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FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE MAINTENANCE OF COMMODITIES INVENTORY
SYSTEM
The Center did not maintain adequate commodities inventory
records.
·
Five of 29 (17%) vouchers tested were recorded
incorrectly in the commodities system.
Items on three vouchers were understated by $569 and items on two
vouchers were overstated by $187 resulting in a net understatement of
$382.
Center management stated the amounts were taken from the
receiving reports and those reports reflect the items catalog price not
actual purchase price.
·
Fourteen of 33 (42%) commodities purchases and
requisitions tested were not recorded into the Center’s commodity inventory
system timely. Transactions were
recorded from 33 to 242 days after receipt of the purchase or
requisition. In addition, from July
1, 2003 through May 1, 2004, the Center did not have a commodities inventory
system.
Center management stated the delays and lack of an inventory
system were due to system conversion to the Department of Human Services
(DHS) Commodity System. (Finding 1,
pages 10-11) This finding was first reported in 1999.
We recommended the Center strengthen
controls over its commodity inventory system and ensure all purchases and
requisitions are recorded timely and purchases are entered into the commodity
system at actual cost.
Center officials agreed with the finding
and stated they will strengthen the control over the Commodities Inventory
System and ensure the timely recording of commodity transactions into the
system using the actual cost. (For
the previous Center response, see Digest Footnote # 1)
INADEQUATE CONTROLS OVER LOCALLY HELD FUND
The Center did not maintain
adequate controls over its School Store Fund.
The Center established the School Store Fund (Fund), a
locally held fund, in FY03 to hold assets generated by School Store sales.
Disbursements were to be used to restock the School Store supplies and fund
student driven activities such as parties and field trips. We noted the following:
·
Cash was not deposited on a regular basis or adequately secured. We noted cash was left in the drawer
overnight and students were left alone to monitor the Store’s sales and cash
drawer with no supervision. Only two
cash deposits totaling $382 and five cash deposits totaling $911 were made to
the Fund’s bank account during FY04 and FY05, respectively. In addition, cash totals were not verified
regularly or reconciled to accounting records.
·
Cash receipts and disbursements ledgers were not adequate. Twenty-one of 25 (84%) disbursements
tested totaling $3,641 and 25 of 25 (100%) receipts tested totaling $185 did
not have adequate supporting documentation.
Various employees and volunteers took cash from the fund to make
purchases such as food, office supplies, and toys for the Store’s inventory
and recorded the amounts used in a log after the purchases were made. No
additional documentation was maintained.
Support for receipts consisted of written entries in a sales journal
made by the student workers.
·
The Center understated its receipts on the locally held fund reports
(C-17s) during FY04 and FY05 by $257 and $364, respectively. The Center’s cash disbursements on the
C-17s were understated by $335 in FY05 when comparing the amount reported to
the disbursements log and accompanying receipts.
Center management stated
the Store is used as a learning tool for students. Volunteers and teachers
are
responsible for supervising and training the students. Those
individuals documented the receipts and disbursements, and the accounting
staff did not have the resources to do a detailed review of all transactions. (Finding 2, pages 12-13)
We recommended the Center strengthen
controls over the School Store Fund and ensure cash is adequately secured,
receipts are deposited timely, and adequate supporting documentation of
accounting records are maintained. In
addition, we recommended management approve all fund disbursements and ensure
the accuracy of the C-17 reports.
Center officials agreed with the finding and stated they are
in the processing of permanently closing the School Store Fund.
VOUCHER PROCESSING WEAKNESSES
The Center did not exercise adequate
control over voucher processing.
·
Four of 79
(5%) vouchers tested, totaling $24,465, were approved for payment from 12 to
40 days late.
Center management stated vouchers were approved late due to staff
turnover, voucher processing errors, and late contract approval by the
Department of Human Services (DHS) Central Office.
·
The required
interest of $323 was not paid on 1 of 79 (1%) vouchers tested, totaling
$17,477.
Center management stated
the required interest was not paid due to DHS Central Office not notifying
the Center that interest was due.
·
One of 79
(1%) vouchers tested, totaling $3,228 for professional medical services, did
not contain supporting documentation.
Center management stated the
lack of documentation was due to staff turnover.
We recommended the Center
implement controls to ensure vouchers are approved within the required time
frame and to identify all vouchers not paid within 60 days to ensure the proper
amount of interest is paid. In
addition, we recommended the Center strengthen controls over voucher
processing procedures including maintaining proper documentation.
Center officials disagreed
with the finding and stated the Business Office always makes every effort to
process all vouchers in a timely manner provided the contract documents are
approved and processed on time through the DHS Central Office. They further
stated voucher processing is always done within the time line needed to meet the
State Prompt Payment Act, and that vouchers cannot be processed at the Center
if the contracts or obligations are not loaded onto the Consolidated
Accounting Reporting System (CARS) by the DHS Central Office. In addition, they stated they will ensure
voucher processing procedures includes maintaining supporting documentation.
In our auditor’s comment, we
noted that the four vouchers in the finding were not approved within 30 days
of receipt of a proper bill which is not in accordance with the Illinois
Administrative Code (74 Ill. Adm. Code 900.70), and only one of the four
vouchers had a contract that needed to be processed at the DHS Central
Office.
We further stated that the State Prompt Payment Act (Act) requires
appropriate State officials or agencies to determine whether interest is due
and automatically pay interest penalties.
Appropriate State officials or agencies is defined in the Act (30 ILCS
540/1) as “the Director or Chief Executive or his designee of that State
Agency or department or facility of such agency or Department.” Therefore, it is the Center’s
responsibility to ensure interest is paid when statutorily required and the
above noted interest of $323 was not paid to the vendor as required.
Carol L. Adams, Ph.D., Secretary
of the Department of Human Services, provided responses to our findings and
recommendations.
AUDITORS’ OPINION
We
conducted a compliance examination of the Center as required by the Illinois
State Auditing Act. This was a
limited scope compliance examination that also included performing certain
agreed-upon procedures with respect to the accounting records of the Center
to assist our audit of the entire Department. Financial statements for the entire Department of Human
Services will be presented in that report.
__________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:PAH:pp
ASSIGNED AUDITORS
The Auditor General’s staff conducted
this examination.
DIGEST FOOTNOTES
#
1 - INADEQUATE MAINTENANCE OF COMMODITIES INVENTORY Previous Center Response
2003: “We agree. We will
review and enhance the systems and procedures to ensure that an adequate
control exists over commodities inventory.
We are now in the process of switching the current inventory system to
DHS CIS in order to ensure accurate recording.”
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