REPORT DIGEST

 

DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY

 

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2006

 

Summary of Findings:

Total this report:                      14

Total last report:                      11

Repeated from last report:         2

 

Release Date:

April 24, 2007

 

 

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

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740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

 

This Report Digest and Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

 

 

 

 

 

SYNOPSIS

 

 

¨      The Department made transfers totaling $4,561,000 to the general revenue fund in FY 06 that were not in accordance with State law.

 

¨      The Department did not timely execute contracts and interagency agreements and did not timely file contracts with the Illinois Office of the Comptroller.

 

¨      The Department did not have adequate policies to require all of its employees to complete daily timesheets.

 

¨      The Department failed to ensure applications for the Local Tourism and Convention Bureau program were complete.

 

¨      The Department did not timely notify Tourism grant applicants of their application status.

 

¨      The Department failed to assist and encourage employers to rehire employees when the employer was involved in a Department developed training program.

 

 

 

 

 

 

 

 

 

 

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

 

 


DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY

COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2006

 

EXPENDITURE STATISTICS

FY 2006

FY 2005

FY 2004

Total Expenditures (All Funds)..........

$606,160,291

$424,473,508

$944,841,593

OPERATIONS TOTAL........................

    % of Total Expenditures....................

$68,908,261

11.4%

$59,311,976

14.0%

$60,035,122

6.4%

Personal Services...................................

    % of Operations Expenditures............

   Average No. of Employees................

   Average Salary per Employee...........

$16,533,302

24.0%

444

$37,170

$17,156,119

28.9%

465

$36,895

$15,841,028

26.4%

519

$30,522

Other Payroll Costs (FICA, Retirement, Group Insurance).................................

    % of Operations Expenditures...........

 

$4,111,768

6.0%

 

$5,554,581

9.5%

 

$4,670,990

7.8%

Contractual Services..............................

    % of Operations Expenditures............

$8,354,506

12.1%

$5,492,796

9.2%

$7,222,513

12.0%

Lump Sum Expenditures.........................

    % of Operations Expenditures...............

$25,415,910

36.9%

$26,423,721

44.5%

$28,111,617

46.8%

Interfund Transfers................................

    % of Operations Expenditures...............

$10,980,000

15.9%

-

0.0%

$73,500

0.1%

All Other Operations Items.....................

    % of Operations Expenditures............        

$3,512,775

5.1%

$4,684,759

7.9%

$4,115,474

6.9%

AWARDS AND GRANTS TOTAL......

    % of Total Expenditures...............

DEBT SERVICE TOTAL..........................

    % of Total Expenditures........................

PERMANENT IMPROVEMENTS............

    % of Total Expenditures........................

REFUNDS TOTAL...................................

    % of Total Expenditures ....................

$536,825,779

88.5%

-

0.0%

$395,000

0.1%

$31,251

0.0%

$364,558,832

85.9%

          -

0.0%

$600,000

0.1%

$2,700

0.0%

$871,096,013

92.2%

$13,697,063

1.4%

-

0.0%

$13,395

0.0%

Cost of Capital Assets.......................

$11,102,291

$11,972,489

$13,475,222

 

CASH RECEIPTS

FY 2006

FY 2005

FY 2004

Federal Grants.................................................

Interfund Transfers..........................................

License and Fees.............................................

Prior Year Refunds..........................................

Sale of Investments and Interest Income...........

State Grants.....................................................

Loan Repayments............................................

Private Donor..................................................

Other..............................................................

         Total......................................................

$250,544,413

10,980,000

7,584,976

5,988,746

4,241,715

3,508,326

1,882,613

683,679

    1,054,290

$268,468,758

$249,702,955

1,800,000

7,693,260

2,808,873

4,117,460

-

3,733,572

33,919

       453,803

$238,615,122

$375,120,624

         -

11,639,109

5,122,283

5,370,061

73,500

2,526,924

5,040,565

       651,570

$405,544,636

 

AGENCY DIRECTOR

     During Examination Period:  Jack Lavin

            Currently:  Jack Lavin

 

 

 

 

 

 

 

 

 

Excess transfers of $4,561,000 were made to GRF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


$3,153,000 in excess transfers from Tourism Promotion Fund

 

$1,408,000 in excess transfers from Coal Technology Development Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracts were not always executed timely

 

 

 

Services often began before interagency agreements were executed

 

 

 

 

 

Some contracts were filed late with the Comptroller’s Office

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timesheets are not maintained for all employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Several items were missing from tourism certification and funding applications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Grant applicants were not notified of their certification application status

 

 

The Department did not always notify tourism grant applicants whether their application was complete

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Department failed to assist and encourage employers to reemploy employees

 

List of employees in Department training programs was not provided to employers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Progress made in implementing 7 of the 8 recommendations examined

 

 

 

 

Structured process to review performance measures implemented

 

 

Procedures implemented to ensure performance measures are calculated correctly

 

 

Controls implemented to ensure grant recipient reports are monitored

 

 

 

 

 

 

 

 

 

 

 

Coal Development Board not staffed

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

 

TRANSFERS TO GENERAL REVENUE FUND NOT IN ACCORDANCE WITH STATE LAW

 

      Transfers were made to the General Revenue Fund (GRF) totaling $4,561,000 in fiscal year 2006 from the Tourism Promotion Fund and the Coal Technology Development Assistance Fund which were not in accordance with State law.

 

      Public Act 94-839 (30 ILCS 105/8h) states, “The total transfer under this Section from any fund in any fiscal year shall not exceed the lesser of (i) 8% of the revenues to be deposited into the fund during that fiscal year or (ii) an amount that leaves a remaining fund balance of 25% of the July 1 fund balance of that fiscal year.” 

 

      For these two funds, 8% of the revenues was less than 25% of the July 1 fund balance, so the revenue calculation was used.  However, the revenues for the calculation included interfund transfers, which are not revenues.  NCGA Statement 1 – Governmental Accounting and Financial Reporting Principles, paragraph 109 states, “The term “revenues” means increases in (sources of) fund financial resources other than from interfund transfers” (emphasis added).

 

      The Department included all $43,671,000 of interfund transfers into the Tourism Promotion Fund as revenue, therefore all $3,153,000 in transfers to GRF were excess transfers.  The Department included $17,207,000 of interfund transfers into the Coal Technology Development Fund as revenue.  Actual revenues were $5,199,000.  Therefore $1,408,000 of transfers from this fund to GRF were excess transfers.  (Finding 1, pages 11-12)

 

      We recommended the Department work with Governor’s Office of Management and Budget (GOMB) to return these transfers to the Tourism Promotion Fund and the Coal Technology Development Assistance Fund.  Further, the Department should work with GOMB to ensure future transfers do not violate State law.

 

      Department management accepted our recommendations and stated they would work with GOMB to address the finding and take appropriate action.

 

 

CONTRACTS AND INTERAGENCY AGREEMENTS NOT TIMELY EXECUTED AND NOT TIMELY FILED WITH THE ILLINOIS OFFICE OF THE COMPTROLLER

 

      The Department did not execute contracts with vendors and interagency agreements with other State agencies in a timely manner.  Also, the Department did not timely file contracts with the Illinois Office of the Comptroller. 

 

      We noted 19 of 60 (31.7%) contracts tested totaling $6,621,994 that were not executed prior to the commencement of services.  Professional and Artistic affidavits were filed for 15 of these contracts.    

 

      We reviewed 9 of the 34 interagency agreements (26.5%) totaling $4,150,087 and noted services began prior to the completion of an executed agreement for 5 of the 9 (55.6%) agreements tested.  Additionally, we could not determine whether 1 of the 9 (11.1%) agreements was executed in a timely manner because the signed interagency agreement was not dated. 

 

      For 7 of the 60 (11.7%) contracts tested Late Filing Affidavits were filed with the Comptroller.  While the Procurement Code permits the use of affidavits to justify noncompliance with the 15 day filing requirement, and the Department submitted late filing affidavits when required to do so, its use should be limited and not routine.  (Finding 2, pages 13-14)

 

      We recommended the Department take the necessary steps to improve the timeliness in reducing contracts and interagency agreements to writing and filing them with the Comptroller.

 

      Department management agreed with the finding and stated they would improve processes to improve the timeliness in reducing contracts and interagency agreements to writing and filing them with the Comptroller.

 

 

CONTROLS OVER EMPLOYEE TIMEKEEPING NEED IMPROVEMENT

 

      The Department does not have adequate policies to require all of its employees to complete daily timesheets.

 

      The Department had personnel policies in regard to timekeeping, but the Department only required “Senior Staff and Policy Making Employees” to maintain a daily timesheet which documents the time spent each day on State business.  The remainder of the Department’s employees were not required by the Department to maintain any daily timesheet.  The Department had an average of 444 employees at June 30, 2006 and the Department only required 59 (13.3%) to prepare timesheets.

 

      The State Officials and Employees Ethics Act (Act) (5 ILCS 430/5-5) requires each State employee to periodically submit timesheets documenting the time spent each day on official State business to the nearest quarter hour.  (Finding 3, page 15)

 

      We recommended the Department comply with the timekeeping requirements of the State Officials and Employees Ethics Act by preparing and maintaining the required timesheets for all State employees.

 

      Department management agreed with the finding and stated that it uses the CMS timekeeping system.  The Department stated it is currently working with the Governor’s Office of Management and Budget on the Shared Services Center Project.  One of the initiatives of this project is to implement an automated timekeeping system which will also meet the requirements of the Act.

 

 

FAILURE TO ENSURE APPLICATIONS FOR LOCAL TOURISM AND CONVENTION BUREAU PROGRAM WERE COMPLETE

 

      The Department failed to ensure applications for the Local Tourism and Convention Bureau (LTCB) program were complete. 

 

      Our testing of the certification applications for 10 LTCB grantees noted the following results: 

 

·        4 were missing the tourism-related experience of the CEO;

·        3 were missing the duties of the CEO; and

·        2 were missing copies of the bylaws.

 

      Our testing of the funding applications for 10 LTCB grantees noted the following results: 

 

·        7 were missing fund account numbers for grant and matching funds; and

·        2 were missing proper certified letters from municipalities specifying the amount of matching funds provided to the applicant.

(Finding 5, pages 17-18)

 

      We recommended the Department comply with the certification and funding application requirements of the Illinois Administrative Code.  Further, if the Department determines that the current rules do not allow for the most efficient and effective operation of the LTCB program, the Department should seek the necessary rule changes.

 

      Department management agreed with the finding and stated they would develop revised policies and procedures to ensure that all applications are complete and in compliance with the rule requirements.

 

 

TOURISM GRANT APPLICANTS NOT PROPERLY NOTIFIED

 

      The Department did not timely notify Tourism grant applicants of their application status. 

 

      During our detail testing of 35 Tourism grant applications, we noted the following: 

 

·        The Department did not notify 10 of 10 (100%) Local Tourism and Convention Bureau Program grant applicants of their certification application status.  

 

·        The Department did not notify 3 of 5 (60%) Tourism Attraction Development Grant and Loan Program grant applicants tested whether their applications were complete.  One of the 2 (50%) remaining application status letters was sent 141 days late.   

 

·        The Department did not acknowledge the date that the applications for 5 of 5 (100%) International Tourism Program grant applicants tested were received. 

 

·        The Department did not notify 3 of 5 (60%) Tourism Private Sector Grant Program applicants tested whether their applications were complete.  One of the 2 (50%) remaining application status letters was sent 20 days late.   

 

      The Department’s response to this previous finding stated they would comply with the Administrative Code or seek a rule change to the Code.  Department management stated they did not seek a change to the Code during the engagement period.  (Finding 6, pages 19-20)

 

      We recommended the Department comply with the Illinois Administrative Code and send the required notification letters to the applicants or seek a rule change to the Illinois Administrative Code.

 

      Department management agreed with the finding and stated Tourism staff will send the required notification letters to comply with the Code and may seek rule changes to make the process more efficient. 

 

NEED TO ASSIST AND ENCOURAGE EMPLOYERS TO REHIRE EMPLOYEES

 

      The Department failed to assist and encourage employers to rehire employees as required by law when the employer was involved in a Department developed training or retraining program. 

 

      During the examination period the Department failed to assist and encourage employers to make every effort to reemploy individuals previously employed when the employer was involved in a Department developed a federal or State funded training or retraining program.  The Department did not provide a list of those employees to the employer for consideration for reemployment as required by the Civil Administrative Code (20 ILCS 605/605-810).  (Finding 12, page 27)

 

      We recommended the Department assist and encourage employers involved in training or retraining programs to consider persons previously employed at the facility for reemployment.  Further, the Department should provide a list of those employees to the employer, as required by law.

 

      Department management agreed with the finding and stated they would develop a process for job training and retraining programs administered by the Department to comply with the requirements of this statutory provision.

 

 

STATUS OF THE DEPARTMENT’S PROGRESS IN IMPLEMENTING MANAGEMENT AND PROGRAM AUDIT RECOMMENDATIONS

 

      In February 2006, the Office of the Auditor General released its report of the Management and Program Audit of the Illinois Department of Commerce and Economic Opportunity (Department) – Administration of its Economic Development Programs.  The audit included 14 recommendations for improvement, 8 of which we followed up on during the compliance examination.  The Department did not have adequate time to implement corrective action for the remaining 6 recommendations.  (Recommendations 1-4, 9 and 11)

 

      During fiscal year 2006, we noted the Department had made progress in implementing 7 of the 8 recommendations.  The remaining recommendation was only partially implemented and resulted in a finding as a part of our compliance examination.  A summary of the Department’s corrective action follows:

 

·        The Department appears to have implemented a structured process to review performance measures on a periodic basis.  (Recommendation 5)

·        The Department appears to have implemented procedures to ensure that performance measures are calculated correctly and adequately supported by underlying documentation.  (Recommendation 6)

·        The Department eliminated a net 29 performance measures as a result of implementing a new Performance Measurement Policy and Procedure.  (Recommendation 7)

 

·        The Department has implemented controls to ensure monitoring reports from grant recipients are accurate and reviewed in a timely manner.  (Recommendation 8)

·        The Department has implemented procedures to periodically review both the efficiency and the effectiveness of economic development programs.  (Recommendation 10)

·        The Department tracks required statutory reporting requirements.  However, the Department did not ensure all 2006 statutory reports were filed in a timely manner.  The Department appeared to have a proactive mechanism in place to facilitate future timely submissions.  (Recommendation 12)

·        The Department did not fully staff the Coal Development Board.  (Recommendation 13)  (See Finding 10, page 24)

·        The Department has implemented several changes to ensure that all reports required under the Corporate Accountability for Tax Expenditures Act include all of the required information and that data reported is complete and meaningful.  (Recommendation 14)  (See Status of Management and Program Audit Recommendations, pages 33-35)

 

 

OTHER FINDINGS

 

      Other findings are reportedly being given attention by Department management.  We will review progress toward implementation of our recommendations in our next examination.   

 

 

 

AUDITORS’ OPINION

 

      We conducted a compliance examination of the Department as required by the Illinois State Auditing Act.  We have not audited any financial statements of the Department for the purpose of expressing an opinion because the Department has not, nor is required to, prepare financial statements.

        

 

 

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:JAF:pp

 

AUDITORS ASSIGNED

 

      Sikich LLP were our special assistant auditors for this engagement.