STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30,2011
Performed as Special Assistant Auditors
For the Auditor General, State of Illinois
E.C. ORTIZ & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
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
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets 5
Statement of Activities 6
Fund Financial Statements
Governmental Funds - Balance Sheet 7
Governmental Funds - Reconciliation of the Governmental Funds
Balance Sheet to the Statement of Net Assets 8
Governmental Funds - Statement of Revenues, Expenditures, and
Changes in Fund Balances 9
Governmental Funds - Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities 10
Notes to Financial Statements 11
Supplementary Information
Nonmajor Governmental Funds:
Combining Balance Sheets 28
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances 29
Special Revenue Funds:
Combining Balance Sheets 30
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances 31
Capital Projects Funds:
Combining Balance Sheets 32
Combining Statement of Revenues, Expenditures, and
Changes in Fund Balances 33
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 34
SCHEDULE OF FINDING 36
PRIOR FINDING NOT REPEATED 39
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
AGENCY OFFICIALS
Executive Director (03/18/11 to present)
(01/01/11 to 03/17/11)
(05/13/08 to 12/31/10)
James Underwood
Gevan Behnke*
James Riemer
Deputy Director of Construction (07/22/11 to present)
(03/18/11 to 07/21/11)
(09/02/08 to 03/17/11)
Josh Weger
Vacant**
James Underwood
Deputy Director of Operations (06/16/11 to present)
(11/01/09 to 06/15/11)
Mike Wilson
Vacant
Administrator of the Office of Fiscal Management Gevan Behnke
Legal Counsel (11/01/11 to present)
(10/01/11 to 10/31/11)
(08/16/10 to 09/30/11)
(05/22/10 to 08/15/10)
Thomas Klein
Vacant
Chris Flynn
Vacant
* “Acting” official during the dates indicated.
** Starting March 17, 2011, the Construction Department has been under the supervision of
the Executive Director.
Agency Office is located at:
300 William G. Stratton Building
401 South Spring Street
Springfield, Illinois 62706
1
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
FINANCIAL STATEMENT REPORT
SUMMARY
The audit of the accompanying financial statements of the State of Illinois, Capital Development
Board (Board) was performed by E. C. Ortiz & Co., LLP.
Based on their audit, the auditors expressed an unqualified opinion on the Board’s basic financial
statements.
SUMMARY OF FINDING
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
Controls Over Approval of Contracts.
EXIT CONFERENCE
The Board opted not to have an exit conference during the financial audit for the year ended June
30, 2011. The response to the recommendation was provided by Douglas Tinch, Chief Internal
Auditor in a correspondence dated February 10, 2012.
2
E.C. ORTIZ & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
Honorable William G. Holland
Auditor General
State of Illinois
and
Board Members
Capital Development Board
As Special Assistant Auditors for the Auditor General, we have audited the accompanying
financial statements of the governmental activities, the major fund, and the aggregate remaining
fund information of the State of Illinois, Capital Development Board, as of and for the year
ended June 30, 2011 , which collectively comprise the State of Illinois, Capital Development
Board's basic financial statements as listed in the table of contents. These financial statements
are the responsibility of the State of Illinois, Capital Development Board'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 ~y 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 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.
As discussed in Note 2, the financial statements of the State of Illinois, Capital Development
Board are intended to present the financial position and changes in financial position of only that
portion of the governmental activities, the maj or fund, and the aggregate remaining fund
information of the State that is attributable to the transactions of the State of Illinois, Capital
Development Board. 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 its financial position for the year then
ended in conformity with accounting principles generally accepted in the United States of
America.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the major fund, and the aggregate
remaining fund information of the State of Illinois, Capital Development Board, as of
June 30, 2011 , and the respective changes in financial position thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
333 SOUTH DES PLAINES STREET, SUITE 2-N CHICAGO, lL 60661 tel: 312.876.1900 fax: 312.876.1911
3
The State of Illinois, Capital Development Board adopted the reporting and disclosure
requirement of Governmental Accounting Standards Board Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definitions, during the year ended June 30, 2011. The
statement changed the classifications of governmental fund balances and clarified the definitions
of existing fund types. The adoption of this statement had no effect on any of the State of
Illinois, Capital Development Board's governmental funds' assets or liabilities nor was there any
effect to the total amount of any of the State of Illinois, Capital Development Board's
governmental fund balances as of and for year ended June 30, 2011.
In accordance with Government Auditing Standards, we have also issued a report dated
February 10, 2012 on our consideration of the State of Illinois, Capital Development Board's
internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, 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, Capital Development Board has not presented a management's discussion
and analysis and budgetary comparison information for the General Revenue Fund that
accounting principles generally accepted in the United States of America have determined is
necessary to supplement, although not required to be part of, the basic financial statements.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the State of Illinois, Capital Development Board's basic financial
statements. The combining nonmajor governmental fund, special revenue fund, and capital
projects fund financial statements listed in the table of contents as supplementary information are
presented for purposes of additional analysis and are not a required part of the basic financial
statements. The combining nonmajor governmental fund, special revenue fund, and capital
projects fund financial statements have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, are fairly stated in all material respects
in relation to the basic financial statements taken as a whole.
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, Board
management, and Board members and audit committee members of the State of Illinois, Capital
Development Board, and is not intended to be and should not be used by anyone other than these
specified parties.
e. c,. (J.J.~ ~
Chicago, Illinois U I
February 10,2012
4
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
STATEMENT OF NET ASSETS
JUNE 30, 2011
(Expressed in Thousands)
Governmental
Activities
ASSETS
Unexpended appropriations $ 2 7,611
Cash equity with State Treasurer 3,009
Cash and cash equivalents 4,731
Intergovernmental receivables 1,626
Due from other State funds, short-term 7,310
Due from other State funds, long-term 2,551
Other receivables 1,076
Capital assets not being depreciated 26,085
Capital assets being depreciated, net 106
TOTAL ASSETS 74,105
LIABILITIES
Accounts payable and accrued expenses 31,175
Intergovernmental payables 7,048
Due to other State funds 225
Deferred revenues 399
Compensated absences, short-term 116
Compensated absences, long-term 1,043
TOTAL LIABILITIES 40,006
NET ASSETS
Invested in capital assets, net of related debt 26,191
Unrestricted 7,908
TOTAL NET ASSETS $ 3 4,099
The accompanying notes to financial statements are an integral part of this statement.
5
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
Net (Expense)
Charges Capital Revenue and
for Grants and Change in
Expenses Services Contributions Net Assets
FUNCTIONS/PROGRAMS
GOVERNMENTAL ACTIVITIES
Education $ 248,306 $ 20,628 $ 26,918 $ (200,760)
General government 15,657 - - (15,657)
Total governmental activities $ 263,963 $ 20,628 $ 26,918 $ (216,417)
GENERAL REVENUES
Appropriations from State resources 4,755,403
Reappropriation to future year(s) (4,145,516)
Lapsed appropriations (308,757)
Net change in liabilities for reappropriated accounts (23,078)
Program Revenues
TRANSFERS
Capital transfers to other State agencies (57,974)
Operating transfers to other State agencies (5,402)
Total general revenues and transfers 214,676
CHANGE IN NET ASSETS (1,741)
NET ASSETS, JULY 1, 2010 35,840
NET ASSETS, JUNE 30, 2011 $ 34,099
The accompanying notes to financial statements are an integral part of this statement.
6
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2011
(Expressed in Thousands)
General Total
Revenue Nonmajor Governmental
Fund Funds Funds
ASSETS
Unexpended appropriations $ - $ 27,611 $ 27,611
Cash equity with State Treasurer - 3,009 3,009
Cash and cash equivalents - 4,731 4,731
Intergovernmental receivables - 1,626 1,626
Due from other State funds - 9,861 9,861
Other receivables - 1,076 1,076
TOTAL ASSETS - 47,914 47,914
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued expenses - 31,175 31,175
Intergovernmental payables - 7,048 7,048
Due to other State funds - 225 225
Unavailable revenues - 638 638
Deferred revenues - 399 399
Total liabilities - 39,485 39,485
FUND BALANCES
Committed - 8,429 8,429
TOTAL LIABILITIES AND FUND BALANCES $ - $ 47,914 $ 47,914
The accompanying notes to financial statements are an integral part of this statement.
7
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
GOVERNMENTAL FUNDS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2011
(Expressed in Thousands)
Total fund balances - governmental funds $ 8,429
Amounts reported for governmental activities in the
Statement of Net Assets are different because:
Capital assets used in governmental activities are not financial
resources and therefore, are not reported in the governmental funds. 26,191
Revenues in the Statement of Activities that do not provide
current financial resources are deferred in the governmental funds. 638
Some liabilities reported in the Statement of Net Assets do not
require the use of current financial resources and therefore,
are not reported as liabilities in governmental funds. These
activities consist of compensated absences. (1,159)
Net assets of governmental activities $ 34,099
The accompanying notes to financial statements are an integral part of this statement.
8
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
General Total
Revenue Nonmajor Governmental
Fund Funds Funds
REVENUES
Federal capital grants $ - $ 26,918 $ 26,918
Licenses and fees - 4,582 4,582
Other charges for services - 15,663 15,663
Total revenues - 47,163 47,163
EXPENDITURES
Education - 248,306 248,306
General government - 15,656 15,656
Capital outlays - 56,347 56,347
Total expenditures - 320,309 320,309
DEFICIENCY OF REVENUES
OVER EXPENDITURES - (273,146) (273,146)
OTHER SOURCES (USES)
Appropriations from State resources - 4,755,403 4,755,403
Reappropriations to future year(s) - (4,145,516) (4,145,516)
Lapsed appropriations - (308,757) (308,757)
Net change in liabilities for reappropriated accounts - (23,078) (23,078)
Operating transfers out - (5,402) (5,402)
Total other sources - 272,650 272,650
DEFICIENCY OF REVENUES OVER EXPENDITURES
AND OTHER SOURCES - (496) (496)
FUND BALANCES, JULY 1, 2010 - 8,925 8,925
FUND BALANCES, JUNE 30, 2011 $ - $ 8,429 $ 8,429
The accompanying notes to financial statements are an integral part of this statement.
9
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
GOVERNMENTAL FUNDS
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
Net change in fund balances $ (496)
Amounts reported for governmental activities in the Statement of Activities
are different because:
Governmental funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is allocated over
their estimated useful lives and reported as depreciation expense.
Capital outlay $ 56,347
Depreciation expense (34) 56,313
Some capital assets were transferred out to other State agencies
and, therefore, were removed from fund balance without any
corresponding proceeds. (57,974)
Revenues in the Statement of Activities that do not provide current
financial resources are not reported as revenues in the governmental funds.
This amount represents the increase in unavailable revenue over the prior year. 383
Some expenses reported in the Statement of Activities do not require
the use of current financial resources, and therefore, are not reported
as expenditures in governmental funds. These activities consist of
compensated absences.
Decrease in compensated absences 33
Change in net assets of governmental activities $ (1,741)
The accompanying notes to financial statements are an integral part of this statement.
10
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 1 - ORGANIZATION
The Capital Development Board (CDB) 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 CDB operates under a budget approved by the General Assembly in which
resources primarily from the Capital Development Fund and the School Construction Fund are
appropriated for the use of the CDB. Activities of the CDB are 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 Treasurer’s
Office, and the State Comptroller’s Office) as defined by the Illinois General Assembly. All
funds appropriated to the CDB and all other cash received are under the custody and control of
the State Treasurer with the exception of locally held retainage accounts as authorized by State
law.
The CDB’s principal statutory functions and responsibilities are:
To build or otherwise provide capital facilities and improvements for which money has been
appropriated by the General Assembly.
To conduct continuous studies into the costs of building or otherwise providing capital
facilities.
To conduct research for improvements in choice of materials and systems and in construction
methods for reducing construction costs and operating and maintenance costs of capital
expenditure plans.
To review and recommend periodic revisions in establishing building and construction codes,
to promote public safety, energy efficiency and economy, including the use of solar energy,
and reduce construction costs and operating and maintenance costs of capital facilities.
To advise State agencies and units of local government, on request, on any matter related to
the purpose of CDB and to assist State agencies in the preparation of their annual long-range
capital expenditure plans.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the CDB have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP), as prescribed by the
11
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
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 CDB has no component units and is not a component
unit of any other entity. However, because the CDB is not legally separate from the State of
Illinois, the financial statements of the CDB are included in the financial statements of the
State of Illinois. The State of Illinois’ Comprehensive Annual Financial Report (CAFR) may
be obtained by writing to the State Comptroller’s Office, Financial Reporting Department,
325 West Adams Street, Springfield, Illinois 62704-1871.
B. Basis of Presentation
The financial statements of the State of Illinois, Capital Development Board, are intended to
present the financial position and the changes in financial position of only that portion of the
governmental activities, each major fund of the State of Illinois, and the aggregate remaining
fund information of the State of Illinois that is attributable to the transactions of the CDB.
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.
The financial activities of the CDB, which consist only of governmental activities, are
reported under the general government and education functions in the CAFR. A brief
description of the CDB’s government-wide and fund financial statements is as follows:
12
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
Government-Wide Statements
The government-wide Statement of Net Assets and Statement of Activities report the overall
financial activity of the CDB. Eliminations have been made to minimize the double-counting
of internal activities of the CDB.
The Statement of Net Assets presents the assets and liabilities of the CDB’s governmental
activities with the difference being reported as net assets. The assets and liabilities are
presented in order of their relative liquidity by class of asset or liability with liabilities whose
average maturities are greater than one year reported in two components - the amount due
within one year and the amount due in more than one year.
The Statement of Activities presents a comparison between direct expenses and program
revenues for the general government and education functions of the CDB’s governmental
activities. Direct expenses are those that are clearly identifiable with a specific function.
Program revenues include (a) charges paid by the recipients of goods or services offered by
the programs and (b) grants and contributions that are restricted to meeting the operational or
capital requirements of a particular program. Revenues that are not classified as program
revenues, including all taxes, are presented as general revenues.
Fund Financial Statements
The fund financial statements provide information about the CDB’s funds. The emphasis of
fund financial statements is on major governmental fund, each displayed in a separate
column. All remaining governmental funds are aggregated and reported as nonmajor funds.
The CDB administers the following major governmental fund (or portion thereof in the case
of shared funds - see Note 2 (D)) of the State:
General Fund - This is the State’s primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in another
fund. The services which are administered by the CDB and accounted for in the general
fund include, among others, general government and education.
The General Fund, as presented in these CDB’s financial statements, is the portion of the
State of Illinois General Revenue Fund financial resources obtained and used by the CDB
and is included only to present the financial position and operations of the CDB in its
entirety.
13
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
Nonmajor funds consist of Special Revenue and Capital Projects.
Special Revenue Funds - Transactions to account for the proceeds of specific revenue
sources that are legally restricted to expenditures for specified purposes pursuant to
the Capital Development Board Revolving Fund Act, the Asbestos Abatement Act,
the School Infrastructure Fund Act, and the Tobacco Settlement Recovery Fund are
accounted for in the special revenue fund. All the special revenue funds in the report
are held in the State Treasury and, except, Fund 170 CDB Special Projects which is
nonappropriated, all are appropriated. The special revenue fund type includes the
following funds:
CDB Special Projects Fund (170) is a non-shared fund that accounts for the
receipts of grant funds from other State agencies and is governed by the Capital
Development Board Act.
CDB Revolving Fund (215) is a non-shared fund that accounts for a three (3)
percent contract administration fee assessed on most CDB contracts in order to
fund the internal operations of the CDB.
Asbestos Abatement Fund (224) is a shared fund that accounts for recoveries from
lawsuits filed by the Attorney General for the State and CDB to use for statewide
asbestos survey programs.
School Infrastructure Fund (568) is a shared fund that is funded through the
General Revenue Fund for the purpose of paying and discharging annually the
principal and interest on bonded indebtedness for the construction of school
improvements under the School Construction Law. Annual surplus in the fund is
to be used for scheduled payments to the School Technology Revolving Fund,
costs incurred by the State Board of Education and CDB to administer the
programs under the School Construction Law, and to pay for grants due under the
School Construction Law.
Tobacco Settlement Recovery Fund (733) is a shared fund that is governed by an
amendment to the State Finance Act and is appropriated to CDB for capital or
other projects relating to health care issues.
Capital Projects Funds - Transactions related to resources obtained and used for the
acquisition or construction of major capital facilities, including those provided to
political subdivisions and other public organizations, are accounted for in capital
projects funds. Such resources are derived principally from proceeds of general
obligation bond issues, federal grants, public school district contributions, and
14
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
operating transfers from general funds of the State. All the capital projects funds in
the report are held in the State Treasury with the exception of retention trust balances
which are held in local bank accounts as retainage due to contractors. Capital
expenditures from the capital projects funds, except Fund 617 CDB Contributory
Trust Fund which is nonappropriated, are appropriated for projects extending beyond
the current budget year. The capital projects fund type includes the following funds:
Capital Development Fund (141) is a shared fund that receives general obligation
bond proceeds in order to build capital facilities for the State and is governed by
the General Obligation Bond Act.
School Construction Fund (143) is a shared fund that receives general obligation
bond proceeds in order to build elementary and secondary schools in the State and
is governed by the General Obligation Bond Act.
CDB Contributory Trust Fund (617) is a non-shared fund that receives
reimbursements from other State agencies for projects financed under various
federal programs, public school district contributions, insurance proceeds, and
settlements in order to build capital facilities in the State and is governed by the
State Finance Act.
Build Illinois Bond Fund (971) is a shared fund that receives Build Illinois Bond
proceeds in order to build capital facilities for State universities and local units of
government in the State and is governed by the Build Illinois Bond Act.
C. Measurement Focus and Basis of Accounting
The government-wide 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. Nonexchange transactions in which the CDB gives (receives) value
without receiving (or giving) equal value in exchange include intergovernmental grants.
Revenue from grants, entitlements, and similar items are recognized in the fiscal year in
which all eligibility requirements imposed by the provider have been met.
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
15
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
when the liability is incurred, as under accrual accounting. However, (1) principal and
interest on formal debt issues, such as bonds and capital leases, are recorded only when
payment is due and (2) compensated absences and claims and judgments are recorded when
they are expected to be liquidated with expendable available financial resources. Capital
asset acquisitions are reported as expenditures in governmental funds. Proceeds of general
long-term debt and acquisitions under capital leases are reported as other financing sources.
Significant revenue sources which are susceptible to accrual include fees, charges for
services, and intergovernmental grants. All other revenue sources are considered to be
measurable and available when cash is received.
Private-sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in the government-wide financial statements to the extent that
those standards do not conflict with or contradict guidance of the GASB.
D. Shared Fund Presentation
The financial statement presentation for the General Revenue Fund, Capital Development
Fund, School Construction Fund, Asbestos Abatement Fund, School Infrastructure Fund,
Tobacco Settlement Recovery Fund, and Build Illinois Bond Fund represents only the
portion of certain shared funds that can be directly attributed to the operations of the CDB.
Financial statements for total fund operations of the shared State funds are presented in the
CAFR.
In presenting these financial statements, certain unique accounts are used for the presentation
of shared funds. The following accounts are used in these financial statements to present the
CDB’s portion of shared funds:
Unexpended Appropriations
This “asset” account represents lapse period warrants issued between July and August
annually in accordance with the Statewide Accounting Management System (SAMS) records
plus any liabilities relating to obligations reappropriated to the subsequent fiscal year.
Appropriations from State Resources
This “other financing source” account represents the final legally adopted appropriation
according to SAMS records. The amounts reported are net of any reappropriations to
subsequent years and the difference between current and prior year liabilities for
reappropriated accounts.
16
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
Reappropriation to Future Year(s)
This contra revenue account reduces current year appropriations by the amount of the
reappropriation to reflect the State’s realignment of the budgetary needs to the subsequent
year and avoid double counting of a portion of the appropriation in more than one fiscal year.
Lapsed Appropriations
Lapsed appropriations are the legally adopted appropriations less net warrants issued for the
14 month period from July to August of the following year and reappropriations to
subsequent years according to SAMS records.
Receipts Collected and Transmitted to State Treasury
This “other financing use” account represents all cash receipts received during the fiscal year
from SAMS records.
Net Change in Liabilities for Reappropriated Accounts
This account reflects the amount which should be added to or subtracted from the current
year appropriation for shared funds to reflect the increase or decrease from prior year to
current year for amounts included in obligations for reappropriated accounts which are
liabilities at June 30 of the prior year and June 30 of the current year.
E. Eliminations
Eliminations have been made in the government-wide Statement of Net Assets to minimize
the “grossing-up” effect on assets and liabilities within the governmental activities column of
the CDB. As a result, amounts reported in the governmental funds balance sheet as
interdepartmental interfund receivables and payables have been eliminated in the
government-wide Statement of Net Assets.
F. Cash Equity With State Treasurer
Cash equity with State Treasurer consists of deposits held in the State Treasury.
G. Cash and Cash Equivalents
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 principally of cash held in local bank accounts as retainage due to contractors.
17
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
H. Interfund Transactions and Transactions with State of Illinois Component Units
The CDB has the following types of interfund transactions between CDB funds and 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 revenues in seller funds and expenditures or expenses in purchaser funds. Unpaid
amounts are reported as interfund receivables and payables in the governmental funds
Balance Sheet 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.
The CDB also has activity with various component units of the State of Illinois for capital
programs appropriated by the General Assembly.
I. Capital Assets
Capital assets, which include construction in progress and equipment, are reported at cost.
Contributed assets are reported at estimated fair value at the time received. Capital assets are
depreciated using the straight-line method. Construction in progress is capitalized as project
costs are incurred and is transferred to the administering State agency upon substantial
completion.
Capitalization thresholds and the estimated useful lives are as follows:
Capital Asset Category
Capitalization
Threshold
Estimated Useful
Life (In Years)
Construction in progress $ 25,000 N/A
Equipment 5,000 3-25
18
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
J. Compensated Absences
The liability for compensated absences reported in the government-wide Statement of Net
Assets consists of unpaid, accumulated vacation and sick leave balances for CDB employees.
A liability for these amounts is reported in governmental funds only if they have matured, for
example, as a result of employee resignations and retirements. The liability has been
calculated using the vesting method, in which leave amounts for both employees who
currently are eligible to receive termination payments and other employees who are expected
to become eligible in the future to receive such payments upon termination are included. The
liability has been calculated based on the employees’ current salary level and includes salary
related costs (e.g., Social Security and Medicare taxes).
Legislation that become effective January 1, 1998 capped the paid sick leave for all State
Employees’ Retirement System members at December 31, 1997. Employees continue to
accrue twelve sick days per year, but will not receive monetary compensation for any
additional time earned after December 31, 1997. Sick days earned between 1984 and
December 31, 1997 (with a 50 percent cash value) would only be used after all days with no
cash value are depleted. Any sick days earned and unused after December 31, 1997 will be
converted to service time for purposes of calculating employee pension benefits.
K. Governmental Fund Balances
In the fund financial statements, governmental funds report fund balances in the following
categories:
Nonspendable - This consists of amounts that cannot be spent because they are either a) not
in spendable form or b) legally or contractually required to be maintained intact. There were
no nonspendable fund balances as of June 30, 2011.
Restricted - This consists of amounts that are restricted to specific purposes, that is, when
constraints placed on the use of resources are either a) externally imposed by creditors,
grantors, contributors, or laws or regulations of other governments or b) imposed by law
through constitutional provisions or enabling legislation. There were no restricted fund
balances as of June 30, 2011.
Committed - This consists of amounts with self-imposed constraints or limitations that have
been place at the highest level of decision making. The following funds comprise committed
fund balances as of June 30, 2011: CDB Special Projects Fund (170), CDB Revolving Fund
(215), Asbestos Abatement Fund (224), School Infrastructure Fund (558), Tobacco
Settlement Recovery Fund (773), Capital Development Fund (141), School Construction
Fund (143), CDB Contributory Trust Fund (617) and Build Illinois Bond Fund (971). These
funds are restricted through enabling legislations but have been subject to fund sweeps in
19
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
previous years and therefore are classified as committed. These committed funds cannot be
used for any other purpose unless the Board removes or changes the specified use by taking
the same type of action it employed to previously commit those amounts. In contrast to fund
balance that is restricted by enabling legislation, committed fund balance classification may
be redeployed for other purposes with appropriate due process. Committed fund balance also
incorporates contractual obligations to the extent that existing resources in the fund have
been specifically committed for used in satisfying those contractual requirements.
Assigned - This consists of net amounts that are constrained by the CDB’s intent to be used
for specific purposes, but that are neither restricted nor committed. There were no assigned
fund balances as of June 30, 2011.
Unassigned - This consists of amounts that are available financial resources and are not
designated for a specific purpose. There were no unassigned fund balances as of June 30,
2011.
L. Net Assets
In the governmental-wide financial statements, equity is displayed in the components as
follows:
Invested in Capital Assets, Net of Related Debt - 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
those assets. The CDB has no capital related debt as of June 30, 2011.
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 CDB’s policy to use restricted
funds first, then unrestricted resources when they are needed. There were no restricted net
assets as of June 30, 2011.
Unrestricted - This consists of net assets that do not meet the definition of “restricted” or
“invested in capital assets, net of related debt.”
M. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to
make 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
20
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
N. New Accounting Pronouncements
Effective for the fiscal year ending June 30, 2011, the CDB implemented GASB Statement
No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, GASB Statement
No. 59, Financial Instrument Omnibus, and GASB Statement No. 62, Codification of
Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB
and AICPA Pronouncements. The implementation of GASB Statement No. 54 changed fund
balance reporting for governmental funds by adding some additional fund balance
classifications, clarifying governmental fund type definitions, and providing additional
disclosures on how fund balance constraints are imposed and may be modified and
eliminated. GASB Statements Nos. 59 and 62 had no significant impact on the CDB’s
financial statements as a result of adopting these statements.
NOTE 3 - DEPOSITS AND INVESTMENTS
The State Treasurer is the custodian of the State’s deposit and investments for funds maintained
in the State Treasury. Section 2 of the Public Funds Investment Act limits the State’s
investments, both inside and outside the State Treasury, to securities of the U.S. government or
its agencies, short-term obligations of domestic corporations exceeding $500 million in assets
that are rated in the three highest categories by at least two nationally recognized statistical
ratings organizations not to exceed ten percent of the domestic corporations outstanding
obligations, money market mutual funds invested in the U.S. government and/or its agencies, and
repurchase agreements securities of the U.S. government or money market mutual funds invested
in the U.S. government or its agencies. The CDB independently manages cash and cash
equivalents maintained outside the State Treasury that are held in trust agreements for the
retention of a percentage of construction contract prices.
Cash on deposit for locally held funds has a carrying amount and bank balance of $4.731 million
at June 30, 2011. Custodial credit risk is the risk that, in the event of a bank failure, the
government’s deposits may not be returned to it. Prior to July 1, 2007, CDB did not have a
deposit policy for custodial credit risk. Retention accounts opened subsequent to June 30, 2007
are required to be insured or fully collateralized. Of the total bank balance, $381 thousand was
exposed to custodial credit risk as uninsured with collateral held by the pledging financial
institutions in the State’s name, and $2.967 million was exposed to custodial credit risk as
uninsured with collateral held by the pledging financial institution’s trust department not in the
State’s name.
21
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
Deposits in the custody of the State Treasurer, or in transit, totaled $3.009 million at
June 30, 2011. These deposits are pooled and invested with other State funds in accordance with
the Deposit of State Moneys Act of the Illinois Compiled Statutes (15 ILCS 520/11). Funds held
by the State Treasurer have not been categorized as to credit risk because the CDB does not own
individual securities. Details on the nature of these deposits and investments are available within
the CAFR.
NOTE 4 - INTERFUND BALANCES AND ACTIVITIES
A. Due From Other State Funds
The following balance (amount expressed in thousands) at June 30, 2011 represents amounts
due from other CDB and State of Illinois funds:
Fund
Due From Other
State Funds Description/Purpose
Nonmajor governmental funds $ 9,861 Due from nonmajor governmental funds for
capital project grants and contracts and for
short-term and long-term borrowings.
B. Due to Other State Funds
The following balance (amount expressed in thousands) at June 30, 2011 represents amounts
due to other CDB and State of Illinois funds:
Fund
Due To Other
State Funds Description/Purpose
Nonmajor governmental funds $ 225 Due to internal service funds of the State for
purchases of services and goods,
reimbursements of capital grant to outside
entities and for costs incurred, and
overpayment of construction costs.
C. Transfers To/From Other Funds
Interfund transfers out (amount expressed in thousands) for the year ended June 30, 2011
were as follows:
Fund
Transfer Out to
Other Funds Description/Purpose
Nonmajor governmental funds $ 5,402 Transfers for awarding grants and debt
service payments
22
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 5 - LOANS RECEIVABLE
Loans receivable in the General Fund are comprised of $14,968 (amount expressed in thousands)
receivable from the Illinois International Port District (Port District).
The loan agreement between the Port District and CDB requires payments to CDB based on
percentages of Port District income or gross receipts, as defined in the agreements. As to the
status of collections, the Port District’s gross receipts, as defined by the loan agreement, have
been insufficient to cause any payments to be made to CDB. While the loan agreement is not
technically in default, the ultimate collectibility of the receivable is dependent upon the
achievement of sufficient gross receipts levels, as defined; accordingly, CDB has reserved the
entire remaining amount of the Port District receivable as uncollectible as of June 30, 2011.
Should the Port District ultimately default on this obligation, no future or present cash outlay by
CDB or the State would be required as the receivables represent previous outlays.
NOTE 6 - CAPITAL ASSETS
Capital asset activities (amounts expressed in thousands) for the year ended June 30, 2011 were
as follows:
Balance
July 1, 2010 Additions Deletions
Net
Transfers
Balance
June 30, 2011
Governmental activities:
Capital assets not being depreciated:
Construction in progress
$ 27,712 $ 56,347 $ ($57,974) $ 26,085
Capital assets being depreciated:
Equipment 900 900
Less accumulated depreciation 760 34 794
Capital assets being depreciated, net 140 (34) 106
Governmental activity
capital assets, net $ 27,852 $ 56,313 $ ($57,974) $ 26,191
Depreciation expense charged to governmental activities - general government totaled $34
(amount expressed in thousands) for the year.
23
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 7 - LONG-TERM OBLIGATIONS
Changes in long-term obligations (amounts expressed in thousands) for the year ended June 30,
2011 were as follows:
Balance
July 1, 2010 Additions Deletions
Balance
June 30, 2011
Amount
Due Within
One Year
Governmental activities:
Compensated absences $ 1,192 $ 744 $ 777 $ 1,159 $ 116
Compensated absences have been liquidated by the applicable governmental funds that account
for the salaries and wages of the related employees.
NOTE 8 - PENSION PLAN
Substantially all of the CDB’s full-time employees who are not eligible for participation in
another State-sponsored retirement plan participate in the 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’ 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.
The CDB pays employer retirement contributions based upon an actuarially determined
percentage of their payrolls. For fiscal year 2011, the employer contribution rate was 27.988%.
Effective for pay periods beginning after December 31, 1991, the State opted to pay the
employee portion retirement for most State agencies (including the CDB) with employees
covered by the State Employees’ and Teachers’ Retirement Systems. However, effective with
the fiscal year 2004 budget, the State opted to stop paying the portion or a part of the portion of
retirement for many State agencies (including the CDB) for certain classes of employees covered
by the State Employees’ and Teachers’ Retirement Systems. The pickup, when applicable, is
24
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
subject to sufficient annual appropriations and those employees covered may vary across
employee groups and State agencies.
NOTE 9 - POST-EMPLOYMENT BENEFITS
The State provides health, dental, and life insurance benefits for certain 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 all 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 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 1, 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 $5,000.
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 expenditure by the State in the Illinois’ CAFR. 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 Ave., Springfield, Illinois, 62763-3838.
NOTE 10 - RISK MANAGEMENT
The CDB is exposed to various risks of loss related to torts; thefts 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).
25
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
The CDB’s risk management activities for 2011 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 CDB and, accordingly, have not
been reported in the CDB’s financial statements for the year ended June 30, 2011. There have
been no settlements that exceeded insurance coverage during the last three fiscal years.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
A. Operating Leases
The CDB leases equipment and office space under the terms of noncancelable operating
lease agreements not extending past the end of the fiscal year, that require the CDB to make
minimum lease payments plus pay a pro rata share of certain operation costs. Rent expense
under operating leases was $153 (amount expressed in thousands) for the year ended
June 30, 2011.
B. Construction Commitments
The CDB has outstanding construction projects for State and other facilities in which it has
entered into future commitments. The amount of CDB’s commitment which includes
amounts related to projects for State’s component units was $444.76 million at June 30,
2011.
Components of Construction in Progress
As of June 30, 2011
(Expressed in Thousands)
Project
Project
Authorization
Expended
Through June 30
Committed
at June 30
Available
Authorization
Chicago Veterans’ Home -
Cook County
$ 65,500 $ 947 $ 3,537 $ 61,016
Menard Correctional Center -
Administration Building
11,917 1,876 10,041
Metro East Forensic Laboratory
- Belleville
41,693 1,916 1,380 38,397
Lincoln’s Challenge Academy -
Military Affairs Rantoul
38,140 737 37,403
Capital Complex Master Plan/
Stratton Building –
Springfield
261,057 4,420 703 255,934
Others (less than $10,000) 366,590 16,926 45,024 304,640
Total $ 784,897 $ 26,085 $ 51,381 $ 707,431
26
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2011
C. Litigation
The CDB 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 additional matters is
not expected to have a material effect on the financial position or results of operations of the
CDB.
27
SUPPLEMENTARY INFORMATION
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NONMAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2011
(Expressed in Thousands)
Total
Special Capital (Memorandum
Revenue Projects Only)
ASSETS
Unexpended appropriations $ - $ 27,611 $ 27,611
Cash equity with State Treasurer 1 ,885 1,124 3,009
Cash and cash equivalents - 4,731 4,731
Intergovernmental receivables - 1,626 1,626
Due from other State funds 4 ,977 4,884 9,861
Other receivables 1 ,076 - 1,076
TOTAL ASSETS 7 ,938 39,976 47,914
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued expenses 5 5 31,120 31,175
Intergovernmental payables - 7,048 7,048
Due to other State funds 3 2 193 225
Unavailable revenues 6 38 - 638
Deferred revenues - 399 399
Total liabilities 7 25 38,760 39,485
FUND BALANCES
Committed 7 ,213 1,216 8,429
TOTAL LIABILITIES AND FUND BALANCES $ 7 ,938 $ 39,976 $ 47,914
28
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
NONMAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
Total
Special Capital (Memorandum
Revenue Projects Only)
REVENUES
Federal capital grants $ - $ 26,918 $ 26,918
Licenses and fees 4,582 - 4,582
Other charges for services - 15,663 15,663
Total revenues 4,582 42,581 47,163
EXPENDITURES
Education 188 248,118 248,306
General government 6,603 9,053 15,656
Capital outlays 17 56,330 56,347
Total expenditures 6,808 313,501 320,309
DEFICIENCY OF REVENUES (2,226) (270,920) (273,146)
OVER EXPENDITURES
OTHER SOURCES (USES)
Appropriations from State resources 859 4,754,544 4,755,403
Reappropriations to future year(s) (134) (4,145,382) (4,145,516)
Lapsed appropriations (8) (308,749) (308,757)
Net change in liabilities for reappropriated accounts - (23,078) (23,078)
Operating transfers out - (5,402) (5,402)
Total other sources 717 271,933 272,650
EXCESS (DEFICIENCY) OF REVENUES OVER
EXPENDITURES AND OTHER SOURCES (1,509) 1,013 (496)
FUND BALANCES, JULY 1, 2010 8,722 203 8,925
FUND BALANCES, JUNE 30, 2011 $ 7,213 $ 1,216 $ 8,429
29
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
SPECIAL REVENUE FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2011
(Expressed in Thousands)
CDB Asbestos School Total
Revolving Abatement Infrastructure (Memorandum
215 224 568 Only)
ASSETS
Cash equity with State Treasurer $ 1,885 $ - $ - $ 1,885
Due from other State funds 4,977 - - 4,977
Other receivables 1,076 - - 1,076
TOTAL ASSETS 7,938 - - 7,938
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued expenses 55 - - 55
Due to other State funds 32 - - 32
Unavailable revenues 638 - - 638
Total liabilities 725 - - 725
FUND BALANCES
Committed 7,213 - - 7,213
TOTAL LIABILITIES AND FUND BALANCES $ 7,938 $ - $ - $ 7,938
30
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
SPECIAL REVENUE FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
CDB Asbestos School Total
Revolving Abatement Infrastructure (Memorandum
215 224 568 Only)
REVENUES
Licenses and fees $ 4 ,582 $ - $ - $ 4,582
EXPENDITURES
Education - 1 88 - 188
General government 6,091 2 0 492 6,603
Capital outlays - 1 7 - 17
Total expenditures 6,091 2 25 492 6,808
DEFICIENCY OF REVENUES
OVER EXPENDITURES (1,509) (225) (492) (2,226)
OTHER SOURCES (USES)
Appropriations from State resources - 3 59 500 859
Reappropriations to future year(s) - (134) - (134)
Lapsed appropriations - - (8) (8)
Total other sources - 2 25 492 717
DEFICIENCY OF REVENUES OVER
EXPENDITURES AND OTHER SOURCES (USES) (1,509) - - (1,509)
FUND BALANCES, JULY 1, 2010 8,722 - - 8,722
FUND BALANCES, JUNE 30, 2011 $ 7 ,213 $ - $ - $ 7,213
31
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
CAPITAL PROJECTS FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2011
(Expressed in Thousands)
CDB
Capital School Contributory Build Total
Development Construction Trust Illinois Bond (Memorandum
141 143 617 971 Only)
ASSETS
Unexpended appropriations $ 2 0,209 $ 7 ,048 $ - $ 3 54 $ 2 7,611
Cash equity with State Treasurer - - 1,124 - 1,124
Cash and cash equivalents 4 ,731 - - - 4,731
Intergovernmental receivables - - 1,626 - 1,626
Due from other State funds - - 4,141 7 43 4,884
TOTAL ASSETS 24,940 7 ,048 6,891 1 ,097 39,976
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and accrued expenses 2 4,898 - 5,868 3 54 31,120
Intergovernmental payables - 7 ,048 - - 7,048
Due to other State funds 4 1 - 152 - 193
Deferred revenues - - 399 - 399
Total liabilities 2 4,939 7 ,048 6,419 3 54 38,760
FUND BALANCES
Committed 1 - 472 7 43 1,216
TOTAL LIABILITIES AND FUND BALANCES $ 2 4,940 $ 7 ,048 $ 6,891 $ 1 ,097 $ 3 9,976
32
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
CAPITAL PROJECTS FUNDS
COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2011
(Expressed in Thousands)
CDB
Capital School Contributory Build Total
Development Construction Trust Illinois Bond (Memorandum
141 143 617 971 Only)
REVENUES
Federal capital grants $ - $ - $ 26,918 $ - $ 26,918
Other charges for services - - 15,663 - 15,663
Total revenues - - 42,581 - 42,581
EXPENDITURES
Education 96,174 133,170 15,305 3,469 248,118
General government 8,502 - - 551 9,053
Capital outlays 32,664 - 23,603 63 56,330
Total expenditures 137,340 133,170 38,908 4,083 313,501
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (137,340) ( 133,170) 3,673 (4,083) (270,920)
OTHER SOURCES (USES)
Appropriations from State resources 2,758,341 1,513,760 - 482,443 4,754,544
Reappropriations to future year(s) (2,319,422) (1,384,717) - (441,243) (4,145,382)
Lapsed appropriations (308,748) (1) - - (308,749)
Net change in liabilities for reappropriated accounts 9,168 4,128 - (36,374) (23,078)
Operating transfers out (2,000) - ( 3,402) - (5,402)
Total other sources (uses) 137,339 133,170 (3,402) 4,826 271,933
EXCESS (DEFICIENCY) OF REVENUES OVER
EXPENDITURES AND OTHER SOURCES (USES) (1) - 271 743 1,013
FUND BALANCES, JULY 1, 2010 2 - 201 - 203
FUND BALANCES, JUNE 30, 2011 $ 1 $ - $ 472 $ 743 $ 1,216
33
E.C. ORTIZ & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
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
Honorable William G. Holland
Auditor General
State of Illinois
and
Board Members
Capital Development Board
As Special Assistant Auditors for the Auditor General, we have audited the financial statements
of the governmental activities, the major fund, and the aggregate remaining fund information of
the State of Illinois, Capital Development Board, as of and for the year ended June 30, 2011 ,
which collectively comprise the State of Illinois, Capital Development Board's basic financial
statements, and have issued our report thereon dated February 10,2012. 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, Capital Development 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, Capital Development Board'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, Capital Development Board's internal control over financial
reporting. Accordingly, we do not express an opinion on the effectiveness of the State of
Illinois, Capital Development 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 misstatements 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 misstatement of the entity's financial statements will not be prevented, or detected and
corrected on a timely basis.
333 SOUTH DES PLAINES STREET, SUITE 2-N CHICAGO, IL 60661 tel: 312.876.1900 fax: 312.876.1911
34
Our consideration of internal control over financial reporting was for the 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
material weaknesses. We did not identify any deficiencies in the internal control over financial
reporting that we consider to be material weaknesses, as described above. However, we
identified a certain deficiency in internal control over financial reporting, described in Finding
II-Olin 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 that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the State of Illinois, Capital Development
Board's financial statements are free of material misstatement, 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 matter that is required to be reported under Government
A uditing Standards.
We noted certain matters that we reported to management of the State of Illinois, Capital
Development Board in a separate letter dated February 10, 2012.
The State of Illinois, Capital Development Board's response to the finding identified in our audit
is described in the accompanying schedule of finding. We did not audit the State of Illinois,
Capital Development Board's response and, accordingly, we express no opinion on it.
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, Board management,
and Board members and audit committee members of the State of Illinois, Capital Development
Board, and is not intended to be and should not be used by anyone other than these specified parties.
J. ~/. (;I<d.x .£
Chicago, Illinois () 7
February 10, 2012
35
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
SCHEDULE OF FINDING
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS
Finding No. 11-1 - Inadequate Controls Over Approval of Contracts
The Capital Development Board (CDB) had not established adequate controls over approval of
contracts prior to the performance of services and resolution of outstanding procurement issues.
Due to the lack of controls governing the interactions between CDB and the Chief Procurement
Officer (CPO), we noted:
Thirteen of 161 (8%) contract vouchers, totaling $685,992, represented improper payments
for services performed prior to a properly executed contract.
Approval by the CPO for one of ten emergency purchases tested, totaling $28,311, was not
evident on the payment voucher.
Request for payments on 11 vouchers, totaling $163,674, were put on hold by CDB’s fiscal
department due to contract modifications, change orders, and authority to proceed for the
construction work lacked the CPO’s approval. Construction work for these vouchers had
been completed as of June 30, 2011.
Additionally, CDB performed an analysis and issued a report entitled “Project Process Assessment”
which was dated July 2011. This report identified 135 instances of departure from CDB’s
procurement practices. Noncompliance represented approximately 6% of the total contract actions
processed over the past two years. The report indicated:
Ongoing works with expired contracts $ 2,694,613
Completed works without approved Change Order
and required documentation 516,443
Completed works voided by CPO 115,998
Works rejected by CPO (45,946)
Total $ 3,281,108
The report indicated most of the work had been performed by Architect/Engineer (A/E) contractors
prior to the applicable documentation being executed and approved. According to CDB
management, the CPO voided completed work and rejected other work; however, did not provide
an explanation as to the reason.
36
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
SCHEDULE OF FINDING
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (CONTINUED)
Finding No. 11-1 - Inadequate Controls Over Approval of Contracts (Continued)
The Illinois Procurement Code (30 ILCS 500/20-80 (d)) states, “No voucher shall be submitted to
the Comptroller for a warrant to be drawn for the payment of money from the State Treasury or
from other funds held by the State Treasurer on account of any contract unless the contract is
reduced to writing before the services are performed and filed with the Comptroller. Vendors shall
not be paid for any goods that were received or services that were rendered before the contract was
reduced to writing and signed by all necessary parties. A chief procurement officer may request an
exception to this subsection by submitting a written statement to the Comptroller and Treasurer
setting forth the circumstances and reasons why the contract could not be reduced to writing before
the supplies were received or services performed.” Additionally, the Illinois Procurement Code (30
ILCS 500/30-35) states, “No funds in excess of the contract price may be obligated or expended
unless the additional work to be performed or materials to be furnished is germane to the original
contract. Even if germane to the original contract, no additional expenditures or obligations
may, in their total combined amounts, be in excess of the percentages of the original contract
amount set forth in subsection (b) unless they have received the prior written approval of the
construction agency. In the event that the total of the combined additional expenditures or
obligations exceeds the percentages of the original contract amount set forth in subsection (b),
the construction agency shall investigate all the additional expenditures or obligations in excess
of the original contract amount and shall in writing approve or disapprove subsequent
expenditures or obligations and state in detail the reasons for the approval or disapproval.”
In August and September 2010, the Chief Procurement Officer issued three “CDB CPO Notices”
stating the CPO was required to approve all contracts, contract extensions/modifications, and
emergency procurements.
According to CDB management, exceptions can be attributed to changes in the Procurement Code,
lack of regional managers, and untimely approval of change order and modification of contracts by
the CPO. Additionally, there were no clear implementing guidelines or procedures provided by the
CPO to be followed by CDB in order to ensure timeliness of contract approval. Also, certain CDB
project managers, faced with issues such as safety of workers at construction sites, time and weather
sensitive construction works, and delays or stop in construction work, had authorized certain
contractors to begin construction works without the approved contracts by the CPO. In addition,
some project managers did not use their online reporting and accountability tool to monitor the
expiration of contracts. These project managers were notified prior to the contract expiration,
however, they did not follow through.
37
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
SCHEDULE OF FINDING
FOR THE YEAR ENDED JUNE 30, 2011
CURRENT FINDING - GOVERNMENT AUDITING STANDARDS (CONTINUED)
Finding No. 11-1 - Inadequate Controls Over Approval of Contracts (Continued)
Failure to fully execute a contract prior to commencement of services leaves CDB vulnerable to
unnecessary liabilities and potential legal issues. In addition, failure to obtain approval of all
necessary parties prior to performance and completion of services results in noncompliance with the
Illinois Procurement Code. (Finding Code No. 11-1)
Recommendation:
We recommend CDB work with the CPO to develop procedures to ensure all contracts are executed
and approved prior to the start of the services. In addition, CDB should implement appropriate
procedures to ensure services are not provided after the contracts have expired.
Board Response:
The Board agrees with the Finding and offers the following response regarding current, ongoing
and future remediation.
CDB is working with the CPO’s office to develop procedures to ensure that contracts are
executed and approved before work begins.
CDB staff has been instructed that they are not to authorize work to begin until the
appropriate contractual documents are executed and approved.
Disciplinary action has been commenced against CDB employees who have authorized
work to commence before the appropriate contractual documents are executed and
approved.
CDB staff has also taken steps to instruct vendors that they are not to commence any
work without the appropriate contract documents.
CDB has created a notification system to ensure that contracts will not be allowed to
expire (90, 60, 30 day e-mail notification alert to all responsible CDB personnel) until all
the services have been provided.
38
STATE OF ILLINOIS
CAPITAL DEVELOPMENT BOARD
PRIOR FINDING NOT REPEATED
FOR THE YEAR ENDED JUNE 30, 2011
A. Reappropriated Projects’ Accounts Payable Understated
In the prior year, the Capital Development Board’s (CDB) process for the estimation of
reappropriated projects’ accounts payable underestimated the unexpended appropriation in
their financial statements.
In the current year, fewer grants were processed and CDB used a higher multiplier for its
multi-year estimation methodology. Also, beginning FY 2011, vendor invoices billed at or
after fiscal yearend for work completed both before and after June 30th were included as
reappropriated project’s accounts payable, proportionately allocated based on number of
service days rendered in FY 2011. In prior years, if the majority of service days were
performed before June 30th, the expenditure is included in reappropriated project’s accounts
payable. Thus, the resulting understatement of reappropriated projects’ accounts payable
recorded in the financial statements was considered insignificant. (Finding Code Nos. 10-1
and 09-1)
39
