DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF CAPITAL ASSET ACCOUNT
For the Year Ended June 30, 2006
For the Two Years Ended:
June 30, 2006
Summary of Findings:
Total this audit 34
Total last audit 29
Repeated from last audit 16
April 10, 2007
State of Illinois
Office of the Auditor General
WILLIAM G. HOLLAND
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· The Department’s primary capital asset and property control accounting system, the Common Inventory System (CIS) was not adequate for the proper calculation and submission of capital asset information for GAAP reporting purposes.
· The Department’s preparation and submission of year-end accounting reports to the Office of the State Comptroller were not performed in an accurate manner.
· The Department issued excessive administrative approvals for deer and turkey hunting permits, approved incomplete applications for administrative approvals, and exceeded Department established hunting quotas.
· The Department did not have a timely or adequate contract for the development and implementation of the Point of Sale System.
· The Department failed to adequately evaluate internal controls in accordance with the Fiscal Control and Internal Auditing Act.
· The Department failed to deposit monies with the State Treasurer in a timely manner in compliance with the State Officers and Employees Money Disposition Act.
· The Department did not enter written warnings issued by Conservation Police Officers into the Traffic Information Planning System in a timely manner.
· The Department is not maintaining time sheets for its employees in compliance with the State Officials and Employees Ethics Act.
· The Department-wide timekeeping system was not automated which resulted in inefficiencies and errors in reporting employee accumulated leave. Each division within the Department maintained a manual timekeeping system for their several hundred employees.
· The Department did not have adequate controls over its State vehicles.
· The Department did not maintain adequate controls over processes related to telecommunications equipment and expenditure records.
· The Department did not cancel telephone calling cards and pagers in a timely manner when they were no longer in use.
· The Department’s art print and collector’s stamp programs operated at a financial loss.
Expenditures and Activity Measures are summarized on the next page.}
DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF CAPITAL ASSET
ACCOUNT for the Year Ended June 30, 2006
AND COMPLIANCE EXAMINATION
For the Two Years Ended June 30, 2006
Total Expenditures (All Appropriated Funds).
% of Total Expenditures.........................
% of Operations Expenditures.................
Average No. of Employees:
Other Payroll Costs (FICA, Retirement)..
% of Operations Expenditures.................
% of Operations Expenditures.................
All Other Operations Items......................
% of Operations Expenditures.................
GRANTS, REFUNDS, OTHER.............
% of Total Expenditures.........................
Cost of Property and Equipment (in thousands)........................................................
SELECTED ACTIVITY MEASURES
Acreage owned and managed..............................
Protected Natural Area Acreage..........................
Hunting Licenses Issued.......................................
Fishing Licenses Issued........................................
Students Certified in Safety Education Classes......
Number of deer harvested...................................
During Audit Period: Joel Brunsvold (July 1, 2004 through December 31, 2005; Sam Flood
(Acting Director effective January 1, 2006)
Currently: Sam Flood (Acting)
Year end accounting reports not prepared accurately
Extensive reconciliations procedures necessary to verify ending balances
$67 million not included on Department’s property control records
Payables overstated by approximately $1.7 million
Significant problems causing financial reporting delays
Adjustments total over $1.8 million
Numerous errors in preparation and submission of accounting reports to the State Comptroller
Significant adjustments and changes needed to agree Department records to actual expenditures
Department officials partially agree
1,250 deer and turkey hunting permits issued via administrative approval process
Department forms and permit applications incomplete
Permit fees not charged
27 youth hunt permits issued for county not approved for youth hunting
Numerous weaknesses noted with point of sale contract process
Per privilege cost contract violated State law
$200,000 per year work not competitively bid
Department failed to make an independent comprehensive review of internal controls
Numerous receipts not deposited timely
Written warnings dating from July 1999 not entered into database
Department used “negative” timekeeping system
Inefficiencies and errors in calculating employee accumulated leave due to manual timekeeping system
Department uses various timekeeping processes
Inadequate controls over State vehicles
Phone records not available
Review of telephone calls not required
Telephone calling cards and pagers not cancelled timely
Art print and collector’s stamp programs operating at a financial loss of $7,720
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE CONTROLS OVER THE CALCULATION AND SUBMISSION OF CAPITAL ASSET INFORMATION FOR FINANCIAL REPORTING PURPOSES
The Department’s primary capital asset and property control accounting system, the Common Inventory System (CIS) was not adequate for the proper calculation and submission of capital asset information for financial reporting purposes. As a result, the Department had to utilize numerous supplemental spreadsheets and schedules to calculate capital asset balances and related depreciation in accordance with General Accepted Accounting Principles (GAAP).
We noted the following problems with the Department’s Statewide Accounting Management System to GAAP Reconciliation – Capital Assets (SCO 537) and the Capital Asset Summary (SCO 538) submitted to the State Comptroller:
· The Department had not agreed the June 30, 2002 ending recalculations with the Common Inventory System (CIS) as of June 30, 2006 although this had been noted in prior audits.
· Due to the incompleteness of CIS records, the Department could not obtain ending balances for each capitalization category from property control records. Without these amounts, it cannot be determined if ending balances are reasonably stated and extensive reconciliation testing procedures had to be performed to verify ending balances.
· Accumulated depreciation was calculated manually requiring extensive reconciliation and testing procedures to be performed to verify ending balances.
· The Department was unable to provide adequate documentation of actual additions, deletions, and transfers. Also, due to the consolidation process, several changes to the category type were made and manual calculations were necessary to account for these amounts.
· The Department still has not included Office of Water Resources sites, totaling approximately $41 million and Department of Transportation managed projects, totaling approximately $26 million, on its property control records. Manual adjustments must be made for these items.
· The Department evaluated the categorization of capital assets at several sites which required a change in category type for a significant number of assets. These changes had to be manually reconciled with the previous year information.
· The Department is unable to properly apply the categorization threshold to determine which parcels of land should be capitalized because the Department may have multiple items with the property control system that constitutes one contiguous parcel of land. This resulted in approximately a $15.6 million increase for items previously not capitalized.
· The Department was unable to properly calculate capital asset accounts payable. The Department overstated payables related to capital equipment by approximately $1.7 million.
· Due to the complexity of the above issues, revised amounts related to capital assets and accumulated depreciation were not available until November 8, 2006. (Finding 1, pages 14-17) This finding was first reported in 2004.
We recommended the Department implement procedures to ensure capital assets are reported in an accurate and complete manner. Further, the Department should reconcile the Common Inventory System to capital asset reporting amounts or seek to replace the CIS system to ensure the property control system can be utilized for capital asset reporting.
Department officials partially agreed with our recommendation
and stated the Department agrees the CIS system is antiquated and necessitates
a large amount of manual intervention and should be replaced. However, the Department does not believe
the audit report fairly and objectively states the conditions present in the
Department as of June 30, 2006 especially since there were no adjustments
made to the capital asset financial statements presented to be audited and
the auditors expressed an unqualified opinion on the financial statements
presented in prior years. Department
officials further stated additional procedures were implemented in FY 2006 to
ensure that the Department’s capital assets would be reported in an accurate
and complete manner. Specifically,
the Office of the Comptroller, on their own initiative, volunteered to assist
the Department and with their assistance the Department did agree ending
recalculations of asset category balances and related accumulated
depreciation as of June 20, 2005, with CIS and including the first three
quarters of FY2006 at March 31, 2006.
This reconciliation was offered to the auditors to test in June 2006
and they opted not to do so. Further,
this reconciliation was updated for the fourth quarter of FY2006 and
submitted to the Comptroller on August 14, 2006 when it was also available to
the auditors. (For the previous Department response, see Digest Footnote #1.)
In an auditor’s comment, we noted the finding primarily addresses the inadequacies in the CIS system and the fact it cannot be relied upon to properly calculate capital asset information for GAAP reporting purposes. The finding does not focus on audit adjustments. In addition, the Office of the Comptroller originally became involved with this process in late fiscal year 2005 only after the Department’s inability to prepare capital asset schedules in a timely manner. Also, the auditors are opining on a capital asset balance at a point in time and it would be inefficient and unproductive to audit the March 31, 2006 balances and again perform procedures at June 30, 2006. Lastly, August 14 was when information was provided to the Comptroller, not to the auditors. After Comptroller revisions and adjustments, the revised capital asset information was made available to the auditors on November 8, 2006.
INADEQUATE PREPARATION OF ACCOUNTING REPORTS AND DIFFICULTY IN USING PROGRAMMATIC ACCOUNTING SYSTEM
The Department's preparation and submission of year end accounting reports (Generally Accepted Accounting Principles GAAP Package Forms) to the Office of the State Comptroller were not performed in an accurate manner.
· Three adjustments totaling over $1.8 million were required to agree GAAP reporting packages to actual revenues and expenditures. These adjustments were for 2 of 23 funds tested of the Department’s 56 funds.
· The Department’s preparation and submission of year end accounting reports to the Office of the State Comptroller related to the Capital Asset Account were not performed accurately, causing significant financial reporting delays
· The Department had inadequate procedures to identify liabilities for capital projects and land acquisition costs payable to local governments from reappropriated accounts. Although the process appears to be materially accurate for 2006, June 30, 2005 expenditure liabilities were significantly overstated resulting in three funds reporting negative expenditures during 2006 totaling $18 million.
· The Department failed to report nearly $1 million of oil royalty revenue earned between August, 2003 and June, 2006 resulting in understated revenue and receivables in the Wildlife and Fish Fund.
· The Department did not maintain support from its Programmatic Accounting System (PAS) in an orderly manner, making it difficult to use for purposes of GAAP reporting. (Finding 2, pages 18-20) This finding was first reported in 2000.
We recommended the Department maintain established procedures to ensure year end accounting reports are prepared in an accurate and complete manner. We further recommended the Department review and revise, as necessary, its current system of gathering programmatic expenditure information to improve the accuracy of its financial reporting and to more clearly document the support for totals used for GAAP reporting.
Department officials partially agreed with our recommendation and noted that they agreed the Programmatic Accounting System is cumbersome to use, however, steps were taken in FY2006 to ensure that the information would be prepared in an accurate and complete manner as possible. In addition, Department officials stated they felt bullet #1 was misleading as it shows the percentage of the packages they chose to review as opposed to the actual number of packages completed. Lastly, Department officials wanted to note the auditors passed on adjusting the capital asset financial statements while making the adjustment on GAAP reports. (For previous Department Response, see Digest Footnote #2.)
In an auditor’s comment we noted bullet #1 refers to two funds with material adjustments but that problems with utilizing the PAS extended across all funds. In addition, materiality levels at a fund level are much lower than at the capital asset account level and therefore, audit adjustments made at the fund level were not required to be posted at the capital asset level due to materiality.
EXCESSIVE ADMINISTRATIVE APPROVALS FOR DEER AND TURKEY PERMITS
The Department issued excessive administrative approvals for deer and turkey hunting permits, approved incomplete applications for administrative approvals, and exceeded Department established hunting quotas. The Department also failed to make the administrative approval process open to the public, resulting in preferential treatment for certain hunters.
During the engagement period, the Department issued 1,250 deer and turkey hunting permits via an administrative approval process. This process allows for a hunter to obtain a deer or turkey hunting permit without going through the lottery system, or to obtain a permit if the hunter was unsuccessful in obtaining a permit though the lottery process. During our testing of 240 permits issued via administrative approval, we noted the following:
· Department forms were incomplete for 220 of 240 (91.7%) administrative approvals issued.
· Permit applications were incomplete for 103 of 240 (42.9%) permits granted via administrative approval.
· Permit fees were not charged for 53 of 240 (22.1%) permits granted via administrative approval.
· One individual was issued 20 permits through administrative approval and there was no documentation of payment for these permits, for which fees totaled $600.
· Five representatives of an ammunition company were granted three permits each through administrative approval for permit year 2005 and there was not documentation of the payment for these permits, for which fees totaled $1,045.
· The Department issued 27 youth hunt permits for Gallatin County although Gallatin County was not approved for youth hunting.
· Many administrative approval permits were issued to allow a hunter who had been issued a permit via the lottery process an additional permit(s) for an earlier hunting season or an either sex deer permit, which is the preferred permit for many hunters.
· Several administrative approvals were issued prior to the initial lottery, resulting in fewer permits available for other hunters. In addition, other administrative approvals occurred after the lottery process resulting in permits issued in excess of target quotas.
· Administrative approvals were issued for Illinois Conservation Foundation donors, professional athletes, judges and politicians. (Finding 3, pages, 21-23)
We recommended the Department establish policies and procedures for administrative approvals for hunting permits, to ensure all approvals are accurate, complete, documented as to purpose and in compliance with the Wildlife Code.
Department officials agreed with our recommendation and noted that the documentation for permits issued administratively needs significant improvement. The Department’s Office of Administration will work with the Director’s Office and General Counsel to develop procedures that fully comply with the Illinois Compiled Statutes.
WEAKNESSES WITH CONTRACT FOR POINT OF SALE SYSTEM
The Department did not have a timely or adequate contract for the development and implementation of the Point of Sale System. In April 2004, the Department issued a request for proposal (RFP) to obtain solutions for modernizing its fishing and hunting license/permit sales and watercraft/snowmobile registrations through the use of an automated Point of Sale (POS) Licensing System operating over the internet. The RFP requested pricing proposals in two manners: “per privilege cost” and “turnkey operation cost.” The Department received responses to the RFP in August 2004 and the selected vendor began work on the system development in October 2004. The following items were noted during this process:
· Negotiating a “per privilege cost” contract violated the State Officers and Employees Money Disposition Act.
· Requesting pricing proposals in two manners, “per privilege cost” and “turnkey operation cost” may have prevented certain vendors from bidding on the contract.
· The original contract did not have all Department approvals that would normally be obtained for any other contract, in violation of established Department internal control procedures.
· The revised “contract” was not sufficiently reduced to writing and filed with the Comptroller before services began.
· The additional $200,000 per year work for the deer harvest data services was not competitively bid in compliance with the Illinois Procurement Code.
· The amendment filed with the Comptroller omitted the key terms which was not filed with the contract. (Finding 4, pages 24-26)
We recommended the Department implement procedures to ensure all contracts are complete and meet all statutory requirements and that the Department seek competitive bids for all contracts as required by the Procurement Code.
Department officials agreed with our recommendation and stated the Department has already solicited assistance from the State Purchasing Officer assigned to the Department and will include his recommendations for improving controls and monitoring of all contracts in our corrective action plan.
FAILURE TO ADEQUATELY EVALUATE INTERNAL FISCAL AND ADMINISTRATIVE CONTROLS
The Department failed to adequately evaluate internal fiscal and administrative controls in accordance with the Fiscal Control and Internal Auditing Act. During fiscal years 2005 and 2006, the Department certified an evaluation was conducted over internal fiscal and administrative controls, listing several reportable internal control weaknesses and corrective action plans addressing these weaknesses. However, the Department only listed items as reportable weaknesses that were noted as findings within the Department’s Compliance Examination for the two years ended June 30, 2004. The Department failed to make an independent comprehensive evaluation of internal fiscal and administrative controls. (Finding 8, pages 32-33)
We recommended the Department establish procedures for an evaluation of internal fiscal and administrative controls to determine whether the systems comply with the requirements of the Act.
Department officials agreed with our recommendation and stated the Department will initiate implementation of evaluation internal fiscal and administrative controls at the division level – as well as formalizing the evaluation process at the agency level.
FAILURE TO DEPOSIT MONIES WITH THE STATE TREASURER IN A TIMELY MANNER
The Department failed to deposit monies with the State Treasurer in a timely manner in compliance with the State Officers and Employees Monies Disposition Act. During our testing of cash receipts throughout various areas of our engagement, we noted the following:
· 22 of 25 (88%) refunds tested, totaling $591,019, were deposited between 1 and 208 days late.
· 5 of 5 (100%) violations tested, totaling $5,051, were deposited between 6 and 18 days late.
· 4 of 25 (16%) general receipts tested, totaling $180,494, were deposited between 3 and 6 days late.
· 1 royalty check totaling $58,108 was deposited 68 days late. (Finding 11, pages 39-40)
We recommended the Department deposit all monies with the State Treasurer in a timely manner.
Department officials agreed with our recommendation and stated the Department’s Office of Fiscal Management will begin to incorporate a periodic reminder to staff handling cash refunds, receipts and/or revenues of their responsibility to comply with the Act.
STATE POLICE TRAFFIC INFORMATION PLANNING SYSTEM (TIPS) NOT UPDATED IN A TIMELY MANNER
The Department did not enter written warnings issued by Conservation Police Officers (CPO) dating from July 1999 to present into the TIPS in a timely manner. The TIPS is a computerized system administered by the State police that provide law enforcement officials information on citations and written warnings. It is the Department’s responsibility to enter information regarding citations and written warnings issued by CPO’s into the TIPS. Department personnel stated CPO’s issue approximately 10,000 written warnings per year. (Finding 15, page 46) This finding was first reported in 2002.
We recommended the Department enter all past and future written warnings issued by CPO’s into TIPS in a timely manner.
Department officials agreed with our recommendation and stated the Department’s Office of Law Enforcement will work with Department’s Budget Division to assess the resources needed to address record keeping for written warning and reprioritize existing resources to the maximum extent possible before requesting additional assistance. (For the previous Department response, see Digest Footnote #3.)
TIME SHEETS NOT MAINTAINED IN COMPLIANCE WITH THE STATE OFFICIALS AND EMPLOYEES ETHICS ACT
The Department is not maintaining time sheets for its employees in compliance with the State Officials and Employees Ethics Act. Department employees (other than senior management) did not maintain time sheets in compliance with the Act. Employees’ time is tracked using a “negative” timekeeping system whereby the employee is assumed to be working unless noted otherwise. No time sheets documenting the time spent each day on official State business to the nearest quarter hour are maintained. (Finding 16, page 47)
We recommended the Department amend its policies to require all employees maintain time sheets in compliance with the Act.
Department officials agreed with our recommendation and stated DNR is currently working with a consultant and another state agency to develop a Request for Proposal (RFP) to implement an automated timekeeping system.
TIMEKEEPING SYSTEM IS NOT AUTOMATED
The Department-wide timekeeping system is not automated, resulting in inefficiencies and errors in accurately calculating employee accumulated leave. The Department employs over 1,600 employees and each division within the Department maintains a manual timekeeping system. We noted the following weaknesses:
· The Department calculated accrued leave incorrectly for 7 of 60 (11.7%) employees selected for testing. One of these errors resulted in accrued sick time being overstated at the end of the month by 5.5 hours for an individual. Another error caused overtime to be understated by 35.25 hours for one individual.
· The Department’s timekeeping process is not universal throughout the Department. The Division of Mines and Minerals uses the CMS Timekeeping System and the Illinois Waste Management Resource Center and the Illinois State Water Survey have their own timekeeping systems; however, most of the divisions use the DNR Manual Timekeeping System which is paper intensive allowing for human errors. (Finding 18, pages 50-51) This finding was first reported in 2000.
We recommended the Department implement controls to ensure its timekeeping is accurate and efficient to maintain and consider implementing an automated timekeeping system to strengthen internal controls and eliminate the multiple timekeeping systems currently used by the Department.
Department officials agreed with our recommendation and stated the Department is currently working with a consultant and another State agency to develop a Request for Proposal (RFP) to implement an automated timekeeping system. (For previous Department Response, see Digest Footnote #4.)
INADEQUATE PROCEDURES REGARDING STATE VEHICLES
The Department did not have adequate controls over its State vehicles. We noted the following:
· A regular review of vehicle assignments to determine whether the assignments are in the best interest of the State did not occur;
· 1 out of 10 employees did not effectively utilize the Department’s vehicle fleet. This traveler was approved to use her personal vehicle for 5,994 miles, resulting in reimbursement totaling $2,428;
· 6 out of 85 (7.1%) accidents involving State vehicles were not reported in a timely manner. The reports were submitted between 1 to 34 days late;
· Odometer readings were not maintained or monitored for all vehicles in a consistent manner; and
· No documentation could be provided to ensure the Department’s approximate 1,100 vehicles were maintained properly. (Finding 20, pages 54-57) This finding was first reported in 2002.
We recommended the Department strengthen its controls regarding State vehicles for the items noted.
Department officials agreed with our recommendation and stated the Department’s Offices of Administration and Fiscal Management worked diligently with Information Technology to implement an Agency-wide database that tracks mileage and maintenance expenditures, however, this was not fully implemented at June 30, 2006. Further, the Office of Fiscal Management has expanded its tasks with respect to assigned vehicle fringe benefit reporting to coordinate the annual review, justification and sign-off by the Director on these vehicles. (For previous Department Response, see Digest Footnote #5.)
INADEQUATE CONTROLS OVER TELECOMMUNICATIONS EXPENDITURES AND RECORDS
The Department did not maintain adequate controls over processes related to telecommunications equipment and expenditure records. We noted the following:
· The Department failed to maintain detail records of phone calls for fiscal year 2005 and the first half of fiscal year 2006.
· The Department did not require supervisors to adequately review and verify a monthly itemized listing of local and long distance calls. Two of 25 calls selected could not be identified and explained by the individuals placing the calls or by their corresponding Telecommunications Liaisons.
· Three of 25 calls tested were deemed to be for personal reasons. Two of these calls exceeded the fifteen minute allowable limit outlined in the Departments’ manual; however these two employees were not required to reimburse the $1.00 per minute administrative charges. Another caller had multiple personal long distance calls and this employee was required to repay all CMS billed charges.
· No records are maintained of operator assisted calls noting the employee placing the call or justification of the call. Seven of 12 calls tested could not be justified by employees due to a lack of record-keeping.
· Telecommunication records are not updated for changes in assignments of equipment, such as cell phones, calling cards, pagers and phone lines. We noted 24 out of 75 instances where cell phones, pagers or calling cards were either lost, unnecessary or not currently used by the persons listed by the Telecommunications Coordinator. We also noted 2 out of 26 instances where the employee assigned to the line had changed, but the telecommunications records were not updated. (Finding 24, pages 63-65) This finding was first reported in 2002.
We recommended the Department include the updated telecommunications expenditure processing procedures in the Department’s Policies and Procedures Manual to ensure enforcement of the restructured guidelines throughout the Department. Also, the Department should develop guidelines for recording and approving all calls to Directory Assistance and encourage the use of alternative methods for obtaining phone number information to minimize the use of this billable service. We further recommended the Department more closely review monthly phone billings within each division and ensure all employees are charged the CMS billable charges along with the administrative and billing costs outlined in the Department’s Policies and Procedures Manual and as provided in the State telephone usage policy.
Department officials agreed with our recommendation and stated the Department has already implemented corrective action. (For previous Department Response, see Digest Footnote #6.)
TELEPHONE CALLING CARDS AND PAGERS NOT CANCELLED ON A TIMELY BASIS
The Department did not cancel telephone calling cards and pagers in a timely manner. We reviewed 25 individuals assigned telephone calling cards and 25 individuals assigned pagers during the engagement period. When inquiring as to the necessity of these cards, we noted that 6 telephone calling cards assigned to individuals were not cancelled when the employees’ use of the calling cards was no longer necessary. In addition, we noted 7 pagers not cancelled timely. The Department is charged $11.44 per month for each pager regardless if it is used or not used. (Finding 25, page 66) This finding was first reported in 2002.
We recommended the Department ensure uniform enforcement of calling card and pager cancellation policies throughout all divisions. Calling card and pager assignments to employees should be reevaluated on regular basis in order to maintain up-to-date records and prevent any potential abuse of calling cards and pagers.
Department officials agreed with our recommendation and stated the Department’s Office of Fiscal Management took control of this function in April 2006 and has implemented corrective action effective July 2006. (For previous Department Response, see Digest Footnote #7.)
ART PRINT AND COLLECTOR’S STAMP PROGRAMS OPERATING AT A LOSS
The Department’s art print and collector’s stamp programs operated at a financial loss. The Department issues the following stamps: habitat stamp, salmon/trout stamp, and migratory waterfowl stamp. These stamps are required to be affixed to an individual’s license or permit for certain hunting and fishing purposes. The Department contracts with artists annually to create paintings suitable for reproduction as an applicable print for each of the three types of stamps. The Department distributes these stamps, charging applicable fees, for hunting and fishing purposes. In addition, the Department also sells collector’s editions of the habitat stamp and art print.
During fiscal year 2005, the Department paid $54,499 for costs associated with artwork, the printing costs of stamps and prints, and promotional materials. Included in this amount is $16,735 related to collector’s edition habitat stamps and prints. During fiscal years 2005 and 2006, the Department generated a total of $9,015 in revenue related to the sales of these collector’s stamps and prints. The Department ordered a total of 1,820 prints, but only sold 144 prints. The 2005 art print and collector’s stamp program operated at a loss of $7,720. (Finding 26, pages 67-68)
We recommended the Department evaluate the art print and collector’s stamp programs to determine the economic feasibility of continuing to offer these items and consider reducing the amount of prints ordered based upon historical sales analysis. We further recommended the Department investigate the possibility of issuing electronic stamps via the Point of Sale system in order to reduce costs associated with collector’s stamps currently issued by the Department.
Department officials agreed with our recommendation and stated the Department’s Office of Public Service has already begun a process to evaluate the efficacy of this program with the assistance of the Director and Executive Staff.
The remaining findings are reportedly are being given attention by the Department. We will review progress towards the implementation of our recommendations in our next compliance engagement.
We conducted a financial audit of the Department’s Capital Asset Account for the year ended June 30, 2006 and a compliance examination of the Department for the two years ended June 30, 2006 as required by the Illinois State Auditing Act. Our special assistant auditors stated that the Department’s capital asset account as of June 30, 2006 is presented fairly in all in all material respects.
WILLIAM G. HOLLAND, Auditor General
Our special assistant auditors for this engagement were Sikich, LLP.
#1 – INADEQUATE CONTROLS OVER THE CALCULATION AND SUBMISSION OF CAPITAL ASSET INFORMATION FOR FINANCIAL REPORTING PURPOSES – Previous Department Response
2004: We agree. The Department will continue to pursue solutions to the 30-odd years of previous management staff’s questionable practices for capital asset recording, the Capital Development Board’s misclassification of capital assets in its transfer reports and the Common Inventory System’s inability to provide reports on capital assets that do not require further substantial amounts of analysis by Department staff.
Auditor Comment: The Department did not devote sufficient time and resources to properly address GASB 34 when it first became effective in fiscal year 2002. This exacerbated the capital asset issues on a go forward basis. The Department is ultimately responsible for reviewing the information obtained from other State agencies and ensuring the information is properly classified and reported.
#2 – INADEQUATE PREPARATION OF GAAP PACKAGES AND DIFFICULTY IN USING PROGRAMMATIC ACCOUNTING SYSTEM – Previous Department Response
2004: We disagree. In response to the prior period audit finding, the Department implemented those actions that were submitted by prior management and were accepted as resolving the finding. Most significant being the Department’s acquisition of additional resources to deliver 56, not just the 13 packages selected for examination, GAAP fund packages by the due date. Furthermore, the differences characterized as “inaccuracies or problems” are based on data that did not exist and was not available when the packages were due and was collected two or more months after the due dates. Additionally, since GAAP packages are due, in many instances prior to the availability of final financial data, management must make informed estimates of the final figures. Until the time issue is addressed, GAAP packages will always require adjusting entries, many of which may be substantial.
Auditor Comment: This is a repeat finding. In the prior audit, we noted similar problems with a failure to timely and accurately prepare the Departments’ GAAP packages and identify liabilities for capital projects and land acquisition cost payable to local governments from reappropriated accounts. Nevertheless, we found similar problems in the current audit. This finding only addressed significant adjustments; there were numerous other inaccuracies. Making informed estimates takes planning, effort and resources. The Department also had two years to deal with its capital asset issues and liabilities issue and neither was resolved in this audit. In addition the proper use of the Programmatic Accounting System noted in finding 04-9 would help accuracy of the Department’s GAAP forms submitted to the Office of the State Comptroller.
#3 – STATE POLICE TRAFFIC INFORMATION PLANNING SYSTEM (TIPS) NOT UPDATED IN A TIMELY MANNER – Previous Department Response
2004: We agree. However, we feel compelled to add, the Department already identified this problem as a number of highly specifically trained staff were experiencing an extended period of health related problems. We have not made substantial progress in addressing the back-log, we estimate it has been cut in half, and believe we will be reasonably current in the near future. Additionally, we hasten to add that some delays may occur as they are beyond our control because they are dependent on judicial actions at the circuit clerk level.
#4 – TIMEKEEPING SYSTEM IS NOT AUTOMATED – Previous Department Response
2004: We partially agree. The Department is not aware of any authoritative State requirement to implement an automated timekeeping system. The automated application currently used by one Department Office is not linked to payroll, is susceptible to keying and manipulative errors by those entering data and is cost prohibitive to extend coverage to other offices of the Department. Nevertheless, we will seek to make available to timekeepers currently owned and licensed software that can minimize calculation errors
Auditor Comment: This is a repeat finding. In the prior audit, we noted the same issues with the Department being unable to properly calculate accrued leave and incurring a large number of manual errors. The Department agreed with our prior recommendation to implement an automated system. We again emphasize that due to the size and decentralization of the Department and the continued errors noted, it would be prudent business practice to implement an automated timekeeping system, even as simple as a spreadsheet or database system.
#5 – INADEQUATE PROCEDURES REGARDING STATE VEHICLES – Previous Department Response
2004: We agree. The Department’s Offices of Administration and Fiscal Management will co-lead an initiative to reenergize and further enhance the evaluations of the Department’s vehicle fleet management which were initially completed in 2003 and implement as many of the recommendations as is determined viable within existing resources.
#6 – INADEQUATE CONTROLS OVER TELECOMMUNICATIONS EXPENDITURES AND RECORDS – Previous Department Response
2002: We agree. The Offices of Administration and Fiscal management will collaborate on an extensive and exhaustive review of the Department’s telecommunications functions as a whole and will develop and implement policies and procedures as well as modify pertinent existing procedures to achieve an adequate level of management control to the extent possible within existing resources.
#7 – TELEPHONE CALLING CARDS NOT CANCELLED ON A TIMELY BASIS – Previous Department Response
2004: We concur. The Department will reevaluate its need for telephone calling cards and will promptly cancel all those cards of former employees as well as all calling cards.