REPORT DIGEST

 

DEPARTMENT OF NATURAL RESOURCES

 

FINANCIAL AUDIT OF CAPITAL ASSET ACCOUNT
For the Year Ended: June 30, 2010

COMPLIANCE EXAMINATION

For the Two Years Ended June 30, 2010

 

Summary of Findings:

Total this audit: 17

Total last audit:  13

Repeated from last audit: 6

 

Release Date: May 19, 2011

 

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, 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 www.auditor.illinois.gov

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SYNOPSIS

 

• The Department did not have adequate policies or procedures to ensure all assets categorized as Construction in Progress were properly recorded.

 

• The Department did not implement adequate procedures to comply with the Illinois and Michigan Canal Protection Act and the Rivers, Lakes and Streams Act.

 

• The Department failed to adopt and impose a plan to ensure that required daily and quarterly inspections of self-contained self-rescuer devices are performed.

 

• The Department did not follow-up on outstanding tickets with the Circuit Clerk.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

INADEQUATE CONTROLS OVER CAPITAL ASSETS

 

The Department does not have adequate policies or procedures to ensure that assets categorized as Construction in Progress (CIP) were properly recorded.

 

During our review, we noted the Department did not have a policy to ensure CIP assets were properly recorded.  As a result, the auditors requested the Department to perform an overall review of the site improvements, and building and building improvements to determine whether assets should have been reported.  As a result of the Department’s review, eight assets were identified as CIP, totaling $1,012,131, which should have been classified as CIP at June 30, 2010.  However, due to the immateriality of the misclassification, a correcting adjustment was not made to the financial statements. (Finding 10-1, page 14)

 

Department personnel stated the Department did not have policies and procedures to ensure assets were properly classified.

 

We recommend the Department establish policies and procedures to ensure assets are properly classified.

 

The Department agreed with our recommendation and stated they have developed policies and procedures to ensure assets are properly classified.

 

INADEQUATE CONTROLS OVER ENCROACHMENTS

 

The Department did not implement adequate procedures to comply with the Illinois and Michigan Canal Protection Act and the Rivers, Lakes and Streams Act.

 

During our testing of the Illinois and Michigan Canal Protection Act we noted the Department had not developed policies or procedures to ensure compliance.

 

On April 20, 2009, the Department submitted a letter to a business regarding an encroachment identified by the Department.  However, we noted the Department had taken no further action.

 

In addition, during our testing of the Rivers, Lakes and Streams Act we noted the Department had not developed policies or procedures to ensure compliance.

 

During our testing of two encroachments, we noted:

 

• The Department submitted a letter of encroachment on April 17, 2006 to a business.  However, as of June 30, 2010 the encroachment still remained.

 

• On November 13, 2009, the Department submitted a letter indicating a deck structure was not permissible and should have been removed. Based on our inquiries with Departmental staff, we were unable to determine the status of the encroachment. (Finding 10-8, pages 29-30)

 

Department personnel stated the Department does not have written policies and procedures to document that the Department followed up on encroachments.

 

We recommend the Department develop policies and procedures to ensure compliance with the Acts. Additionally, the Department should follow up on encroachments to ensure they comply with the Acts.

 

The Department agreed with our recommendations and stated they would develop written policies and procedures to document compliance with the Illinois and Michigan Canal Protection Act and the Rivers, Lakes and Streams Act. 

 

FAILURE TO ENSURE COMPLIANCE WITH REQUIRED INSPECTIONS

 

The Department failed to adopt and impose a plan to ensure that required daily and quarterly inspections of self-contained self-rescuer devices (SCSR) are performed.

 

During our testing we noted the Department had not established written policies and procedures that described how a plan is adopted and imposed to ensure the daily and quarterly inspections are performed as required by statute.

 

The Department requires mine operators to develop and submit emergency response plans (ERP) for review. The ERPs are to outline the daily and quarterly inspections conducted by the operators.  The Department completes an evaluation of the ERP which is returned to the mine operator for corrective actions. In addition, the Department performs monthly inspections of each underground mine.

 

The Department documents its monthly inspections in a report for each inspection. These reports include only exceptions noted by the State mine inspector. Based on discussions with Department personnel, the required daily inspections of SCSRs are performed by the actual persons who are underground using such devices. We reviewed a sample of five inspection reports as well as a sample of ERP.

 

Based on our review of ERPs, we noted no language that documents the miner’s plan for the daily and quarterly inspections of applicable SCSRs. Based on our review of the five monthly inspection reports, the Department did not adequately document these exceptions to the requirements.

           

In addition, the Department did not adequately document the decision to follow the requirements of all federal Mine Safety and Health Administration requirements.  (Finding 10-13, pages 36-37)

 

Department personnel stated the U.S. Mine Safety and Health Agency (MSHA) require all mine operators to submit Emergency Response Plans (ERPs) for approval.  ERPs must satisfactorily document compliance with requirements of Federal laws, after which our Statutes have been modeled.

 

We recommend the Department implement policies and procedures to ensure compliance with the plan to ensure daily and quarterly inspections of self-contained self-rescuer devices. 

 

The Department agreed with our recommendation and stated they would implement policies and procedures to ensure mine operators comply with requirements for daily and quarterly inspections of self-contained self-rescuer devices. 

 

FAILURE TO FOLLOW UP ON OUTSTANDING TICKEST WITH THE CIRCUIT CLERK

 

The Department did not follow up on outstanding tickets with the Circuit Clerk.

 

The Department did not request nor receive a monthly aging report from the Illinois State Police that includes all tickets written for all Department offenses and consequently, did not discuss outstanding ticket amounts owed to the Department with appropriate Circuit Clerks.

 

Supreme Court Rule 552, effective since September 30, 2002, while requiring clerk(s) to issue a Disposition Report, does not preclude the Department’s responsibility to determine if violators are prosecuted in a timely manner and to follow up on outstanding tickets with the appropriate clerk.  Failure to follow up on outstanding tickets could result in lost revenue to the State.

 

Department personnel stated the Department has determined that the cost of following up on outstanding tickets outweighs the benefit because the potential recovery of fines is minimal.  Also, the Illinois State Police is no longer making the paper disposition report available to other Agencies.  (Finding 10-15, pages 40-41)

 

We recommend the Department obtain outstanding ticket reports from the Illinois State Police, review the reports, and follow up on outstanding tickets with the Circuit Clerks.

 

The Department disagrees with the finding and recommendation.  The Department stated the Supreme Court Rule 552 does not require the Department to follow up on outstanding tickets.  Additionally, the Illinois State Police is no longer making the paper disposition report available to other Agencies.  Once the Automated Disposition Reporting System is implemented, the Department will be able to follow up on outstanding tickets in a non-cost prohibitive manner.

 

In an auditor’s comment, we noted the Supreme Court Rule 552 states “Upon final disposition of each case, the clerk shall execute the “Disposition Report” and promptly forward it to the law enforcement agency that issued the ticket.” It is the issuing law enforcement agency’s responsibility to establish and maintain controls to effectively utilize the Disposition Reports.

 

OTHER FINDINGS

 

With regards to the other findings noted in our report, Department management indicated they are being given attention.  We will review the progress towards the implementation of our recommendations during our next engagement. 

 

AUDITOR’S OPINION

 

Our auditors stated at June 30, 2010 the Department of Natural Resource’s Schedules of Capital Assets and Intangible Assets are fairly presented.

 

 

WILLIAM G. HOLLAND

Auditor General

 

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AUDITORS ASSIGNED

 

Washington, Pittman & McKeever, LLC were our special assistant auditors for this audit.