REPORT DIGEST
DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF
THE SCHEDULE OF CAPITAL ASSETS
For the Year Ended:
June 30, 2009
Release Date:
April 15, 2010
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
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INTERNAL CONTROL WEAKNESSES RELATED TO THE RECORDING AND
REPORTING OF STATE PROPERTY
During testing of the Department’s State property, a number
of weaknesses were identified in the Department’s internal control,
particularly in the following areas:
• An
overstatement of $1,393,000 in accumulated depreciation was not deducted from
the Capital Asset Summary (SCO-538 Accounting Report
Form) submitted to the Office of the State Comptroller. Further, this
adjustment was not made to the June 30, 2008 audited Schedule of Capital
Assets. To correct this error, the Department reduced the June 30, 2009
additions to depreciation expense, which understates the current year’s actual
depreciation expenses by $1,393,000. The
amount of this error did not necessitate the auditors to propose a correcting
adjustment.
• During
fiscal year 2008, the Department changed its depreciation methodology. During
this change, certain fully depreciated capital assets were included in the
depreciation computation, ultimately overstating the June 30, 2008 depreciation
expense by $223,602. The correction of this error resulted in understating
depreciation expense in fiscal year 2009.
The amount of the error did not necessitate the auditors to propose a
correcting adjustment.
• During
fiscal year 2009, the Department conveyed a building, with improvements of
$167,287, to a local municipality.
However, the Department could not provide documentation to support the
conveyance officially occurred during fiscal year 2009.
An important element of internal control is the accurate
review, reconciliation and reporting of accounting data.
Department personnel stated both internal and external
reviews of capital asset information are being performed and the exceptions
noted occurred due to management oversight. Regarding documentation not
maintained to support the building conveyance, Department personnel stated this
occurred due to a miscommunication between the Department’s Office of Realty
and Environmental Planning (OREP) and Capital
Assets. (Finding 09-1, pages 13-15)
We recommended the Department improve controls over their
recording and reporting of capital assets to ensure the adequate review and
reconciliation of property control records to external financial reports are
being performed to identify errors.
Further, the Department should improve its efforts to ensure supporting
documents on all disposals of capital assets are maintained.
Department officials partially agreed with the finding and
recommendation. The Department indicated
their internal control system detected the errors, and did agree that the
errors occurred. The Department
indicated the $223,602 infrastructure depreciation overstatement was done as
directed by the external audit firm, Office of the Auditor General and the
Illinois Office of the Comptroller.
In an auditor’s comment, we noted the Department agreed that
the errors did occur. The external audit
firm and the Office of the Auditor General proposed a correcting entry to the
Department’s Schedule of Capital Assets based on information provided by the Department,
but did not direct the Department to overstate fiscal year 2008 infrastructure
depreciation.
AUDITORS’ OPINION
Our special
assistant auditors stated that the Department’s Schedule of Capital Assets as
of June 30, 2009 is presented fairly in all material respects.
WILLIAM G. HOLLAND, Auditor General
WGH:RPU:pp
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this engagement were Washington, Pittman & McKeever, LLC.