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Nine findings included in the report were considered material weaknesses in internal control Financial reporting
information contained inaccuracies and incomplete data Financial reporting
forms submitted 1½ months late Detailed workpapers
not provided to auditors until five months after first requested
Liability balances
were over and under stated in the reported financial information
Capital assets were
not properly recorded
Auditors qualified
their opinion on the Department’s June 30, 2008 financial statements Department noted
lack of resources and competing priorities for errors
Lack of cooperation
during engagement
78 requests for
audit documentation were received 31-120 days after due date Failure to
adequately respond to auditor requests
Information provided
to auditors 5 months after due date Department noted
timing constraints and competing priorities caused the problems in providing
auditors with information
Department
originally understated liabilities by $23 million at June 30, 2008
Accounts payable
and encumbrance reporting errors Unpaid balance due
to DCMS Amounts expended in
excess of appropriation not recorded
Department noted errors were due to oversight
Over $13 million
owed to DCMS revolving funds was left unpaid at the end of fiscal year 2008 Part of the
outstanding liability is attributable to amounts left unpaid from previous
years Department
indicated they did not have sufficient funds to pay DCMS Department expended
$10.6 million more than appropriated without authorization
Department reduced
contract obligation documents for medical services to free up funds for other
obligations
Department failed
to pay electrical and / or gas service for 19 Correctional Centers
Department
instructed vendors their appropriation had lapsed
Department indicated they did not have sufficient funds to pay for the required services
Capital asset
information not accurately recorded in financial records
Capital assets
could be understated by as much as $30 million
Property System
does not allow for testing depreciation of individual assets
Sufficient support
could not be provided to substantiate amounts reported to Comptroller Department
attributed exceptions to weaknesses in the system and miscommunication
Bank reconciliations
for consolidated Resident’s Benefit Fund bank account not provided Department &
DJJ activity commingled in general ledger Department & DJJ commingle Benefit Fund money in one consolidated bank account Receipts could not
be traced to source documents Department’s
General Office employee Benefit Fund June 30 bank reconciliations not
provided Department indicated
exceptions were related to timing and creation of the Department of Juvenile
Justice
Auditors at 5
Correctional Centers qualified their opinions regarding errors with inventory Errors in
Correctional Centers inventories
$1.6 million error
in compiling inventory balances for financial reporting
Center personnel
attributed errors to lack of training on new automated inventory system
Department auditors
qualified opinion on June 30, 2008 financial statements The Department
failed to hire front line staff based on funds appropriated for that purpose Department paid
Center payrolls from fiscal year 2007 appropriation for hiring new front line
staff
Correctional
Centers reported 324 and 455 front line staff left employment with the
Department during fiscal years 2007 and 2008
Management noted
additional personal services costs were incurred due to the mandatory
overtime and inadequate staffing levels
126
Department
continued to pay personnel services
costs for employee working at GOMB Department’s
explanation for paying employee salary was inconsistent with employee’s
responsibility at GOMB
$2,259,760 and
$2,339,244 were collected respectively for fiscal year 2007 and 2008 from
inmates by adding an additional charge to goods sold from the inmate
commissary
Goods sold in the
inmate commissary included an additional charge not allowed by State law Unified Code of
Corrections only allows goods to be marked up 25-35%
Department
management noted based on their interpretation they are allowed to add the
additional charge
Department
indicated a legal interpretation had been requested, but was unable to
provide documentation of the request
Purchases of goods
for resale in commissaries not made in accordance with the
Competitive sealed
bidding not performed
Terms and
conditions not documented in formal contracts
Notices not
published in the Administrative
Directive does not include all
Problems were identified in numerous
areas at the Adult Transition Centers Similar weaknesses have been reported in the last 8 audits.
Need to fully
automate payroll timekeeping system Timekeeping data
for correctional center employees is manually tabulated and then entered into
the payroll system Department attributes
problem to lack of funds
Independent
auditors’ opinion on financial statements included three qualifications
The Department did
not comply in all material respects with State compliance determinations |
INTRODUCTION
This report presents our financial statement
audit of the whole Department for the year ended June 30, 2008 and compliance
attestation examination of the Department’s General Office operations for the
two years ended June 30, 2008. During
the two years ended June 30, 2008 the Department administered 28 adult correctional
centers, 8 adult transition centers and Correctional Industries. The auditors
identified 9 findings involving internal control over financial reporting
that they considered to be material weaknesses. A material weakness is a significant
deficiency in the internal control that results in more than a remote
likelihood that a material misstatement of the financial statements will not
be prevented or detected by the Department’s internal control. The material weaknesses are described in
the Schedule of Findings on pages 19 to 43 of the report. Following is a summary of some of the
findings included in the report. FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS WEAKNESSES IN PREPARATION OF YEAR END
FINANCIAL REPORTS AND STATEMENTS The Department’s year-end financial reporting contained numerous inaccuracies and incomplete data. These problems, if not detected and corrected, could materially misstate the Department’s financial statements and negatively impact the statewide financial statements prepared by the Illinois Office of the Comptroller (Comptroller). During the audit of the June 30, 2008 Department financial statements, auditors noted both untimely preparation and insufficient review of Generally Accepted Accounting Principles (GAAP) reporting packages submitted to the Comptroller. The auditors recommended extensive adjustments and corrections. Several of the problems noted were as follows: · GAAP reporting packages were due to the Comptroller on September 12, 2008, but were not submitted until October 27, 2008, approximately 1½ months late.
· After numerous requests, the Department did not provide the auditors with detailed workpapers to support GAAP reporting packages and financial statements until February 19, 2009, almost five months after the date the documentation was first requested.
· Accounts payable were overstated and encumbrances were understated by $557,000. Amounts owed to State revolving funds totaling $13,120,000 at June 30, 2008 were not included as liabilities. Expenditures in excess of Department appropriations totaling $10,443,000 were not recorded as liabilities at June 30, 2008.
· Transfers from the Capital Development Board were improperly recorded. The Department’s Automated Property Control System did not allow for testing of depreciation by asset. The Department could not provide sufficient support for the additions, deletions, and net transfers of capital assets as originally reported to the Comptroller. Accurate and timely preparation of the Department’s financial information for GAAP reporting purposes is important due to the complexity of the Department and the impact adjustments have on the statewide financial statements. Due to the significance of the weaknesses identified, the auditors were unable to express an unqualified opinion in the Independent Auditor’s Report of the Department’s June 30, 2008 financial statements. Department management stated the errors noted were due to a lack of resources and competing priorities for personnel. We recommended the Department implement procedures to ensure GAAP Reporting Packages are prepared in a timely, accurate and complete manner, and that all supporting documentation is maintained in a contemporaneous manner. (Finding 1, pages 19-21)
Department officials responded that they have partially implemented our recommendation and have devoted resources within the limitations of the current technology and budget constraints to complete the GAAP reporting as required. REQUESTED DOCUMENTATION TO PERFORM AUDIT
TESTING NOT PROVIDED TIMELY OR AT ALL The Department
did not provide all the requested documentation to the auditors in a timely
manner and generally demonstrated a lack of cooperation during the
engagement. As a result of the Department’s audit request protocol a number of requested documents to perform the audit testing were not provided timely. Documents related to 208 requests were provided after the due date they were requested to be provided. Further, 78 of the requests were received 31 to over 120 days late, with 15 being over 120 days late. In addition to providing requested audit documentation late, the Department did not adequately respond to all auditor requests. Specifically they failed to provide the auditors with all the requested documents. As a result, for those requests where documents were partially provided auditors could not complete the associated testing and considered the missing items to be exceptions. There were also 17 requests for audit documentation that the Department failed to complete and had to be considered exceptions during our testing. Many of these are included as part of other findings in the report. Finally, the Department did not provide the auditors with detailed workpapers to support the fiscal year 2008 GAAP reporting packages submitted to the Comptroller’s Office until February 19, 2009, approximately 5 months late. Providing auditors with requested supporting documentation almost five months late significantly delays the audit and negatively impacts the preparation and audit of the statewide financial statements. Department management stated they were unable to provide the requested information timely because of timing constraints and competing priorities. This finding is repeated from the previous report, in which the Department stated it would comply timely and accurately with all requests and be vigilant in the follow up to determine the auditor’s questions and needs are met. (Finding 2, pages 22-24) We recommended the Department reevaluate and restructure its process of providing an audit liaison function to the auditors to ensure requested engagement documentation is provided in a timely manner as required by the Illinois State Auditing Act. Department
officials accepted our recommendation and responded they are in the process
of reviewing their operations and will plan a restructuring of the audit liaison
function in accordance with State statutes. Improper calculation and reporting of
liabilities at year end The Department did not utilize a comprehensive, consistent methodology to analyze and calculate its liabilities at year end, resulting in numerous errors in the Department’s financial data as reported on their year end financial statements. As a result, the Department originally understated its liabilities by a net of approximately $23 million at June 30, 2008. Auditors recommended, and the Department made, adjustments to correct the June 30, 2008 financial statements. The following exceptions were noted: · The Department deemed all of its lapse period spending to be accounts payable, rather than consider whether or not the items or services purchased were received prior to June 30. As a result of this process, the Department overstated accounts payable and understated encumbrances by $557,000 at June 30, 2008. · The Department did not include the amounts owed to the State revolving funds at June 30, 2007 or 2008 in its amounts due to other funds at year end. This resulted in an understatement of liabilities totaling $13,120,000 at June 30, 2008 and a $10,844,000 restatement of beginning net assets as of July 1, 2007. · The Department incurred expenditures in fiscal year 2008 in excess of its appropriations at June 30, 2008. The vendors who were owed money were instructed to submit their requests for payment to the Court of Claims. The Department did not include these liabilities in its accounts payable at June 30, 2008. As a result, accounts payable were understated $10,443,000. Department management indicated the lack of reporting was due to oversight. (Finding 3, pages 25-26) We recommended the Department establish a comprehensive, consistent methodology for determining liabilities and accumulating the information necessary for accurate financial reporting. Department officials responded that they have implemented our recommendation and have developed a consistent methodology for financial reporting. Department DID not Pay Revolving Fund The
Department failed to pay $13,120,311to DCMS at June 30, 2008. Auditors also noted the Department
did not record this revolving fund liability for financial reporting
purposes. Of the liability owed to
DCMS at June 30, 2008, $2,373,534 represents amounts still owed for services
provided in fiscal years 2006 and 2007. The previous
audit cited the Department for transferring funds out of the line items used
to pay the revolving fund billings to pay other bills. The auditors noted the Department did not
transfer funds out of the revolving fund line items during the audit
period. Rather, the Department has
built up such a large liability from previous years that the appropriations
received during the audit period did not provide enough funding to pay the
current charges or those owed from previous years. Department
management indicated there was not sufficient funds to pay the invoices due
DCMS. Per the DCMS Administrative
Rules, “User agencies shall not leave Internal Service Fund bills unpaid in
order to circumvent fiscal year budgetary controls”. (Finding 4, pages 27- 28) We recommended
the Department work with the Governor’s Office of Management and
Budget to determine a method by which to become current with its balance due
to DCMS and initiate reductions in other line items to ensure sufficient
funds exist to pay for the services provided by DCMS. Department officials indicated the
recommendation has been implemented and that during fiscal year 2009 the
balances due DCMS have been paid and that they have remained current with
open invoices for operation of automotive and telecommunication expenditures.
DEPARTMENT INDEBTED THE STATE WITHOUT
AUTHORIZATION The Department indebted the State for approximately $10.6 million by procuring services and products for amounts that exceeded the funds appropriated without authorization. The $10.6 million indebtedness is owed to two entities, $6.3 million to a medical services company and $4.3 million to a supplier of electric and gas utilities. The Department also failed to promptly approve the vendor/supplier bills. The Department filed contract obligation documents (COD’s) with the Office of the Comptroller to obligate $91.5 million to pay for medical services during fiscal year 2008. Near the end of fiscal year 2008 the Department filed amended COD’s with the Office of the Comptroller to decrease the amount obligated for the medical services contract by approximately $5.2 million, freeing up that amount of appropriation to spend on other obligations. The Department was in possession of the June invoices from the vendor before the COD’s were amended to reduce the appropriation obligations, thereby knowing they were not going to be able to pay the vendor the final amounts owed of approximately $6.3 million at 25 Correctional Centers. In addition,
the Department did not pay for electrical and gas service for 19 Correctional
Centers near the end of fiscal year 2008.
Invoices for the electrical and gas service for the last The Department instructed both vendors after the lapse period had expired that they were unable to pay the charges as their appropriations have lapsed and referred the vendors to file a claim with the Court of Claims. The State Finance Act states no department shall contract any
indebtedness on behalf of the State, nor assume to bind the State in an
amount in excess of the money appropriated, unless expressly authorized by
law. Department management stated there
were not sufficient funds to pay the invoices due for these required
services. (Finding 5, pages 29- 31) We recommended the Department only enter into contracts for which they have available appropriation and consult with the Governor’s Office of Management and Budget when situations arise where it appears amounts appropriated will not be sufficient to meet the Department’s obligations. Department officials accepted our
recommendation and noted they had requested to transfer funds to pay for the
services but their request was not granted, and had to make difficult
decisions regarding expenditures. WEAKNESSES IN FINANCIAL
ACCOUNTING AND REPORTING OF CAPITAL ASSETS The Department did not accurately record all capital asset information in their financial records. As a result, the Department presented inaccurate information on the Capital Asset Summary (SCO-538) submitted to the Comptroller and in their financial statements for fiscal year 2008. Auditors noted the following errors and weaknesses: · The Department improperly recorded transfers from the Capital Development Board. The precise inaccuracy could not be determined, but auditors estimated the Department’s capital assets could be understated by as much as $30 million. This resulted in a qualification of the Independent Auditors’ Report on the Department’s financial statements for the year ended June 30, 2008. · The Department’s Automated Property Control System (APCS) does not allow for testing of depreciation by asset. Through analytical review and other audit procedures auditors determined the ending accumulated depreciation was misstated by $5,768,000. Auditors recommended, and the Department made, adjustments to correct the misstatement in the June 30, 2008 financial statements. · The Department could not provide sufficient support for the additions, deletions, and net transfers as originally reported on the SCO-538. In addition, the Department could not provide support for deletions of $6,632,000 and net transfers of ($17,868,000) for the year in the depreciation section of the SCO-538. Department
management attributed these exceptions and weaknesses to the inherent
limitations of the Department’s APCS and miscommunication between facilities
and the General Office. (Finding 6, pages 32-34) We made a number of specific
recommendations to the Department to improve accounting procedures and
controls over capital assets. Department officials responded they have
partially implemented our recommendation within the limits of the property
control system and procedures are in place to ensure timely and accurate
reporting to the best of the ability of the Agency within the existing
property control system. INADEQUATE ADMINISTRATION AND
ACCOUNTING OF LOCALLY HELD FUNDS During our testing we identified numerous exceptions related to the administration, accounting and financial reporting of the Department’s locally held (bank accounts) funds. The following weaknesses were noted during the testing for the two years ended June 30, 2008: ! The Department failed to provide the June 30, 2008 bank reconciliation of the consolidated bank account for the residents portion of the Resident’s and Employee’s Benefit Fund (Benefit Fund), and as such, the auditors were unable to test the cash balance.
! The Department maintains the adult facility resident portion and the juvenile facility resident portion, which belongs to the Department of Juvenile Justice (DJJ), of the Benefit Fund within one consolidated general ledger. The Department could not provide a detailed general ledger specific to the Department’s portion of the Resident’s Benefit Fund activity.
! The Department maintains the adult facility resident portion and the juvenile facility resident portion, which belongs to the DJJ, of the Benefit Fund in one umbrella bank account at a local financial institution. The Department and the DJJ are two separate and distinct agencies whose funds should not be commingled, especially without adequate accounting records and adequate supporting documentation.
!
Auditors were unable to perform testing on
receipts in the resident’s portion of the Benefit Fund. Receipts could not be traced to source
documentation, as the source documents are not maintained by the General
Office. In addition, receipts could
not be traced into the bank statements because the Department did not provide
the requested bank statements.
!
The Department did not provide the June 30,
2007 and 2008 bank reconciliations or statements for the General Office’s
employee portion of the Benefit Fund.
Inadequate control over maintaining financial records
prevents the Department from preparing and submitting required financial
information and results in inaccurate, incomplete and untimely preparation of
financial statements. Department management stated the exceptions were
directly related to the timing and creation of the Department of Juvenile Justice
and that the funds were not split at that time. (Finding 8, pages 38 - 41) We recommended the Department take actions to improve
its administration of its locally held funds. Department officials responded the
recommendation was implemented and the funds of the two Departments were
split. In addition it was noted
Centers are now given copies of bank statements on a monthly basis as well as
access to the accounting system. INADEQUATE CONTROLS OVER INVENTORY During testing of
Department inventory balances at June 30, 2008, numerous errors were noted at
Correctional Centers. The errors were
so pervasive the auditors at five Centers (Stateville, Big Muddy, · Physical inventory counts did not agree to accounting records; · Inventory purchases were not recorded in the proper fiscal year; and · Inventory counts were not reconciled to The Inventory Management System (TIMS). Auditors also noted the General Office made errors totaling $1.6 million compiling inventory balances from the Centers for financial statement reporting. Center personnel attributed the weaknesses noted in the Department’s inventory controls to the lack of training provided to employees on the use of the Department’s new automated inventory system, During the testing by auditors at 14 of the Department’s Correctional Centers, the auditors noted personnel at 10 (71%) did not consider the training provided on TIMS sufficient to provide them with the knowledge needed to properly utilize the application. Due to the significance of the weaknesses identified at the Centers and the overall lack of inventory controls, the Department auditors were unable to express an opinion in the Independent Auditors’ Report on the inventory balance of Department’s financial statements at June 30, 2008. (Finding 9, pages 42 - 43) We recommended the Department improve its centralized oversight function related to inventory and ensure the Center personnel are adequately trained on the use of TIMS. Additionally, the Department should ensure that the inventory balances reported to the Comptroller’s Office during the GAAP reporting process are reconciled adequately with those maintained at the Centers. Department officials
responded the recommendation was implemented and during fiscal year 2009
mandatory training was given on TIMS, and facilities were instructed to
maintain timely and accurate information for use in financial reporting. Failure to Expend PERSONAL SERVICE
APPROPRIATIONS IN COMPLIANCE WITH LEGISLATIVE INTENT The Department failed to satisfy the legislative intent of its appropriation authority during fiscal year 2007 by utilizing part of the funds authorized for the hiring of 231 front line staff for the purposes of paying personal services expenditures for its existing staff. In addition, the Department did not expend any of the $12 million appropriated by the legislature during fiscal year 2008 to hire 500 additional front line staff. During April and May of 2007 the Department paid Taylorville Correctional Center’s entire payroll 3 times, Robinson Correctional Center’s payroll 2 times, Logan Correctional Center’s payroll 2 times and Jacksonville Correctional Center’s payroll 2 times from the appropriation to hire front line staff. In addition, testing performed at the Department’s 28 Correctional Centers noted only 154 new front line staff were added during fiscal year 2007. Expending the fiscal year 2007 appropriation designated for new front line staff for costs of existing staff violated legislative intent and resulted in the Department having to utilize existing staff to cover the needs of staffing the Correctional Centers. The lack of utilizing the amount appropriated by the legislature in fiscal year 2008 for new front line staff added to the short staffing at the Correctional Centers. Required and volunteer overtime was used to cover staffing shortages. Based on the information provided, the Correctional Centers reported 324 and 455 front line staff left employment with the Department during fiscal years 2007 and 2008. Department management stated using the frontline staff appropriation to cover personal services costs incurred in fiscal year 2007 was necessary because the Department’s personal services appropriations were not sufficient and the Department could not transfer funds between the personal services lines of its various divisions. The additional personal services costs were incurred due to the mandatory overtime and inadequate staffing levels. Department management also noted they were not allowed, at the direction of the Office of the Governor, to hire any front line staff during fiscal year 2008. The auditors identified 126 employees working in frontline
positions at various Correctional Centers during fiscal year 2008 where their
year to date gross compensation exceeded $100,000. The employee’s normal salary rate per their
position classification without overtime and compensatory time would be in
the range of $40,000-75,000 annually. (Finding 11, pages 46 - 48) We recommended the Department make payments in accordance with its appropriation authority. Furthermore, the Department should take steps necessary to meet the intent of the General Assembly when utilizing its appropriation authority. Department officials accepted our
recommendation and indicated they will work within the limitations and
guidelines of appropriation language as passed by the legislature. inappropriate payment of another agency’s
PERSONNEL cost During the audit period, an employee who had previously worked for the Department transferred to a position within Governor’s Office of Management and Budget (GOMB). The Department continued to pay for the employee’s personnel costs on its payroll vouchers. Department personnel explained this individual was working on behalf of the Department as the Deputy Director Project Manager for the Public Safety Shared Services Center (PSSSC). The Department’s explanation was inconsistent with the fact the employee was at the same time listed on the GOMB organization chart as the Deputy Director of Financial Reporting and was responsible for the oversight of other GOMB employees. While the employee in question might have had some type of indirect involvement with the PSSSC, that does not appear to be the employee’s primary responsibility. Another individual was listed on the GOMB organization chart as the GOMB Project Manager over PSSSC and the Department and GOMB entered into an interagency agreement concerning that employee’s responsibilities. The payment of personnel costs of another agency results in
noncompliance with State statute. This
is particularly egregious considering the employee would be accruing
retirement benefits under the alternative formula when the position as being
performed would not qualify for that benefit.
(Finding 12, page 49) We recommended the Department pay the personnel costs of only its employees, not those of other agencies. Department officials responded they had
implemented our recommendation and the employee noted in the finding had
transferred to another State agency. Inmate
Commissary Goods MARKED UP MORE THAN ALLOWED BY STATUTE In testing the inmate commissary operations
it was identified the Department was adding a charge to the purchase price of
the goods to be resold in the commissaries prior to adding the statutorily
allowed percentage mark-up to arrive at the sales price to charge
inmates. The Department phased in the application of the charge, effective
November 1, 2005 the charge was set at Upon testing the Department’s collection of the 3%-7% additional charge it was determined the Department was computing the amount to collect using sales revenue as opposed to cost of goods sold on which the 3%-7% charge is originally computed. Using the sales revenue instead of the cost of goods sold the Department collected more money as a result of the statutorily allowed mark-up of 25%-35% being added to the additional charge. Ultimately, the 3%-7% charge equates to a markup on the cost of goods sold of 9%. The Unified Code
of Corrections sets forth “the selling prices for all goods shall be sufficient
to cover the costs of the goods and an additional charge of up to 35% for
tobacco products and up to 25% for non-tobacco products.”
Based on the above statute the maximum
amount to charge inmates for items sold in the inmate commissary would be the
purchase price of the item plus any transportation costs the total of which
would then be marked up to a maximum of 25%-35%. Department
management stated the charge was to help cover the costs of State employees
who work in the inmate commissary, inmate labor for the commissary and
utilities to operate the commissary.
Department management also noted that they felt the definition of cost
of goods in the Department’s enabling legislation allowed them to apply the
additional charge to the items. In the prior report we had recommended the
Department seek a formal written Attorney General opinion on this
matter. During the April 1, 2008
Legislative Audit Commission hearing on the Department’s June 30, 2006 audit,
it was stated by Department staff and the Director that they were waiting on
the Attorney General’s opinion before making any changes because the
Department has to cover its commissary costs.
During the current engagement we requested a copy of the letter sent
to the Attorney General requesting an opinion on the matter, the Department
failed to provide any documentation that a formal opinion had ever been
requested of the Attorney General on the matter. Department staff indicated during the prior
administration, permission was not granted to seek an opinion from the
Attorney General. (Finding 13, pages 50
- 52) We recommended the
Department comply with the statute and only mark-up the goods for resale in
the inmate commissary the allowable amounts.
We also recommended the Department seek a formal written opinion from
the Attorney General regarding whether the charge is statutorily allowed. Department officials accepted our recommendation
and responded they will once again try to get permission to seek an opinion
from the Attorney General. NONCOMPLIANCE WITH THE The Department
is not complying with the requirements of the Illinois Procurement Code
(Code) with regard to purchases of items for resale in the Department’s
commissaries at Correctional Centers. The commissaries
commodity purchases are made through non-appropriated locally held
funds. As a result of testing
performed during the compliance examination the auditors noted the following
items:
Department
management indicated they have requested guidance and direction from DCMS on
the commissary purchasing. By not
following the requirements of the Code the Department has limited the pool of
available vendors to only a few selected vendors. In addition, the Department may be paying
more for commodities for their commissaries than they should. (Finding 15, pages 55 - 56) This finding was first reported in 2004. We recommended the Department comply with
the requirements of the Illinois Procurement Code in making commissary
purchases. Department officials accepted our recommendation
and indicated they will ask DCMS for direction on the commissary
purchasing. (For the previous Department response, see Digest footnote #1.) Adult Transition Center
records not properly maintained The Department did not properly maintain
records at the Adult Transition Centers (ATCs). Testing at the eight ATCs for the two years
ended June 30, 2008, produced numerous exceptions. Some of the exceptions noted were in the
following areas:
·
Year
end cash balances were misstated at two ATCs.
·
Deficiencies
were identified in the processing of Residents’ Trust Fund disbursements at
five ATCs.
·
Errors
were noted in the calculation of resident’s maintenance fees at two ATCs.
·
Documents
related to resident loan files were not properly supported at two ATCs.
·
Inadequate
controls of property and equipment records were identified at five ATCs.
·
Resident
master files at two ATCs did not contain complete and adequate documentation. We reported similar weaknesses at the ATCs in the
previous eight audits. Department
personnel stated the on-going issues are the result of human errors, also
noting that turnover in personnel occurred at several of the ATCs during the
audit period. (Finding 18, pages 62 - 65)
This finding was first reported in 1994.
We made a number of specific recommendations to the Department to
improve accounting procedures and controls at the ATCs. Department
officials accepted our recommendation and responded they will continue to
work to ensure accurate and proper records are maintained. (For the previous
Department response, see Digest footnote #2.) PAYROLL TIMEKEEPING SYSTEM
NOT AUTOMATED
The Department-wide payroll timekeeping system is not fully automated. During the current engagement period the
Department’s human resources responsibilities were consolidated with a
number of other State agencies as part of the Public Safety Shared Services
Center (PSSSC). The PSSSC was
scheduled to create / implement an automated timekeeping system, but it was
not created. As noted in the previous audits each
correctional center still maintained a manual timekeeping system for several
hundred employees. Correctional center
employees sign in and out and the sign-in sheets are sent to the timekeeping
clerk. Other information, including
notification of absence and call-in reports, are also forwarded to the
timekeepers. No automation is involved
except for the processing of payroll warrants. Department officials indicated the
automated payroll system project was delayed due to various issues that arose
during the creation of the PSSSC. They
stated a project began in August 2008, but ceased in January 2009 due to lack
of funding. Prudent business practices
suggest that controls available through an automated timekeeping system can
provide greater efficiency and reduce the potential for costly errors or
employee abuse. (Finding 20, page 68) This finding has been repeated since 1998. We recommended the Department
implement an automated timekeeping system. Department officials accepted
our recommendation and noted at this time they do not have the resources to
purchase a new timekeeping system. (For the
previous Department response, see Digest footnote #3.) OTHER
FINDINGS The
remaining findings are reportedly being given attention by the
Department. We will review the
Department’s progress toward the implementation of our recommendations in our
next engagement. AUDITORS’ OPINIONS The auditors expressed a qualified opinion on the Department’s financial statements for the year ended June 30, 2008. The auditor’s qualified their opinion on the financial statements for the following:
·
Because of
the inadequacy of the accounting records, the auditors were unable to form an
opinion regarding the amounts at which inventory balances are recorded in the
financial statements;
·
Because of
the inadequacy of the accounting records, the auditors were unable to audit
the financial activity of the DOC Residents’ and Employees’ Benefit Fund,
and;
·
The
Department has excluded from capital assets being depreciated certain
property transferred from another State agency. The amount of which this
departure would affect the financial statements is not reasonably
determinable. The Independent
Accountants Report on State Compliance on Internal Control Over Compliance
and on Supplementary Information for State Compliance Purposes noted the
Department did not comply in all material respects with the requirements
regarding:
·
The obligation, expenditure, receipt and use of public
funds in accordance with any limitations, restrictions, conditions or
mandatory directions imposed by law upon such obligation, expenditure,
receipt or use;
·
Applicable laws and regulations, including the State
uniform accounting system, in its financial and fiscal operations, and;
·
Requirements regarding money or negotiable securities
or similar assets handled by the Department on behalf of the State or held in
trust by the Department regarding properly and legally administering,
accounting and accurate recordkeeping thereto in accordance with law. _____________________________________ WILLIAM G. HOLLAND,
Auditor General WGH:RPU:pp SPECIAL ASSISTANT AUDITORS Sikich
LLP were our special assistant auditors for this engagement.
DIGEST FOOTNOTES
#1 NONCOMPLIANCE WITH THE
2006: Recommendation
accepted: The Department will continue to work with DCMS to define
competitive purchasing processes for the commissary operations that are
consistent with the State’s procurement policy while meeting the security and
safety needs of the Department.
#2 Adult Transition Centers Records
Not Properly Maintained - Previous
Department Response
2006: Recommendation
accepted: The Department has made significant improvements in the maintenance
in the records of the transitional centers during the past years. Increased utilization of the automated
accounting systems will address several of the exceptions noted. All Centers have been reminded of the
importance of timely and accurate record maintenance and there will be zero
toleration of failures to comply.
#3 PAYROLL
TIMEKEEPING SYSTEM NOT AUTOMATED –Previous Department Response
2006: Recommendation accepted: As Part of the Shared Services Program statewide effort to improve processes, the Department is scheduled to be one of the pilot agencies for the implementation of an automated timekeeping solution. |
