REPORT DIGEST

 

CLYDE L. CHOATE
MENTAL HEALTH AND DEVELOPMENTAL CENTER

 

LIMITED SCOPE

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2007

 

Summary of Findings:

Total this audit                  7

Total last audit                  8

Repeated from last audit   6

 

Release Date:

June 12, 2008

 

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

http://www.auditor.illinois.gov

 

 

 

 

 

 

 

SYNOPSIS

 

¨      The Center did not complete an adequate year-end physical inventory and did not sufficiently maintain perpetual commodities inventory records.

¨      The Center did not maintain sufficient controls over the utilization, recording and reporting of its property.

¨      The Center lacked adequate internal controls and documentation for the operation of their locally held funds.

 

       

     

     

 

 

 

 

 

 

 

 

 

 

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


 

 

CLYDE L. CHOATE MENTAL HEALTH AND DEVELOPMENTAL CENTER

LIMITED SCOPE COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2007

 

EXPENDITURE STATISTICS

FY 2007

FY 2006

FY 2005

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

$36,590,859

$34,297,934

$36,265,043

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

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

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

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

                Average No. Of Employees.......................

                Average Salary Per Employee....................

$36,463,399

99.65%

$27,026,362

74.12%

511

$52,889

$34,175,495

99.64%

$26,251,923

76.82%

517

$50,777

$36,141,109

99.66%

$26,583,554

73.56%

530

$50,158

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

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

$5,073,333

13.91%

$4,183,075

12.24%

$6,053,530

16.75%

Commodities………………………………….......

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

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

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

$1,400,265

3.84%

$2,545,235

6.98%

$1,407,000

4.12%

$2,014,636

5.89%

$1,331,468

3.68%

$1,867,849

5.17%

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

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

 

          GRANTS TOTAL....................................................

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

$418,204

1.15%

 

$127,460

0.35%

$318,861

0.93%

 

$122,439

0.36%

$304,708

0.84%

 

$123,934

0.34%

·         Cost of Property and Equipment...........................

·         Cost of Inventories on hand (not examined).........

$49,738,130

$381,496

$49,749,507

$366,191

$49,781,933

$614,018

 

SELECTED ACTIVITY MEASURES (Not Examined)

FY 2007

FY 2006

FY 2005

·         Average Number of Residents...................................

248

251

267

·         Ratio of Employees to Residents................................

2.1 to 1

2.1 to 1

2.0 to 1

·         Cost Per Year Per Resident......................................

*

$177,723

$181,186

* The Department had not calculated these figures as of the end of fieldwork.

 

CENTER DIRECTOR

     During Audit Period:  Ms. Janice Farmer, Center Director

     Currently:  Ms. Janice Farmer, Center Director

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auditors unable to report on inventory

 

 

 

 

 

 

 

 

 

 

Person responsible for maintaining inventory also performed physical counts

 

 

 

 

 

 

 

 

General store inventory was not well maintained

 

 

 

 

Most of the items tested required an adjustment to write-down inventory

 

 

 

 

Coal usage not recorded

 

 

Failure to forward report

 

 

 

 

 

 

 

 

 

 

 

Certain items tested could not be reconciled to Center reports

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Center partially agreed

 

 

 

 

 

 

 

 

 

 

 

Center concurs some controls were not sufficient

 

 

 

 

 

 

 

 

 

 

 

 

Oversupply and deterioration of property and equipment

 

 

 

 

Most of adjustments tested were not made timely

 

 

 

 

 

 

 

 

Many asset transactions tested did not have proper documentation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No unique disbursement numbers

 

 

 

 

 

 

 

Cash fund had a negative balance for 56 days

 

 

 

 

 

 

 


Special Trust Fund disbursements missing supporting documentation

 

 

 

No indication of approval

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recipient Trust Fund disbursements missing supporting documentation

 

 

 

 

 

 

 

 

 

Inability to trace amounts from receipts journal to bank statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

INVENTORY NONCOMPLIANCE AND CONTROL WEAKNESSES

 

      The Center did not complete an adequate year-end physical inventory and did not sufficiently maintain perpetual commodities inventory records.

 

      Total commodities expenditures were $1,400,265 and $1,407,000 for fiscal years 2007 and 2006, respectively.  Because of poor record keeping and the numerous weaknesses noted in internal controls over commodities inventory, auditors were unable to report on commodities inventory balances at June 30, 2006 and June 30, 2007 in the Center’s limited scope compliance examination report. 

 

      During our testing of the Center’s commodity inventory records we noted deficiencies.  Some of the problems noted follow: 

 

·           Storekeepers from three of the four stores (75%) who are responsible for maintaining the inventory also performed the physical inventory counts.  Temporary workers were brought in to help with inventory; however, in the general store, the staff responsible for maintaining the inventory performed the count and the temporary workers recorded the figures.

 

·           Interim periodic inventory test counts were not performed in FY07.

 

·           Inventory was not well maintained in the general store (food).  Inventory items were not stored in an orderly manner and the same items were often stored in multiple locations.  Instances were noted where food items that had expired were still in inventory.

 

·           Sixteen of 24 (67%) items tested during the inventory test count required an adjustment to write-down inventory.  The majority of adjustments made by the Center were to write-down food inventory.  The frequent write-down of food inventory suggests that items are being removed from the food store without appropriate requisitions.

 

·           As a result of the annual inventory count, during June 2007 the Center adjusted inventory down by $439,784 (115%).  Most of the adjustment ($411,688) was due to the Center not recording their coal usage during FY07.

 

·           The business office frequently failed to forward weekly and monthly inventory reports to the storekeepers.

 

·           One of twelve (8%) commodities vouchers tested, valued at $418, could not be traced to the Center's Monthly Status Report and was recorded in the wrong fiscal year.  The Center records inventory into the inventory system at the date the storekeeper signs off on a receiving report, which could be several days or weeks after the inventory is actually received.  This results in ending inventory being incorrectly stated.

 

·           Seventeen of 77 (22%) items selected for test counts could not be reconciled to the June 30, 2007 Monthly Commodity Status Report.

 

      The business office has experienced significant turnover and changes in commodity control, purchasing and accountant supervisor.  A lack of clarity between the central office and the Center led to the mistake between the comparison of cans to cases. (Finding 1, pages 9-11)

 

      We recommended the Center devote the resources necessary to timely report inventory transactions to the business office.  In addition, we recommended the Center develop and implement internal control procedures to ensure the following are completed in a timely manner:

 

·           Inventory transactions are input into the reporting system

·           Inventory reports are distributed to the appropriate storekeepers

·           Requisition forms are completed every time inventory items are consumed

 

         We also recommended the Center conduct a complete physical inventory at the end of each fiscal year with staff independent of maintaining the inventory.  The Center should develop procedures to ensure the general store inventories are better organized and they periodically test count inventory throughout the year to increase the accuracy of perpetual inventory records and ensure expired items are properly disposed.

     

Center officials partially agreed with our recommendations and stated it does ensure inventory in the food store is well maintained.  The food store has been separated into areas for general storage, immediate use items and items needed for menu substitutes.  The multiple locations have been established to increase efficiency at the facility.  Inventory is rotated to minimize loss through expiration.  Requisitions for all food items are prepared and submitted for approval in advance of issuance.  Periodic test counts are performed throughout the year, discrepancies are followed up on and adjustments made if necessary.

 

Center officials agreed that some controls were not sufficient during the audit period due to the business office experiencing significant turnover and staff shortages which resulted in the recording and reconciling exceptions noted by the auditors.  The facility now has additional staff and will increase controls over commodity inventories.

 

NONCOMPLIANCE WITH PROPERTY CONTROL PROCEDURES

 

      The Center did not maintain sufficient controls over the utilization, recording and reporting of its property.  Some of the conditions noted follow:

 

·           During the tour of buildings and grounds, we noted a storage building that contained instances of oversupply and deterioration of property and equipment.  The building contained 604 items valued at $254,714.

 

·           Seventeen of 20 (85%) property location adjustments tested, valued at $4,722, were not made timely.  Since location adjustments were not entered until several months after the asset inventory count occurred we were unable to reconcile the Center's Asset Inventory Count record to the Comptroller's Activity Location Report.

 

·           Three of 40 (7.5%) equipment items tested, totaling $2,032, did not have a property control tag affixed and two of 40 (5%) items tested, totaling $876, could not be traced from the inventory report to the physical asset.

 

·           Six of 15 (40%) asset transactions tested did not have proper documentation; this included two transfers totaling $21,362 and four deletions totaling $20,150.

 

      Center management stated the storekeeper/property control position was vacant for several months.  This resulted in delay in the accurate accounting of property. (Finding 2, pages 12-13)

 

We recommended the Center develop and implement internal procedures to ensure equipment transactions have proper supporting documentation, approval, and are reported timely, all capital assets have a control tag, and surplus and scrap property is reported and transferred to Department of Central Management Services on a timely basis.

 

      Center officials agreed with our recommendation and stated the Property Control Clerk position that remained vacant for several months during the audit period has now been filled.  The facility has been working routinely to eliminate surplus, damaged and outdated equipment.  Property will be marked with an indelible marker and a property control tag to ensure identification.  Controls will be strengthened to ensure proper documentation, approval and timely reporting.        

 

 

INADEQUATE CONTROLS OVER LOCALLY HELD FUNDS

 

      The Center lacked adequate internal controls and documentation for the operation of their locally held funds.

 

Some of the exceptions noted during our testing of the Patient Travel Trust Fund follow:

 

·           Although the disbursement form has an area for a unique disbursement number, 10 of 10 (100%) disbursements tested, totaling $556, did not have a disbursement number.

 

·           Two of ten (20%) disbursements tested, totaling $216, that required travel vouchers be completed, did not have completed travel vouchers.

 

·           The Patient Travel Fund, which is a cash fund, had a negative balance during for 56 days during FY06.  The highest negative balance was $437. 

 

·           The Travel Fund Disbursements Journal for July 2006 was missing.

 

The following exceptions were noted during our testing of the Special Trust Fund:

 

·           Eleven of twenty (55%) disbursements tested, totaling $2,201, were missing supporting documentation; seven disbursements were missing a voucher or invoice, three disbursements were missing a disbursement request, and two disbursements did not have any supporting documentation.

 

·           Seven of twenty (35%) disbursements tested, totaling $340, did not have indication of approval.

 

·           Four of twenty (20%) receipts tested, totaling $138, could not be traced from the receipts journal to the bank statement.

 

·           Two of twenty (10%) individual items on deposit slips tested, totaling $46, could not be traced from the bank statement to the receipt documentation.

 

The following exceptions were noted during our testing of the Recipient Trust Fund:

 

·           Twenty of 100 (20%) disbursements tested, totaling $11,514, were missing supporting documentation; sixteen disbursements did not have a disbursement request, two disbursements were missing invoices, and four disbursements did not have any supporting documentation.

 

·           Twenty-nine of 100 (29%) disbursements tested, totaling $13,511, did not have indication of approval.

 

·           Fourteen of 100 (14%) disbursements tested, totaling $2,643, were not stamped that they were paid.

 

·           One of twenty receipts (5%) tested, totaling $25, could not be traced from the receipts journal to the bank statement.

 

      Center management stated it does not currently have procedures in place that require documentation of approval of disbursements and supporting documentation may have been misplaced when someone was temporarily filling in for the person that oversees the locally held funds.  Center management further stated some receipts could not be traced to the bank statement because cash receipts are deposited together and there is not a breakdown on the deposit slip for cash.  Additionally, the accountant supervisor position was vacated for most of the examination period.  (Finding 3, pages 14-16)

 

      We recommended the Center develop and implement internal controls to ensure that disbursements from the fund have adequate supporting documentation, are properly approved, are properly recorded in cash disbursements and receipts logs and are periodically reconciled to the unexpended cash balance by an individual independent of the receipt and disbursement process.

      Center officials agreed with our recommendations and stated the Center will strengthen controls over locally-held funds to ensure proper supporting documentation, approvals, recording of transactions, reconciliation and segregation of duties.  The vacant Accountant Supervisor position has been filled and will oversee maintenance of the locally-held funds.

 

OTHER FINDINGS

 

      Department and Center management indicated that they are addressing the remaining findings and taking appropriate corrective action.  We will review the Center’s progress toward implementation of our recommendations in our next compliance examination. 

 

 

AUDITORS’ REPORT

 

      We conducted a limited scope compliance examination of the Center as required by the Illinois State Auditing Act.  We also performed certain agreed upon procedures with respect to the accounting records of the Center to assist our financial audit of the entire Department.  Financial statements for the Department will be presented in that report.

     

_____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:aks

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors were Kemper CPA Group, LLP.