REPORT DIGEST DEPARTMENT OF VETERANS’ AFFAIRS ILLINOIS VETERANS’ HOME - MANTENO COMPLIANCE ATTESTATION EXAMINATION For the Two Years Ended: June 30, 2008 Summary of Findings: Total this audit 6 Total last audit 4 Repeated from last audit 2 Release Date: June 25, 2009 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 Home did not exercise adequate control over the tracking and recording of its commodities inventory. · The Home did not maintain accurate property control records and filed inaccurate Agency Reports of State Property. · The Home did not complete annual employee performance evaluations timely. · The Home did not comply with the terms of a grant agreement. (Expenditures and Activity Measures are summarized on the next page.)

DEPARTMENT OF VETERANS' AFFAIRS

ILLINOIS VETERANS’ HOME AT MANTENO

COMPLIANCE ATTESTATION EXAMINATION

For The Two Years Ended June 30, 2008

EXPENDITURE STATISTICS	FY 2008	FY 2007	FY 2006
Total Expenditures (All Funds).............	$25,326,578	$23,558,287	$21,235,276
OPERATIONS TOTAL........................... % of Total Expenditures..................	$25,326,578 100.00%	$23,558,287 100.00%	$21,235,276 100.00%
Personal Services............................ % of Operations Expenditures......	$14,477,930 57.2%	$14,255,625 60.5%	$13,460,581 63.4%
Other Payroll Costs (FICA, Retirement)..................................... % of Operations Expenditures......	$3,461,562 13.7%	$2,687,038 11.4%	$2,155,434 10.1%
Contractual Services........................ % of Operations Expenditures......	$4,343,460 17.1%	$4,072,538 17.3%	$3,980,955 18.8%
Locally Held Funds - Benefit Fund^(1).......... % of Operations Expenditures......	$430,467 1.7%	$386,698 1.6%	$234,138 1.1%
All Other Operations Items................... % of Operations Expenditures........ NON-APPROPRIATED FUNDS State Projects Fund (501)............................... Library Grant Fund (775)........................ . Federal Projects Fund (897)………………... % of Total Expenditures........................	$2,597,330 10.2% $3,579 $12,250 $0 .1%	$1,499,631 6.4% $135,776 $19,499 $501,482 2.8%	$1,389,168 6.5% $0 $15,000 $0 .1%
Cost of Property and Equipment...........	$48,112,219	$46,927,526	$45,837,543

SELECTED ACTIVITY MEASURES (Not Examined)	FY 2008	FY 2007
Average Number of Residents – Skilled Care...............................	238	273
Average Number of Employees...................................................	293	292
Ratio - Average Number of Employees to Residents.....................	1.22/1	1.07/1
Annual Cost of Nursing Care Per Resident...................................	$75,233	$80,077

HOME ADMINISTRATOR(S)

During Period: Martin J. Downs

Currently: Martin J. Downs

⁽¹⁾Includes all funds except the Member’ Trust Fund and Homeless Trust Fund

Unable to report on commodities inventory balance C-15’s were incorrect Property records were incorrect Untimely completion of performance evaluations Noncompliance with grant agreement

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS LACK OF CONTROLS OVER COMMODITIES INVENTORY The Home did not exercise adequate control over the tracking and recording of its commodities inventory. Total commodities expenditures were $1,140,371 and $1,285,635 for fiscal years 2007 and 2008, respectively. As a result of the Home’s inadequate recordkeeping and the weaknesses noted, the auditors were able to report on the commodities inventory balances at June 30, 2007 and June 30, 2008 in the compliance examination report. We noted the following deficiencies: · Twenty-nine of 50 (58%) items tested during our physical inventory observation did not agree to the Home’s perpetual inventory records. For FY07, overages were $81,531 and shortages were $34,519. In FY08, overages were $73,603 and shortages were $145,841. · The Inventory Variance Reports showed differences between the physical and perpetual counts amounting to $116,050 (16%) and $219,444 (55%), for FY07 and FY08, respectively. · Ninety of 660 (14%) commodities inventory items reported negative on-hand quantities on the FY08 Usage Report. · Commodity item receipts and disbursements were not entered into inventory system on a timely basis. The staff was approximately two to three months behind entering receipts and requisitions by the end of FY08. Failure to maintain accurate and timely inventory records could result in unexpected shortages, overstocking, theft or waste of commodities. (Finding 1, page 10) We recommended the Home devote adequate resources to ensure that commodity records are accurately maintained and updated timely. In addition, we recommend the Home apply proper year-end inventory procedures to reflect actual quantities on hand at the end of the fiscal year. This would require the Home to perform a count of 100% of items on hand at year end. The Home agreed with the finding. INACCURATE REPORTING OF FIXED ASSETS The Home did not maintain accurate property control records and filed inaccurate Agency Reports of State Property (C-15’s). We tested six of 8 (75%) C-15’s including related fixed assets transactions and noted the following weaknesses: · The Home did not report 43 property items totaling $72,546 on the C-15’s during the quarter in which the items were received. · The Home did not report 17 property additions totaling $7,271 and 6 property transfers totaling $4,007 in the correct asset class line on the C-15’s. We tested 60 property items during an inventory observation and the following exceptions were noted: · Two items (3%), totaling $55,312, were included on the Home’s property control records but were not tagged. · Four items (7%), totaling $7,508, were included on the Home’s property control records but could not be located. · One item (2%), totaling $3,718, was included on the Home’s property control records but could not be viewed because it is located in a condemned building at the Home. · One item (2%) was not included on the Home’s property control records. During our review of the annual inventory certifications, we noted 72 items, totaling $89,858, could not be found at the specified location. However, only one item was removed from the Home’s property control records because the Department of Veterans’ Affairs – Central Office believes that the items are located at a different location than specified at the Home. Per Home personnel, no reports of stolen property have been filed. Failure to account for property items accurately and in a timely manner increases the potential for fraud and possible loss or theft of State property. In addition, property not recorded in the proper period results in inaccurate capital asset reports submitted to the Comptroller. (Finding 2, page 12) We recommended the Home comply with SAMS requirements in the preparation of the Agency Reports of State Property which are submitted to the Comptroller. Further we recommended the Home devote adequate resources to ensure that property records are maintained and updated timely. The Home agreed with this finding. EMPLOYEE EVALUATIONS NOT COMPLETED TIMELY The Home did not complete annual employee performance evaluations timely. The Home did not timely complete annual evaluations for 19 of 25 (76%) employees tested during the period. Eleven employee evaluations were completed form 47 to 303 days late. In addition, there was no record of an annual evaluation for five employees for the latest fiscal year and three employees have not been evaluated since FY05. Performance evaluations are a systematic and uniform approach used for the development of employees and communication of performance expectations to employees. Performance evaluations should serve as a foundation for salary adjustments, promotion, demotion, discharge, layoff, recall, and reinstatement decisions. (Finding 3, page 4) We recommended that the Home take appropriate measures to ensure performance evaluations are conducted annually as required by policy. The Home agreed with this finding. NONCOMPLIANCE WITH GRANT AGREEMENT TERMS The Home did not comply with the terms of a grant agreement. The Home entered into a grant agreement with the Illinois Department of Veterans’ Affairs (the grantor) for the receipt of $50,000 to be used for the new Homeless Veterans’ Program. According to the grant agreement between the Home and the grantor, the Home was to submit to the grantor a semi-annual evaluation report regarding the status of the program and on the expenditures of the grantor’s funds. The Home did not submit the semi-annual evaluation report. Failure to comply with the grant agreement may jeopardize the receipt of future funds from the grantor. (Finding 5, page 16) We recommended the Home carefully review grant agreements to ensure grant agreement terms are being complied with. The Home agreed with this finding. OTHER FINDINGS The remaining findings are reportedly being given attention by the Home. We will review progress toward implementation of our recommendations in our next examination. AUDITORS' OPINION We conducted a compliance attestation examination of the Home as required by the Illinois State Auditing Act. We also performed certain agreed-upon procedures with respect to the records of the Home to assist in our compliance attestation examination of the entire Department of Veterans’ Affairs. We have not audited any financial statements of the Home for the purpose of expressing an opinion because the Home does not, nor is it required to, prepare financial statements. ____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:AS:pp SPECIAL ASSISTANT AUDITORS Our special assistant auditors were McGreal & Company, PC.