REPORT DIGEST
ILLINOIS ARTS COUNCIL AND FOUNDATION

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:

Release Date:
April 8, 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 Council did not conduct any compliance audits of grantees during the FY 96 or 97.
  
• Two Council members and one panelist voted on grants to recipients with whom they had affiliations.
  
• The Council did not always prepare vouchers properly. Some vouchers were not approved within 30 days, an identical voucher number was issued for different invoices, an invoice for direct travel expense was paid twice, and certain vouchers had incorrect appropriation codes.
  
• Council management did not approve out-of-state travel before the travel occurred as required under the Governor's travel regulations.
  
• Council management did not disburse federal grant funds within 30 days as required under federal guidelines.
  
  
  
  
  
  
  
  

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

FY 1997

FY 1996

FY 1995

• Total Expenditures (All Funds)

OPERATIONS TOTAL
% of Total Expenditures
Personal Services
% of Operations Expenditures
Average No. of Employees
Average Salary Per Employee

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

Contractual Services
% of Operations Expenditures

All Other Operations Items
% of Operations Expenditures

GRANTS TOTAL
% of Total Expenditures

• Cost of Property and Equipment

$7,995,329

$1,403,319
17.5%
$969,181
69.0%
22
$44,054

$176,926
12.6%

$104,693
7.5%

$152,519
10.9%

$6,592,010
82.5%

$232,381

$6,256,129

$1,384,933
22.1%
$957,210
69.1%
23
$41,618

$179,906
13.0%

$114,751
8.3%

$133,066
9.6%

$4,871,196
77.9%

$233,357

$7,378,954

$1,349,553
18.3%
$856,401
63.5%
22
$38,927

$158,951
11.8%

$117,693
8.7%

$216,508
16.0%

$6,029,401
81.7%

$222,894

FY 1997

FY 1996

FY 1995

• Federal Grant Receipts
  
• Foundation Revenues
  
• Grant Applications Received
  
• Artists Employed Through Grants Awarded

$474,200
$55,259
1,861
121,000

$758,860
$72,244
1,903
115,110

$749,910
$17,179
2,289
123,400

During Audit Period: Ms. Lori Montana Spear, Ms. Katherine Davis
Currently: Ms. Katherine Davis

The Council did not conduct any compliance audits of grantees

Members and the panelist did not abstain from voting on related grant proposals

Ten of 51 vouchers tested were not approved or denied within 30 days as required by administrative rule

Out of state travel was not approved by management before the travel occurred

Cash advances were not expended within the 30 day period required by federal guidelines

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INSUFFICIENT GRANT ADMINISTRATION

The Council did not perform grant compliance audits during the audit period. In addition, 2 out of 57 fellowship grants tested were not approved by the Council as required by the Council's procedures manual and 10 of 15 special Assistance Grants were funded without all required signatures on the grant review sheets. Further, two grants were paid without signed cash request forms from the grantee as required by the procedures manual. (Finding 1, pages 26-28)

We recommended the agency strengthen internal controls to improve its grant administration.

Management for the Illinois Arts Council agreed with the recommendation except officials noted that grants have varying compliance characteristics and the Council would audit grants accordingly.

CONFLICT OF INTEREST ON GRANT APPROVALS

Members of the Council and panelists voted on two grants to recipients with whom they had affiliations. In addition, panelist affiliation statements were not always retained by the Council.

One advisory panel member voted on a grant proposal for which the panelist had an affiliation with the applicant. While the members and panelist disclosed these affiliations on disclosure statements, they did not abstain from voting on the grant proposals. In addition, the Council did not retain affiliation statements for advisory panels that vote on grant proposals. Only one panel of three reviewed maintained the affiliation statements. (Finding 2, pages 29-30)

Council management agreed with our recommendation to enact procedures to ensure Council members and panelists do not vote on grants to organizations with which they have affiliations.

INADEQUATE CONTROLS OVER VOUCHER PREPARATION

The Council staff did not always prepare vouchers properly. The auditors noted the following:

• 10 of 51 vouchers tested were not approved for payment within 30 days as required by administrative rule 70 IL Admin. Code 900.70;
  
• in 2 instances the same voucher number was issued for different invoices and payees;
  
• one invoice for direct travel expense was paid twice;
  
• 3 of the 51 vouchers contained incorrect appropriation codes.

Council management agreed with our recommendation to implement procedures to ensure timely and thorough review of vouchers prior to approval of payment. (Finding 4, pages 33-35)

INADEQUATE APPROVAL OF TRAVEL VOUCHERS

Council management did not approve out of state travel, amounting to $7,987 for the audit period, before travel occurred as required by the Governor's Travel Control Board. In addition, one travel voucher was paid without supervisory approval. Further, one Council member received $462 for travel even though the member did not sign a travel voucher or submit receipts to support expenses incurred. (Finding 5, pages 36-37)

Council management agreed with our recommendation to implement procedures to ensure prior approval before out of state travel occurs and adequate review of travel vouchers prior to payment.

INADEQUATE CASH MANAGEMENT OF FEDERAL GRANTS

The Council did not disburse cash advances of federal funds within 30 days as required by federal grant agreements.

The terms and conditions of the National Endowment for the Arts grant agreement require the Arts Council to spend cash advances within 30 days after the Council completes a cash request form. However, for Fiscal Year 1996 cash advances covered expenditures made 60 to 120 days after the cash request. Similarly, cash advances in Fiscal Year 1997 covered periods of more than 30 days. For example, Council management requested a cash advance on August 9, 1996 of $100,000. This money was then used to cover expenditures made from August to October 1996. (Finding 6, page 38-39)

We recommended Council management comply with the 30 day disbursement requirement for cash advances. Council management responded that the recommendation has been implemented.

Ms. Katherine Davis, Executive Director for the Illinois Arts Council, and Mr. Richard Carlson, Deputy Director, provided responses to the recommendations.

OTHER FINDINGS

The remaining finding was less significant and is being given appropriate attention by the Agency. We will review progress toward implementing the recommendations during the Agency's next audit.

AUDITORS' OPINION

Our auditors state that the financial statements of the Illinois Arts Council and Foundation at June 30, 1997 and 1996 are fairly presented.

____________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Our special assistant auditors were McGreal, Johnson and McGrane, Certified Public Accountants.