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. "
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