STATE OF ILLINOIS
ILLINOIS GAMING BOARD
FINANCIAL AUDIT
FUND 129 - STATE GAMING FUND
For the Year Ended June 30,2011
STATE OF ILLINOIS
ILLINOIS GAMING BOARD
FINANCIAL AUDIT- STATE GAMING FUND
For the Year Ended June 30, 2011
TABLE OF CONTENTS
Page
Board Officials 1
Financial Statement Report
Summary 2
Independent Auditors' Report 3
Basic Financial Statements
Balance Sheet S
Statement of Revenues, Expenditures and Changes in Fund Balances 6
Notes to the Basic Financial Statements 7
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 13
Schedule of Finding 15
Prior Finding Not Repeated 16
BOARD OFFICIALS
ILLINOIS GAMING BOARD
Chairman
Board member
Board member
Board member
Board member
Administrator
General Counsel
Acting General Counsel
Deputy General Counsel
Acting Deputy General Counsel
Deputy Administrators:
Enforcement
Investigations
Audit and Financial Analysis
Finance and Administration
Chief Fiscal Officer
Agency offices are located at;
801 S. 7* Street
Suite 400-South
Springfield, IL 62794
Judge Aaron Jaffe
Lee Gould (10/24/11 - present)
Charles Gardner (7/1/10 - 10/23/11)
Michael Holewinski (10/24/11 -present)
Rev. Eugene Winkler (7/1/10 - 10/23/11)
Zaldwaynaka Scott (10/24/11 - present)
Joe Moore Jr. (7/1/10 - 10/23/11)
Marybeth Vander Weele (10/24/11 - present)
Vacant (4/25/11-10/23/11)
Judge James E. Sullivan (7/1/10 - 4/24/11)
Mark Ostrowski
Lynn Carter (8/22/11 - present)
Vacant (6/16/11-8/21/11)
Michael Fries (7/1/10- 12/15/10)
Erin Alexander (12/16/10-6/15/11)
Erin Alexander (7/1/10 - 12/15/10)
William Bogot (12/16/10-present)
Emily Mattison (12/16/10 - present)
Patrick Kimes (10/1/11 - present)
Bruce Banks (7/1/10 - 9/30/11)
Scott Deubel
Douglas Bybee
Kathy Spain
Mark Lewis
160 North LaSalle St.
Suite 300
Chicago, Illinois 60601
9511 West Harrison
Des Plaines, IL 60016
STATE OF ILLINOIS
ILLINOIS GAMING BOARD
FINANCIAL AUDIT - STATE GAMING FUND
For the Year Ended June 30, 2011
FINANCIAL STATEMENT REPORT
SUMMARY
The audit of the accompanying financial statements of the Illinois Gaming Board's State
Gaming Fund was performed by the Office of the Auditor General.
Based on their audit, the auditors expressed an unqualified opinion on the State Gaming
Fund's financial statements.
SUMMARY OF FINDINGS
The auditors identified a matter involving the Board's internal control over financial
reporting that they considered to be a significant deficiency. The significant deficiency is
described in the accompanying Schedule of Finding listed in the table of contents as finding 11-1,
Inadequate Internal Control over Cash Receipts.
EXIT CONFERENCE
The Illinois Gaming Board waived an exit conference in a letter dated February 16, 2012.
Responses to the recommendation were provided by Douglas Bybee, Audit and Financial Analysis
Deputy Administrator, in a letter dated March 1, 2012.
SPHINGFIELD OFFICE:
li_E5 PARK PLAZA
74O EAST ASH • 627O3-3154
PHONE- Z I 7/782-6040
FAX: 2 I 7/785-8232 • TTY: SBB/26 I -2887
CHICAGO OFFICE;
MICHAEL A. BILANDIC HLDG. SUITE S-9OO
I6O NORTH LASALLE 6OGOI-3 103
PHONE: 3 I 2/B Td-4000
FAX. 312/814-4006
OFFICE OF THE AUDITOR GENERAL
WILLIAM G. HOLLAND
INDliPI-NOl-NT AUDITORS1 RI-l'ORl
Honorable William G. Holland
Auditor General
Stale of Illinois
We have audited the accompanying financial statements of the State Gaming Fund of the Slate of
Illinois. Illinois Gaming Board, as of and for the year ended June 30. 2011, as listed in the table of
contents. These financial statements are the responsibility of the Stale of Illinois. Illinois Gaining
Board's management. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
Stales 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 misstatcmenl. 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 thai our audit provides a
reasonable basis for our opinion.
As discussed in Note 2. the financial statements present only the State Gaming Fund and do not
purport to. and do not. present fairly the financial position of the Stale of Illinois and the Illinois
Gaming Board as of June 30, 2011, and ils changes in financial position for Ihe year then ended in
conformity with accounting principles generally accepted in the United Slates of America.
In our opinion, the financial statements referred to above present fairly, in all material respecls, the
financial position of the Slate Gaming Fund of the State of Illinois, Illinois Gaming Board, as of
June 30. 2011. and the changes in financial position thereof 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 8.
2012 on our consideration of the Stale oi' Illinois. Illinois Gaming Board's internal control over
financial reporting of the Stale Gaming Fund and on our tests of the Slate of Illinois, Illinois
INTERNET ADDRESS AUDITORIUM A I L.STATE . 11.. US
RECVCLEI3 PAt'ljH ■ SOYBEAN INhb
Gaming Board's 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 Standards and
should be considered in assessing the results of our audit.
The State of Illinois, Illinois Gaming Board has not presented a management's discussion and
analysis for the State Gaming Fund that accounting principles generally accepted in the United
States of America has determined is necessary to supplement, although not required to be part of,
the financial statements.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, the Comptroller, the Illinois Gaming
Board and Board management, and is not intended to be and should not be used by anyone oilier
than these specified parties.
Bruce L. Bullard, CPA
Director of Financial and Compliance Audits
March 8, 2012
State of Illinois
Illinois Gaming Board - State Gaming Fund
Individual Nonshared Fund
Balance Sheet
June 30,2011 (Expressed In Thousands)
State
Gaming Fund
ASSETS
Cash equity wllh State Treasurer
Taxes receivable, net
Other receivables, net
Total asaota
LIABILITIES
Accounts payable and accrued liabilities
Intergovernmental payables
Due to other State fiduciary funds
Due to other State funds
Total llabtlttlos
FUND BALANCE
Committed
Total fund balance
Total liabilities and fund balance $ 38.922
The accompanying notes to the financial statements are an Integral part of this statement.
s
i
36,113
2,807
2
38,922
720
6.915
141
20.146
38.922
-
State of Illinois
Illinois Gaming Board - State Gaming Fund
Individual Nonshared Fund
Statement of Revenues, Expenditures
and Changes in Fund Balance
For the Year Ended June 30,2011 (Expressed In Thousands)
State Gaming
Fund
Revenues:
Blvertoat taxes
Licenses and lees
Other
Total revenues
Expenditures:
Health and social services
Public protection and justice
Capital outlays
Intergovernmental
Total expenditures
Excess of revenues over expenditures
Other sources (uses) ot financial resources:
Translera-out
Net other sources (uses) of financial resources
Net change In fund balance
Fund balance, July 1,2010
Fund balance, June 30,2011
The accompanying notes to the llnancial statements are en inlegral part ol this statement.
$
$
457,865
1,283
1
459.129
838
29,930
80.987
111.755
347.374
(347,374)
(347.374)
-
-
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
(1) Description of Fund
The State Gaming Fund (the Fund) is administered by the Illinois Gaming Board (the Board). The Board is
a part of the executive branch of government of the State of Illinois (State) and operates under the authority
of and review by the Illinois General Assembly. The Board is subject to the authority of the Office of the
Governor, the State's chief executive officer, and other departments of the executive and legislative
branches of government (such as the Department of Central Management Services, the Governor s Office of
Management and Budget, the State's Treasurer's Office, and the State Comptroller's Office) as defined by
the Illinois General Assembly.
The purpose of the Fund is to receive and record taxes and fees obtained from owner's license applications
for riverboat gambling operations. Pursuant to appropriation, monies in the Fund are used to defray the
costs associated with background investigations conducted by the Board, including personnel costs,
enforcement of the Riverboat Gambling Act, conducting background investigations, and revenue sharing
with units of local government. Excess funds are transferred to the Education Assistance Fund. All funds
appropriated to the Board and all other cash received are under the custody and control of the State
Treasurer.
(2) Summary of Significant Accounting Policies
The financial statements of the Fund, an individual nonshared fund of the Board, 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, 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.
Based upon the required criteria, the Fund has no component units and is not a component unit of any
other entity. HoweVer, because the Fund is not legally separate from the State of lllniw. the flnjno.al
statements of the Fund are included in the financial statements of the State of Illinois. The State of
Illinois' Comprehensive Annual Financial Report may be obtained by writing to the State
Comptroller's Office, Division of Financial Reporting, 325 West Adams Street, Springfield, Illinois,
62704-1871.
The financial statements of the State Gaming Fund are intended to present the financial position and
the changes in financial position of only that portion of the governmental activities of the State of
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
Illinois that is attributable to the transactions of the Fund. They do not purport to, and do not, present
fairly the financial position of the State of Illinois as of June 30, 2011 and the changes in financial
position for the year then ended in conformity with accounting principles generally accepted in the
United States of America.
(b) Basis ofPresentation
In government, the basic accounting and reporting entity is a fund. A fund is defined as an independent
fiscal and accounting entity with a self-balancing set of accounts recording cash and/or other resources
together with all related liabilities, obligations, reserves, and equities which are segregated for the
purpose of carrying on specific activities or attaining certain objectives in accordance with special
regulations, restrictions, or limitations. A balance sheet and statement of revenues, expenditures, and
changes in fund balance have been presented for the individual nonshared governmental fund
administered by the Board.
The nonshared governmental funds is a special revenue fund. Transactions related to resources
obtained from specific revenue sources (other than for expendable trusts) that are legally restricted for
specified purposes are accounted for in special revenue funds. The Special Revenue Fund, Fund 129,
is held in the State Treasury. The funds are appropriated by the General Assembly. .
(c) Measurement Focus and Basis ofAccounting
The individual nonshared governmental funds are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as
• they are both measurable and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current period.
For this purpose, the State considers revenues to be available if they are collected within 60 days of the
end of the current fiscal year.
Expenditures generally are recorded when a liability is incurred, as under accrual accounting.
However, principal and interest on long-term debt obligations, claims and judgments, and compensated
absences are recorded only when payment is due. General capital asset acquisitions are reported as
expenditures. Proceeds of long-term debt obligations and acquisitions under capital leases are reported
as other financing sources.
(d) Cash and Cash Equivalents
Cash and cash equivalents are defined as short-term, highly liquid investments readily convertible to
cash with maturities of less than 90 days at the time of purchase. Cash and cash equivalents consist of
deposits held in the State Treasury.
(e) Interfund Transactions
The Fund has the following types of interfund transactions between funds of other State agencies:
Services provided and used—sales and purchases of goods and services between funds for a price
approximating their external exchange value. Interfund services provided and used are reported as
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
revenues in seller funds and expenditures or expenses in purchaser funds. Unpaid amounts are
reported as inteifund receivables and payables in the governmental funds balance sheets or the
government-wide statements of net assets.
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—flows of assets (such as cash or goods) without equivalent flows of assets in return
and without a requirement for repayment. In governmental funds, transfers are reported as other
financing uses in the funds making transfers and as other financing sources in the funds receiving
transfers.
(f) Fund Balance
In the fund financial statements, governmental fimds report commitments of fund balances for amounts
with self-imposed constraints or limitations that have been placed at the highest level of decision
making. The Fund is comprised of a committed fund balance as of June 30,2011. These funds are
restricted through enabling legislation and are subjected to mandatory transfers to the Education
Assistance Fund and therefore are classified as committed. These committed funds cannot be used for
any other purpose unless the Illinois General Assembly removes or changes the specified use by taking
the same type of action it employed to previously commit those amounts.
(g) Use ofEstimates
contingent — — — — — -- . ,
revenues and expenses during the reporting period. Actual results could differ from those estimates.
(It) Adoption of GASB Statements
Effective for the year ending June 30, 2011 the State adopted GASB Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions, which establishes fund balance classifications
and clarifies the definitions of fund types.
(3) Deposits
The State Treasurer is the custodian of the State's cash and cash equivalents for funds maintained in the
State Treasury. Deposits in the custody of the State Treasurer are pooled and invested with other State
funds in accordance with the Deposit of State Moneys Act of the Illinois Compiled Statutes (15 1LCS
520/11). Funds held by the State Treasurer have not been categorized as to credit risk because the Board
does not own individual securities. Detail on the nature of these deposits and investments is available
within the State of Illinois' Comprehensive Annual Financial Report.
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
(4) Interfund Balances and Activity
(a) Balances Due to Other Funds
The following balances (amounts expressed in thousands) at June 30,2011 represent amounts due to other
funds:
Due to
Other Department Funds S 28,693 Due to other Department funds pursuant to statutory aulhority of the
Riverboat Gambling Act.
Other State Funds 453 Due to other State Funds for administrative cost reimbursements and
payment for services related to riverboat security.
Other Slate Fiduciary Funds 141 Due to other Stale fiduciary funds for payment of retirement benefits.
2Q.287
(b) Transfers to Other Funds
Interfund transfers out for the year ended June 30,2011, totaled $347,374 million, and represented transfers
to the State's Educational Assistance Fund, an account of the General Fund, a major fund of the State,
pursuant to statutory authority of the Riverboat Gambling Act.
(5) Taxes Receivable
Riverboat taxes receivable at June 30, 2011, totaled $2,807 million, with no amounts reported as an
allowance for uncollectible taxes.
(6) Pension Plan
Substantially all of the Board's full-time employees who are not eligible for participation in another state-sponsored
retirement plan participate in the State Employees' Retirement System (SERS), which is a
pension trust fund in the State of Illinois reporting entity. The SERS is a single-employer defined benefit
public employee retirement system (PERS) in which State employees participate, except those covered by
the State Universities, Teachers', General Assembly, and Judges' Retirement Systems. The financial
position and results of operations of the SERS for fiscal year 2011 are included in the State of Illinois'
Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2011. The SERS issues a
separate CAFR that may be obtained by writing to the SERS, 2101 South Veterans Parkway, Springfield,
Illinois, 62794-9255.
A summary of SERS benefit provisions, changes in benefit provisions, employee eligibility requirements
including eligibility for vesting, and the authority under which benefit provisions are established are
included as an integral part of the SERS' CAFR. Also included is a discussion of employer and employee
obligations to contribute and the authority under which those obligations are established.
10
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
The Board pays employer retirement contributions based upon an actuarially determined percentage of their
payrolls. For fiscal year 2011, the employer contribution rate was 27.988%.
(7) Post-employment Benefits
The State provides health, dental, vision, and life insurance benefits for retirees and their dependents in a
program administered by the Department of Healthcare and Family Services along with the Department of
Central Management Services. Substantially nil State employees become eligible for post-employment
benefits if they eventually become annuitants of one of the State sponsored pension plans. Health, dental,
and vision benefits include basic benefits for annuitants and dependents under the State's self-insurance
plan and insurance contracts currently in force. Annuitants may be required to contribute towards health,
dental, and vision benefits with the amount based on factors such as date of retirement, years of credited
service with the State, whether the annuitant is covered by Medicare, and whether the annuitant has chosen
a managed health care plan. Annuitants who retired prior to January 1, 1998, and who are vested in the
State Employee's Retirement System do not contribute towards health, dental, and vision benefits. For
annuitants who retired on or after January I, 1998, the annuitant's contribution amount is reduced five
percent for each year of credited service with the State allowing those annuitants with twenty or more years
of credited service to not have to contribute towards health, dental, and vision benefits. Annuitants also
receive life insurance coverage equal to the annual salary of the last day of employment until age 60, at
which time the benefit becomes $3,000.
The total cost of the State's portion of health, dental, vision, and life insurance benefits of all members,
including post-employment health, dental, vision, and life insurance benefits, is recognized as an expense
by the State in the Illinois Comprehensive Annual Financial Report. The State finances the costs on a pay-as-
you-go basis. The total costs incurred for health, dental, vision, and life insurance benefits are not
separated by department or component unit for annuitants and their dependents nor active employees and
their dependents.
A summary of post-employment benefit provisions, changes in benefit provisions, employee eligibility
requirements including eligibility for vesting, and the authority under which benefit provisions are
established are included as an integral part of the financial statements of the Department of Healthcare and
Family Services. A copy of the financial statements of the Department of Healthcare and Family Services
may be obtained by writing to the Department of Healthcare and Family Services, 201 South Grand Avc,
Springfield, Illinois, 62763-3838.
(8) Risk Management
The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; workers compensation and natural disasters. The State retains the risk of loss (i.e.
self insured) for these risks.
The Board's risk management activities are financed through appropriations to the Illinois Department of
Central Management Services and are accounted for in the General Fund of the State. The claims are not
considered to be a liability of the Board; and accordingly, have not been reported in the Fund's financial
statements for the year ended June 30,2011.
11
STATE OF ILLINOIS
ILLINOIS GAMING BOARD - STATE GAMING FUND
INDIVIDUAL NONSHARED FUND
Notes to Financial Statements
June 30,2011
(9) Commitments and Contingencies
(a) Litigation
On January 26,2011, the Illinois Appellate Court opinion in Wirtz v. Quinn indicated that Public Acts
96-34, 96-35, 96-37 and 96-38 violated provisions of the Illinois Constitution. On January 28, 2011,
the State of Illinois filed a Petition for Appeal with the Illinois Supreme Court. The Supreme Court
also approved the State's motion for a stay of enforcement of the Appellate Court's decision. On July
11, 2011, the Illinois Supreme Court reversed the judgment of the Appellate Court, and affirmed the
judgment of the Circuit Court, deeming the Public Acts were indeed Constitutional. This has resulted
in a delay of implementing Video Gaming. At this time, the financial impact on this fund is
indeterminable.
The Board is routinely involved in a number of legal proceedings and claims that cover a wide range of
matters. In the opinion of management, the outcome of these matters is not expected to have any
material adverse effect on the financial position or results of operations of the Fund.
(10) Subsequent Event
On July 15, 2011, the tenth riverboat casino license became operational. This event triggered a
statutory change where 15% and 2% of the tenth riverboat's adjusted gross receipts were to be paid by
the Board to the Illinois Racing Board for deposit into the Horse Racing Equity Fund and Chicago
State University, respectively. The Fund is retaining these proceeds, as the Board does not currently
have appropriation authority authorizing these distributions. The Board is currently seeking a
legislative remedy to allow for these payments to be made to the Illinois Racing Board and Chicago
State University.
12
SPRINGFIELD OFFICE:
ILES PARK PLAZA
74O EAST ASH • 627O3-3 I 5fl
PHONE; 217/7H2-6O46
FAX: 2 I 7/78S-S222 • TTV: 888/26 I -2887
CHICAGO OFFICE
MICHAEL A BILANOIC BLDG. SUITE S-9OO
I 6O NORTH LASALLE ■ 6C6OI -31O3
PHONE. 312/B14-40O0
FAX: 3I2/8M-40O6
OFFICE OF THE AUDITOR GENERAL
WILLIAM G. HOLLAND
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 w GOVERNMENT AUDITING STANDARDS
Honorable William G. Holland
Auditor General
Slate of Illinois
We have audited the Stale Gaming Fund of the State of Illinois. Illinois Gaming Board, as
of and for the year ended June 30. 2011, and have issued our report thereon dated Mareh 8, 2012.
We conducted our audit in accordance with auditing standards generally accepted in the United
Stales of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller Genera! of the United States.
Internal Control Over Financial Reporting
Management of the Slate of Illinois. Illinois Gaming Board 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 Gaining Board's internal control over financial
reporting of the Slate Gaming Fund as a basis for designing our auditing procedures for the purpose
of expressing our opinion on the financial statements, but nol for the purpose of expressing an
opinion on the effectiveness of the Slate of Illinois. Illinois Gaming Board's internal control over
financial reporting. Accordingly, we do nol express an opinion on the effectiveness of the State of
Illinois. Illinois Gaming Board's internal control over financial reporting.
A deficiency in 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 misstatcments on a timely basis. A material weakness is a deficiency,
or a combination of deficiencies, in internal control such that there is a reasonable possibility that a
material missiatement of the entity's financial statements will not be prevented, or detected and
corrected on a timely basis.
Our consideration of internal control over financial reporting was for ihe limited purpose
described in the first paragraph of this section and was not designed to identify all deficiencies in
the internal control over financial reporting that might be deficiencies, significant deficiencies or
INTERNET ADDRESS ALJDITOR^MAI L. STATE U_-U5
RECYCL-EFDO IPAPER SOYBEAN IrVKS
material weaknesses. We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above. I lowever, we identified a
certain deficiency in internal control over financial reporting, described in finding 11-3 in the
accompanying schedule of finding that we consider to be a significant deficiency in internal control
over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control thai is less severe than a material weakness, ycl important enough to merit
attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Slate of Illinois, Illinois
Gaming Board's financial statements are tree of material misstalemenl, we performed tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those provisions was not
an objective of our audit, and accordingly, we do not express such an opinion. The results of our
tests disclosed no instances of noncompliance or other matters that arc required to be reported under
Government Auditing Standards.
State of Illinois, Illinois Gaming Board's response to the finding identified in our audit is
described in the accompanying schedule of finding. We did not audit State of Illinois. Illinois
Gaming Board's response and, accordingly, we express no opinion on the response.
This report is intended solely for the information and use of the Auditor General, the
General Assembly, the Legislative Audit Commission, the Governor, the Illinois Gaming Board
and Board management and is not intended to be and should not be used by anyone other than these
specified parties.
Bruce L. Bullard, CPA
Director of Financial and Compliance Audits
March 8, 2012
14
STATE OF ILLINOIS
ILLINOIS GAMING BOARD
FINANCIAL AUDIT - STATE GAMING FUND
SCHEDULE OF FINDING
For the Year Ended June 30,2011
11-1. FINDING (Inadequate Internal Control over Cash Receipts)
The Illinois Gaming Board (Board) did not perform reconciliations of its cash receipt journal
to Board deposit records.
While reviewing the Board's manual cash receipt process, it was noted that the Board
maintains a cash receipt journal to track the physical cash received at the Board's two main
offices; however, at no point during FYU was a reconciliation performed between the cash
receipt journal and the Board's State Treasury deposit records. During FY11, the Board
received $668,149 in cash receipts that were deposited into the State Gaming Fund (Fund).
The auditors performed the reconciliation for FY11 and no discrepancies were noted.
The Fiscal Control and Internal Auditing Act (30 ILCS 10/3001) requires State agencies to
establish a system of fiscal and administrative controls to provide assurance that "funds,
property, and other assets and resources are safeguarded against waste, loss, unauthorized use,
and misappropriation."
Board personnel stated that cash receipt reconciliation procedures between the Board's cash
receipt journal and the deposit records had never been developed and implemented.
Without an adequate cash receipt reconciliation process, the Board cannot ensure that all cash
receipts received by the Board are deposited into the Fund in accordance with State statutory
requirements thus increasing the likelihood that a loss from errors, theft, or other irregularities
could occur and would not be found in the normal course of employees carrying out their
assigned duties. (Finding Code No. 11-1)
RECOMMENDATION
We recommend the Board perform reconciliations of its cash receipt journal to Board deposit
records to ensure accurate and timely deposits of its cash into the State Treasury.
BOARD RESPONSE
The Board agrees with this Recommendation. The Board has developed and implemented
reconciliation procedures for cash receipts to comply with the Fiscal Control and Internal
Auditing Act (30 ILCS 10/3001). These procedures identify the series of events beginning
with the Board's receipt of cash items, the immediate recording to a Remittance Ledger, the
posting to a Receipts Journal, and subsequent reconciliation procedures between the Ledger
and Journal prior to depositing the cash receipts into the State Gaming Fund.
15
STATE OF ILLINOIS
ILLINOIS GAMING BOARD
FINANCIAL AUDIT - STATE GAMING FUND
PRIOR FINDING NOT REPEATED
For the Year Ended June 30,2011
A. FINDING (Lack of Controls Governing the Transfer Required by the Illinois
Administrative Code)
During the prior period, the Board did not have formal written procedures and supporting
documentation detailing the calculation for the transfers made to the Education Assistance
Fund (EAF). In addition, the Board did not have adequate segregation of duties to approve the
final amount transferred to the EAF. The Board was unable to support amounts transferred by
a management employee that went on leave of absence.
In the current audit period, the Board implemented new procedures for calculating, recording,
and approving the mandatory transfers. (Finding Code 10-1)
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