DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF THE SCHEDULE OF CAPITAL ASSETS
For the Year Ended:
June 30, 2009
April 15, 2010
State of Illinois
Office of the Auditor General
WILLIAM G. HOLLAND
To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703
(217) †† 782-6046 or TTY (888) 261-2887
This Report Digest and Full Report are also available on the worldwide web at http://www.auditor.illinois.gov
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INTERNAL CONTROL WEAKNESSES RELATED TO THE RECORDING AND REPORTING OF STATE PROPERTY
During testing of the Departmentís State property, a number of weaknesses were identified in the Departmentís internal control, particularly in the following areas:
ē†††††††††† An overstatement of $1,393,000 in accumulated depreciation was not deducted from the Capital Asset Summary (SCO-538 Accounting Report Form) submitted to the Office of the State Comptroller. Further, this adjustment was not made to the June 30, 2008 audited Schedule of Capital Assets. To correct this error, the Department reduced the June 30, 2009 additions to depreciation expense, which understates the current yearís actual depreciation expenses by $1,393,000.† The amount of this error did not necessitate the auditors to propose a correcting adjustment.
ē†††††††††† During fiscal year 2008, the Department changed its depreciation methodology. During this change, certain fully depreciated capital assets were included in the depreciation computation, ultimately overstating the June 30, 2008 depreciation expense by $223,602. The correction of this error resulted in understating depreciation expense in fiscal year 2009.† The amount of the error did not necessitate the auditors to propose a correcting adjustment.
ē†††††††††† During fiscal year 2009, the Department conveyed a building, with improvements of $167,287, to a local municipality.† However, the Department could not provide documentation to support the conveyance officially occurred during fiscal year 2009.
An important element of internal control is the accurate review, reconciliation and reporting of accounting data.†
Department personnel stated both internal and external reviews of capital asset information are being performed and the exceptions noted occurred due to management oversight. Regarding documentation not maintained to support the building conveyance, Department personnel stated this occurred due to a miscommunication between the Departmentís Office of Realty and Environmental Planning (OREP) and Capital Assets.† (Finding 09-1, pages 13-15)
We recommended the Department improve controls over their recording and reporting of capital assets to ensure the adequate review and reconciliation of property control records to external financial reports are being performed to identify errors.† Further, the Department should improve its efforts to ensure supporting documents on all disposals of capital assets are maintained.
Department officials partially agreed with the finding and recommendation.† The Department indicated their internal control system detected the errors, and did agree that the errors occurred.† The Department indicated the $223,602 infrastructure depreciation overstatement was done as directed by the external audit firm, Office of the Auditor General and the Illinois Office of the Comptroller.
In an auditorís comment, we noted the Department agreed that the errors did occur.† The external audit firm and the Office of the Auditor General proposed a correcting entry to the Departmentís Schedule of Capital Assets based on information provided by the Department, but did not direct the Department to overstate fiscal year 2008 infrastructure depreciation.
††††††††††† Our special assistant auditors stated that the Departmentís Schedule of Capital Assets as of June 30, 2009 is presented fairly in all material respects.††
WILLIAM G. HOLLAND, Auditor General
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this engagement were Washington, Pittman & McKeever, LLC.