REPORT DIGEST

REPORT DIGEST

DEPARTMENT OF VETERANS’ AFFAIRS – CENTRAL OFFICE

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2004

Summary of Findings:

Total this report 3

Total last report 2

Repeated from last report 0

Release Date:

April 13, 2005

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

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740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

· The Department made payments for efficiency initiative billings from improper line item appropriations.

· The Department did not have adequate monitoring procedures over an FY04 contract.

The Department did not maintain adequate internal controls over telecommunications.

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

DEPARTMENT OF VETERANS’ AFFAIRS

COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2004

EXPENDITURE STATISTICS

FY 2004

FY 2003

FY 2002

Total Expenditures (All Funds).............

$8,231,087

$9,138,723

$9,387,734

OPERATIONS TOTAL.......................

% of Total Expenditures..........

Personal Services..........................

% of Operations Expenditures......

Average No. of Employees..........

$6,552,726

80%

$4,015,140

61%

$7,241,406

79%

$4,528,191

63%

105

$7,234,792

77%

$4,544,123

63%

113

Other Payroll Costs (FICA, Retirement)

% of Operations Expenditures.........

$770,638

12%

$1,022,919

14%

$1,007,785

14%

Contractual Services.........................

% of Operations Expenditures.......

$722,311

11%

$705,248

$698,322

All Other Items................................

% of Operations Expenditures........

$1,044,637

16%

$985,048

14%

$984,562

14%

GRANTS TOTAL..................................

% of Total Expenditures...................

$1,678,361

20%

$1,897,317

21%

$2,152,942

23%

Cost of Property and Equipment.............

$1,315,035

$1,242,366

$1,562,046

SERVICE EFFORTS AND ACCOMPLISHMENTS (NOT EXAMINED)		FY 2004	FY 2003	FY 2002
Field Services Number of veterans and dependents served.............. Grants Number of claims processed.................................... State Approving Agency (based on Federal Fiscal Year) Number of visits made to ensure continued approval of Programs for Veterans' Educational Benefits........		171,629 5,517 645	189,200 6,854 640	167,040 7,026 636

	AGENCY DIRECTOR
	During Audit Period: Mr. Roy Dolgos (March 3, 2003 - June 30, 2004) Mr. John Johnston (July 1, 2002 - March 2, 2003)
	Currently: Mr. Roy L. Dolgos

Department did not receive guidance or documentation with the billings from CMS

Efficiency initiative payments were made from line items that had available monies

Efficiency initiative payments totaled $1,231,892

A $22,003 contract was not adequately monitored

Department could not produce evidence that all services and deliverables contracted for were provided

A telecommunications device for the deaf was not installed and operational

Phone bills were not reviewed

Telephone credit cards were not timely revoked

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

PAYMENTS WERE MADE FOR EFFICIENCY INITIATIVE BILLINGS FROM IMPROPER LINE ITEM APPROPRIATIONS

The Department made payments for efficiency initiative billings from improper line item appropriations. Public Act 93-0025, in part, outlines a program for efficiency initiatives to reorganize, restructure and reengineer the business processes of the State. The State Finance Act details that the amount designated as savings from efficiency initiatives implemented by the Department of Central Management Services (CMS) shall be paid into the Efficiency Initiatives Revolving Fund. The Act further requires State agencies to pay these amounts from line item appropriations where cost savings are anticipated to occur.

The Department did not receive guidance or documentation with the billings from CMS detailing from which line item appropriations savings were anticipated to occur. According to Department staff, they received no documentation or information from CMS detailing the nature and/or type of savings that CMS anticipated. The only guidance received was the amount of payments that should be taken from General Revenue Funds versus Other Funds for the September 2003 billings.

The Department made payments for these billings not from line item appropriations where the cost savings were anticipated to have occurred but from line items that simply had available monies to make payments from. For example, the Department used:

· $433,448 from an appropriation of $1.3 million for the Illinois Veterans’ Home at Manteno that was appropriated to the Department for an addition of 38 beds. The payment was applied to the Procurement Efficiency Initiative billing.

· $434,500 from personal services line item appropriations (i.e., regular positions, retirement, social security) for staff positions at the Illinois Veterans’ Homes in Quincy and

Manteno. These monies were applied to the Procurement Efficiency, Information Technology, and Vehicle Fleet Management initiatives. Additional personal services funds were used to pay the Facilities Management Consolidation billing.

The Department paid a total of $1,231,892 for the efficiency initiative from the General Revenue Fund. (Finding 1, pages 9-11)

We recommended that the Department only make payments for efficiency initiative billings from line item appropriations where savings would be anticipated to occur. Further, we recommended the Department seek an explanation from the Department of Central Management Services as to how savings levels were calculated, or otherwise arrived at, and how savings achieved or anticipated impact the Department’s budget.

Department officials concurred with the finding and stated “Payments for the supposed savings occurred from the line item appropriations that had sufficient funds rather than from the line item appropriations where savings were anticipated to occur. However, this was a matter of necessity and the Department felt it had few options available other than to follow this course of action.”

INADEQUATE CONTRACT MONITORING PROCEDURES

The Department did not adequately monitor an FY04 contract. The $22,003 contract required the vendor to provide various procedural manuals for the purpose of determining eligibility for V.A. benefits. Additionally, the vendor was to provide guidance and assistance to the Department’s clients and staff members relating to V.A. benefits and to submit quarterly reports summarizing and verifying the services provided during the quarter.

The Department paid the $22,003 contract amount in July 2003 but could not provide sufficient evidence that the vendor produced the various manuals, provided all services to Department clients, or provided the quarterly reports. (Finding 2, pages 12-13)

We recommended the Department adequately monitor its contracts to ensure all required items are received and reviewed before payments are made. Further, we recommended the Department either obtain sufficient evidence that the contractual services were provided or request that the vendor reimburse the State if the services were not adequately performed.

Department officials concurred with the finding.

NEED TO IMPROVE CONTROLS OVER TELECOMMUNICATIONS

The Department did not maintain adequate internal control over telecommunications. We noted the following:

· The Department did not have a telecommunications device for the deaf installed and operational.

· The Department had not reviewed phone bills for personal or unauthorized long distance calls since December 2002.

· The Department had not revoked telephone credit cards in a timely manner. We tested 20 (100%) credit card cancellations and noted that 13 (65%) cards issued to former employees were canceled 200 to 863 days late. (Finding 3, pages 14-16)

We recommended the Department have a telecommunications device for the deaf installed and operational to comply with DCMS Guidelines. We also recommended the Department establish procedures to review billing details before payments are made. Further, we recommended the Department establish controls over the revocation of telephone credit cards.

Department personal concurred with the finding and responded that a telecommunications device for the deaf and hard of hearing is now installed and operational. Also, the responsibility for review of the telephone bills has been assigned and all future phone bills will be reviewed and justification or reimbursement will be received for all questionable or unauthorized calls. Further, the Department has established procedures to timely cancel credit cards.

Responses to the findings were provided by Mr. Curt Stephens, Chief Fiscal Officer.

AUDITORS’ OPINION

We conducted a compliance examination of the Department as required by the Illinois State Auditing Act. We have not audited any financial statements of the Department for the purpose of expressing an opinion because the Department does not, nor is it required to, prepare financial statements.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:LKW:mec/jps

ASSIGNED AUDITORS

The Auditor General’s staff performed this compliance examination.