REPORT DIGEST ILLINOIS BOARD OF EXAMINERS Compliance Examination For the Two Years Ended June 30, 2015 Release Date: February 11, 2016 FINDINGS THIS AUDIT: 5 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 2 -- 3 -- 5 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 3 -- 5 FINDINGS LAST AUDIT: 4 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 • (15-1) The Board did not ensure it maintained adequate property control records. • (15-2) The Board failed to establish adequate controls over contracts and leases. • (15-3) The Board did not exercise adequate controls over the CPA Examination Trust Account. ILLINOIS BOARD OF EXAMINERS COMPLIANCE EXAMINATION For the Two Years Ended June 30, 2015 CPA EXAMINATION TRUST ACCOUNT 2015 2014 2013 Balance at July 1 $4,525,462 $5,018,809 $4,636,893 Receipts Fees 1,210,393 1,171,051 1,477,242 Interest Income 15 278 393 Disbursements 1,480,681 1,680,639 1,095,719 Adjustments (5,959) 15,963 - Balance at June 30 $4,249,230 $4,525,462 $5,018,809 Total Receipts $1,234,207 $1,189,214 $1,480,611 Average Number of Employees (Not Examined) 1 1 1 "SELECTED ACTIVITY MEASURES (Not Examined)" 2015 2014 2013 Average pass rates by section • Auditing 50.1% 49.2% 49.6% • Business Environment and Concepts 61.8% 62.8% 62.5% • Financial Accounting Reporting 51.5% 49.4% 51.7% • Regulation 51.7% 52.0% 51.2% Number of candidates that passed the Uniform CPA Exam 1,392 1,647 1,474 First-time candidates for exam 2,595 2,646 3,195 AGENCY DIRECTOR During Examination Period: Mr. Russ Friedewald Currently: Mr. Russ Friedewald FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE CONTROLS OVER STATE PROPERTY The Board did not exercise adequate controls over State property. During our testing, we noted the following: • Two of eight (25%) equipment items observed during testing were not recorded on the Board’s property listing. • One of eight (13%) equipment items tested was not marked with a unique identification number. • One of eight (13%) equipment items tested from the deletions register, totaling $2,600, was still in service and remained on the Board’s property listing. • One of eight (13%) equipment additions tested, totaling $1,450, was not able to be located. (Finding 1, pages 8-9) This finding has been repeated since 2011. We recommended the Board ensure it maintains accurate property records and supporting documentation of all its property transactions. Board officials agreed with the recommendation and stated when the office moved from the University of Illinois (U of I) to the Northern Illinois University (NIU), the Board transferred property to the U of I and the record for that transfer was maintained by the Office of the Vice Chancellor for Student Affairs. Board officials further stated once the Board relocated to the campus of NIU, a new property control system was implemented using unique property control identification and maintained by the business manager. (For previous Board response, see digest footnote #1.) NEED TO IMPROVE CONTROLS OVER CONTRACTS AND LEASES The Board did not establish adequate internal controls over contracts and leases to ensure they contained all the necessary approvals and were filed with the Office of the Comptroller (Comptroller). During our testing, we noted the following: • Two of four (50%) contracts tested, totaling $67,248, were not filed with the Comptroller as required. We also noted the Board did not file signature authorization cards with the Comptroller. • Two of four (50%) contracts tested did not contain all the required elements. • Two of four (50%) contracts tested did not have the Board's head typed or printed legibly below the signature. • The lease agreement between the Board and Northern Illinois University was not filed with the Comptroller and did not contain all the required elements. (Finding 2, pages 10-11) We recommended the Board improve controls to ensure its contracts and leases are filed with the Comptroller and contain all the required elements and disclosures. In addition, we recommended the Board file signature authorization cards with the Comptroller. Board officials agreed with the recommendations and stated they had a maintenance agreement for the main IT system contract that was filed and they mistakenly assumed this was an addendum to that contract. Board officials further stated there was no initial intent on having the second contract exceed the maximum threshold for filing, but delays resulted in exceeding the threshold. In addition, Board officials stated the lease agreement between the Board and Northern Illinois University has now been properly submitted to the Comptroller. NEED TO IMPROVE CONTROLS OVER CPA EXAMINATION TRUST ACCOUNT The Board did not exercise adequate controls over the CPA Examination Trust Account (Account). During our testing, we noted the following: • The Board was unable to provide support for 1 of 40 (3%) disbursements tested, totaling $1,048. • The Board could not provide supporting documentation for its $15,963 adjustment to increase the Fiscal Year 2014 beginning balance of the Account. Additionally, the Board could not support $259 of the $5,959 adjustment to decrease the Fiscal Year 2015 beginning balance of the Account. • Two of 23 (9%) disbursement refunds tested, totaling $690, did not contain documentation of the Director’s approval as required. • Two of seven (29%) travel vouchers tested were not in accordance with the Governor’s Travel Control Board rules and resulted in overpayments totaling $384. (Finding 3, pages 12-13) We recommended the Board strengthen its controls over disbursements and Account accounting to ensure expenditures are reasonable and necessary for State business operations and are in accordance with State law, and adequate supporting documentation is maintained for disbursements and accounting transactions. In addition, we recommended the Board ensure its travel reimbursements comply with applicable rules and obtain reimbursements for the overpayments. Board officials agreed with the recommendations and stated the discrepancy for the disbursement of $1,048 was from a lack of supporting documentation for direct bill travel expense accommodation for temporary help during the office move. Board officials also stated an accounting error was made by failing to bring over all funds from previous fiscal year accounts and reconciliation corrected the error. Likewise, a similar error occurred in FY15. Board officials also stated they agree all refund vouchers must contain the Director’s signature and this requirement has been conveyed to the accounting department at Northern Illinois University. In addition, travel vouchers require receipts for all expenses exceeding $9.99 and procedures are now in place to ensure all receipts are appropriately accounted for. OTHER FINDINGS The remaining findings pertain to required information omitted from annual report and failure to implement the Identity Protection Act. We will review the Board’s progress toward implementation of our recommendations in our next examination. ACCOUNTANT’S OPINION We conducted a compliance examination of the Board for the two years ended June 30, 2015, as required by the Illinois State Auditing Act. The accountants stated the Board complied, in all material respects, with the requirements described in the report. FRANK J. MAUTINO Auditor General FJM:PH AUDITORS ASSIGNED This examination was performed by the Office of the Auditor General’s staff. DIGEST FOOTNOTE #1 - NEED TO IMPROVE CONTROLS OVER STATE PROPERTY - Previous Board response 2013: The Board of Examiners agrees with the finding. During the testing period, the Board was in the process of moving offices from Champaign, IL to Naperville, IL and the coordination of the move relating to surplus of inventory was coordinated through the Office of the Vice Chancellor for Student Affairs at the University of Illinois (U of I). Some inventory was left for surplus to the University of Illinois, while the balance of inventory was moved to Naperville on the campus of the Northern Illinois University. The three items mentioned as missing included a Sonic Wall firewall, a three drawer file cabinet, and a notebook computer with docking station. Following the audit testing and after the findings were concluded, the three items have been located and accounted for. The Sonic Wall firewall was part of the surplus to the University of Illinois. The three drawer file cabinet is a fire proof cabinet currently in storage awaiting transfer to Northern Illinois University for archiving of old records and the notebook is currently in the possession of a contractual employee who has been providing financial records support to the office. The two items identified as not recorded refers to a small copier and a monitor and that are both a part of the surplus items sent to the University of Illinois and are accounted for on the surplus items listings currently held in the Office of the Vice Chancellor for Student Affairs. This listing will be transferred to our office at the conclusion of our financial relationship, but not later than the end of April 2014. The Board of Examiners is now in the process of completely revamping our inventory system including a completely new reconciliation process.