes funds committed to credit enhancement,
federally assisted programs and funds held by bond trustees that are governed by the
provisions of bond agreements. The allowable investments are as follows:
Credit Enhancement Funds
Moneys in this fund are invested or reinvested by the Trustee in permitted investments
as defined in the applicable Trust Indenture. The permitted investments include direct
obligations of the United States of America; obligations, debentures, notes, or other
evidences of indebtedness issued or guaranteed; New Housing Authority Bonds or
Project Notes issued by public agencies or municipalities; interest-bearing demand or
time deposits in banks or savings and loan associations insured by the Federal Deposit
Insurance Corporation; the Public Treasurers’ Investment Pool of the State of Illinois;
repurchase agreements with banks which are members of the federal reserve system or
with government bond dealers; and obligations issued by or on behalf of a state or
political subdivision.
Federally Assisted Programs
Federally assisted program fund reserves and other cash shall be deposited in accounts
in banks or other financial institutions. Such accounts will be fully covered by Federal
Deposit Insurance Corporation or fully collateralized with U.S. Government
Obligations, and must be interest-bearing.
Bond Funds
Investment of bond funds shall be made in investment obligations, including federal
securities; bonds, notes, debentures, or similar obligations; interest-bearing savings
accounts, interest-bearing certificates of deposit or interest-bearing deposits or any
other investments constituting direct obligations of any bank, as defined by the
Illinois Banking Act, which is fully insured by the Federal Deposit Insurance
Corporation or collateralized with federal securities; short-term obligations of
corporations organized in the U.S. with assets exceeding $500,000,000; money
market mutual funds registered under the Investment Company Act of 1940; short-term
discount obligations of the Federal National Mortgage Association; shares or
other forms of securities legally issuable by savings and loan associations;
obligations the interest upon which is tax-exempt under Section 103 of the Code;
repurchase agreements of government securities; and any other investment which is
permitted by the Bond Trust Indenture.
21
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in market interest rates. The Authority manages its
exposure to interest rate risk by basing its investment decisions regarding maturity dates
and rates on an analysis of the Authority’s short-, mid-, and long-term cash needs and
keeping the portfolio sufficiently liquid to enable the Authority to meet its operating
requirements. In addition, the Authority’s Investment policy limits any new investments to
maturities of 5 years or less unless approved by the Executive Director.
As of June 30, 2011, the Weighted Average Maturity of the Authority’s investments were:
Investment Type June 30, 2011
Weighted Average
Maturity (in years)
Federal agency securities $ 42,980,893 3.03
State investment pool (Illinois Funds) 33,643,237 0.10
Money market funds 14,763,193 N/A
Investment contracts (Bond Fund) 8,409,982 9.60
Commercial paper 39,813,125 0.17
Repurchase agreements 10,699,530 0.003
Investment in partnerships and companies 2,247,981 N/A
Total $ 152,557,941
Credit Risk
Generally, credit risk is the risk that an issuer of a debt investment will not fulfill its
obligation to the holder of the investment. This is measured by the assignment of a rating
by a nationally recognized statistical rating organization. The Authority’s investment
policy on credit risk is limiting the investments to high rated securities and diversifying the
portfolio to limit exposure. Presented below is the rating as of year end for each
investment type:
22
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Exempt
From
Investment Type June 30, 2011 Disclosure AAA A-1 Not Rated
Federal agency securities $ 4 2,980,893 $ - $ 4 2,980,893 $ - $ -
State investment pool 33,643,237 - 33,643,237 - -
Money market funds 2,498,009 - 2,498,009 - -
Held by bond trustee:
Money market funds 12,265,184 - 12,265,184 - -
Investment contracts (Bond Fund) 8,409,982 - - - 8,409,982
Commercial paper 39,813,125 - - 39,813,125 -
Repurchase agreements 10,699,530 - 10,699,530 - -
Investments in partnerships and companies 2,247,981 2,247,981 - - -
Total $ 1 52,557,941 $ 2,247,981 $ 1 02,086,853 $ 39,813,125 $ 8,409,982
Ratings as of Year End
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the concentration of an entity’s
investment in a single issuer. To reduce the risk of loss resulting in excess concentrations
in a specific type, maturity, issuer or class of securities, the Authority’s investment policy
places the following restrictions on concentrations of investments:
a) Certificates of deposit from any single financial institution may not comprise more
than 20% of the Authority’s portfolio or 5% of the financial institution’s total
deposits.
b) Commercial paper purchases may not exceed 20% of the Authority’s portfolio in
total and 5% of Authority’s portfolio in any single issuer’s name.
c) No investment category shall exceed 30% of the Authority’s portfolio, with the
exception of U.S. Treasury securities and cash equivalents, including certificates of
deposits.
As of June 30, 2011, investments in any one issuer (other than U.S. Treasury securities,
mutual funds, and external investment pools) that represent 5% or more of the total
Authority investments are as follows:
MetLife Funding Bond Fund Commercial Paper $ 16,860,046
Citigroup Funding Bond Fund Commercial Paper $ 22,953,079
23
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, the Authority will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, the Authority will not be able to recover the value of its investment or
collateral securities that are in the possession of another party. The Authority’s investment
policy requires that any deposits in excess of amounts insured by the FDIC or SAIF
(Savings Association Insurance Fund) be secured by an eligible form of collateral equal to
110% of the uninsured deposit. Eligible collateral instruments are any of the following:
1) Federal government securities
2) Securities guaranteed by the federal government
3) Obligations of the State of Illinois
4) Letters of credit issued by the Federal Home Loan Bank of Chicago or equivalent
entity
5) Surety bonds issued by Municipal Bond Insurance Association (MBIA) or equivalent
entity.
Third party safekeeping is required for collateral items 1, 2 and 3 above. The Authority’s
investment policy does not specifically address the collateralization requirements for
investments.
As of June 30, 2011 all of the Authority’s deposits with financial institutions in excess of
federal depository limits were collateralized. The securities pledged as collateral were held
with third party safekeeping in the name of the Authority. As of June 30, 2011, the value
of collateralized property was 112% of uninsured deposits.
As of June 30, 2011 all of the Authority’s investments were backed by U.S. Government
Treasuries held in the name of the Authority.
The Illinois Funds is an external investment pool administered by the Illinois State
Treasurer. The fair value of the Authority’s investment fund is the same as the value of
pool shares. Although not subject to direct regulatory oversight, the fund is administered in
accordance with the provisions of the Illinois Public Funds Investment Act, 30 ILCS 235.
The Authority has entered into a repurchase agreement with Bank of America. Under the
terms of this agreement at the end of each business day the Bank will sell the Authority
government securities. The Bank promises to repurchase these same securities at the
beginning of the next banking day for the amount invested plus interest. The interest rate is
24
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
established each day by the Bank. If, on the maturity date, the Bank defaults on its
obligation to repurchase the securities, the Bank will transfer the Securities to a custodian
to hold for the benefit of the Authority. If this occurs, the Authority could incur a loss if
the value of the securities declines. At June 30, 2011 the Authority had invested
$10,699,530 under these agreements. The underlying securities are held by Bank of
America’s safekeeping department.
(4) SECURITIES LENDING TRANSACTION
The State Treasurer lends securities to broker-dealers and other entities for collateral that
will be returned for the same securities in the future. The State Treasurer has, through a
Securities Lending Agreement, authorized Deutsche Bank Group to lend the State
Treasurer’s securities to broker-dealers and banks pursuant to a form of loan agreement.
During fiscal year 2011 and 2010, Deutsche Bank Group lent U.S. Agency Securities, U.S.
Treasury Bills, and U.S. Agency Discount Notes and received as collateral U.S. dollar
denominated cash. Borrowers were required to deliver collateral for each loan equal to at
least 100% of the aggregate fair value of the loaned securities. Loans are marked to market
daily. If the fair value of collateral falls below 100%, the borrower must provide additional
collateral to raise the fair value to 100%.
The State Treasurer did not impose any restrictions during the fiscal year on the amount of
the loans of available, eligible securities. In the event of borrower default, Deutsche Bank
Group provides the State Treasurer with counterparty default indemnification. In addition,
Deutsche Bank Group is obligated to indemnify the State Treasurer if Deutsche Bank
Group loses any securities, collateral or investments of the State Treasurer in Deutsche
Bank Group’s custody. Moreover, there were no losses during the fiscal year resulting
from a default of the borrowers or Deutsche Bank Group.
During the fiscal year, the State Treasurer and the borrowers maintained the right to
terminate all securities lending transactions on demand. The cash collateral received on
each loan was invested in repurchase agreements with approved counterparties
collateralized with securities approved by Deutsche Bank Group and marked to market
daily at no less than 102%. Because the loans are terminable at will, their duration did not
generally match the duration of the investments made with cash collateral. The State
Treasurer had no credit risk as a result of its securities lending program as the collateral
held exceeded the fair value of the securities lent.
In accordance with GASB Statement No. 28, paragraph 9, the Office of the State Treasurer
has allocated the assets and obligations at June 30, 2011 arising from securities lending
25
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
agreements to the various funds of the State. The securities lending collateral invested in
repurchase agreements allocated to the Illinois Agricultural Loan Guarantee Fund and
Illinois Farmer Agribusiness Loan Guarantee Fund were $3,892,147 and $2,996,461,
respectively, as of June 30, 2011.
(5) BONDS AND LOANS RECEIVABLE
The Authority sponsors a variety of lending programs including direct lending and direct
lending participation loans. The Authority also makes loans through its two federal
programs, the Economic Development Administration (E.D.A.) Title IX Revolving Loan
Program and the Rural Development Loan Program. Bonds receivable from local
governmental units represent amounts loaned to the units through the purchase of their
securities.
Illinois Housing Partnership Program
The Authority participates in the Illinois Housing Partnership Program (IHPP) which
was established by the Illinois General Assembly in 1985 in order to finance the
acquisition and renovation of multi-family housing units. A predecessor Authority
entered into the loan program with the City of Chicago in 1986 acting as a pass-through
entity. The loan is non-interest bearing, with collections due on August 1, 2016. Total
loan outstanding as of June 30, 2011, were $3,000,000.
Direct Lending Program
The Authority provides loans to Illinois businesses that cannot obtain sufficient
financing through conventional sources, by lowering the amount of equity the borrower
must contribute. Financing includes up to $250,000 to small and mid-size businesses
for land, building, machinery, and equipment purchases. The Authority did not provide
any new loans under this program for the year ending June 30, 2011. Loans under this
program carry an interest rate of 1.5% with maturity dates up to ten years. This program
has been superseded by the Direct Lending Participation Program. Total loans
outstanding as of June 30, 2011, were $107,808.
Direct Lending Participation Program
Similar to the Direct Lending Program, the Authority allows for the purchase of land,
building, construction or renovation of a building, and acquisition of machinery and
equipment up to the lesser of $500,000 or 50% of the project. By purchasing a
participation of the bank at a lower interest rate than the borrower would receive on its
26
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
own, the Authority requires the bank to pass savings directly to the borrower. The
Authority participations are on a pro-rata 50/50 basis with the bank. Loans under this
program carry a variable interest rate that is up to 100 basis points less than the bank’s
rate with maturity dates up to ten years. Total loans outstanding as of June 30, 2011,
were $17,059,314.
The E.D.A. Title IX Revolving Loan Program
The E.D.A. Title IX Restricted Revolving Loan Program provides low-cost
supplemental financing to manufacturing companies located in areas declared eligible
for Title IX assistance by the E.D.A. Loans under this program are up to $100,000 for
small and mid-size manufacturers, and carry a fixed interest rate of 7.5% with maturity
dates up to ten years. Total loans outstanding as of June 30, 2011, were $91,484. The
E.D.A Title IX Restricted Revolving loans are fully reserved.
The Rural Development Revolving Loan Program
The Rural Development Revolving Loan Program participates with the Rural
Development Administration’s (formerly the Farmers Home Administration)
Intermediary Relending Program to provide loans to business facilities and community
development projects in rural areas for land acquisitions, facility construction and
renovation, and machinery and equipment purchases. The Authority will contribute up
to 75% or $250,000 of fixed asset costs at a 6% interest rate with maturity dates up to
20 years. Total loans outstanding as of June 30, 2011, were $303,782.
SBA Microloan Demonstration Program
This program of the Authority accounts for the activity of loans received under the
Small Business Administration (SBA) Microloan Demonstration Program. The
purpose of this program is to assist women, low income, and minority entrepreneurs,
and business owners, and other such individuals possessing the capability to operate
successful business concerns and to assist small business concerns in those areas
suffering from a lack of credit due to economic downturn as set forth under the loan
agreement and the Small Business Act, 15 U.S.C. 636. Total loans outstanding as of
June 30, 2011, were $80,635. The SBA Microloans are fully reserved.
27
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Employee Ownership Assistance Program
This program provides supplemental financing to help facilitate employee acquisition
of industrial and manufacturing facilities about to close or relocate outside of Illinois.
Loans are made to employee-owned enterprises and may be used to finance up to 50%
of total acquisition costs. It is funded by an appropriation for these purposes of
$2,000,000 received by the prior Illinois Development Finance Authority during 1986
as set forth in Public Act 82-991. Total loans outstanding as of June 30, 2011, were
$1,000,000.
Fire Truck Revolving Loan Program
This program provides zero interest rate loans for the purchase of fire trucks by a fire
department, fire protection district, or a township fire department. The loans to each
department, district or township may not exceed $250,000 and must be repaid within 20
years. The program is funded by a transfer of $19,000,000 from the State of Illinois,
and administered by the Authority. Total loans outstanding as of June 30, 2011, were
$17,486,608.
Ambulance Revolving Loan Program
This program provides zero interest rate loans for the purchase of ambulances by fire
departments, fire protection districts, township fire departments and non-profit
ambulance services. The loans may not exceed $100,000 and must be repaid within 10
years. The program is funded by an appropriation of $4,000,000 received by the State
of Illinois, and administered by the Authority. Total loans outstanding as of
June 30, 2011, were $832,213.
Local Government Financing Assistance Program
This program provides financing to units of local government located in the State of
Illinois by purchasing the securities of the local governments. Total loans outstanding
as of June 30, 2011, were $246,525.
Bond Bank Lending Program
This program facilitates the financing needs of a broad array of governmental units
located throughout the State. The Local Government units make payments on the loans
from taxes, revenues, rates, charges or assessments, in an amount sufficient to pay the
principal of and interest on its Local Government Securities when due. The program is
28
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
funded by issuing Moral Obligation Revenue Bonds (Note 10). Total loans outstanding
as of June 30, 2011, were $38,659,874.
Loans with the Primary Government and Component Units of the State
The Authority has provided financing to the State of Illinois and to component units of
the State of Illinois. The borrowers make payments in an amount sufficient to pay the
principal of and interest on the bonds when due. Total loans outstanding as of
June 30, 2011, were $116,832,070.
Renewable Energy Development Program
This program provides loans to qualified borrowers who construct community scale
wind projects for use as alternative energy. This program was funded by a $2,000,000
grant received from the Illinois Clean Energy Community Foundation. Total loans
outstanding as of June 30, 2011, were $1,668,555.
Allowance for Doubtful Accounts
The allowance for doubtful accounts for all loans receivable and notes receivable at
June 30, 2011, is comprised of two components. Loans which are delinquent greater than
90 days are reserved for at 100% of principal outstanding. In addition, the Authority
provides a general reserve at approximately 5% for the principal balance of all other loans
outstanding. Loans originated by the predecessor Illinois Rural Bond Bank, Loans to the
State of Illinois and Component Units of the State of Illinois, the Fire Truck Revolving
Loan Program, Renewable Energy Development Fund, Ambulance Revolving Loan
Program and the Local Government Financing Assistance Program have not experienced a
default, therefore, the allowance for doubtful accounts based on prior experience is zero.
(6) GUARANTEE RECEIVABLES
Guarantee receivables result from amounts due to the Authority after it has paid a
guarantee claim. Activity related to guarantee receivables for the year ended
June 30, 2011, consisted of the following:
29
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Illinois Farmer Illinois Illinois
Agribusiness Agricultural Industrial Revenue
Loan Guarantee Loan Guarantee Bond Insurance
Fund Fund Fund Total
Guarantee receivables
beginning of year $ 6 52,650 $ 170,902 $ - $ 823,552
Disbursements on
guarantee claims - - 28,402 28,402
Payments received (25,676) - - (25,676)
Receivables written off (3,867) - - (3,867)
Gross guarantee receivables
end of year 623,107 170,902 28,402 822,411
Allowance for doubtful
accounts (623,107) (170,902) (28,402) (822,411)
Net receivables - end of year $ - $ - $ - $ -
The allowance for doubtful accounts for all guarantee receivables at June 30, 2011, is the
difference between the guarantee payments made and the Authority’s estimation of the
value of any collateral securing the guarantee.
(7) INVESTMENTS IN PARTNERSHIPS AND COMPANIES
The Authority currently has investments in one (1) partnership and six (6) companies.
These investments were made to accomplish the statutory purpose of the Venture
Investment Fund. There is no established market for the purchase or sale of the partnerships
and company interests or the equity securities in which the partnerships have investments.
The valuation methods and significant assumptions used by the Authority include
discounted cash flows and comparable data for businesses with similar products/services
and/or similar market segments. The Authority also uses financial and operational
information from the last investment round which is most appropriate when the firm is not
publicly traded and the current cash flows are negative.
The fair value, which is reported at the lower of cost or market, of the Authority’s
investment in the partnerships and companies as of June 30, 2011, is reflected below:
30
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Recorded
Partnership/Company Book Value
ARCH Development Fund Partnership $ 6 5,431
Lemko Corporation 300,000
Moire, Inc. 600,000
Open Channel Software, Inc. 250,000
Ohmx Corporation 300,000
Video Home Tour 250,000
Zuchem, Inc. 482,550
Total $ 2 ,247,981
The following eleven (11) companies have zero values: Champaign-Urbana Venture Fund
LLC, Mortgage Banking Center.com (Evantis), Mobitrac, UserActive (O’Reilly Media),
Venture Capital Online, Clearstack Combustion Corporation, Metalconforming Controls
Corporation, Nephrx, Neuronautics, Inc., Firefly Energy, Inc. and Stonewater Software,
Inc.
(8) INTERFUND BALANCES AND ACTIVITY:
Balances due to/from other funds and transfers made for the fiscal year ended
June 30, 2011, were as follows:
Funds
Other Major
Funds
Other Nonmajor
Funds Description / Purpose
Transfer to: Transfer from:
General Operating $ - $ 1,167,543 Venture Capital Fund due to sale of
investments
General Operating - 8,000 Credit Enhancement Fund since
funds are no longer needed for
program
Total $ - $ 1,175,543
Transfer from: Transfer to:
Venture Capital $ 1,167,543 $ - General Operating Fund for
payment of funds owed
General Operating 8,000 - General Operating Fund for excess
program funds
Total $ 1,175,543 $ -
31
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(9) LONG-TERM OBLIGATIONS
Intermediary Relending Program
The predecessor authorities (Note 1) entered into loan agreements, now a liability of the
Authority, with the U.S. Department of Agriculture/Rural Development Administration
(formerly Farmers Home Administration), a federal agency, on December 14, 1990, for
funding of the Intermediary Relending Program (IRP). The funding was negotiated through
a line of credit in the amount of $1,500,000.
The loan payable is collateralized by the existing outstanding and future loans receivable of
the IRP, by cash and investments recorded in the IRP fund derived from the proceeds of
this loan award.
Principal and interest on the December 14, 1990 loan, at the fixed rate of 1% per annum,
are being paid in 27 equal annual amortized installments of $63,675, with any remaining
balance due and payable 30 years from the date of the note.
Long-term debt is summarized as follows:
Balance
June 30, 2010 Repayments
Balance
June 30, 2011
Due Within
One Year
Rural Development Revolving Loan $ 660,209 $ 57,072 $ 603,137 $ 57,644
Principal and interest payments of long-term debt at June 30, 2011, are due as follows:
Principal Interest Total
Year ending June 30:
2012 $ 57,644 $ 6,031 $ 63,675
2013 58,220 5,455 63,675
2014 58,802 4,873 63,675
2015 59,390 4,285 63,675
2016 59,984 3,691 63,675
2017 - 2021 309,097 9,335 318,432
$ 603,137 $ 33,670 $ 636,807
32
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Fire Truck Revolving Loan and Ambulance Revolving Loan
The Fire Truck Revolving Loan program was authorized by Public Act 94-221. The loan
program is jointly administered by the Authority and the Office of the State Fire Marshall.
The Fire Prevention Fund and Build Illinois Bond Fund loaned $9 million and $10 million,
respectively, to the Authority to grant interest-free loans for the purchase of fire trucks by a
fire department, fire protection district, or a township fire department based on need as
determined by the State Fire Marshall. Under the terms of the program, the loans to any
fire department, fire protection district or township fire department may not exceed
$250,000. Repayment period for each loan may not exceed 20 years and requires a
minimum of 5% of the principal amount borrowed each year.
The Ambulance Revolving Loan program was authorized by Public Act 94-829. The loan
program is jointly administered by the Authority and the Office of the State Fire Marshall.
The Fire Prevention Fund loaned $4 million to the Authority to grant interest-free loans for
the purchase of ambulances by a fire department, fire protection district, a township fire
department, or a non-profit ambulance service based on need as determined by the State
Fire Marshall. Under the terms of the program, the loans to any fire department, fire
protection district or non-profit ambulance service may not exceed $100,000. Repayment
period for each loan may not exceed 10 years and requires a minimum of 5% of the
principal amount borrowed each year.
Due to primary government is summarized as follows:
Balance
June 30, 2010 Additions Repayments
Balance
June 30, 2011
Due Within
One Year
Fire Truck Revolving Loans $18,730,135 $ - $1,243,527 $17,486,608 $1,215,550
Ambulance Revolving Loans 993,200 - 160,987 832,213 160,987
$19,723,335 $ - $1,404,514 $18,318,821 $1,376,537
33
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Principal payments of due to primary government at June 30, 2011, are due as follows:
Fire Truck
Revolving Loan
Ambulance
Revolving Loan Total
Year ending June 30:
2012 $ 1,215,550 $ 160,987 $ 1,376,537
2013 1,197,005 160,986 1,357,991
2014 1,197,005 94,320 1,291,325
2015 1,197,005 94,320 1,291,325
2016 1,138,905 74,320 1,213,225
2017 - 2021 5,532,227 247,280 5,779,507
2022 - 2026 4,329,799 - 4,329,799
2027 - 2030 1,679,112 - 1,679,112
$ 17,486,608 $ 832,213 $ 18,318,821
(10) REVENUE BONDS PAYABLE
Each revenue bond issue is payable only out of the trust estate established for each issue.
The trust estate is comprised of all rights, title and interest of the Authority in the loan
securities, the purchase agreements, the intercept proceedings and all moneys and securities
held in all funds and accounts under the indenture, except moneys and securities on deposit
in the redemption fund which are for the payment of the principal and interest of bonds
called for redemption prior to maturity. The Authority has pledged future loan revenues to
repay the outstanding principal revenue bond. Proceeds from the bonds provided financing
for various loan programs. The bonds are payable solely from principal and interest
revenues under the related loans and are payable through the final maturity of the bonds in
2040. Annual principal and interest payments on the bonds are expected to require
approximately 100% of these loan revenues. The assets of the Bond Fund are therefore
classified as restricted assets on the Statement of Net Assets.
All bonds outstanding at June 30, 2011, are revenue bonds of the Authority and are payable
solely from the revenues or funds pledged or available for their payment as authorized by
the Act. Neither the faith and credit nor the taxing power of the State of Illinois is pledged
to the payment of the principal or interest on the bonds.
The Authority may issue revenue bonds with the State's moral obligation pledge attached.
This pledge means that in the event it is determined that money will not be available for
34
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
payment of principal and interest of these obligations, the Governor is to submit the
shortfall amount to the General Assembly. The 1992A Revenue Bonds through the 2009
Revenue Bonds are considered moral obligation revenue bonds. The revenue bonds of the
component units and primary government were not issued with the State’s moral obligation
pledge attached. Bonds payable at June 30, 2011, are comprised of the following
individual issues:
1992A Revenue Bonds - original issue $8,915,000, dated May 1, 1992, provides for serial
retirement of principal on February 1, and interest payable on February 1 and August 1 of
each year at rates of 3.70-6.625%. Final maturity is February 1, 2012.
1992B Revenue Bonds - original issue $4,975,000, dated December 1, 1992, provides for
serial retirement of principal on February 1, and interest payable on February 1 and August
1 of each year at rates of 4.00-6.75%. Final maturity is February 1, 2018.
1993B Revenue Bonds - original issue $9,450,000, dated December 1, 1993, provides for
serial retirement of principal on February 1, and interest payable on February 1 and August
1 of each year at rates of 3.75-5.75%. Final maturity is February 1, 2016.
1995A Revenue Bonds - original issue $1,700,000, dated May 1, 1995, provides for serial
retirement of principal on February 1, and interest payable on February 1 and August 1 of
each year at rates of 4.40-6.10%. Final maturity is February 1, 2016.
1996C Revenue Bonds - original issue $3,765,000, dated December 1, 1996, provides for
serial retirement of principal beginning February 1, 1997 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 4.10-5.65%. Final
maturity is February 1, 2012.
1997A Revenue Bonds - original issue $6,285,000, dated June 1, 1997, provides for serial
retirement of principal beginning February 1, 1998 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 4.40-5.80%. Final
maturity is February 1, 2018.
1997B Revenue Bonds - original issue $2,935,000, dated December 1, 1997, provides for
serial retirement of principal beginning February 1, 1999 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 4.05-5.35%. Final
maturity is February 1, 2023.
1998A Revenue Bonds - original issue $9,940,000, dated June 1, 1998, provides for serial
retirement of principal beginning February 1, 1999 and every February 1 thereafter, and
35
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
interest payable on February 1 and August 1 of each year at rates of 3.80-5.32%. Final
maturity is February 1, 2024.
1998B Revenue Bonds - original issue $3,710,000, dated December 1, 1998, provides for
serial retirement of principal beginning February 1, 2000 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 3.50-5.15%. Final
maturity is February 1, 2024.
1999A Revenue Bonds - original issue $2,520,000, dated June 1, 1999, provides for serial
retirement of principal beginning February 1, 2000 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 3.45-5.50%. Final
maturity is February 1, 2029.
2000A Revenue Bonds - original issue $5,145,000, dated June 1, 2000, provides for serial
retirement of principal beginning February 1, 2001 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 4.65-6.00%. Final
maturity is February 1, 2031.
2000B Revenue Bonds - original issue $735,000, dated December 1, 2000, provides for
serial retirement of principal beginning February 1, 2002 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 4.40-5.55%. Final
maturity is February 1, 2025.
2001A Revenue Bonds - original issue $3,625,000, dated July 1, 2001, provides for serial
retirement of principal beginning February 1, 2002 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 3.00-5.35%. Final
maturity is February 1, 2024.
2001B Revenue Bonds - original issue $5,545,000, dated December 1, 2001, provides for
serial retirement of principal beginning February 1, 2003 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 2.55-5.35%. Final
maturity is February 1, 2031.
2002A Revenue Bonds - original issue $1,180,000, dated June 1, 2002, provides for serial
retirement of principal beginning February 1, 2003 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 1.60-5.20%. Final
maturity is February 1, 2022.
2003A Revenue Bonds - original issue $11,740,000, dated June 1, 2003, provides for serial
retirement of principal beginning February 1, 2004 and every February 1 thereafter, and
36
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
interest payable on February 1 and August 1 of each year at rates of 1.00-4.15%. Final
maturity is February 1, 2021.
2003B Revenue Bonds - original issue $10,700,000, dated September 1, 2003, provides for
serial retirement of principal beginning February 1, 2004 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 1.10-5.20%. Final
maturity is February 1, 2024.
2004A Revenue Bonds - original issue $2,640,000, dated August 1, 2004, provides for
serial retirement of principal beginning February 1, 2005 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 1.45-5.00%. Final
maturity is February 1, 2024.
2006A Revenue Bonds - original issue $11,505,000, dated January 1, 2006, provides for
serial retirement of principal beginning February 1, 2007 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 3.30-4.85%. Final
maturity is February 1, 2031.
2006B Revenue Bonds - original issue $1,915,000, dated August 3, 2006, provides for
serial retirement of principal beginning February 1, 2007 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 3.75-4.90%. Final
maturity is February 1, 2036.
2007A Revenue Bonds - original issue $6,455,000, dated August 16, 2007, provides for
serial retirement of principal beginning February 1, 2008 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 3.70-4.85%. Final
maturity is February 1, 2039.
2007B Revenue Bonds - original issue $2,590,000, dated January 24, 2008, provides for
serial retirement of principal beginning February 1, 2009 and every February 1 thereafter,
and interest payable on February 1 and August 1 of each year at rates of 2.85-4.70%. Final
maturity is February 1, 2038.
2008A Revenue Bonds - original issue $1,800,000, dated July 22, 2008, provides for serial
retirement of principal beginning February 1, 2009 and every February 1 thereafter, and
interest payable on February 1 and August 1 of each year at rates of 4.125-5.125%. Final
maturity is February 1, 2039.
2009A Revenue Bonds - original issue $4,460,000, dated December 4, 2009, provides for
serial retirement of principal beginning February 1, 2011 and every February 1 thereafter,
37
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
and interest payable on February 1 and August 1 of each year at rates of 1.90-5.375%.
Final maturity is February 1, 2040.
Revenue bonds issued for the benefit of other agencies and component units of the State of
Illinois:
Northern Illinois University, Series 1999 - original issue $20,000,000, dated
February 1, 1999, provides for serial retirement of principal beginning September 1, 2000
and every September 1 thereafter, and interest payable March 1 and September 1 of each
year at rates of 4.30% to 5.00%. Final maturity is September 1, 2024.
State of Illinois Revolving Fund, Series 2002 (Clean Water) - original issue $150,000,000,
dated June 27, 2002, provides for serial retirement of principal beginning March 1, 2003
and every September 1 and March 1, thereafter, and interest payable on March 1 and
September 1 of each year at rates of 3.25% to 5.5%. Final maturity is March 1, 2020.
State of Illinois Revolving Fund, Series 2004 (Clean Water) - original issue $130,000,000,
dated May 20, 2004, provides for serial retirement of principal beginning March 1, 2005
and every September 1 and March 1, thereafter, and interest payable on March 1 and
September 1 of each year at rates of 3.25% to 5.25%. Final maturity is September 1, 2023.
Illinois Medical District Commission, Series 2006A - original issue $7,500,000, dated
January 31, 2006, provides for serial retirement of principal beginning September 1, 2010
and every September 1 thereafter, and interest payable on March 1 and September 1 of
each year at rates of 4.125% to 4.70%. Final maturity is September 1, 2031.
Illinois Medical District Commission, Series 2006B - original issue $32,500,000, dated
January 31, 2006, provides for serial retirement of principal beginning September 1, 2010
and every September 1 thereafter, and interest payable on March 1 and September 1 of
each year at rates of 5.14% to 5.33%. Final maturity is September 1, 2031.
Northern Illinois University Foundation, Series 2006 - original issue $9,206,100, dated
August 15, 2006, provides for serial retirement of principal beginning February 15, 2007
and every February 15 and August 15 until August 15, 2012 and then every August 15
thereafter, and interest payable February 15 and August 15 of each year at rate of 4.66%.
Final maturity is August 15, 2016.
38
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
The future debt service requirements for revenue bonds as of June 30, 2011, including
interest payments are as follows:
Fiscal Period
Ending June 30, Principal Interest Total
2012 $ 25,435,000 $ 12,396,360 $ 37,831,360
2013 23,931,208 11,140,030 35,071,238
2014 22,099,000 9,959,682 32,058,682
2015 21,592,300 8,845,398 30,437,698
2016 21,961,800 7,741,446 29,703,246
2017-2021 82,377,700 23,461,164 105,838,864
2022-2026 28,920,000 9,423,102 38,343,102
2027-2031 17,895,000 3,932,727 21,827,727
2032-2036 4,655,000 598,204 5,253,204
2037-2040 1,130,000 118,916 1,248,916
$ 249,997,008 $ 87,617,029 $ 337,614,037
The following is a summary of the revenue bond transactions of the Authority for the year
ended June 30, 2011:
Bond Series
Balance
June 30, 2010 Additions Retirements
Balance
June 30, 2011
Amount
Due Within
One Year
1992 A Bonds $ 30,000 $ - $ (15,000) $ 15,000 $ 15,000
1992 B Bonds 170,000 - (25,000) 145,000 25,000
1993 B Bonds 215,000 - (55,000) 160,000 55,000
1994 A Bonds 40,000 - (40,000) - -
1995 A Bonds 65,000 - (10,000) 55,000 5,000
1996 C Bonds 100,000 - (50,000) 50,000 50,000
1997 A Bonds 110,000 - (10,000) 100,000 10,000
1997 B Bonds 640,000 - (95,000) 545,000 100,000
1998 A Bonds 1,435,000 - (380,000) 1,055,000 140,000
1998 B Bonds 1,420,000 - (300,000) 1,120,000 80,000
1999 A Bonds 1,280,000 - (460,000) 820,000 55,000
2000 A Bonds 400,000 - (50,000) 350,000 50,000
2000 B Bonds 520,000 - (30,000) 490,000 30,000
2001 A Bonds 1,755,000 - (880,000) 875,000 135,000
2001 B Bonds 3,785,000 - (2,290,000) 1,495,000 85,000
2002 A Bonds 535,000 - (105,000) 430,000 105,000
2003 A Bonds 6,895,000 - (895,000) 6,000,000 1,400,000
2003 B Bonds 6,990,000 - (475,000) 6,515,000 495,000
2004 A Bonds 1,815,000 - (140,000) 1,675,000 145,000
2006 A Bonds 10,090,000 - (545,000) 9,545,000 555,000
2006 B Bonds 1,775,000 - (60,000) 1,715,000 60,000
39
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Bond Series
Balance
June 30, 2010 Additions Retirements
Balance
June 30, 2011
Amount
Due Within
One Year
2007 A Bonds $ 5,915,000 $ - $ (210,000) $ 5,705,000 $ 210,000
2007 B Bonds 2,205,000 - (200,000) 2,005,000 205,000
2008 A Bonds 1,740,000 - (40,000) 1,700,000 40,000
2009 A Bonds 4,460,000 - (125,000) 4,335,000 160,000
Northern Illinois University
Series 1999 14,580,000 - (690,000) 13,890,000 720,000
Clean Water Series 2002 79,495,000 - (11,295,000) 68,200,000 11,685,000
Clean Water Series 2004 86,335,000 - (8,225,000) 78,110,000 8,300,000
Illinois Medical District Commission
Series 2006A 7,500,000 - (210,000) 7,290,000 220,000
Series 2006B 32,500,000 - (150,000) 32,350,000 300,000
Northern Illinois University
Foundation Series 2006 4,863,250 - (1,606,242) 3,257,008 -
Unamortized issuance
premium 5,022,252 - (993,784) 4,028,468 864,583
Total $ 284,680,502 $ - $ (30,655,026) $ 254,025,476 $ 26,299,583
The bond closing fees received from local governments are reported as deferred revenue
and amortized over the term of the bond issues. The amortized revenues are included in the
miscellaneous income. The following changes in deferred revenue occurred during the
period:
Balance
June 30, 2010 Addition Amortization
Balance
June 30, 2011
Due Within
One Year
Bond closing fees $ 517,567 $ - $ 82,537 $ 435,030 $ 71,394
(11) LEASE COMMITMENTS
The Authority is obligated under long-term operating leases for one (Chicago) of its four
offices. Total rent expense for the year ended June 30, 2011 was $265,312.
The Authority entered into a lease agreement to lease facilities at 180 North Stetson
Avenue, Suite 2555, Chicago, Illinois 60601. The term of the lease is through
August 2014. No payments were required under the terms of the lease for the period from
June 21, 2004 through June 30, 2006. Annual base rent payments, which began on
July 1, 2006, range from approximately $119,000 to $149,000. In accordance with
accounting principles generally accepted in the United States of America (GAAP), the total
lease payments have been amortized over the term of the lease. Included in rent expense
for the year ended June 30, 2011 is $107,349, which represents the current year
amortization. Rent expense for the year ended June 30, 2011 is $240,559.
40
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
The Authority entered into an Interagency Agreement with the Illinois Department of
Commerce and Economic Opportunity to lease office space in Springfield free of charge,
effective April 29, 2009 until June 20, 2013.
The Authority entered into a lease agreement to lease facilities at 100 Southwest Water
Street, Peoria, Illinois 61602. The term of the lease expires in May 2013. Annual base rent
payments are approximately $4,524.
The Authority entered into a lease agreement to lease facilities at 2929 Broadway, Suite
7B, Mount Vernon, Illinois 62864. The term of the lease expires in June 2012. Annual
base rent payments are approximately $9,765.
The Authority entered into a lease agreement to lease two digital copiers for its Chicago
and Mt. Vernon offices for 36 months. The term of the lease expires in September 2012.
Annual base rental payments are approximately $10,464.
The future minimum lease commitments as of June 30, 2011 are as follows:
Fiscal Year Ending June 30, Amount
2012 $ 166,698
2013 151,418
2014 148,090
2015 24,803
Total $ 491,009
Letter of Credit
The lease at Two Prudential Plaza requires a letter of credit of $85,000 as a security
deposit. As of June 30, 2011 no amounts have been drawn against this letter of credit.
41
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(12) CAPITAL ASSETS
Balance Balance
June 30, 2010 Additions Deletions June 30, 2011
Cost
Leasehold improvements $ 2,000 $ - $ 2,000 $ -
Furniture and equipment 249,842 1,819 26,763 224,898
Computers 32,911 82,494 20,505 94,900
Software 174,154 9,492 - 183,646
Total capital assets being depreciated 458,907 93,805 49,268 503,444
Accumulated Depreciation
Leasehold improvements 2,000 - 2,000 -
Furniture and equipment 201,409 22,916 26,763 197,562
Computers 32,622 5,475 20,505 17,592
Software 174,155 1,055 - 175,210
Total accumulated depreciation 410,186 29,446 49,268 390,364
Capital assets, net of depreciation $ 48,721 $ 64,359 $ - $ 113,080
Authority’s records were reconciled to the records maintained by the Comptroller of the
State of Illinois.
(13) COMMITMENTS AND CONTINGENCIES
(a) Debt Service Reserve
The Authority is contingently liable for any claims (maximum of amount held in the
Debt Service Reserve in the non-major Credit Enhancement Fund) submitted by the
respective Bond Trustees of the prior Illinois Development Finance Authority if the
company liable under the bond indenture were to default on repayment of the bond. At
June 30, 2011, restricted demand deposits totaling $617,750 were held in the Credit
Enhancement Fund for this purpose.
42
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(b) Federally Assisted Programs
The Authority participates in the following federally assisted programs:
E.D.A. Title IX-Restricted Revolving Loan Program
FmHA-Intermediary Relending Program
Demand deposits of $748,763 and $1,989,275 are held in the E.D.A. Title IX Restricted
Revolving Loan Fund and the Rural Development Revolving Loan Fund, respectively,
and are restricted due to federal program requirements. In addition, included in
restricted assets is $282,862 in net loans receivable which secure the loans of the
intermediary relending program.
(c) Loan Guarantees
The Authority has a contingent liability regarding the loan guarantees outstanding at
June 30, 2011. When a guaranteed loan defaults, the Authority is responsible for 85%
of the liability, with the participating lender being responsible for the remaining 15%.
Any guarantee that must be paid out by the State of Illinois, because of a claim properly
filed by a bank that has a guaranteed loan that has defaulted, becomes a receivable on
the books of the Authority. The State Treasurer, custodian of the loan guarantee funds,
maintains the cash and cash equivalents for the funds. The cash deposits totaled
$17,696,764 at June 30, 2011, and are restricted by enabling legislation to secure the
state guarantees. In addition to the funds held by the State Treasurer, per Public Act
96-0897 the Authority is authorized to make payments on State Guarantees from the
Industrial Revenue Bond Insurance Fund. This fund has cash deposits totaling
$11,647,109 at June 30, 2011. The Authority must liquidate the loan collateral, and
absorb any loss due to uncollectible amounts. Any recoveries on the defaulted loan are
first used to repay the Authority’s guarantee and then used to repay the lender. These
future liabilities, if any, cannot be estimated. According to certifications received by
the Authority from lenders, the maximum guarantees outstanding are:
State Guarantee Program for Restructuring Agricultural Debt $ 17,330,482
Specialized Livestock Loan Guarantee Program 5,551,691
Young Farmer Loan Guarantee Program 2,416,215
Farmer and Agri-Business Loan Guarantee Program 32,575,292
Farm Purchase 975,261
43
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
(14) RISK FINANCING ACTIVITIES
The Authority is exposed to various risks of loss related to torts, theft of, damage to, and
destruction of assets; errors or omissions; injuries to employees; and natural disasters
which are covered through purchase of commercial insurance. The Authority accounts for
its risk financing activities in the General Operating Fund. There has been no significant
reduction or changes in coverage during the current year nor have settlements exceeded
insurance coverage in any of the last three years.
(15) DEFINED CONTRIBUTION PLAN
The Authority’s Board of Directors approved the Illinois Finance Authority Deferred
Compensation Plan. The Authority’s Board of Directors has the power to amend the plan.
The Plan is administered through the State of Illinois Department of Central Management
Services; this plan is considered a defined contribution plan. This plan allows participants
to invest a portion of their salary in a choice of investment programs. Federal and State
income taxes are deferred on the total amount through the plan as well as on investment
earnings. However, the total contributions are subject to FICA taxes. The program
provides a tax sheltered retirement account. The employee may begin participating in the
Deferred Compensation Plan after 30 days of employment have been completed.
The maximum contributions through the year 2011 are:
YEAR MAXIMUM CONTRIBUTION AGE 50 CATCH UP
2011 $16,500 $22,000
The contribution schedule requires the Authority to match $2 for every $1 deferred by an
eligible employee up to a maximum of 5% of an employee’s salary. In order to participate
in this plan an employee must contribute a minimum of 1% of their salary.
Total employer and employee contributions for fiscal year 2011 were $102,569 and
$101,228, respectively.
(16) TRANSACTIONS WITH THE PRIMARY GOVERNMENT
The Authority, a body corporate and politic, is a component unit of the State of Illinois.
The Authority is principally engaged in issuing taxable and tax-exempt bonds, making
loans, and investing capital for businesses, non-profit corporations, local government units,
and primary government including component units of the State of Illinois. This includes
44
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
moral obligation bonds which were inherited from the former Illinois Development
Finance Authority used to finance a primary government project. The Authority also
administers programs for the State and the related state appropriations for the programs.
Due to primary government - The Office of the Auditor General engaged an external audit
firm to perform an audit of the Illinois Finance Authority’s basic financial statements. The
Operating General Fund of the Authority is indebted with the Office of the Auditor General
in the amount of $200,000 for audit related fees.
Due to primary government - The Bond Fund monies held are at the loan subaccount to
support the debt service payment. These monies are payments received from the borrowers
to cover the debt service payment. Total amount held as of June 30, 2011 is $418,224.
Due to State - The Fire Truck Revolving Loan Fund is established as a special fund in the
State Treasury in accordance with Section 5.595 of the Finance Act (30 ILS 105). The Fire
Prevention Fund and Build Illinois Bond Fund loaned $9 million and $10 million,
respectively, to the Authority to grant interest-free loans for the purchase of fire trucks by a
fire department, fire protection district, or a township fire department based on need as
determined by the State Fire Marshall. Total current portion due is $1,215,550 and total
long-term due is $16,271,058.
Due to State - The Ambulance Revolving Loan Fund is established as a special fund in the
State Treasury in accordance with Section 5.663 of the Finance Act (30 ILCS 105). The
Fire Prevention Fund loaned $4 million to the Authority to grant interest-free loans for the
purchase of ambulances by a fire department, fire protection district, a township fire
department, or a non-profit ambulance service based on need as determined by the State
Fire Marshall. Total current portion due is $160,987 and total long-term due is $671,226.
(17) NEW GOVERNMENTAL ACCOUNTING STANDARDS
The Governmental Accounting Standards Board (GASB) has issued the following
Statements:
Statement No. 57, OPEB Measurements by Agent Employers and Agent Multiple-
Employer Plans, The objective of this Statement is to address issues related to the use of
the alternative measurement method and the frequency and timing of measurements by
employers that participate in agent multiple-employer other post employment benefits
(OPEB) plans (that is, agent employers). The Authority is required to implement this
Statement for the year ending June 30, 2012. Management has not yet completed its
assessment of the impact of this GASB Statement on the Authority’s financial
statements.
45
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2011
Statement No. 60, Accounting and Financial Reporting for Service Concession
Arrangements, The objective of this statement is to improve financial reporting by
addressing issues related to service concession arrangements, which are a type of public-private
or public-public partnership. The Authority is required to implement this
Statement for the year ending June 30, 2013. Management has not yet completed its
assessment of the impact of this GASB Statement on the Authority’s financial
statements.
Statement No. 61, The Financial Reporting Entity: Omnibus-an amendment of GASB
Statements No. 14 and No. 34, The objective of this Statement is to improve financial
reporting for a governmental financial reporting entity. The Authority is required to
implement this Statement for the year ending June 30, 2013. Management has not yet
completed its assessment of the impact of this GASB Statement on the Authority’s
financial statements.
Statement No. 62, Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, The objective
of this statement is to incorporate into the GASB’s authoritative literature certain
accounting and financial reporting guidance that is included in certain FASB and AICPA
pronouncements issued on or before November 30, 1989, which does not conflict with or
contradict GASB pronouncements. The Authority is required to implement this
Statement for the year ending June 30, 2013. Management has not yet completed its
assessment of the impact of this GASB Statement on the Authority’s financial
statements.
Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources, and Net Position, This statement provides financial reporting
guidance for deferred outflows of resources and deferred inflows of resources. The
Authority is required to implement this Statement for the year ending June 30, 2013.
Management has not yet completed its assessment of the impact of this GASB Statement
on the Authority’s financial statements.
Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination
Provisions-an Amendment of GASB Statement No. 53, The objective of this Statement is
to clarify whether an effective hedging relationship continues after the replacement of a
swap counterparty or a swap counterparty’s credit support provider. The Authority is
required to implement this Statement for the year ending June 30, 2012. Management
has not yet completed its assessment of the impact of this GASB Statement on the
Authority’s financial statements.
46
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Net Assets - Nonmajor Funds
June 30, 2011
Industrial Illinois Illinois
Revenue Agricultural Farmer
Bond Venture Credit Loan Agribusiness
Insurance Investment Enhancement Guarantee Loan Guarantee
Assets Fund Fund Fund Fund Fund
Current assets:
Cash and cash equivalents - unrestricted $ 11,647,109 $ - $ - $ - $ -
Restricted current assets
Cash and cash equivalents - - - - -
Securities lending collateral equity with State Treasurer - - - 3,892,147 2,996,461
Accrued interest receivable - - - - -
Loans receivable - - - - -
Allowance for doubtful accounts - - - - -
Receivables
Loans receivable - - - - -
Interest and other - - - - -
Total current assets 11,647,109 - - 3,892,147 2,996,461
Noncurrent assets:
Restricted noncurrent assets
Cash and cash equivalents - - 617,750 9,985,250 7,711,514
Interest receivable - - - 4,428 3,409
Guarantee payments receivable 28,402 - - 170,902 623,107
Allowance for doubtful accounts (28,402) - - (170,902) (623,107)
Loans receivable - - - - -
Allowance for doubtful accounts - - - - -
Investments in partnerships and companies - 2,247,981 - - -
Loans receivable - - - - -
Total noncurrent assets - 2,247,981 617,750 9,989,678 7,714,923
Total assets 11,647,109 2,247,981 617,750 13,881,825 10,711,384
Liabilities
Current liabilities:
Obligation under securities lending of State Treasurer - - - 3,892,147 2,996,461
Accrued interest payable - - - - -
Due to primary government - - - - -
Current portion of long-term debt - - - - -
Total current liabilities - - - 3,892,147 2,996,461
Noncurrent liabilities
Noncurrent portion of long-term debt - - - - -
Due to primary government - - - - -
Total noncurrent liabilities - - - - -
Total liabilities - - - 3,892,147 2,996,461
Net Assets
Restricted - - 617,750 9,989,678 7,714,923
Unrestricted 11,647,109 2,247,981 - - -
Total net assets $ 11,647,109 $ 2,247,981 $ 617,750 $ 9,989,678 $ 7,714,923
47
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Net Assets - Nonmajor Funds
June 30, 2011
Assets
Current assets:
Cash and cash equivalents - unrestricted
Restricted current assets
Cash and cash equivalents
Securities lending collateral equity with State Treasurer
Accrued interest receivable
Loans receivable
Allowance for doubtful accounts
Receivables
Loans receivable
Interest and other
Total current assets
Noncurrent assets:
Restricted noncurrent assets
Cash and cash equivalents
Interest receivable
Guarantee payments receivable
Allowance for doubtful accounts
Loans receivable
Allowance for doubtful accounts
Investments in partnerships and companies
Loans receivable
Total noncurrent assets
Total assets
Liabilities
Current liabilities:
Obligation under securities lending of State Treasurer
Accrued interest payable
Due to primary government
Current portion of long-term debt
Total current liabilities
Noncurrent liabilities
Noncurrent portion of long-term debt
Due to primary government
Total noncurrent liabilities
Total liabilities
Net Assets
Restricted
Unrestricted
Total net assets
(continued)
E.D.A.
IRBB Title IX Rural Employee Illinois
Special Restricted Development Ownership Housing
e Reserve Revolving Revolving Assistance Partnership
Fund Loan Fund Loan Fund Loan Fund Program
$ 2,649,497 $ - $ - $ - $ 1,828,305
- 748,763 1,989,275 - -
- - - - -
- - 4,723 - -
- 91,484 35,830 - -
- (91,484) - - -
28,103 - - 1,000,000 -
1,271 - - - -
2,678,871 7 48,763 2,029,828 1,000,000 1,828,305
- - - - -
- - - - -
- - - - -
- - - - -
- - 267,952 - -
- - (20,920) - -
- - - - -
218,422 - 3,000,000
218,422 - 247,032 - 3,000,000
2,897,293 7 48,763 2,276,860 1,000,000 4,828,305
- - - - -
- - 3,014 - -
- - - - -
- - 57,644 - -
- - 60,658 - -
- - 545,493 - -
- - - - -
- - 545,493 - -
- - 606,151 - -
- 748,763 1,670,709 - -
2,897,293 - - 1,000,000 4,828,305
$ 2 ,897,293 $ 7 48,763 $ 1,670,709 $ 1,000,000 $ 4,828,305
48
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Net Assets - Nonmajor Funds
June 30, 2011
Assets
Current assets:
Cash and cash equivalents - unrestricted
Restricted current assets
Cash and cash equivalents
Securities lending collateral equity with State Treasurer
Accrued interest receivable
Loans receivable
Allowance for doubtful accounts
Receivables
Loans receivable
Interest and other
Total current assets
Noncurrent assets:
Restricted noncurrent assets
Cash and cash equivalents
Interest receivable
Guarantee payments receivable
Allowance for doubtful accounts
Loans receivable
Allowance for doubtful accounts
Investments in partnerships and companies
Loans receivable
Total noncurrent assets
Total assets
Liabilities
Current liabilities:
Obligation under securities lending of State Treasurer
Accrued interest payable
Due to primary government
Current portion of long-term debt
Total current liabilities
Noncurrent liabilities
Noncurrent portion of long-term debt
Due to primary government
Total noncurrent liabilities
Total liabilities
Net Assets
Restricted
Unrestricted
Total net assets
(continued)
Fire Truck Renewable Ambulance
Revolving Energy Revolving
Loan Development Loan Total
Fund Fund Fund Nonmajor
$ - $ - $ - $ 16,124,911
- 475,711 - 3,213,749
- - - 6,888,608
- 191 - 4,914
1,215,550 88,853 160,987 1,592,704
- - - (91,484)
- - - 1,028,103
- - - 1,271
1,215,550 564,755 160,987 28,762,776
- - - 18,314,514
- - - 7,837
- - - 822,411
- - - (822,411)
16,271,058 1,579,702 671,226 18,789,938
- - - (20,920)
- - - 2,247,981
- - - 3,218,422
16,271,058 1,579,702 671,226 42,557,772
17,486,608 2,144,457 832,213 71,320,548
- - - 6,888,608
- - - 3,014
1,215,550 - 160,987 1,376,537
- - - 57,644
1,215,550 - 160,987 8,325,803
- - - 545,493
16,271,058 - 671,226 16,942,284
16,271,058 - 671,226 17,487,777
17,486,608 - 832,213 25,813,580
- 2,144,457 - 22,886,280
- - - 22,620,688
$ - $ 2,144,457 $ - $ 45,506,968
49
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Funds
For the Year Ended June 30, 2011
Industrial Illinois Illinois
Revenue Agricultural Farmer
Bond Venture Credit Loan Agribusiness
Insurance Investment Enhancement Guarantee Loan Guarantee
Fund Fund Fund Fund Fund
Operating revenues
Interest on loans $ - $ - $ - $ - $ -
Miscellaneous - - - - -
Bad debt recoveries - - - - 25,676
Total operating revenues - - - - 25,676
Operating expenses
Professional services - - - - -
Interest expense - - - - -
Loan loss provision 28,402 - - - -
Total operating expenses 28,402 - - - -
Operating income (loss) (28,402) - - - 25,676
Nonoperating revenues:
Interest and investment income 17,473 30,840 - 58,573 44,395
Gain on sale of investments - 871,767 - - -
Total nonoperating income 17,473 902,607 - 58,573 44,395
Transfers
Transfers to other fund - (1,167,543) (8,000) - -
Total transfers - (1,167,543) ( 8,000) - -
Change in net assets (10,929) (264,936) ( 8,000) 58,573 70,071
Net assets - beginning of year 11,658,038 2,512,917 625,750 9,931,105 7,644,852
Net assets - end of year $ 11,647,109 $ 2,247,981 $ 617,750 $ 9,989,678 $ 7,714,923
50
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Funds
For the Year Ended June 30, 2011
Operating revenues
Interest on loans
Miscellaneous
Bad debt recoveries
Total operating revenues
Operating expenses
Professional services
Interest expense
Loan loss provision
Total operating expenses
Operating income (loss)
Nonoperating revenues:
Interest and investment income
Gain on sale of investments
Total nonoperating income
Transfers
Transfers to other fund
Total transfers
Change in net assets
Net assets - beginning of year
Net assets - end of year
(continued)
E.D.A.
IRBB Title IX Rural Employee Illinois
Special Restricted Development Ownership Housing
Reserve Revolving Revolving Assistance Partnership
Fund Loan Fund Loan Fund Loan Fund Program
$ 12,875 $ - $ 2 1,027 $ - $ -
- - 8,858 - -
- - - - -
12,875 - 2 9,885 - -
- 24 9,780 - -
- - 6,318 - -
- - - - -
- 24 1 6,098 - -
12,875 (24) 1 3,787 - -
3,007 934 2,121 - 2,135
- - - - -
3,007 934 2 ,121 - 2,135
- - - - -
- - - - -
15,882 910 1 5,908 - 2,135
2,881,411 747,853 1,654,801 1,000,000 4,826,170
$ 2,897,293 $ 748,763 $ 1,670,709 $ 1,000,000 $ 4,828,305
51
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets - Nonmajor Funds
For the Year Ended June 30, 2011
Operating revenues
Interest on loans
Miscellaneous
Bad debt recoveries
Total operating revenues
Operating expenses
Professional services
Interest expense
Loan loss provision
Total operating expenses
Operating income (loss)
Nonoperating revenues:
Interest and investment income
Gain on sale of investments
Total nonoperating income
Transfers
Transfers to other fund
Total transfers
Change in net assets
Net assets - beginning of year
Net assets - end of year
(continued)
Fire Truck Renewable Ambulance
Revolving Energy Revolving
Loan Development Loan Total
Fund Fund Fund Nonmajor
$ - $ 34,317 $ - $ 68,219
- - - 8,858
- - - 25,676
- 34,317 - 102,753
- - - 9,804
- - - 6,318
- - - 28,402
- - - 44,524
- 34,317 - 58,229
- 181 - 159,659
- - - 871,767
- 181 - 1,031,426
- - - (1,175,543)
- - - (1,175,543)
- 34,498 - (85,888)
- 2,109,959 - 45,592,856
$ - $ 2,144,457 $ - $ 45,506,968
52
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Cash Flows - Nonmajor Funds
For the Year Ended June 30, 2011
Industrial Illinois
Revenue Agricultural
Bond Venture Credit Loan
Insurance Investment Enhancement Guarantee
Fund Fund Fund Fund
Cash flows from operating activities:
Cash received for fees and other $ - $ - $ - $ -
Cash payments to suppliers for goods and services - - - -
Net cash used in operating activities - - - -
Cash flows from noncapital financing activities:
Principal paid to State - - - -
Bonds and notes principal payments - - - -
Interest payments - - - -
Due from other funds - - - -
Due to other funds - - - -
Transfers to other fund - (1,167,543) (8,000) -
Net cash used in noncapital financing activities - (1,167,543) (8,000) -
Cash flows from investing activities:
Sales and maturities of investments - 1,136,703 - -
Cash received on loan receivables and guarantees - - - -
Cash payments for loan receivables and guarantees (28,402) - - -
Cash received for interest on loans - - - -
Interest and dividends on investments 17,473 30,840 - 57,145
Net cash provided by (used in) investing activities (10,929) 1,167,543 - 57,145
Net increase (decrease) in cash and cash equivalents (10,929) - (8,000) 57,145
Cash and cash equivalents at beginning of year 11,658,038 - 625,750 9,928,105
Cash and cash equivalents at end of year $ 11,647,109 $ - $ 617,750 $ 9,985,250
Reconciliation of operating income (loss) to net cash used
in operating activities:
Operating income (loss) $ (28,402) $ - $ - $ -
Adjustments to reconcile operating income (loss) to net cash
used in operating activities:
Interest on loans - - - -
Interest expense - - - -
Bad debt recoveries - - - -
Loan loss provision 28,402 - - -
Change in asset: - - - -
Accounts receivable - - - -
Net cash used in operating activities $ - $ - $ - $ -
53
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Cash Flows - Nonmajor Funds (continued)
For the Year Ended June 30, 2011
Illinois E.D.A.
Farmer IRBB Title IX Rural Employee
Agribusiness Special Restricted Development Ownership
Loan Guarantee Reserve Revolving Revolving Assistance
Fund Fund Loan Fund Loan Fund Loan Fund
Cash flows from operating activities:
Cash received for fees and other $ - $ - $ - $ 31 $ -
Cash payments to suppliers for goods and services - - (24) ( 9,780) -
Net cash used in operating activities - - (24) ( 9,749) -
Cash flows from noncapital financing activities:
Principal paid to State - - - - -
Bonds and notes principal payments - - - (57,073) -
Interest payments - - - ( 6,602) -
Due from other funds - (75,356) (2,157) (9,780) -
Due to other funds - 77,099 710 10,344 -
Transfers to other fund - - - - -
Net cash used in noncapital financing activities - 1,743 (1,447) (63,111) -
Cash flows from investing activities:
Sales and maturities of investments - - - - -
Cash received on loan receivables and guarantees 25,676 62,778 - 191,991 -
Cash payments for loan receivables and guarantees - - - - -
Cash received for interest on loans - 12,579 - 21,303 -
Interest and dividends on investments 43,986 3,006 934 2,121 -
Net cash provided by (used in) investing activities 69,662 78,363 934 215,415 -
Net increase (decrease) in cash and cash equivalents 69,662 8 0,106 (537) 142,555 -
Cash and cash equivalents at beginning of year 7,641,852 2,569,391 749,300 1,846,720 -
Cash and cash equivalents at end of year $ 7,711,514 $ 2,649,497 $ 748,763 $ 1,989,275 $ -
Reconciliation of operating income (loss) to net cash used
in operating activities:
Operating income (loss) $ 25,676 $ 12,875 $ (24) $ 13,787 $ -
Adjustments to reconcile operating income (loss) to net cash
used in operating activities:
Interest on loans - (12,875) - (21,027) -
Interest expense - - - 6,318 -
Bad debt recoveries (25,676) - - - -
Loan loss provision - - - - -
Change in asset: - - - - -
Accounts receivable - - - ( 8,827) -
Net cash used in operating activities $ - $ - $ (24) $ (9,749) $ -
54
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
Combining Statement of Cash Flows - Nonmajor Funds (continued)
For the Year Ended June 30, 2011
Illinois Fire Truck Renewable Ambulance
Housing Revolving Energy Revolving
Partnership Loan Development Loan Total
Program Fund Fund Fund Nonmajor
Cash flows from operating activities:
Cash received for fees and other $ - $ - $ - $ - $ 31
Cash payments to suppliers for goods and services - - - - (9,804)
Net cash used in operating activities - - - - (9,773)
Cash flows from noncapital financing activities:
Principal paid to State - (1,243,527) - (832,213) (2,075,740)
Bonds and notes principal payments - - - - ( 57,073)
Interest payments - - - - ( 6,602)
Due from other funds - - - - ( 87,293)
Due to other funds - - - - 8 8,153
Transfers to other fund - - - - ( 1,175,543)
Net cash used in noncapital financing activities - ( 1,243,527) - (832,213) (3,314,098)
Cash flows from investing activities:
Sales and maturities of investments - - - - 1 ,136,703
Cash received on loan receivables and guarantees - 1,243,527 87,090 832,213 2,443,275
Cash payments for loan receivables and guarantees - - - - ( 28,402)
Cash received for interest on loans - - 34,323 - 68,205
Interest and dividends on investments 2,135 - 180 - 157,820
Net cash provided by (used in) investing activities 2,135 1,243,527 121,593 8 32,213 3,777,601
Net increase (decrease) in cash and cash equivalents 2,135 - 121,593 - 453,730
Cash and cash equivalents at beginning of year 1,826,170 - 354,118 - 3 7,199,444
Cash and cash equivalents at end of year $ 1,828,305 $ - $ 4 75,711 $ - $3 7,653,174
Reconciliation of operating income (loss) to net cash used
in operating activities:
Operating income (loss) $ - $ - $ 34,317 $ - $ 58,229
Adjustments to reconcile operating income (loss) to net cash
used in operating activities:
Interest on loans - - (34,317) - ( 68,219)
Interest expense - - - - 6 ,318
Bad debt recoveries - - - - ( 25,676)
Loan loss provision - - - - 28,402
Change in asset: - - - - -
Accounts receivable - - - - ( 8,827)
Net cash used in operating activities $ - $ - $ - $ - $ ( 9,773)
55
Imllel!lCil04ent Auditors' on Control over
Matters Based on an Audit
Honorable William Holland
Auditor General
State of Illinois
and
Gila Bronner
Honorable Chairman of the Audit Committee
of the Board of Directors
Illinois Finance Authority
As Special Assistant Auditors for the Auditor General, we have audited the financial statements
of the business-type activities, each major fund and the aggregate remaining fund information of
the State of Illinois, Illinois Finance Authority, a component unit of the State of Illinois, as of
and for the year ended June 30, 2011, which collectively comprise the Authority's basic financial
statements and have issued our report thereon dated March 9, 2012. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of the State of Illinois, Illinois Finance Authority is responsible for establishing and
maintaining effective internal control over financial reporting. In planning and performing our
audit, we considered the State of Illinois, Illinois Finance Authority's internal control over
financial reporting as a basis for designing our auditing procedures for the purpose of expressing
our opinions on the financial statements and not for the purpose of expressing an opinion on the
effectiveness of the State of Illinois, Illinois Finance Authority's internal control over financial
reporting. Accordingly, we do not express an ·opinion on the effectiveness of the Authority's
internal control over financial reporting.
A deficiency internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis.
A weakness is a deficiency, or a combination of deficiencies, in internal control such
that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis.
u TR
was limited
...... ..., ...... F>'"'"""''"'" to identify deficiencies
'YVJL.LVJcV.U.VJ.""..:>' significant or
............. "'................. control over financial
of obtaining reasonable assurance Illinois, Finance
Authority's financial statements are free misstatement, we performed tests its
co1npliance certain of laws, regulations, grant
noncompliance which could a direct and determination of
statement amounts. providing an on with those
provisions was not an of our audit, accordingly, we do not express an op1n1on.
The results our tests disclosed noncompliance or other matters are
required to reported under
report is intended solely for
the Audit the Governor, Finance
management, State of Illinois, Illinois Finance Board of Directors,
awarding agencies pass-through and is not intended to and should not
.-:lt"'\'1,,",.,,~ other than specified parties.
March 9,
57
STATE OF ILLINOIS
ILLINOIS FINANCE AUTHORITY
(A Component Unit of the State of Illinois)
June 30, 2011
PRIOR FINDING NOT REPEATED - GOVERNMENT AUDITING STANDARDS
A. Finding (Noncompliance with the investment requirements of the Bond Indenture)
The Illinois Finance Authority (Authority) did not ensure that its investments of bond
proceeds were in accordance with the Bond Indenture.
Monies relating to the issuance of series 2002 and 2004 bonds were invested in a short-term
obligation of a corporation that exceeded the cap required per Bond Indenture.
Status: Implemented
During the current year, the bond trustee of the series 2002 and 2004 bonds cured the
default that resulted from its noncompliance by investing monies relating to the issuance of
these bonds in a short-term obligation of different corporations so that investment in a
single corporation does not exceed the cap as required by the Bond indenture.
58