Illinois Department of Employment Security

REPORT DIGEST

DEPARTMENT OF EMPLOYMENT SECURITY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 1999
AND
COMPLIANCE AUDIT
(In Accordance with the Single Audit Act and OMB Circular A-133)
FOR THE TWO YEARS ENDED JUNE 30, 1999

Summary of Findings:

Total this audit 3
Total last audit 4
Repeated from last audit 0

Release Date:
April 20, 2000

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 lacked adequate supporting documentation and approvals on a number of transactions selected for testing by the auditors.

The Department incorrectly recorded certain property purchases and also misstated its property values by not posting all equipment disposals to the property records.

The Department had not implemented certain mandates including an Emergency Assistance Revolving Fund to pay job search and/or start-up costs of persons either unemployed or newly hired.

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

DEPARTMENT OF EMPLOYMENT SECURITY

EXPENDITURE STATISTICS	FY 1999	FY 1998	FY 1997
Total Expenditures (All Funds) Total Expenditures (Appropriated Funds) % of Total Expenditures OPERATIONS TOTAL % of Total Expenditures (Appropriated Funds) Personal Services % of Operations Expenditures Average No. of Employees Other Payroll Costs (FICA, Retirement and Group Insurance) % of Operations Expenditures Contractual Services % of Operations Expenditures Unemployment Compensation Benefits to Former State Employees % of Operations Expenditures Telecommunications Expenditures % of Operations Expenditures All Other Operations Items % of Operations Expenditures GRANTS AND TRANSFERS TOTAL % of Total Expenditures (Appropriated Funds) Total Expenditures (Non-Appropriated Funds/Other Agency Spending % of Total Expenditures OPERATIONS TOTAL % of Total Expenditures Contractual Services % of Operations Expenditures Trade Readjustment, North American Free Trade & Disaster Unemployment Assistance Programs % of Operations Expenditures GRANTS AND OTHER TOTAL % of Total Expenditures Unemployment Compensation Benefits % of Total Expenditures Appropriated Spending by other agencies and State Employee Unemployment Transfer (no Transfers in FY 1997) % of Total Expenditures Cost of Property and Equipment (All Funds)	$1,602,477,922 $191,912,174 12.0% $177,571,004 92.5% $85,445,112 48.1% 2,073 $27,733,599 15.6% $40,938,796 23.0% $7,391,802 4.2% $7,764,538 4.4% $8,297,157 4.7% $14,341,170 7.5% $1,410,565,748 88.0% $4,852,469 0.3% $758,889 15.6% $4,093,580 84.4% $1,405,713,279 99.7% $1,393,797,976 99.2% $11,915,303 0.8% $34,159,000	$1,557,143,509 $180,189,313 11.6% $173,876,281 96.5% $84,865,020 48.8% 2,076 $24,126,360 13.9% $38,938,546 22.4% $9,181,343 5.3% $5,991,355 3.4% $10,773,657 6.2% $6,313,033 0.4% $1,376,954,196 88.4% $6,161,334 0.4% $1,088,499 17.7% $5,072,835 82.3% $1,370,792,862 99.6% $1,363,100,180 99.4% $7,692,682 0.6% $38,570,000	$1,442,649,618 $169,104,996 11.7% $166,025,754 98.2% $82,603,738 49.8% 2,071 $21,693,742 13.1% $29,477,720 17.8% $10,019,175 6.0% $4,074,813 2.4% $18,156,566 10.9% $3,079,242 1.8% $1,273,544,622 88.3% $9,855,143 0.8% $1,475,507 15.0% $8,379,636 85.0% $1,263,689,479 99.2% $1,263,411,000 100.0% $278,479 0.0% $36,151,000
SELECTED ACTIVITY MEASURES	*FY 1999	FY 1998	FY 1997
Revenues Average Quarterly State Unemployment Rate Average Quarterly National Unemployment Rate	4.36% 4.36%	4.46% 4.51%	4.71% 4.95%
AGENCY DIRECTOR(S) During Audit Period: Linda Renee Baker Currently: Gertrude W. Jordan

*Calculation of the average does not include the fourth quarter.

Documentation or signature of approvals missing

Maintenance of property records lacked accuracy

Statutory mandates not implemented

INTRODUCTION

The Department of Employment Security is a cabinet-level agency which operates three major programs: Unemployment Insurance, Employment Service, and Labor Market Information.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO IMPROVE DOCUMENTATION PRACTICES

The Department had various missing documents and documents with no approval signatures to adequately support certain transactions. In addition, 1998 Advisory Board minutes were not retained due to both faulty recording equipment and missing notes. (Finding 1, pages 12-14)

We noted 58 of 60 payroll vouchers and 30 of 60 automotive vouchers which did not contain approval signatures. Without the retention of a signed document, it is difficult to determine if a transaction has been processed. It is also difficult for accounts payable staff to avoid duplicate payments. For 6 of 60 vehicle property records we examined, the acquisition date of the vehicle was missing. Finally, the Department did not follow its rules which require documentation of all Board meetings because there were no minutes available of the February, 1998 Advisory Board meeting.

We recommended the Department ensure compliance with its policies and procedures which require proper documentation in these areas.

Department officials concurred with the recommendations.

NEED TO IMPROVE CONTROLS OVER PROPERTY AND EQUIPMENT

The Department was not recording equipment purchases properly, and it did not have adequate controls over equipment that had been transferred or disposed of. (Finding 2, pages 15-16)

Five equipment purchases which included a trade-in of an existing piece of equipment were improperly recorded net of the trade-in value. This procedure undervalues the actual cost of the item on the Department's property ledger. Also, the Department's recording of disposed or transferred property was not reliable due to lack of adequate controls.

We recommended the Department review all invoices for equipment purchases to insure that the property is recorded at cost to include any trade-in, installation costs, etc. as required by generally accepted accounting principles. Also, additional guidelines for the disposal of property should be established to insure that proper amounts and items are deleted from the Property Ledger.

Department officials concurred with our recommendation.

NONCOMPLIANCE WITH STATUTORY MANDATES

The Department was not in compliance with certain applicable statutory mandates that provide (1) assistance to individuals by paying job search or start-up costs pursuant to the Unemployment Insurance Act, and (2) the posting of a bond by nonresident contractors as required pursuant to the Nonresident Contractor Bond Act. (Finding 3, pages 17-19)

The Unemployment Insurance Act created an Employment Assistance Revolving Fund whose initial funding and reimbursements were to be obtained from Department of Human Services appropriations. The purpose of the Fund is to assist individuals who have no available resources in paying job search costs and related start-up costs in their efforts to attain employment. The Fund had not been established.

The Nonresident Contractor Bond Act requires that nonresident contractors from states which require Illinois contractors to pay a surety bond are also required to pay a surety bond with the Department prior to commencement of work. This mandate had not been implemented.

We recommended the Department seek funding from the Department of Human Services to establish and implement the employment assistance program as required by the Unemployment Insurance Act. We further recommended that the Department allocate resources to comply with the Nonresident Contractor Bond Act.

Department officials concurred with our recommendation and stated they plan to take corrective action.

AUDITORS' OPINION

Our auditors state the Department's financial statements as of and for the year ended June 30, 1999 are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:SES:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were KPMG LLP.