Illinois Office of the State Fire Marshal 2002 Audit

REPORT DIGEST

OFFICE OF THE STATE FIRE MARSHAL

COMPLIANCE AUDIT

For the Two Years Ended:

June 30, 2002

Summary of Findings:

Total this audit 8
Total last audit 4
Repeated from last audit 2

Release Date:
April 16, 2003

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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

The Agency did not exercise proper control over monies paid from the Firefighters Memorial Fund.

The Agency did not sufficiently monitor and pursue collections on delinquent accounts receivable.

GAAP financial reporting forms were not timely filed, correctly completed, or adequately supported.

The Agency had a high number of past due inspections of boiler and pressure vessels.

{Expenditures and Activity Measures are summarized on the reverse page.}

OFFICE OF THE STATE FIRE MARSHAL
COMPLIANCE AUDIT
For the Two Years Ended June 30, 2002

EXPENDITURE STATISTICS	FY 2002	FY 2001	FY 2000
Total Expenditures (All Funds) OPERATIONS TOTAL % of Total Expenditures Personal Services % of Operations Expenditures Average No. of Employees Other Payroll Costs (FICA, Retirement) % of Operations Expenditures Contractual Services % of Operations Expenditures Lump Sums and Other Purposes % of Operations Expenditures All Other Operations Items % of Operations Expenditures AWARDS, GRANTS, AND OTHER % of Total Expenditures Cost of Property and Equipment (Expressed in Thousands)	$16,620,770 $13,638,678 82.1% $7,397,707 54.2% 149 $2,832,528 20.8% $804,621 5.9% $1,183,885 8.7% $1,419,937 10.4% $2,982,092 17.9% $3,504,262	$16,942,630 $12,775,860 75.4% $7,245,848 56.7% 150 $2,628,712 20.6% $781,583 6.1% $579,729 4.5% $1,539,988 12.1% $4,166,770 24.6% $3,214,741	$23,502,068 $11,834,163 50.4% $6,644,023 56.1% 156 $2,221,081 18.8% $757,486 6.4% $949,707 8.0% $1,261,866 10.7% $11,667,905 49.6% $3,202,092
SELECTED ACTIVITY MEASURES	FY 2002	FY 2001	FY 2000
Arson Investigations Boiler and Pressure Vessel Inspections Fire Prevention Inspections Firefighter Training Certifications Firefighter Training Examinations Underground Storage Tank (UST) Inspections Emergency Responses and Investigations	1,081 42,845 21,748 9,144 17,386 3,617 1,829	1,033 43,069 23,827 7,593 11,652 3,347 2,972	988 41,722 17,547 8,782 17,153 3,180 3,521

AGENCY DIRECTOR(S)

Through 1/31/01: Thomas L. Armstead, State Fire Marshal
Currently: Ernest Russell, State Fire Marshal

Provisions of the Illinois Procurement Code, appropriations, and contracts were not followed

Documentation did not support goods and services provided or line item expenditures charged

No formal procedures existed to collect delinquent accounts receivables after a second invoice was sent

Forms were 26 days to 6 months late and depreciation of $330,000 was not supported

14.6% of inspections were past due as of June 30, 2002

The backlog has been steadily increasing

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

LACK OF CONTROLS OVER FIREFIGHTERS MEMORIAL FUND DISTRIBUTIONS

The Agency did not exercise proper control over the expenditure and monitoring of monies paid from the Firefighters Memorial Fund. The Agency remitted a total of $280,000 to the Illinois Firefighters Memorial Foundation, a separate not-for-profit charitable organization, pursuant to an annual contract. We noted:

The Agency did not comply with provisions of the Illinois Procurement Code. The Agency did not use competitive procurement; nor did it demonstrate that services could only be economically and feasibly provided by the Foundation, and publish notices as required for sole source procurements.

The Agency did not require sufficient written documentation from the contractor to support goods and services provided.

The Agency did not comply with appropriation and contract restrictions on the purpose of expenditures.

The Agency could not support charges to property construction and maintenance line items for expenditures. The majority of funds remitted to the Foundation remained in the Foundation’s cash account. (Finding 1, pages 8-10)

We recommended the Agency establish internal controls to ensure contracts are appropriately established and adequately monitored, and expenditures are reasonable, necessary, properly documented, and in compliance with applicable laws, rules, and regulations. We also recommended the Agency determine the Foundation’s plans for the unspent State funds and recoup any overpayments.

Agency management accepted the finding and stated it will make sure that all provisions are followed.

INADEQUATE COLLECTION OF ACCOUNTS RECEIVABLE

The Agency did not sufficiently monitor and pursue collections on delinquent accounts receivable.

At June 30, 2002, Boiler and Pressure Vessel Safety Inspection receivables totaled $268,000 and Underground Storage Tank (UST) receivables totaled $27,500. We noted the Agency sent two invoices for fees due, but had no formal procedure to further pursue collection on the accounts with balances. Boiler and Pressure Vessel Inspection accounts receivables were reviewed and followed up when employees had time; however, no further action was taken on UST receivables unpaid after the second invoice. (Finding 2, pages 11-12) This finding has been repeated since 1990.

We recommended the Agency send regular billings for all accounts, refer delinquent accounts to the Comptroller’s Offset System and pursue other collection methods.

The Agency accepted the finding and stated they have worked toward implementing recommendations. (For previous Agency responses, see Digest Footnote #1.)

UNTIMELY AND INACCURATE GAAP REPORTING FORMS

The Agency did not timely file or correctly complete accounting reports prepared in accordance with Generally Accepted Accounting Principles (GAAP forms) and could not support all amounts reported to the State Comptroller. We noted:

The FY01 Interim Forms were 6 months late and FY02 reporting packages were 26 days late.

The Interim Forms were not properly completed, resulting in a $39,000 understatement in equipment and $154,000 total understatements in accumulated depreciation.

Supporting documentation was not maintained for FY02 accumulated depreciation of $330,000. (Finding 3, pages 13-14)

We recommended the Agency comply with established procedures to timely file, accurately complete, and properly support GAAP forms. We also recommended key finance department personnel should be cross-trained.

The Agency accepted the finding and stated it now has a full fiscal staff and anticipates no further problems.

BACKLOG OF BOILER AND PRESSURE VESSEL INSPECTIONS

The Agency had a high number of past due inspections of Boiler and Pressure Vessels. Of the 47,373 vessels required to be inspected, there was a 14.6% backlog as of June 30, 2002. The following table indicates the range of days past due for the June 30, 2002 past due inspections:

Number of Days Past Due	Number of Past Due Inspections	Percentage by Category
1-90	3,193	46.0%
91-180	1,142	16.5%
181-360	1,040	15.0%
361-720	956	13.8%
Over 720	605	8.7%
TOTAL	6,936	100.0%

In addition, the number of past due inspections has been steadily increasing. The backlog at June 30 increased from 3,265 in 2000 to 4,162 in 2001, and 6,936, in 2002. (Finding 5, pages 16-17)

We recommended the Agency designate appropriate resources to reduce the backlog of inspections.

The Agency accepted the finding and stated it will do everything within its means to address this issue.

OTHER FINDINGS

The remaining findings are less significant and are reportedly being given attention by the Agency. We will review progress toward implementing those recommendations in our next audit. Responses to the recommendation were provided by State Fire Marshal, Ernest Russell.

AUDITOR’S OPINION

Our auditors conducted a compliance audit of the Agency as required by the Illinois State Auditing Act. The Agency has no locally-held funds, consequently, there were no financial statements requiring an audit.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:LKW:pp

SPECIAL ASSISTANT AUDITORS

McGladrey & Pullen, LLP were our special assistant auditors for this engagement.

DIGEST FOOTNOTE

#1 INADEQUATE COLLECTION OF ACCOUNTS RECEIVABLE - Previous Agency Responses

2000: "The Agency discussed the collection of past due Boiler and Pressure Vessel Safety accounts with a number of collection agencies that had been selected by the Debt Collection Board. Due to the small amounts of the individual accounts (typically $15 - $50), these firms were reluctant to take responsibility for the collection.

In lieu of this fact, the agency designated an employee within the Division of Boiler and Pressure Vessel Safety to examine the past due accounts on a regular basis and send letters requesting payment after the issuance of the second notice. This arrangement yielded some success. However, the employee subsequently left the division and collection efforts became more sporadic.

The Agency has once more formally designated an individual within the Division of Boiler and Pressure Vessel Safety to review the accounts on a monthly basis and follow up with appropriate correspondence and further action beyond the issuance of a second notice.

As of the end of September, 2000, there were 13 Underground Storage Tank accounts receivable over 90 days old on the aging report. In spite of this relatively small number, in accordance with the finding, the agency is taking steps to insure that the number of such accounts does not grow. As with the Underground Storage Tank accounts, the Division of Boiler and Pressure Vessel Safety has designated an individual to review these accounts on a monthly basis.

After reasonable in house means of collection have been exhausted, the Agency will refer delinquent accounts to the Comptroller's Offset System as appropriate and, if necessary, renew the attempt to utilize collection agencies."

1998: "The Agency accepts the finding.

The establishment of an accurate and reliable data management system is the first step in pursuing an effective and efficient accounts receivable collection effort. Having made this first step, the Agency is studying specific means whereby each facet of the recommendation can be implemented. The Agency will confer with the Debt Collection Board in this effort. In conjunction, the Agency will determine a reasonable method to determine an allowance for uncollectible accounts to ensure net accounts receivable are properly reported."

1996: "The Agency accepts the finding and each of the recommendations."

1994: "The Agency is in agreement with this finding and recommendation.

The Agency is using the recommendation to serve as a checklist of deficiencies to be corrected in this system. As discussed in finding number three and in the response, the Agency is conscientiously applying systems standards and structured methodology to correct the many deficiencies noted in the finding as well as implement the controls listed in the recommendation.

The Agency has received assistance from the United States Environmental Protection Agency (USEPA) and has implemented their recommendations with positive results. We intend to take full advantage of their offer of continued assistance.

The computer systems discussed in the finding were purchased for the Agency by USEPA. USEPA is currently developing a local area network (LAN) system for use by the states; the Agency intends to replace its current cumbersome system at the earliest possible opportunity with this LAN, which will facilitate the production of ad hoc spreadsheet reports for problem solving, as well as produce the basic reports discussed in the finding. At this writing, funding poses a challenge to this solution.

The Division of Petroleum and Chemical Safety (DPCS) must process their facility files prior to performing data entry in order to verify that critical information, such as ownership and related matters, are current. In accordance with the finding, the Agency is reassessing the manual processing system for facility files in an attempt to expedite this process. Lack of funds has caused the backlog to accumulate and prevents the acquisition of additional personnel to assign to the problem.

The Agency is working with the Illinois Debt Collection Board concerning the collections and assessment of past due accounts. The Office of the Attorney General will also be contacted regarding this process."

1992: "The Agency accepts this finding. The Agency is taking steps to eliminate the backlog in order that the accounts receivable can be reviewed on a regular basis. The Agency is also investigating means to streamline the audit trail and the process of entering receipts."

1990: "The Agency accepts this finding.

As noted elsewhere, the Agency has previously placed considerable emphasis on public safety and owner identification within the boiler, unfired pressure vessel and underground storage tank program. The underground storage tank program in particular is still a relatively new mandate which the Agency has taken very seriously in terms of protecting the lives of Illinois citizens. Identification of objects and tanks and the determination of ownership and circumstances of use comprise the goals which prompted the processing systems utilized by the Agency at the time of the audit. The fines discussed in the finding are severe, considering that they may be prompted by an owner's initial failure to pay a certification bill as low as $20. Local State's attorneys are often reluctant to pursue such matters against citizens in their districts. The Agency has thus put considerable emphasis on the identification of owners before resorting to the use of such provisions.

The Agency takes this finding seriously and has begun compliance with the items noted in the recommendation. The Agency is currently installing a new software release which will greatly enhance the ease of use in terms of reporting and targeting collection efforts. Exploration of procedures for implementation of penalty provisions has likewise begun."