REPORT DIGEST


ILLINOIS DEPARTMENT OF AGRICULTURE



FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the Single Audit Act and OMB Circular A-128)
For the Two Years Ended:
June 30, 1997



Summary of Findings:

Total this audit 14
Total last audit 18
Repeated from last audit 7





Release Date:
April 15, 1998





State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046









SYNOPSIS

  • The Department circumvented appropriation restrictions by transferring administrative service employees to unrelated divisional appropriations during fiscal years 1996 and 1997. Also, the Department did not have a consistent methodology for charging costs such as postage, telecommunications, and operation of automotive equipment among line items. This condition has existed since 1993.
  • Since 1986, the Department operated a locally held bank account without authority.
  • The Department made unnecessary advance payments for projects under the Fertilizer Research and Education Program. This condition has existed since 1993.
  • The Department did not charge rent to a non-governmental entity for office space at the Illinois State Fairgrounds.







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


DEPARTMENT OF AGRICULTURE
FINANCIAL AND COMPLIANCE AUDIT
For The Two Years Ended June 30, 1997

 

EXPENDITURE STATISTICS

FY 1997

FY 1996

FY 1995

  • Total Expenditures (All Funds)

OPERATIONS TOTAL
% of Total Expenditures
Personal Services
% of Operations Expenditures
Average No. of Employees
Other Payroll Costs (FICA, Retirement)
% of Operations Expenditures
Contractual Services
% of Operations Expenditures
All Other Operations Items
% of Operations Expenditures
GRANTS, PERMANENT IMPROVEMENTS, REFUNDS - TOTAL
% of Total Expenditures

  • Cost of Property and Equipment

 

 

$77,277,120

$47,924,665
62.0%
$23,598,871
49.2%
633
$4,471,931
9.3%
$7,836,507
16.4%
$12,017,356
25.1%


$29,352,455
38.0%

$122,450,078

$68,143,125

$44,493,340
65.3%
$22,934,440
51.5%
625
$4,412,604
9.9%
$8,037,507
18.1%
$9,108,789
20.5%


$23,649,785
34.7%

$118,823,588

$58,787,962

$40,397,520
68.7%
$22,220,998
55.0%
629
$4,137,486
10.2%
$8,018,207
19.9%
$6,020,829
14.9%


$18,390,442
31.3%

$113,727,720

SELECTED ACTIVITY MEASURES

FY 1997

FY 1996

FY 1995

  • Consumer Complaints - Weights & Measures
    Number of complaints (Calendar Year)
    Number of valid complaints (Calendar Year)
  • Consumer Complaints - Motor Fuel
    Number of complaints
    Number of valid complaints

*(through 10/17/97)

 

 


106*
9*

71
17


167
15

107
6


125
8

137
20

AGENCY DIRECTOR(S)
During Audit Period: Ms. Becky Doyle
Currently: Ms. Becky Doyle










Hundreds of employees were transferred to divisions for which they did not work















The Department does not have a consistent methodology for charging costs to line items
















The Department operated a locally held bank account since 1986 without statutory authority


The fund was operated without internal accounting controls and the only accounting record was a check register












Over $755,000 was awarded in advance without substantive reasons










For three awards, $108,267 out of $160,910 advanced remained unspent after 14 months









Approximately $14,000 in rental income was not collected

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CIRCUMVENTION OF APPROPRIATION RESTRICTIONS

The Department of Agriculture circumvented appropriation restrictions by transferring Administrative Service employees to unrelated divisional appropriations during fiscal years 1996 and 1997.

During the two fiscal years, there were hundreds of employees transferred to divisions for which they did not work. Department officials indicated these transfers were necessary to avoid layoffs due to insufficient appropriation authorizations in several personal service line items. Such transfers placed individuals on divisional payrolls for which they had no reporting responsibility and for which appropriations were improperly charged. As a result, the Department did not expend funds for the purposes expressly stated in the appropriation bill and did not comply with the State Finance Act. (Finding 2, page 25) This finding has been repeated since 1991.

We recommended that the Department expend funds only for the purposes for which they have been appropriated and properly plan future staffing levels. The Department stated that a cost allocation study now underway will provide a consistent methodology to charge administrative costs among its many line items.

We also noted that the Department does not have a consistent methodology for charging State costs among line items, including postage, telecommunications, and operation of automotive equipment. During the audit period, for example, approximately $94,728 in telecommunications bills were charged to the wrong division's appropriation. We also found that $3,584 for copier usage was charged to an unrelated lump sum appropriation for "Expenses to Promote Illinois Horseracing and Breeding Industry;" and $3,000 of postage for the Executive Office was charged to Environmental Programs in fiscal 1997 and $2,000 of postage was charged to Electronic Data Processing in fiscal year 1996. Without a documented and consistently applied methodology for charging costs among line items, expenditures may be incurred contrary to legislative intent. (Finding 1, page 23) This finding has been repeated since 1993.

We recommended the Department develop a cost allocation plan to document and justify the methodology to be used in charging expenditures throughout the Department. The Department stated they were developing a consistent and documented cost allocation methodology to charge State costs among line-items. (For previous Agency responses, see Digest Footnote #1.)

UNREPORTED AND UNRECORDED FUND

The Department operated a locally held bank account since 1986 without statutory authority, without filing reports with the State Comptroller, without recording the fund or related assets on Department records, and without reporting the fund to the Auditor General.

The Department was bequeathed a 94 acre farm (the Henry White Experimental Farm) in December 1985. In July 1986, the Department established a checking account to deposit receipts and pay expenses related to the farm. In fiscal years 1996 and 1997, the fund expended $14,226 and $22,144 respectively. The fund balance at June 30, 1997 was $36,370. The Department was unable to explain why the fund was not reported until this audit. The fund was operated without internal accounting controls, and the only accounting record was a check register. (Finding 5, page 29)

We recommended the Department comply with legal directives and the Comptroller's requirements with respect to reporting and recording local fund activities. The Department agreed that the bank account was held incorrectly outside of statutory authority, and stated that the Department itself had now corrected this omission. The Department also said a review of the accounting function determined that no other accounts were improperly classified.

UNNECESSARY ADVANCE PAYMENTS FOR RESEARCH

The Department made advance payments for all research projects awarded under the Fertilizer Research and Education Program without substantive reasons. During the audit period, the Department treated as contracts, awards that should be considered to be grants. Over $755,000 was advanced to universities for fertilizer research. As a result, recipients had full use of funds before incurring any expenses. Several awards were not fully spent and should have been recovered under the Illinois Grant Funds Recovery Act. The Department maintained that these awards were contracts for purchase of professional services, and, therefore, it was not necessary to track expenditures.

As a result of advancing funds before they were needed, $108,267 out of $160,910 for three 1996 awards remained unspent at June 30, 1997, 14 months after the award. Because the Department did not track these funds, we were unable to determine if the remaining $108,267 was used for fertilizer research. For four awards totaling $158,136 advanced in May, 1997, only $7,398 had been spent at June 30, 1997, two months later. (Finding 7, page 33) This finding has been repeated since 1993.

We recommended the Department comply with the Grant Funds Recovery Act and State Finance Act for these awards and recover all unspent funds at the completion of the grant. The Department stated it will develop procedures to better time payments with grantee expenditure needs and recover unspent funds at the end of the grant period. (For previous Agency responses, see Digest Footnote #2)

RENT NOT CHARGED FOR LEASED SPACE

The Department did not charge rent to a non-governmental entity which occupied office space at the Emerson Building at the Illinois State Fairgrounds. The Department estimated that beginning with the occupancy in November 1995 until a lease was drafted in November, 1997 approximately $14,000 of rental income was not collected. Department personnel said not entering into a rental agreement was an oversight. (Finding 12, page 40)

We recommended the Department finalize a lease agreement and establish procedures to ensure that any future space rentals have properly executed lease agreements. The Department stated that a lease agreement was finalized in December, 1997 and that procedures have been established that provide for a signed copy of a "Lease Rental Agreement" being placed on file before authorizing the space to be occupied.

OTHER FINDINGS

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

AUDITORS' OPINION

Our auditors state the June 30, 1996 and 1997 financial statements for the Department of Agriculture are fairly presented.

____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:KMC:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were Sikich Gardner & Co, LLP.

 

DIGEST FOOTNOTES

#1: CIRCUMVENTION OF APPROPRIATION RESTRICTIONS-PREVIOUS AGENCY RESPONSES.

Administrative Transfers

1995: "The Department does not concur. The Department asserts that administrative costs are allocable to all programs administered by the Department. Due to the recommendation from the previous audit, an effort to reduce such charges has resulted in no administrative personnel charges to the various programs in FY 95." (We disagreed with the Department in an auditor's comment following this response)

1993: "The Department will implement the recommendation."

1991: "The Department will comply with the recommendation. However, it should be noted that these personnel transfers were within the purposes of the appropriations involved."

Allocation Plan

1995: "The Department does not concur. The Department asserts that it has properly documented the charges." (The response then goes into detail to support the rationale for specific charges. In an Auditor's Comment following this response, we did not agree.)

1993: "The Department will implement the recommendation. Over the past two fiscal years, the agency has undergone a major reorganization. Various organization units were moved or combined with other units which did not match the structure in the appropriations passed by the General Assembly. In addition, personnel were physically moved, which created difficulty in tracking telephones, vehicles, and other support costs to the proper appropriations. The current budget request is structured to match the new organization chart."

#2 UNNECESSARY ADVANCE PAYMENTS FOR RESEARCH - PREVIOUS AGENCY RESPONSES

1995: "The Department does not concur. The Department does have a substantive reason to make advance payments. This can be substantiated by a letter on file at the Department from the University of Illinois at Urbana-Champaign which states the following: "As a matter of policy, the University of Illinois requests full funding in advance for research activities." It further states: "This arrangement is necessary for many reasons the following being of primary importance." The letter then lists the reasoning for the University's position. (In an Auditor's Comment following this response, we did not agree.)

1993: "The Department will implement this recommendation, however, the Illinois Fertilizer Act does not require financial reporting, only reports of research progress. Future grant contracts will include provisions for financial reports to be submitted to the Department. "