REPORT DIGEST ILLINOIS CONSERVATION FOUNDATION FINANCIAL AUDIT and COMPLIANCE EXAMINATION For the Year Ended June 30, 2014 Release Date: February 11, 2015 FINDINGS THIS AUDIT: 5 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 2 -- 2 Category 2: 2 -- 1 -- 3 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 3 -- 5 FINDINGS LAST AUDIT: 5 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. 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 • (14-1) The Foundation’s financial reporting process is lacking sufficient internal controls. • (14-3) The Foundation’s internal controls related to accounting transactions should be enhanced. • (14-2) All of the Foundation’s accounting functions are performed by one employee creating a segregation of duties issue. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE FINANCIAL REPORTING PROCESS The Illinois Conservation Foundation (Foundation) does not have sufficient internal controls over the financial reporting process. Several errors were identified during the audit of the Foundation’s financial statements. The Foundation’s financial statements were adjusted for the following reporting errors: • The Foundation failed to make numerous adjusting entries to present the financial statements in accordance with Generally Accepted Accounting Principles (GAAP). • The Foundation recorded brokerage fees for certain investment accounts as unrealized losses in error. A net audit adjustment of $16,616 was recorded to correct the balances in the expense and unrealized loss accounts. • The Foundation recorded a payment of credit card receipts to another governmental entity as an expense, rather than offsetting the original revenue recorded. A net audit adjustment of $32,262 was recorded to reduce both the appropriate revenue and expense accounts. • The Foundation did not properly account for $10,000 of federal revenues and expenses. An audit adjustment was recorded to increase both the federal revenue and expense accounts for the omitted activity. (Finding 1, pages 11-12) This finding was first reported in 2011. We recommended the Foundation implement additional internal control procedures to ensure financial statements are prepared in accordance with GAAP. Foundation management accepted our recommendation. (For the previous Foundation response, see Digest Footnote #1.) NEED TO ENHANCE CONTROLS OVER ACCOUNTING TRANSACTIONS The Foundation did not maintain adequate internal controls over accounting transactions. The following weaknesses were noted during testing: • The Foundation’s adjusting journal entries did not have evidence of review and approval by an individual independent of the preparer. • Three of 36 bank reconciliations were not completed in a timely manner. Thirty-six of 36 bank reconciliations did not have evidence of review and approval by an individual independent of the preparer. • The Foundation’s credit card and cash receipts postings recorded into the general ledger did not have evidence of review and approval by an individual independent of the preparer. • The Foundation’s payroll and payroll related expense activity recorded into the general ledger, as well as hourly timesheets, did not have evidence of review and approval by an individual independent of the recording. • One of 117 paid invoices tested was a duplicate payment made in the amount of $2,850 that was not detected by the Foundation. • The Foundation did not obtain dual signatures on 3 of 22 expenditures tested greater than $5,000. (Finding 3, pages 14-15) We recommended the Foundation document reviews of journal entries, bank reconciliations, credit card receipts and cash receipts postings, and payroll reports and hourly timesheets on the face of the document with the reviewer’s initials and date of review. Also, the Foundation should implement procedures to ensure duplicate payments are not made and to ensure that bank reconciliations are completed in a timely manner and that all disbursements greater than $5,000 include two required signatures. The Foundation should also request the duplicate payment made be refunded. Foundation management accepted our recommendation. INADEQUATE SEGREGATION OF DUTIES The Foundation lacks adequate segregation of duties over its accounting functions. The Foundation has three employees, an Executive Director, a Chief Financial Officer, and a property manager. Because of the small size of the Foundation staff, all of the accounting functions are performed by one employee which creates a segregation of duties issue. (Finding 2, page 13) This finding was first reported in 2009. We recommended the Board of Directors remain involved in the financial affairs of the Foundation to provide oversight and independent review functions. Foundation management accepted our recommendation. (For the previous Foundation response, see Digest Footnote #2.) OTHER FINDINGS The remaining findings pertain to a failure to sufficiently collateralize deposits and inadequate controls over vacation pay. Auditors will review the Foundation’s progress towards the implementation of all the recommendations in the next engagement. AUDITOR’S OPINION The auditors expressed an unmodified opinion on the Foundation’s financial statements for the year ended June 30, 2014. WILLIAM G. HOLLAND Auditor General WGH:APA SPECIAL ASSISTANT AUDITORS Kemper CPA Group, LLP was our special assistant auditor for this engagement. DIGEST FOOTNOTES #1 – NEED TO IMPROVE FINANCIAL REPORTING PROCESS 2013: The Foundation agrees. #2 – INADEQUATE SEGREGATION OF DUTIES 2013: The Foundation agrees.