REPORT DIGEST

OFFICE OF THE COMPTROLLER
NONFISCAL OFFICER RESPONSIBILITIES

FINANCIAL AND COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1996

Summary of Findings:

Release Date:
May 30, 1997

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• The Office of the Comptroller needs to continue to strengthen controls over the monitoring of cemeteries to detect possible problems in the cemeteries' maintenance of trust funds.

{Financial Information and Activity Measures are summarized on the next page.}

FY 1996

FY 1995

FY 1994

• Total Expenditures (All Funds)

$69,113,000

$44,624,000

$42,192,000

OPERATIONS TOTAL
% of Total Expenditures

$42,854,000
62%

$40,365,000
90%

$37,933,000
90%

Personal Services
% of Operations Expenditures
Average No. of Employees

30,601,000
71%
368

30,108,000
75%
393

28,550,000
75%
400

Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures

3,022,000
7%

3,046,000
8%

2,789,000
7%

Contractual Services
% of Operations Expenditures

6,075,000
14%

4,056,000
10%

3,629,000
10%

All Other Operations Items
% of Operations Expenditures

3,156,000
8%

3,155,000
7%

2,965,000
8%

GRANTS TOTAL
% of Total Expenditures

$4,259,000
6%

$4,259,000
10%

$4,259,000
10%

TRANSFER TO NEW FUND
% of Total Expenditures

22,000,000
32%

0
0%

0
0%

• Cost of Property and Equipment

$8,603,000

$9,726,000

$9,750,000

AGENCY DIRECTOR(S)

Currently: Honorable Loleta Didrickson

Weak controls over cemetery funds

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

NEED TO STRENGTHEN CONTROLS OVER CEMETERY CARE AND BURIAL TRUST FUNDS

Prior to 1995, inadequate controls were in place to monitor the disposition of Cemetery Care and Burial Trust Funds. At that time, the Comptroller's Office Cemetery Care and Burial Trust Department's focus was to ensure licensees filed reports as required by statute.

The Office of the Comptroller's Cemetery Care and Burial Trust Department is responsible for administering the Cemetery Care Act. This duty involves registering and licensing all cemeteries in Illinois that have care funds and monitoring their compliance with the Act through submission of annual financial reports. Care funds are trusts established pursuant to a contract for the maintenance of cemetery plots, graves, crypts or mausoleums belonging to the persons establishing the trusts. To obtain a license under the Act, applications must be accompanied by a fidelity bond equal to 10% of care funds. Details from annual reports submitted are used to determine licensees requiring a bond increase. Field auditors from the Comptroller's Office are required to notify cemeteries of the bond increase and audit compliance with the Act. Audits are performed annually on cemeteries with care funds greater than $250,000. According to the Comptroller's office, approximately 630 cemeteries are audited per year.

Prior to 1995, the Office's Cemetery Care and Burial Trust Department placed little emphasis on the quality or accuracy of information provided by licensees. In 1995, the Office developed and implemented new audit checklists and a notice of findings for Department employees to utilize in performing their review and notifying licensees of deficiencies. In addition, the Office has developed and received approval for legislation directly authorizing enforcement actions and civil recoveries; legislation creating a two tier audit structure, with the "second tier" audit to be performed at the licensees' expense where specified indicators of financial instability are found; and legislation requiring that an independent trustee be appointed for trust funds exceeding $500,000.

The Office states it is also proposing a fee to generate monies to be used to allow the Office to maintain cemeteries whose trust funds have been depleted and to seek recovery of misspent trust funds; developing a new administration database to identify risk factors to indicate potential problems before trusts funds are dissipated; and, pursuing civil recovery actions in Circuit Court to recover over $8 million in misspent trust funds for three cemetery licensees. (Finding 1, page 8)

We recommended the Office continue efforts to strengthen controls over the operations of the Cemetery Care and Burial Trust Department.

Comptroller's officials stated they agree and that they have taken significant steps to correct the weakness by:

• creating an enforcement protocol to deal with past delinquencies in an equitable manner,

• performing a file by file review and update of all licensees to validate their legal compliance,

• continuing to improve the reliability of stress indicators used to help determine financial instability of licensees, and

• increasing discipline in licensee revocation.

Comptroller officials stated they believe these measures, along with the steps taken previously, will help ensure that adequate controls are in place to monitor the disposition of Cemetery Care and Burial Trust funds.

OTHER FINDING

The remaining finding was less significant and has been given appropriate attention by management. We will review progress toward the implementation of our recommendation in our next audit. Office responses were provided by Mr. Michael Moody, Director of Internal Audits.

AUDITORS' OPINION

Our auditors stated the Office's financial statements are fairly presented.

____________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Pandolfi, Topolski, Weiss & Co., Ltd. were our special assistant auditors.