REPORT DIGEST ENVIRONMENTAL PROTECTION AGENCY COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED: JUNE 30, 2016 Release Date: August 22, 2017 FINDINGS THIS AUDIT: 6 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 5 -- 6 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 5 -- 6 FINDINGS LAST AUDIT: 7 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 FRANK J. MAUTINO, 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 • (16-01) The Agency did not exercise adequate internal control over automobiles. • (16-02) The Agency did not have adequate controls over equipment. • (16-03) The Agency did not have adequate controls over the administration of its accounts receivable. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER STATE VEHICLES The Environmental Protection Agency (Agency) did not exercise adequate internal control over automobiles. As of December 31, 2015, the Agency had 166 vehicles. During testing, auditors noted the following: • The Agency had not performed an analysis of its automobiles to determine whether maintaining each vehicle can be justified as the most cost effective solution for the specific operational needs of the Agency. The auditors analyzed the total activity of the Agency’s 166 vehicles used throughout the eighteen month period ended December 31, 2015. During this period, the Agency’s vehicles traveled between 0 and 54,932 miles, with the following chart showing the average monthly vehicle utilization during the period: (Please see PDF version of this digest to view the exhibit.) Further, the auditors noted the following apparently underutilized vehicles during the eighteen-month period ending December 31, 2015: (Please see PDF version of this digest to view the exhibit.) • The Agency did not ensure its vehicles were properly maintained during the examination period. The auditors reviewed the maintenance records for 19 vehicles, noting the following: – 13 (68%) vehicles tested did not have routine oil changes performed on a timely basis; – Five (26%) vehicles tested did not undergo an annual inspection by the Department of Central Management Services (CMS) or an authorized vendor; and, – Seven (37%) vehicles tested did not receive tire rotations at the required interval. • The Agency did not exercise adequate control over insurance certifications for personally assigned vehicles. Three of 12 (25%) employees tested in Fiscal Year 2015 and 10 of 10 (100%) employees tested in Fiscal Year 2016 did not have the annual insurance certification on file at the Agency. • One of 12 (8%) vehicle accidents tested was not reported timely to the Auto Liability Unit at CMS. The auditors noted this incident’s Illinois Motorist Report (Form SR-1) was submitted 14 days late. (Finding 1, pages 10-13) We recommended the Agency perform an analysis of its automobiles to determine whether each vehicle can be justified as the most cost effective solution for the Agency’s specific operational needs. Further, the Agency should review its internal controls over monitoring its fleet to ensure vehicles receive timely maintenance. Finally, the Agency should properly document that its employees are duly licensed and insured and accident reports are timely filed with CMS as required by State law. Agency officials agreed with the recommendation and stated they believe the vehicles were adequately utilized for Agency needs. INADEQUATE CONTROLS OVER EQUIPMENT The Agency did not have adequate controls over equipment. During testing, the auditors noted the following: • Two of 30 (7%) equipment additions tested, totaling $4,242, were recorded on the Agency’s property control records from 36 to 86 days late. In addition, five of 40 (13%) equipment deletions tested, totaling $44,617, were removed from the Agency’s property control records from 12 to 117 days late. • 15 of 110 (14%) equipment items tested, totaling $13,813, selected from the Agency’s property listing were unable to be physically located. • Three of 110 (3%) items observed, including a multi-threat monitor, a refrigerator/freezer, and a hydrogen detector, were not tagged and were not found on the Agency’s property listing. In addition, three of 110 (3%) equipment items tested, totaling $10,260, did not have an identification tag. • 12 of 110 (11%) equipment items tested, totaling $18,401, appeared to be obsolete. (Finding 2, pages 14-15) We recommended the Agency implement procedures to strengthen controls over equipment and ensure accurate recordkeeping and accountability for all State property. Agency officials agreed with the recommendation and stated the new Property Control Manager is actively working on updating the property control records as necessary and timely adding and deleting equipment items. INADEQUATE CONTROLS OVER ACCOUNTS RECEIVABLE The Agency did not have adequate controls over the administration of its accounts receivable. Excluding loans receivable from the Water Revolving Fund, the Agency reported $72.6 million in accounts receivable, of which $34.6 million was over one year past due, as of June 30, 2016. During testing, auditors noted the following: • Fourteen of 25 (56%) accounts receivable tested, totaling $11.88 million, were over 90 days past due and had not been referred to the Office of the Comptroller’s (Comptroller) Offset System or the Department of Revenue’s Debt Collection Bureau (Bureau). In addition, 13 of 25 (52%) accounts receivable tested had balances totaling, $11.86 million, that were over one year old and were not referred to the Attorney General for write off. • Eight of 25 (32%) accounts receivable balances tested were incorrectly reported. The differences noted resulted in an overstatement of the Agency’s accounts receivable by $270,087. (Finding 3, pages 16-17) We recommended the Agency pursue all reasonable and appropriate procedures to collect on outstanding debts as required by State laws and regulations. Agency officials agreed with the recommendation and stated Agency staff continues to improve collections with the main focus on current billings. OTHER FINDINGS The remaining findings pertain to employee performance evaluations, an insufficient number of members on the Community Water Testing Supply Council, and noncompliance with the Fiscal Control and Internal Auditing Act. We will review the Agency’s progress towards the implementation of our recommendations in our next compliance examination. AUDITOR’S OPINION The financial audit of the Agency’s Water Revolving Fund as of and for the year ended June 30, 2016 was previously released. The auditors stated the financial statements of the Agency’s Water Revolving Fund as of and for the year ended June 30, 2016, were fairly stated in all material respects. This financial audit was conducted by the Office of the Auditor General’s staff. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Agency for the two years ended June 30, 2016, as required by the Illinois State Auditing Act. The accountants stated the Agency complied, in all material respects, with the requirements described in the report. This compliance examination was conducted by the Office of the Auditor General’s staff. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:PH