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FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
INADEQUATE FINANCIAL REPORTING
The Department of Human Rights did not maintain adequate financial records or prepare accurate accounting reports for submission to the Illinois Office of the Comptroller. The Department did not keep adequate records, schedules, or reconciliations to support grant/contract data, accounts receivables, and accounts payable.
As part of the year-end accounting and financial reporting closing process, State Agencies are required to prepare and submit to the State Comptroller accounting reports prepared in accordance with generally accepted accounting principles (GAAP) which summarize their yearly financial activities and status of their funds at year-end. The GAAP packages are used by the Comptroller to prepare the State’s Basic Financial Statements (which are prepared on an accrual basis). The Department’s books and records were maintained using the Comptroller’s Statewide Accounting Management System (SAMS) which is essentially a cash basis budgetary accounting system. Data must be gathered and a computation must be made annually to prepare GAAP basis financial statements. While the SAMS manual has information and instructions for preparing the "GAAP Reporting Package", the Department did not comply with these requirements. (Finding 1, pages 9-10) This finding, or variation thereof, has been repeated since 1997.
We recommended the Department identify the accounting principle issues generally accepted in the United States and keep accurate records, schedules, or reconciliations to support grant/contract data, accounts receivables, and accounts payable so that accurate GAAP packages can be prepared in the future.
Agency Officials stated that the Department keeps all source documents and schedules and will maintain its accounts receivables and accounts payables in general ledger form. (For previous agency responses, see Digest Footnote 1.)
UNTIMELY PROCESSING OF VENDOR INVOICES
The Department did not process vendor invoices in a timely manner.
We noted that 108 vouchers ($278,348) of 262 ($715,072) tested in fiscal years 2002 and 2003 (41%) were not approved within 30 days. We also noted that 49 vouchers paid out of the General Revenue Fund (6 in fiscal year 2002 and 43 in fiscal 2003) were paid 2 to 66 days late. Five of these vouchers paid late had interest due totaling $1,155 which was not automatically paid to the respective vendors.
Department management stated that the untimely processing of vouchers was due mainly to funds not being available at the time of receipt of bills and that they were not aware of the statutory requirement regarding the payment of interest on bills. (Finding 3, pages 13-14) This finding has been repeated since 1995.
We recommended the Department process vendor invoices timely and pay interest due vendors in compliance with the State Prompt Payment Act.
Department officials stated that they will try to approve and process vouchers within 30 days and will pay interest on late payments in compliance with the Act. (For previous agency responses, see Digest Footnote 2.)
INADEQUATE CONTROLS OVER PROPERTY
The Department lacked adequate controls over property with regards to physical control, recordkeeping, and reporting. The Department’s property and equipment totaled $1,261,325 as of June 30, 2003.
We noted the following:
Seven ($310,178) of 30 equipment items tested could not be located;
- Five of the 25 (20%) vouchers tested contained items totaling $26,705 which were recorded at an average cost instead of the actual cost. The 40 items on these five vouchers were recorded at an average unit cost of $667 each. Actual unit costs ranged from $654 to $799;
- Two equipment items (a camera case and an IBM computer) were located on the Agency’s premises but were not on the inventory listings; and
- One voucher for the purchase of new furniture, which included an item with a cost of $604, did not have a new furniture affidavit filed with the State Surplus Administrator. (Finding 4, pages 15-16)
We recommended the Department establish accountability for their fixed assets as required by Statute and SAMS procedures. The Department responded it will adhere to this recommendation.
OTHER FINDINGS
Other findings dealt with inadequate expenditure classifications and documentation, inadequate review of internal controls, and inadequate cash receipts records and reconciliation procedures. We will review progress toward implementation of all our recommendations during our next audit.
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WILLIAM G. HOLLAND, Auditor General
WGH:KMC:drh
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were E. C. Ortiz & Co., LLP.
Digest Footnotes
- INADEQUATE FINANCIAL REPORTING – (Previous Department
Responses)
2001: "The Department of Human Rights mantained most records needed to prepare FY’2000 and 2001 GAAP Reporting Package and Financial Statements. The Department hired a CPA firm to help prepare 2000-2001 financial statements and the 2001 GAAP Package. In preparing the 2000 GAAP Package it was determined that the beginning balances were incorrect. Once the error was detected by the Auditors, the Department was unable to make timely adjustments because FY’99 files had been sent to archives. Consequently a disclaimer was issued on FY’2000 and 2001 Financial Statements.
The DHR is making necessary adjustments to the prior year GAAP Package so that the GAAP Package and Financial Statements will be correct. In the future the Department will keep all necessary documentation inhouse."
1999: "The Department will comply with the recommendation and keep accurate records so that a complete and accurate GAAP package can be prepared."
1997: "The Department was aware and did maintain most of the supporting documentation for reported year-end financial information. Steps have been implemented and staff hired to ensure that all supporting documentation is retained in file."
- INADEQUATE VOUCHER PROCESSING - (Previous Department
Responses)
2001: "The Department tries to adhere to the established system of internal control over voucher processing. We are continuing to review vouchers for errors and have hired and trained staff in voucher processing. However, despite our best efforts some vouchers are not processed within 30 days. Generally, this is due to a delay in receipt of Federal Funds. Processing such vouchers, when funds are not available for payment, causes an accounting problem with the Comptroller’s office as well as the Department. If funds are not available when the Comptroller receives the vouchers, the voucher tape is voided and vouchers are returned to the agency. The agency must then void vouchers and hold until funds are available and reprocess. This is double work for both the agency and Comptroller’s office and causes even more delays.
The Department will make every effort to reduce the occurrence of these errors in order to reduce any interest liability and loss of credit."
1999: "The Department has updated its procedures and implemented controls to monitor and correct its own errors."
1997: "The Department agrees as recommended by the Auditors. The Department will establish a more stringent policy in order to strengthen controls over voucher processing."
1995: "The Department agrees with the recommendation. But, the receipt of federal funds are not always timely for payment of vendors within 30 days. Therefore, for internal control, invoices are not approved or paid until funds are available for expenditure.
This avoids vouchers being processed and returned by the Comptroller’s Office because monies are not available in the appropriate expenditure line. In the future, the Department will make every effort to approve and pay vouchers within 30 days."
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