REPORT DIGEST

OFFICE OF THE
COMPTROLLER
NONFISCAL OFFICER
RESPONSIBILITIES

FINANCIAL AND
COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1998

Summary of Findings:

Release Date:
May 25, 1999

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217) 782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

• The Office of the Comptroller does not have an adequate disaster contingency plan to ensure the Office can recover its computer operations and minimize the overall impact of a disaster on State Government.

• The Office of the Comptroller did not charge correct appropriation account codes as required by the State Finance Act and SAMS procedures for its expenditures on the Statewide Accounting Management System (SAMS) Project. 

• The Office of the Comptroller did not maintain adequate records for the proper recording and reporting of property and equipment.

• The Office of the Comptroller needs to strengthen its controls over its monitoring of Cemetery Care, Burial Trust, and Crematory licensees.
  
  
  
  
  
  

{Financial Information and Activity Measures are summarized on the next page.}

FY 1998

FY 1997

FY 1996

Total Expenditures (All Funds)

$74,907,000

$98,685,000

$98,055,000

OPERATIONS TOTAL

% of Total Expenditures

$70,638,000
94.3%

$70,146,000
71.1%

$71,796,000
62%

Personal Services
% of Operations Expenditures
Average No. of Employees

31,569,000
44.7%
315

30,505,000
43.5%
312

30,601,000
42.6%
368

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

3,380,000
4.8%

2,933,000
4.2%

3,022,000
4.2%

Contractual Services
% of Operations Expenditures
Warrant Escheat
% of Operations Expenditures
Offset Claims
% of Operations Expenditures
Series EE Savings Bonds
% of Operations Expenditures

4,668,000
6.6%
2,905,000
4.1%
10,005,000
14.2%
8,827,000
12.5%

4,475,000
6.4%
5,408,000
7.7%
8,278,000
11.8%
10,415,000
14.8%

6,075,000
8.5%
6,162,000
8.6%
7,771,000
10.8%
11,631,000
16.2%

All Other Operations Items

% of Operations Expenditures

9,284,000
13.1%

8,132,000
11.6%

6,534,000
9.1%

GRANTS TOTAL

% of Total Expenditures

$4,269,000
5.7%

$4,259,000
4.3%

$4,259,000
4.3%

INTERFUND CASH TRANSFER

% of Total Expenditures

0
0%

24,280,000
24.6%

22,000,000
22.4%

Cost of Property and Equipment

$7,120,000

$10,549,000

$8,603,000

FY 1998

FY 1997

14,042,540
92,417
140
839
24.1%

16,564,663
118,297
839
839
19.0%

During Audit Period: Honorable Loleta Didrickson

Currently: Honorable Daniel Hynes

Fidelity bonds could not be located in licensee's permanent file

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE DISASTER CONTINGENCY PLAN

The State Comptroller's Office (Office) does not have an adequate disaster contingency plan established to ensure the Office can recover its computer operations and minimize the overall impact of a disaster on State Government.

Although the Office had a generalized disaster contingency document for its mainframe environment, we found that the document was inadequate for the Office's critical environment. Supporting contingency documentation, including detailed information for recovering specific critical applications, did not adequately reflect the significant changes associated with the implementation of the Statewide Accounting Management System (SAMS).

The detailed information for recovering specific applications located on the Office's mainframe computer had not been updated for several years and was the same documentation originally established for recovering the preceding Statewide accounting system. In addition, a specific recovery site had not been determined, and no tests had been performed to determine recoverability of the Office's mainframe system. (Finding 98-1, pages 14-15)

We recommended the Office update its disaster contingency plan to reflect the current processing environment and include certain minimum documentation to be maintained and regularly updated. Once modified, the plan should be tested annually for each computer platform. In addition, a copy of the disaster contingency plan and supporting documentation should be stored at a secured off-site location.

Comptroller officials agreed with our recommendation and stated the Office continues to take the task of developing a disaster contingency plan for all platforms very seriously and:

1. will continue to apply available resources towards this endeavor and
2. will have a viable and comprehensive plan documented, formalized, and fully tested for all platforms within the next 12 months.

STATEWIDE ACCOUNTING MANAGEMENT SYSTEM FINANCING

The Office of the Comptroller did not charge correct appropriation account codes as required by the State Finance Act and SAMS procedures for its expenditures on the Statewide Accounting Management System (SAMS) Project.

In fiscal year 1996 the Office began implementation of a Statewide Accounting Management System and entered into a lease agreement effective until 2002 with a vendor for the purchase of computer hardware, software, consulting services, and licensing agreements. The Office entered into thirteen separate lease agreements with the vendor at a rate equal to, or less than 6 percent.

During our review of the vendor contracts and each separate lease agreement for the implementation of SAMS, the following was noted:

• Rather than charging the applicable appropriation codes, the Office incorrectly charged administrative services, such as audit services, training materials and preparation, and policy and procedure updates totaling $402,680 to Electronic Data Processing.

• The Office charged all expenditures relating to the SAMS system to detail object code 1687, EDP equipment. This was done even though each lease schedule detailed the amounts of specific vendor charges, including consulting services, travel expenditures, software, licensing costs, EDP equipment, and training. In accordance with SAMS procedures, agencies that receive an EDP appropriation should utilize the proper operational detail object codes when reporting expenditures, and payments for computer software must cite detail object 1284.

Office management considered the above charges to be related to the SAMS Project; therefore, they believed the costs were appropriately chargeable to the electronic data processing appropriation line item and to detail object 1687, EDP equipment, only. (Finding 98-3, pages 18-19)

We recommended the Office utilize the correct appropriation line items and detail object codes to ensure an adequate reflection of expenditures for projects in the future.

Office management disagreed and felt that, in the special circumstances, all costs connected to this acquisition could properly be charged to the detail object code for Electronic Data Processing equipment.

INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT RECORDS

During our audit we noted the Office of the Comptroller did not maintain adequate records for the proper recording and reporting of property and equipment. The Office failed to maintain adequate records of property and equipment. Some of the conditions noted follow:

• Documentation was insufficient to substantiate additions, deletions, or ending amounts reported on the Agency Report of Fixed Assets for the four quarters in fiscal year 1997.

• Documentation was not maintained to support the two annual inventory certifications submitted to DCMS during the two year audit period.

• Vouchers selected for testing from the Asset Inventory Report - Assets Acquired FY97 were actually expenditures from fiscal year 1996. Further, 5 of the vouchers obtained for testing from the Asset Inventory Report - Assets Acquired FY98, were actually expenditures from fiscal year 1997.

• The Office failed to remove an asset from its asset inventory after transfer. In addition, the Office failed to file a Request for Deletion from Inventory Form with DCMS for all asset deletions tested.

• The Asset Inventory Listing printed by location did not agree to the Asset Inventory Listing printed by asset number.

Office management indicated the above weaknesses are due to the implementation of a new PC-based equipment tracking system and employee turnover in the Property Control section. (Finding 98-4, pages 20-21)

We recommended the Office review property and equipment records to ensure completeness and accuracy. We further recommended the Office reiterate the importance of compliance with mandated duties and internal procedures to safeguard assets and provide an adequate audit trail.

Office management accepted our recommendation.

NEED TO STRENGTHEN CONTROLS OVER CEMETERY CARE AND BURIAL TRUST DIVISION

The Office of the Comptroller's Cemetery Care and Burial Trust Division is responsible for administering the Cemetery Care Act, Funeral or Burial Funds Act, Illinois Pre-Need Cemetery Sales Act, and the Illinois Crematory Regulation Act.

During our audit, we noted the following deficiencies in monitoring the Acts with which the Division is charged to enforce:

• In one of ten funeral homes tested for fiscal year 1997, the fidelity bond amount was not sufficient, and the annual report was not received for December 31, 1996. This funeral home had not reported since 1994, whereby this report was marked "Final Report". Per our review, this funeral home was still in operation until May 1997. The Comptroller's Office should have imposed a $5 per day penalty for each day the licensee remained delinquent in filing their annual report.

• The required registration statements were not on file for two of ten crematories tested for fiscal year 1998. Per statute, applications for registration shall be in writing on forms furnished by the Comptroller.

• Six out of ten crematory annual reports for fiscal year 1997 disclosed incorrect fiscal year start and end date information. In addition, for one of the ten annual reports tested, the Division's database incorrectly noted the licensee as owing the Comptroller a $470 fine for late reporting. The report was received in accordance with statutory timeframes.

• In testing Burial Trust Funds, one fidelity bond could not be located in the licensee's permanent file. In testing Cemetery Care Funds greater than $250,000, three fidelity bonds could not be located in the licensee's permanent file. Per statutes, applications for licenses are to be accompanied by a fidelity bond.

Office management indicated the weaknesses above are due to the implementation of the Division's database and to having limited staff and resources to review the database for accuracy or sufficiency of documentation. (Finding 98-6, pages 23-25)

We recommended the Division devote adequate resources to ensure monitoring for compliance with the applicable Acts. We further recommended the Division review the database utilized to help ensure accuracy of entity information and to help prevent undue loss of revenue to the State.

Office management agreed with our recommendation.

OTHER FINDINGS

The remaining findings were less significant and have been given appropriate attention by management. We will review progress toward the implementation of our recommendations in our next audit. Office responses were provided by Mr. Stan Brown, Director of Internal Audits.

AUDITORS' OPINION

Our auditors state the June 30, 1998 financial statements of the Office are fairly presented, except for the effects of such adjustments, if any, as might have been determined to be necessary had they been able to examine evidence regarding Year 2000 disclosures.

____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

Pandolfi, Topolski, Weiss & Co., Ltd. were our special assistant auditors.