INTRODUCTION
This report presents our financial and compliance audit of the Department of
Corrections' General Office, and our audit of the entire Department under the Single Audit
Act of 1996. The Department administers 32 correctional facilities - 25 adult centers, 7
youth centers and 11 community correctional centers. Our auditors at the 32 correctional
facilities assisted the General Office auditors in the preparation of the Department-wide
financial statements and federal single audit.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
CONTROL WEAKNESSES AT COMMUNITY CENTERS
In addition to 32 correctional centers, the Department operates a work release
program for approximately 1,300 inmates who are housed in 11 community correctional
centers.
During our audit fieldwork at the community centers, we noted many internal control
weaknesses, and observed that several of the centers lacked procedures to maintain
accounting records. Internal control weaknesses noted included:
- Checks were signed by one person when two authorized signers are required.
- Bank reconciliations were not prepared.
- Cash receipts and disbursements ledgers were not maintained.
- General maintenance fees for food and housing were not being charged.
- Resident financial folders did not contain all required documents. (Findings 7 through
11, pages 24 - 33)
We recommended the Department improve internal controls over bank accounts, accounting
records, and resident files at community correctional centers.
Department officials accepted our recommendation and stated they have established a
central business office for the Community Services Division. The CSD business
administrator will implement monitoring and follow-up procedures to ensure better
performance and greater accountability by field accounting personnel.
INADEQUATE PROCEDURES TO COLLECT RESIDENT MAINTENANCE FEES
The Department did not have adequate procedures at the community correctional
centers to ensure that all maintenance fees, which are generally 20% of the resident's net
paycheck, were collected from the residents.
- At 2 of the 11 centers tested, it was noted that in specific instances residents'
maintenance fees were either not being charged to residents or were calculated incorrectly
causing inmates to be overcharged or undercharged.
- No maintenance agreements had been prepared at Metro C.C.C., which houses individuals on
electronic detention (ED). Residents at all other community correctional centers are
required to remit 20% of their outside earnings to cover a portion of their housing costs.
Metro C.C.C. does receive maintenance payments from these individuals on ED, but there is
nothing in writing to allow the Department to collect a certain amount or percentage.
There was no supporting documentation to determine if the Department received a
maintenance payment or if such a payment was properly computed.
- We noted that 2 of the 11 centers tested (Fox Valley, West Side) do not require that the
entire paycheck earned by a resident be deposited into the Resident Trust Fund. These
centers allow the residents to cash their paychecks outside the center and only return a
percentage (20%) at one center and 30% at the other) to the center to be used to pay
maintenance fees. It requires significant monitoring by center personnel to track the
frequency and amounts of paychecks to determine whether maintenance payments have been
submitted for all paychecks earned.
The centers have policies to discipline residents if maintenance fees are not submitted
at all or on a timely basis. However, the proper, timely monitoring of the collection of
these fees, in order to be able to enforce these disciplinary actions, is not adequate.
(Finding 98-10, page 30)
We recommended the Department implement procedures to ensure the accurate collection of
maintenance fees from all residents who are required to pay maintenance, and the
Department concurred.
QUESTIONS ARISE IN PAYMENT OF WORKERS' COMPENSATION CLAIMS
Without specific statutory authority to do so, the Department purchased annuities
to pay future workers' compensation claims, circumventing State fiscal year appropriation
constraints. The Department is responsible for the administration and payment of all
workers' compensation claims relating to Department employees. The Department receives an
annual appropriation to pay outstanding claims. These claims have historically been paid
when currently due in accordance with the workers' compensation settlement. Many
settlements contain provisions for fixed payments to be made over a future period of time,
sometimes for the claimant's life.
Beginning in fiscal year 1996, the Department began purchasing annuities from current
year appropriations through lump sum payments to insurance companies to fund some of these
future year claims. These lump sum payments totaled $1,310,771, $2,024,891 and $290,456 in
fiscal years 1996, 1997 and 1998, respectively. The Department obtained annuity quotes
from insurance companies by individual claimant, then selected individual claimants and
annuity payments to expend its remaining appropriations. These annuities appear to
constitute "investments", most of which have nominal interest rates of between
4% and 5.5%.
Department officials indicated that these lump sum payments would reduce future
obligations of the Department. We feel this process allowed the Department to utilize all
of its current appropriations through the arbitrary prepayment of future liabilities.
(Finding 98-4, pages 19 - 20)
We recommended the Department comply with fiscal year constraints and pay current year
obligations from current year appropriations. If proper appropriation authorization to
continue this practice is obtained, the Department should also review its lack of specific
statutory authority to invest appropriated Treasury funds before continuing to purchase
annuities.
Department officials stated their belief that the Department had the authority to pay
the claims. The Department received a substantial appropriation increase in 1996 so a
backlog could be addressed. In fiscal year 1996, annuities were purchased from highly
rated insurance companies to fund surviving spouse benefits. In fiscal year 1997, five and
ten year annuities were purchased to fund the total and permanent disability payments for
adjudicated claims.
IMPROPER FISCAL YEAR EXPENDITURES
The Department improperly paid fiscal year 1997 costs totaling $661,590 from fiscal
year 1998 appropriations.
We noted vouchers payable to the Department of Central Management Services (DCMS) for
computer services and automotive costs totaling $661,590 chargeable to fiscal year 1997
were paid from fiscal year 1998 appropriations. The invoices for services were submitted
to the Department during fiscal year 1997 allowing adequate time to process the payment
against fiscal year 1997 funds. The invoices were also initially approved by Department
personnel during fiscal year 1997, but due to insufficient remaining funds, were paid in
fiscal year 1998.
As a result, the Department exceeded their fiscal year 1997 appropriation authority and
improperly charged costs to the subsequent fiscal year.
The Department charged these expenditures to the subsequent fiscal year by classifying
them as "catch-up" billings. Department officials stated the Agency was faced
with urgent needs to pay for certain prison reform initiatives and felt that the then new
"catch-up billing" provision of the State Finance Act was a viable and
appropriate approach to meeting its obligations. They further stated the costs cited above
were paid from fiscal year 1998 appropriations upon the receipt of a designated catch-up
billing from DCMS.
The State Finance Act allows for "catch-up" billings, but we feel the
Department is misinterpreting this statute. We interpret the statute as a means for DCMS
to collect past due billings, not as a means to allow the Department to fund new
initiatives and defer current year obligations to future fiscal years. The Department
should fund new initiatives through supplemental appropriations from the General Assembly,
not through "catch-up" billings. (Finding 98-5, page 21)
We recommended the Department monitor expenditures to ensure they stay within current
year budgetary constraints. The Department agreed that monitoring expenditures is an
important fiscal function, but the Department believed that it acted properly within the
provisions of the State Finance Act.
OUTDATED MANUAL PAYROLL SYSTEM
The Department-wide payroll timekeeping system is not automated. Each of the 32
large correctional centers employs several hundred employees, and the related timekeeping
system is maintained manually. Facility 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, is also forwarded to the timekeepers. No automation is involved
except for the processing of payroll warrants. Officials indicate that there are
insufficient funds available to develop a Department-wide system to replace the outdated
manual system used for over 14,000 employees.
Prudent business practices suggest that controls available through automated
timekeeping systems can provide greater efficiency and reduce the potential for costly
errors or employee abuse. (Finding 98-17, page 40)
We recommended the Department continue to pursue an automated timekeeping system.
The Department accepted our recommendation and stated it will continue to pursue an
automated timekeeping system as resources become available subsequent to completion of
Year 2000 EDP projects.
NEED TO IMPROVE CONTROLS OVER DISCIPLINARY TICKETS
The Department did not have adequate internal controls over disciplinary tickets
written for infractions committed by inmates while in the 25 adult correctional
facilities. When an inmate commits a disciplinary infraction at an adult facility, a
correctional officer may issue a disciplinary ticket to the inmate. The ticket describes
the infraction and is sent to the shift supervisor. The shift supervisor rates the
infraction major or minor and forwards it to the facility's Adjustment Committee. The
ticket is supposed to be docketed and tracked in the system through the issuance of a
disciplinary action.
We noted that there were no internal controls over the disciplinary tickets to ensure
an accounting of all tickets. The tickets are not standardized among facilities and are
not prenumbered. There are also no Department-wide policies or procedures for accounting
for these tickets. Without proper controls such as prenumbered tickets, these tickets
could be lost or stolen before reaching the Adjustment Committee. (Finding 98-20, page 44)
We recommended the Department develop standardized written procedures to track and
account for all disciplinary tickets written by correctional officers. Such procedures
should include prenumbering of these tickets.
The Department did not accept our recommendation and stated it does not believe that
modifying the existing procedures would necessarily solve the underlying concerns about
lost or destroyed tickets.
OTHER FINDINGS
The remaining findings are less significant and are being given attention by the
Department. We will review the Department's progress toward the implementation of our
recommendations in our next audit.
Mr. Mark Krell, Chief Auditor of the Department of Corrections, provided the agency's
responses.
AUDITORS' OPINION
Our auditors stated the Department's financial statements as of June 30, 1998
were 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
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SPECIAL ASSISTANT AUDITORS
Sikich Gardner & Co, LLP were our special assistant auditors on the audit
of the General Office and coordinated the performance of various procedures at the
correctional facilities administered by the Department. |
