REPORT DIGEST

DEPARTMENT OF TRANSPORTATION

FINANCIAL AND COMPLIANCE AUDIT

For the Year Ended:
June 30, 2000

Summary of Findings:

Total this audit 8
Total last audit 13
Repeated from last audit 5

Release Date:
April 26, 2001

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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 did not have adequate procedures regarding the use and disposition of excess land.
  • The Department did not have adequate procedures to estimate accounts payable.
  • The Department did not have adequate controls over commodities inventory. This condition has existed since 1994.
  • The Department's Chief of Audits did not report directly to the Secretary of Transportation as required by statute. This condition has existed since 1990.

 

 

 

 

 

 

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

 

 

 

 

DEPARTMENT OF TRANSPORTATION FINANCIAL AND COMPLIANCE AUDIT
For The Year Ended June 30, 2000

EXPENDITURE STATISTICS

FY 2000

FY 1999

Total Expenditures (All Funds)

$3,273,689,037

$2,605,280,389

OPERATIONS TOTAL

% of Total Expenditures

$563,933,416

17.23%

$536,545,762

20.59%

Personal Services
% of Operations Expenditures
Average No. of Employees

$331,473,565
58.78%
6,673

$319,280,060
59.51%
6,434

Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures

$68,668,683

12.18%

$65,112,770

12.13%

Contractual Services
% of Operations Expenditures

$80,802,985
14.33%

$79,445,169
14.81%

All Other Operations Items
% of Operations Expenditures

$82,988,183
14.71%

$72,707,763
13.55%

CONSTRUCTION TOTAL

% of Total Expenditures

$1,565,847,817

47.83%

$1,058,329,545

40.62%

GRANTS TOTAL

% of Total Expenditures

$1,138,011,708

34.76%

$1,004,441,060

38.56%

CAPITAL IMPROVEMENTS TOTAL

% of Total Expenditures

$5,896,096

0.18%

$5,964,031

.23%

Cost of Property and Equipment

$525,404,000

$463,069,000

SELECTED ACTIVITY MEASURES (Unaudited)

FY 2000

FY 1999

New Bridges Constructed

140

99

Bridges Widened

12

6

Bridges Repaired

81

111

Miles of Concrete Road Constructed

43

60

Miles of Full-depth Bituminous Road Constructed

28

19

Miles of Bituminous Road Surfaced

1,558

964

AGENCY SECRETARY(S)

During Audit Period: Mr. Kirk Brown
Currently: Mr. Kirk Brown

 

 

 

 

 

Excess land should be inventoried and disposed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$40,587,904 of disbursements were not properly accrued in the accounts payable estimate

 

 

 

 

 

 

 

 

 

 

 

 

Controls over commodities need improvement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal Auditor does not report directly to the Secretary

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE PROCEDURES REGARDING EXCESS LAND

The Department did not have adequate procedures regarding the use and disposition of excess land.

The Department has acquired numerous properties in previous years through acquisition and eminent domain proceedings for future highway construction. These properties are currently not being used. Department officials state that no comprehensive inventory of excess land has been maintained. Currently, it is not possible to identify these properties and determine their potential future use because no formal assessment of the use of each significant parcel of excess land is performed. Management stated that the Department relies on external parties who are interested in the purchase of excess land to inquire of the Department about a potential sale. (Finding 1, page 10)

We recommended the Department follow the written policies and procedures to control the use and disposition of excess land. The excess land should be inventoried and a complete listing compiled, and that listing should be updated on a monthly basis. We also recommended the Department revise its current policies and procedures to require that a periodic evaluation of the use of each significant parcel of excess land be performed by the District Engineer so that excess land can be identified and disposed.

Department officials responded that property acquired which is not needed for highway construction will be inventoried as time permits and the Department will continue to respond to citizen inquiries regarding excess property.

ESTIMATE OF ACCOUNTS PAYABLE WAS NOT SUFFICIENT

The Department did not have adequate procedures to estimate accounts payable at year-end in the combined financial statements.

During our review of the Department’s estimate of accounts payable as of June 30, 2000, we reviewed subsequent disbursements in July, August, and September, 2000. We found disbursements totaling $40,587,904 were not properly accrued in the accounts payable estimate as of year end. Of this amount, the Department adjusted the combined financial statements for the Road Fund and the State Construction Fund by $18,291,434 and $9,067,329, respectively. The remaining amounts were not adjusted because management believed the net effect of the offsetting federal reimbursements would not be material to the Department’s financial statements. (Finding 2, page 11)

We recommended the Department develop improved methods to estimate this portion of its accounts payable accrual.

Department officials responded that it has adjusted the method used for estimating year end accounts payable.

COMMODITIES INVENTORY RECORDS ARE INADEQUATE

No formal commodities inventory policy exists. Inventory on hand did not reconcile to the commodity inventory records maintained in the Department’s District maintenance yards. No inventory records existed at the Springfield west yard in District 6.

Of the inventory records tested at Hillside, Stevenson, and Alsip in District 1; LaSalle, Morris, and Yorkville in District 3; and Lincoln and Riverton in District 6; the quantity on hand for specific inventory items did not reconcile to the Department’s stock status reports for 15 out of 60 items tested. The most significant differences were in the LaSalle and Yorkville yards where 5 of 10 and 3 of 10 items, respectively, did not agree to the index cards. (Finding 4, page 13) This finding has been repeated since 1994.

We recommended the Department develop formal inventory policies and procedures for all District maintenance yards and maintain inventory records throughout the year. The Department should implement a policy for its inventories based on levels of inventory and thresholds of consumption.

Department officials stated commodity items stored in maintenance yard stockrooms are not material and consumption is monitored by issuing warehouses and distribution centers. Inventory records at the yard level are not cost effective, yet may be voluntarily maintained to avoid outages and provide estimated usage rates. The Department is developing a system to analyze both warehouse inventory and yard expenditure records to track commodity consumption for each yard. Unreasonable yard usage of commodities will be investigated. (For previous Agency responses, see Digest Footnote 1.)

LACK OF COMPLIANCE WITH STATUTE

The Department’s Chief of Audits does not report to the Secretary of Transportation as required by the Fiscal Control and Internal Auditing Act, but instead reports to the Bureau Chief of Accounting and Auditing. The Act (30 ILCS 10/2002) requires the chief internal auditor to report directly to the chief executive officer and have direct communication with the chief executive officer and the governing board, if one exists, in exercising audit activities.

As set forth by Departmental Order 7-1, the Chief of Audits has access and may communicate directly to the Secretary of Transportation on any Departmental matter. Although the Department believes that the existing relationship between the Chief of Audits and the Secretary complies with the intent of the Statute, sound internal controls dictate internal audit functions should exist outside organization’s primary operational structures and should regularly report to the organization's executive management (the Secretary). The Department’s existing reporting structure, as it relates to the internal audit function, does not appear to fully promote exclusive communication by the Chief of Audits and the Secretary of the Department. (Finding 5, page 14) This finding has been repeated since 1990.

We recommended the Chief of Audits report directly to the Secretary of Transportation to comply with the Fiscal Control and Internal Auditing Act.

Department officials do not agree with our recommendation. They believe that the current reporting relationship between the Chief of Audits and the Secretary has worked well and meets the needs of the Department and the intent of the Statute. (For previous agency responses, see Digest Footnote 2.)

OTHER FINDINGS

The remaining findings are less significant and are being given attention by the Department. We will review progress toward implementing these recommendations in our next compliance audit.

Responses to the recommendations were provided by Mr. David G. Campbell, Bureau Chief of Accounting and Auditing.

AUDITORS’ OPINION

Our auditors state the combined financial statements of the Department as of and for the year ended June 30, 2000 are fairly presented in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:GSR:pp

SPECIAL ASSISTANT AUDITORS

KPMG, LLP were our special assistant auditors for this audit.

DIGEST FOOTNOTES

#1 INADEQUATE CONTROLS OVER COMMODITIES INVENTORY - Previous Agency Responses

1999: The Department agrees with the finding that field locations should be monitored regarding their consumption of bulk and utilitarian commodities and is developing a system to produce this information. However, the Department believes the cost of maintaining perpetual inventory systems outweighs the benefits.

1998: (Same response as 1999.)

1996: (Same response as 1999.)

1994: (Same response as 1999.)

#2 INTERNAL AUDIT NONCOMPLIANCE - Previous Agency Responses

1999: "The Chief of Audits, in accordance with IDOT Departmental Order 7-1, has access and may report directly to the Secretary of Transportation on any audit matter. Each internal audit report is addressed directly to the Secretary. The Chief of Audits meets directly with the Secretary at his discretion to discuss the annual audit work plan, results of specific audits, and concerns of the Secretary. We believe that the current reporting relationship between the Chief of Audits and the Secretary has worked well and meets the needs of the Department and the intent of the Statute."

1998: (Same response as 1999.)

1996: (Same response as 1999.)

1994: (Same response as 1999.)

1992: (Same response as 1999.)

1990: (Same response as 1999.)