REPORT DIGEST

DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY

COMPLIANCE EXAMINATION
For the Two Years Ended June 30, 2012


Release Date:   March 13, 2013

Summary of Findings:
Total this audit: 9
Total last audit:  6
Repeated from last audit: 3

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, Iles Park Plaza, 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 www.auditor.illinois.gov

SYNOPSIS

• The Department of Commerce and Economic Opportunity
(Department) did not ensure proper controls were
established in the administration of its grant programs.

• The Department did not fully comply with the
requirements of the Fiscal Control and Internal Auditing
Act.

• The Department did not complete employee performance
evaluations annually and timely.

• The Department did not complete small business impact
analyses timely.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO MAKE IMPROVEMENTS TO GRANT ADMINISTRATION

The Department did not ensure proper controls were
established in the administration of its grant programs.

The Department expended $2,059,012,994 for awards and
grants, or 94% of its $2,191,533,514 total expenditures
during the two year examination period. We tested 60
grant agreements covering five program areas: Energy
Assistance, Business Development, Coal Development,
Illinois Energy Office, and Grants Management Unit.

Specific weaknesses noted in the grant program areas
tested follow:

• The Department did not have a policy to define the
timeframe to close out a grant after the grant period
ends.
• The Department failed to monitor seven (12%) tested
grants beyond reviews of quarterly financial and project
status reports.
• The Department failed to perform required desk reviews
for seven (12%) tested grants which were funded through
the American Recovery and Reinvestment Act.
• The Department failed to ensure grant modifications
were properly executed for two (3%) tested grants. One
modification was not approved by the Department’s
Director, and the other modification was signed by a
person who was not an authorized signatory or designee
of the grantee.
• The Department accepted and approved financial and
project status reports which were signed by an employee
who was not an authorized signatory or designee of the
grantee for six (10%) tested grants. (Finding 1, pages
11-13) This finding was first reported in 2008.

We recommended the Department strengthen its controls
over the grant management process and establish a
reasonable timeframe for the close out grants. Further,
the Department should modify its approach to monitoring
the performance of grantees.

Department management concurred with our finding and
stated they will establish a close out policy with
reasonable due dates for final grant reports and
Department review. The Department will also improve
grant management controls using a risk-based monitoring
plan. (For the previous Department response, see Digest
Footnote #1.)

NEED TO COMPLY WITH FISCAL CONTROL AND INTERNAL AUDITING
ACT REQUIREMENTS

The Department did not comply with the requirements of
the Fiscal Control and Internal Auditing Act (Act).

The Department’s Office of Internal Audit (OIA) did not
conduct and complete an audit of the Department’s major
systems of internal accounting and administrative
controls during the last two years as required by the
Act.

In addition, the OIA did not conduct reviews of the
design of major new electronic data processing systems
and major modifications to existing systems prior to
their installation to ensure these systems provide for
adequate audit trails and accountability. (Finding 2,
pages 14-15)

We recommended the Department’s OIA complete internal
audits of its major systems of internal accounting and
administrative controls as required by the Act.

Department management concurred with our finding.

NEED TO COMPLETE EMPLOYEE PERFORMANCE EVALUATIONS TIMELY

The Department did not timely perform annual employee
performance evaluations. During our testing of 53
employee files, the following was noted:

• The Department did not complete performance
evaluations for eight (15%) tested employees as of the
completion of our testing.
• The Department completed performance evaluations for
21 (40%) tested employees from two to 283 days late.
(Finding 3, pages 16-17) This finding was first reported
in 2006.

We recommended the Department evaluate its procedures
for monitoring performance evaluations to ensure that
performance evaluations are completed timely.

Department management concurred with our finding and
recommendation. (For the previous Department response,
see Digest Footnote #2.)

NEED TO COMPLETE SMALL BUSINESS IMPACT ANALYSES TIMELY

The Department did not complete small business impact
analyses within the timeframe required.

The Illinois Administrative Procedure Act (5 ILCS
100/5-30(c)) states that the Business Assistance Office
(Office) within the Department shall prepare an impact
analysis of the rule or amendment describing its effect
on small business whenever the Office believes, in its
discretion, that an analysis is warranted or whenever
requested to do so by 25 interested persons, an
association representing at least 100 interested
persons, the Governor, a unit of local government, or
the Joint Committee on Administrative Rules (JCAR). The
impact analysis shall be completed before or within the
notice period as described in subsection (b) of Section
5-40 which states that each agency shall give at least
45 days’ notice of its intended action to the general
public. This first notice period shall commence on the
first day the notice appears in the Illinois Register.

During our testing of 25 small business impact analyses,
we noted 14 (56%) analyses were completed from one to
287 days beyond the 45 day notice period. (Finding 8,
page 28)

We recommended the Department ensure compliance with the
requirements to prepare business impact analyses within
the required timeframe.

Department management concurred with our finding and
stated that they have implemented a tracking system to
ensure small business impact analyses are completed
within the 45 day notice period.

OTHER FINDINGS

The remaining findings pertain to: 1) failure to timely
submit required reports in accordance with various
statutory mandates, 2) failure to ensure newly hired
employees complete required ethics training timely, 3)
failure to ensure various boards, committees, and
councils are fully staffed, 4) failure to comply with
various statutory mandates, and 5) failure to provide
notice of new legislation affecting local governments.
We will follow up on these findings during our next
examination of the Department.

AUDITORS’ OPINION

We conducted a compliance examination of the Department
as required by the Illinois State Auditing Act.  The
Department has no funds that require an audit leading to
an opinion of financial statements.

WILLIAM G. HOLLAND
Auditor General

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SPECIAL ASSISTANT AUDITORS

E. C. Ortiz & Co., LLP were our special assistant
auditors.

DIGEST FOOTNOTES

#1 – NEED TO MAKE IMPROVEMENTS TO GRANT ADMINISTRATION

2010:  The Department agrees with the recommendation and
has implemented several new controls for grantee
reporting in fiscal year 2010. The new control
environment in eGrants provides an efficient method for
staff to follow-up on grantee delinquent reports and
documents the date reports are received and approved.
Each grantee also receives a “Welcome Package” with a
copy of their executed grant agreement that includes a
grant-specific report deliverable schedule that lists
report due dates. eGrants generates automated emails to
remind each grantee of upcoming report due dates and
also sends out a series of late notice emails if a
report has not been received and the receipt date of the
report is not entered into the system. This provides an
automated follow-up process for delinquent reports that
is documented in eGrants. The eGrants system places a
“lock” on a grantee’s Federal Employer Identification
Number (FEIN) if a report is 15 days or more past due.
The FEIN lock prevents the Department from processing
any payments or approving future funding for the
organization until the problem is resolved.

The Department is committed to continue to strengthen
its monitoring controls and will begin development of a
monitoring quality assurance program. The monitoring
quality assurance program will ensure Department-wide
monitoring policies and procedures are established and
each office has completed an assessment of the risks for
their programs.

#2 – NEED TO COMPLETE EMPLOYEE PERFORMANCE EVALUATIONS
TIMELY

2010:  The Department agrees with the recommendation. On
September 1, 2010, the Department implemented a new
employee evaluation tracking system. The system sends
automated emails to both the office’s senior manager and
evaluation tracking coordinator for all evaluations that
are to be completed by that office. Email notifications
are sent 30 days prior to the end of the evaluation
period and a second reminder is sent 7 days before it is
due. Late notices are then sent weekly for untimely
evaluations and continue until the evaluation is
completed. During this examination period, the
evaluations sampled were twice as many from the prior
examination period and the Department’s rate of untimely
completion from the sample decreased from 56% to 28%.