ILLINOIS DEPARTMENT OF LABOR

COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2007

EXPENDITURE STATISTICS

FY 2007

FY 2006

FY 2005

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

$6,934,114

$6,161,381

$6,456,954

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

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

$5,238,439

76%

$4,711,460

76%

$5,165,422

80%

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

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

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

$3,776,814

72%

$3,410,736

72%

$3,425,871

66%

Other Payroll Costs (FICA, Retirement)...

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

$716,578

14%

$543,982

12%

$793,893

15%

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

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

$186,896

$148,580

$184,069

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

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

$558,151

11%

$608,162

13%

$761,589

15%

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

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

$1,695,675

24%

$1,449,921

24%

$1,291,532

20%

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

$664,820

$659,944

$702,115

SELECTED ACTIVITY MEASURES (Not Examined)	FY 2007	FY 2005	FY 2005
.... Complaints Received Due to Safety Problems Noted in Public Buildings................................................	61	92	91
.... Carnival Rides Inspected......................................	2,132	1,843	1,874
.... Prevailing Wage Complaints Completed................	682	1,081	1,201
.... Arbitration Hearings.............................................	15	42	47
.... Minimum Wage Investigations Completed.............	1,224	942	887
.... Number of Participants in Displaced Homemaker Program..............................................................	1,484	1,515	1,373

AGENCY DIRECTOR

During Examination Period: Arthur Ludwig (through 12/31/06); Catherine Shannon, Acting Director 12/18/06 to 1/31/07; Director effective 2/1/07

Currently: Catherine Shannon

Amounts totaling $898,544 in FY06 and $1,081,398 in FY07 not supported.

Monthly reconciliations could not be located

Deposits totaling $58,899 deposited late

Documentation could not be located

Incomplete reports

Inadequate method of tracking and monitoring complaints related to billings

Three sets of property inventory records maintained, however, all differed in content and did not reconcile to each other

Inaccurate and incomplete reports submitted to the Department of Central Management Services

Items not added to Department property inventory register

Items totaling $2,816 could not be located

Errors noted by prior year auditors not corrected

No ledger of claimants and corresponding dollar amounts maintained

Reconciliations could not be located

Vouchers totaling $11,476 could not be located

Lump sum appropriation improperly used

$157,965 and $157,821 expended improperly in FY06 and FY07, respectively

Unrecorded transactions totaling $528,067 noted

Incorrect transactions totaling $213,161 noted

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER REVENUES

The Department did not exercise adequate controls over revenues. We noted the following control weaknesses:

· The Department did not maintain documentation to support amounts reported on their Agency Fee Imposition Reports totaling $898,544 and $1,081,398 for Fiscal Years 2006 and 2007, respectively.

· The Department did not maintain documentation of returned checks. As a result, we could not determine if collection attempts on unpaid amounts were made.

· The Department could not locate any monthly reconciliations of its receipts to State Comptroller records for the General Revenue Fund, the Special State Trust Fund, and the Child Labor Law Enforcement Fund.

· The Department’s records for 51 of 60 (5%) receipts tested, totaling $160,454, were inconsistent in terms of dates received and dates deposited on the Department’s Check Receipts System and the Department’s files, respectively.

· The Department’s records did not include date stamps for 32 of 60 (53%) receipts tested, totaling $103,732.

· Nineteen of 60 (32%) receipts tested, totaling $58,899, were deposited between 4 and 33 days late.

· The Department did not retain copies of the checks or bank deposit slips for 2 of 60 (3%) receipts tested, totaling $5,995. (Finding 1, pages 10-12)

We recommended the Department maintain documentation to support amounts reported on their Agency Fee Imposition Reports, document collection efforts on past-due amounts owed to the State, and perform monthly reconciliations of Department records to State Comptroller records. We also recommended the Department comply with the State Officers and Employees Money Disposition Act by making timely deposits into the State Treasury and documenting the date that receipts are received and ensure collection of revenues and adequate documentation is maintained and readily available for all transactions.

Department officials agreed with our recommendation.

INADEQUATE CONTROLS OVER ACCOUNTS RECEIVABLE RECORDS AND REPORTING

The Department did not exercise adequate controls over accounts receivable records and reporting. We noted the following:

· The Department could not locate documentation to support the transactions reported on 21 of 24 (88%) quarterly accounts receivable reports submitted to the State Comptroller’s Office.

· Two of three (67%) quarterly accounts receivable reports prepared by the Department for the quarter ended June 30, 2007 were incomplete and inaccurate.

· The Department did not maintain adequate accounts receivable records to facilitate aging and collection attempts on unpaid amounts and there does not exist an adequate method of tracking and monitoring complaints related to billings, or receivables, due to the absence of proper accounts receivable records.

· Three of 24 (13%) accounts receivable reports prepared by the Department were submitted to the State Comptrollers’ Office late. (Finding 2, pages 13-14)

We recommended the Department maintain detailed records of all billings to support accounts receivable balances reported. We also recommended the Department periodically review all accounts receivable to facilitate collection attempts and to maximize revenues.

Department officials agreed with our recommendation.

PROPERTY CONTROL WEAKNESSES

The Department did not exercise adequate controls over recording and reporting of State Property. The Department maintained three sets of property inventory records during the period, including two computerized property inventory registers and manually prepared monthly transaction spreadsheets. The results of our testing indicated the three sets differed in content and did not reconcile to each other. We noted the following:

· The Annual Inventory Certifications submitted to the Department of Central Management Services were not accurate and complete due to the Department using different reports to prepare the FY06 and FY07 reports. In addition, one item, totaling $699 was excluded from the May 31, 2006 certification, two items, totaling $1,106 were excluded from the May 31, 2007 certification, and three items, totaling $4,207 purchased in prior periods were excluded from both the May 31, 2006 and May 31, 2007 certifications.

· Six of 8 (75%) Quarterly Reports of State Property (C-15’s) prepared by the Department and submitted to the State Comptroller’s Office did not accurately reflect Department equipment transactions. We noted differences between the addition, deletion, and ending balance amounts reported on the C-15’s and the Department’s monthly transaction reports.

· Seven of 10 (70%) additions to property inventory tested, totaling $2,241 were added to the Departments’ monthly transaction spreadsheets but were not added to their property inventory register.

· One of 3 (33%) deletions of property tested, totaling $13,995 was deleted from the Department’s monthly transaction spreadsheet but was not removed form their property inventory register.

We also noted the following:

· Six items purchased during the period, totaling $1,403 were not added to the Department’s property inventory register and one item, totaling $699 was not added timely.

· The Department could not locate supporting documentation to verify the historical costs for 6 of 10 (60%) additions to property inventory tested, totaling $3,225.

· Two of 3 (67%) transferred out items, totaling $14,223 did not have documentation showing they provided the historical cost, purchase price, and date to the receiving agency.

· Five of 25 (20%) items tested, totaling $2,816 appeared on the Department’s records but could not be located within the Department.

· Two of 25 (8%) items tested, were located within the Department, however, the physical locations differed from the locations specified in the Department’s records.

· The Department did not accurately correct errors noted during the previous period by the auditors. (Finding 3, pages 15-18) This finding was first reported in 2003.

We recommended the Department strengthen controls over the recording and reporting of State property by reviewing their inventory and recordkeeping practices to ensure compliance with statutory and regulatory requirements. We also recommended the Department ensure all equipment is accurately and timely recorded on the Departments’ property records and properly tagged. In addition, we recommended the Department thoroughly review all reports prepared from internal records for accuracy before submission to the State Comptroller and the Department of Central Management Services.

Department officials agreed with our recommendation. (For the previous agency response, see Digest Footnote #1)

INADEQUATE CONTROL OVER SPECIAL STATE TRUST FUND

The Department did not exercise adequate control over its Special State Trust Fund (Fund 251). We noted the following:

· The Department did not maintain a ledger of claimants and corresponding dollar amounts comprising the balance held in the Special State Trust Fund. The State Comptroller’s Office records showed balances of $920,829 and $1,357,403 as of June 30, 2006 and June 30, 2007 respectively.

· The Department could not locate documentation of reconciliations prepared for receipts or expenditures during the examination period.

· The Department could not locate 19 of 47 (40%) vouchers, totaling $11,476, requested for detail testing of disbursements.

· The Department could not locate documentation for 12 receipts, totaling $27,067 received by the Department and deposited in Fund 251. Those receipts should have resulted in either disbursements to the individual claimants or in liability amounts held in Fund 251 until the claimants could be located and paid.

· The Department’s records for one receipt, totaling $2,208, did not contain the name or names of the

corresponding claimant or claimants. (Finding 4, pages 19-20)

We recommended the Department maintain detailed records for all Special State Trust fund transactions. We also recommended the Department retain documentation of all reconciliations performed.

Department officials agreed with our recommendation and stated they currently maintain documentation of its monthly reconciliations.

IMPROPER USE OF APPROPRIATED FUNDS

The Department improperly used funds appropriated by the General Assembly. The Department received lump sum appropriations of $159,000 in each of Fiscal Year 2006 and Fiscal Year 2007 for costs associated with conducting an annual study regarding the employment progress of women and minorities as mandated by P.A. 87-405. However, an interagency agreement, effective November 16, 2004, transferred all powers, duties, rights and responsibilities with respect to administration of the annual study from the Department of Labor to the Illinois Department of Employment Security. However, no monies were to be transferred.

We noted the Department continued to spend from this lump sum appropriation although the Department performed no further duties associated with this study after the transfer. The Department expended $157,965 from this fund in Fiscal Year 2006 and $157,821 in Fiscal Year 2007. (Finding 5, pages 21-22)

We recommended the Department limit expenditures from appropriate line items to the purpose for which they are appropriated.

Department officials agreed with our recommendation and stated the FY 2008 and FY 2009 appropriation language had been changed to allow for costs associated with Equal Pay and Victims Economic Safety and Security Act.

INACCURATE EXPENDITURE RECORDS

The Department did not maintain accurate and properly reconciled expenditure records. We noted 13 unrecorded transactions during Fiscal Year 2006 and 54 unrecorded transactions during Fiscal Year 2007 totaling $1,655 and $526,412, respectively. We also noted 8 incorrectly recorded transactions during Fiscal Year 2006 and 14 incorrectly recorded transactions during Fiscal Year 2007. The net dollar amounts of these incorrectly recorded transactions were $4,711 and $208,450, respectively. (Finding 6, pages 23-24)

We recommended the Department maintain accurate and complete records of all expenditures. We also recommended the Department perform monthly reconciliations of agency expenditures to Comptroller records as required by the Statewide Accounting Management System to ensure the accuracy of their expenditure records.

Department officials agreed with our recommendation and stated they currently perform monthly expenditure reconciliations.

OTHER FINDINGS

The remaining findings are reportedly being given attention by the Department. We will follow up on our findings during our next examination of the Department.

STATE COMPLIANCE EXAMINATION ACCOUNTANT'S REPORT

The auditors qualified their report on State Compliance for findings 07-1, 07-2 and 07-4. Except for the noncompliance described in these findings, the auditors state the Department complied, in all material respects, with the requirements described in the report.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JSC:pp

AUDITORS ASSIGNED

The compliance examination was conducted by the Auditor General’s staff.

DIGEST FOOTNOTES

#1 – PROPERTY CONTROL WEAKNESSES – Previous Agency Response

2005: The Department of Labor agrees.