FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
IMPROPERLY ALTERING INVOICE TO REDUCE FY 2001 LAPSED APPROPRIATION AND INCREASING
FY 2002 EXPENDITURE AUTHORITY
The Department altered an invoice for computer data services in FY 2001 that had
not yet been provided by the Department of Central Management Services (DCMS).
During the FY 2001 lapse period, the Department improperly changed an invoice for
$219,016 representing June, 2001 charges to reflect $2,783,011. The alteration resulted in
an excess of $2,563,995 being paid and used as a "credit" by the Department in
its FY 2002 data service activity with DCMS. DCMS has a specific prohibition of not
"advance billing" for the purpose of intentionally using up a user agency's
remaining appropriation balance. The FY 2001 invoice also included a notation that the
services being paid were for FY 2001 charges by stating "Contracted Prior to July
1". Due to the alteration of the invoice and this notation, the State Comptroller's
ability to identify the payment as improper was significantly impaired. Management stated
the alteration was to provide an advance to DCMS for costs the Department would incur in
FY 2002. (Finding 1, pages 13-14)
We recommended the Department implement procedures to: (1) ensure goods and services
are paid with current available appropriations relating to the proper fiscal year, and (2)
ensure manually altered invoices are not processed for payment.
Department officials responded their interpretation of the State Finance Act applicable
to CMS's ability to bill in advance based on estimated charges permitted the payment for
charges in advance without regard of appropriation year. The Department does agree with
the finding and will ensure that future vendor invoices are not altered and are paid from
the proper appropriation period.
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 2, pages 15-16)
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 and new acquisitions will be compiled on a current basis.
The Department has established a 5-year time period to complete the compilation of excess
land holdings acquired prior to FY 2003.
ESTIMATE OF ACCOUNTS PAYABLE WAS NOT SUFFICIENT
The Department did not have adequate procedures to estimate accounts payable at
year-end in the financial statements.
During our review of the Department’s estimate of accounts payable as of June 30,
2002, we reviewed subsequent disbursements in July, August, September, and October 2002.
We found disbursements totaling $14,162,000 were not properly accrued in the accounts
payable estimate as of year end. Of this amount, the Department adjusted the financial
statements for the Road Fund and the Transportation Bond Series B Fund by $10,648,000 and
$3,514,000, respectively. (Finding 3, pages 17-18)
We recommended the Department develop improved methods to estimate this portion of its
accounts payable accrual.
Department officials responded that it is developing a report that will improve the
timeliness and 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.
Of the inventory records tested at Hillside in District 1; Morton and Peoria West in
District 4; and Effingham in District 7; the quantity on hand for specific inventory items
did not reconcile to the Department’s stock status reports for 112 out of 160 items
tested. (Finding 9, pages 25-26) 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
consumed at the time they are issued from the primary warehouse to the district site.
Inventory records at the noted maintenance field locations are maintained primarily for
estimating annual usage to calculate future budgets. The Department will develop formal
written policies to set a threshold for the tracking of commodities inventory in the
District Maintenance Yards. (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 audit 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 4, pages 19-20) 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 reportedly 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. Andrew Gordon, Acting Bureau
Chief of Accounting and Auditing.
AUDITORS’ OPINION
Our auditors state the basic financial statements of the Department as of and
for the year ended June 30, 2002 are fairly presented in all material respects.
____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:SES: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
2000: 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.
1999: (Same response as 2000.)
1998: (Same response as 2000.)
1996: (Same response as 2000.)
1994: (Same response as 2000.)
#2 INTERNAL AUDIT NONCOMPLIANCE - Previous Agency Responses
2000: "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."
1999: (Same response as 2000.)
1998: (Same response as 2000.)
1996: (Same response as 2000.)
1994: (Same response as 2000.)
1992: (Same response as 2000.)
1990: (Same response as 2000.)
