REPORT
DIGEST

DEPARTMENT OF CORRECTIONS
GENERAL OFFICE

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Single Audit Act and OMB Circular A-133)

For the Two Years Ended:
June 30, 1998

Summary of Findings:

Total this audit  20
Total last audit  18
Repeated from last audit  11

Release Date:
April 21, 1999


State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

  • The Department did not maintain adequate internal controls at community correctional centers to assure accounting records were properly maintained.
  • The Department did not have adequate procedures to ensure all maintenance fees were collected from residents of community correctional centers.
  • The Department purchased annuities to prepay workers' compensation claims from appropriations without specific statutory authority.
  • The Department improperly paid fiscal year 1997 costs of $661,000 from fiscal year 1998 appropriations.
  • The Department did not have an automated payroll timekeeping system for use at its various correctional centers.
  • The Department did not use standardized procedures and prenumbered forms to account for and control disciplinary tickets at its adult correctional centers.

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

DEPARTMENT OF CORRECTIONS - GENERAL OFFICE
FINANCIAL AND COMPLIANCE AUDIT
For The Two Years Ended June 30, 1998

EXPENDITURE STATISTICS

FY 1998

FY 1997

FY 1996

  • Total Expenditures(All Treasury Held Funds)

OPERATIONS TOTAL
% of Total Expenditures

Personal Services
% of Operations Expenditures
Average No. of Employees
Average Employee Salary

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

Contractual Services
% of Operations Expenditures

Claims and Settlements
% of Operations Expenditures

All Other Operations Items
% of Operations Expenditures

GRANTS AND TREATMENT
PROGRAMS
% of Total Expenditures

  • Cost of Property and Equipment

$198,912,203

$191,989,443
97%

$57,511,111
30%
1,442
$39,883

$36,117,335
19%

$37,959,377
20%

$10,019,980
5%

$50,381,640
26%


$6,922,760
3%

$84,480,810

$163,038,413

$155,296,003
95%

$48,597,130
31%
1,304
$37,268

$32,812,898
21%

$33,326,062
22%

$9,363,420
6%

$31,196,493
20%


$7,742,410
5%

$74,349,318

$145,416,902

$138,912,272
96%

$44,959,115
32%
1,265
$35,541

$29,965,178
22%

$29,494,587
9%

$12,148,692
9%

$22,344,700
16%


$6,504,630
4%

$28,504,434

SELECTED ACTIVITY MEASURES

FY 1998

FY 1997

FY 1996

  • ADULT CENTERS
    Average Population
    Rated Capacity
    Population in Excess of Capacity
    Average Annual Costs
  • JUVENILE CENTERS
    Average Population
    Rated Capacity
    Population in Excess of Capacity
    Average Annual Costs
  • COMMUNITY CENTERS
    Average Population
    Rated Capacity
    Population in Excess of Capacity
    Average Annual Costs


38,862
27,444
11,418
$17,483

2,115
1,366
749
$32,237

1,359
1,168
191
$17,649


37,129
26,906
10,223
$17,271

1,996
1,314
682
$29,432

1,287
1,168
119
$16,455


35,769
25,825
9,944
$16,710

1,700
1,210
490
$30,445

1,255
1,083
170
$15,624

AGENCY DIRECTOR
During Audit Period: Mr. Odie Washington
Currently: Mr. Donald Snyder

 












Internal control weaknesses at community correctional centers




























Maintenance fees were either not being charged or were calculated incorrectly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Use of current funds to pay future claims



































Catch-up billings were used to pay for prior year costs

































Need to develop an automated payroll timekeeping system






















Controls over disciplinary tickets need to be strengthened

INTRODUCTION

This report presents our financial and compliance audit of the Department of Corrections' General Office, and our audit of the entire Department under the Single Audit Act of 1996. The Department administers 32 correctional facilities - 25 adult centers, 7 youth centers and 11 community correctional centers. Our auditors at the 32 correctional facilities assisted the General Office auditors in the preparation of the Department-wide financial statements and federal single audit.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROL WEAKNESSES AT COMMUNITY CENTERS

In addition to 32 correctional centers, the Department operates a work release program for approximately 1,300 inmates who are housed in 11 community correctional centers.

During our audit fieldwork at the community centers, we noted many internal control weaknesses, and observed that several of the centers lacked procedures to maintain accounting records. Internal control weaknesses noted included:

  • Checks were signed by one person when two authorized signers are required.
  • Bank reconciliations were not prepared.
  • Cash receipts and disbursements ledgers were not maintained.
  • General maintenance fees for food and housing were not being charged.
  • Resident financial folders did not contain all required documents. (Findings 7 through 11, pages 24 - 33)

We recommended the Department improve internal controls over bank accounts, accounting records, and resident files at community correctional centers.

Department officials accepted our recommendation and stated they have established a central business office for the Community Services Division. The CSD business administrator will implement monitoring and follow-up procedures to ensure better performance and greater accountability by field accounting personnel.

INADEQUATE PROCEDURES TO COLLECT RESIDENT MAINTENANCE FEES

The Department did not have adequate procedures at the community correctional centers to ensure that all maintenance fees, which are generally 20% of the resident's net paycheck, were collected from the residents.

  • At 2 of the 11 centers tested, it was noted that in specific instances residents' maintenance fees were either not being charged to residents or were calculated incorrectly causing inmates to be overcharged or undercharged.
  • No maintenance agreements had been prepared at Metro C.C.C., which houses individuals on electronic detention (ED). Residents at all other community correctional centers are required to remit 20% of their outside earnings to cover a portion of their housing costs. Metro C.C.C. does receive maintenance payments from these individuals on ED, but there is nothing in writing to allow the Department to collect a certain amount or percentage. There was no supporting documentation to determine if the Department received a maintenance payment or if such a payment was properly computed.
  • We noted that 2 of the 11 centers tested (Fox Valley, West Side) do not require that the entire paycheck earned by a resident be deposited into the Resident Trust Fund. These centers allow the residents to cash their paychecks outside the center and only return a percentage (20%) at one center and 30% at the other) to the center to be used to pay maintenance fees. It requires significant monitoring by center personnel to track the frequency and amounts of paychecks to determine whether maintenance payments have been submitted for all paychecks earned.

The centers have policies to discipline residents if maintenance fees are not submitted at all or on a timely basis. However, the proper, timely monitoring of the collection of these fees, in order to be able to enforce these disciplinary actions, is not adequate. (Finding 98-10, page 30)

We recommended the Department implement procedures to ensure the accurate collection of maintenance fees from all residents who are required to pay maintenance, and the Department concurred.

QUESTIONS ARISE IN PAYMENT OF WORKERS' COMPENSATION CLAIMS

Without specific statutory authority to do so, the Department purchased annuities to pay future workers' compensation claims, circumventing State fiscal year appropriation constraints. The Department is responsible for the administration and payment of all workers' compensation claims relating to Department employees. The Department receives an annual appropriation to pay outstanding claims. These claims have historically been paid when currently due in accordance with the workers' compensation settlement. Many settlements contain provisions for fixed payments to be made over a future period of time, sometimes for the claimant's life.

Beginning in fiscal year 1996, the Department began purchasing annuities from current year appropriations through lump sum payments to insurance companies to fund some of these future year claims. These lump sum payments totaled $1,310,771, $2,024,891 and $290,456 in fiscal years 1996, 1997 and 1998, respectively. The Department obtained annuity quotes from insurance companies by individual claimant, then selected individual claimants and annuity payments to expend its remaining appropriations. These annuities appear to constitute "investments", most of which have nominal interest rates of between 4% and 5.5%.

Department officials indicated that these lump sum payments would reduce future obligations of the Department. We feel this process allowed the Department to utilize all of its current appropriations through the arbitrary prepayment of future liabilities. (Finding 98-4, pages 19 - 20)

We recommended the Department comply with fiscal year constraints and pay current year obligations from current year appropriations. If proper appropriation authorization to continue this practice is obtained, the Department should also review its lack of specific statutory authority to invest appropriated Treasury funds before continuing to purchase annuities.

Department officials stated their belief that the Department had the authority to pay the claims. The Department received a substantial appropriation increase in 1996 so a backlog could be addressed. In fiscal year 1996, annuities were purchased from highly rated insurance companies to fund surviving spouse benefits. In fiscal year 1997, five and ten year annuities were purchased to fund the total and permanent disability payments for adjudicated claims.

IMPROPER FISCAL YEAR EXPENDITURES

The Department improperly paid fiscal year 1997 costs totaling $661,590 from fiscal year 1998 appropriations.

We noted vouchers payable to the Department of Central Management Services (DCMS) for computer services and automotive costs totaling $661,590 chargeable to fiscal year 1997 were paid from fiscal year 1998 appropriations. The invoices for services were submitted to the Department during fiscal year 1997 allowing adequate time to process the payment against fiscal year 1997 funds. The invoices were also initially approved by Department personnel during fiscal year 1997, but due to insufficient remaining funds, were paid in fiscal year 1998.

As a result, the Department exceeded their fiscal year 1997 appropriation authority and improperly charged costs to the subsequent fiscal year.

The Department charged these expenditures to the subsequent fiscal year by classifying them as "catch-up" billings. Department officials stated the Agency was faced with urgent needs to pay for certain prison reform initiatives and felt that the then new "catch-up billing" provision of the State Finance Act was a viable and appropriate approach to meeting its obligations. They further stated the costs cited above were paid from fiscal year 1998 appropriations upon the receipt of a designated catch-up billing from DCMS.

The State Finance Act allows for "catch-up" billings, but we feel the Department is misinterpreting this statute. We interpret the statute as a means for DCMS to collect past due billings, not as a means to allow the Department to fund new initiatives and defer current year obligations to future fiscal years. The Department should fund new initiatives through supplemental appropriations from the General Assembly, not through "catch-up" billings. (Finding 98-5, page 21)

We recommended the Department monitor expenditures to ensure they stay within current year budgetary constraints. The Department agreed that monitoring expenditures is an important fiscal function, but the Department believed that it acted properly within the provisions of the State Finance Act.

OUTDATED MANUAL PAYROLL SYSTEM

The Department-wide payroll timekeeping system is not automated. Each of the 32 large correctional centers employs several hundred employees, and the related timekeeping system is maintained manually. Facility employees sign in and out, and the sign-in sheets are sent to the timekeeping clerk. Other information, including notification of absence and call-in reports, is also forwarded to the timekeepers. No automation is involved except for the processing of payroll warrants. Officials indicate that there are insufficient funds available to develop a Department-wide system to replace the outdated manual system used for over 14,000 employees.

Prudent business practices suggest that controls available through automated timekeeping systems can provide greater efficiency and reduce the potential for costly errors or employee abuse. (Finding 98-17, page 40)

We recommended the Department continue to pursue an automated timekeeping system.

The Department accepted our recommendation and stated it will continue to pursue an automated timekeeping system as resources become available subsequent to completion of Year 2000 EDP projects.

NEED TO IMPROVE CONTROLS OVER DISCIPLINARY TICKETS

The Department did not have adequate internal controls over disciplinary tickets written for infractions committed by inmates while in the 25 adult correctional facilities. When an inmate commits a disciplinary infraction at an adult facility, a correctional officer may issue a disciplinary ticket to the inmate. The ticket describes the infraction and is sent to the shift supervisor. The shift supervisor rates the infraction major or minor and forwards it to the facility's Adjustment Committee. The ticket is supposed to be docketed and tracked in the system through the issuance of a disciplinary action.

We noted that there were no internal controls over the disciplinary tickets to ensure an accounting of all tickets. The tickets are not standardized among facilities and are not prenumbered. There are also no Department-wide policies or procedures for accounting for these tickets. Without proper controls such as prenumbered tickets, these tickets could be lost or stolen before reaching the Adjustment Committee. (Finding 98-20, page 44)

We recommended the Department develop standardized written procedures to track and account for all disciplinary tickets written by correctional officers. Such procedures should include prenumbering of these tickets.

The Department did not accept our recommendation and stated it does not believe that modifying the existing procedures would necessarily solve the underlying concerns about lost or destroyed tickets.

OTHER FINDINGS

The remaining findings are less significant and are being given attention by the Department. We will review the Department's progress toward the implementation of our recommendations in our next audit.

Mr. Mark Krell, Chief Auditor of the Department of Corrections, provided the agency's responses.

AUDITORS' OPINION

Our auditors stated the Department's financial statements as of June 30, 1998 were fairly presented except for the effects of such adjustments, if any, as might have been determined to be necessary had they been able to examine evidence regarding Year 2000 disclosures.



_____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:KMM:pp

SPECIAL ASSISTANT AUDITORS

Sikich Gardner & Co, LLP were our special assistant auditors on the audit of the General Office and coordinated the performance of various procedures at the correctional facilities administered by the Department.