REPORT DIGEST

GOVERNOR’S OFFICE OF MANAGEMENT AND BUDGET

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2005

Summary of Findings:

Total this audit 7

Total last audit 3

Repeated from last audit 1

Release Date:

April 11, 2006

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

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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 the Full Report are also available on the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

· The Governor’s Office of Management and Budget (Office) made payments for efficiency initiative billings from improper line items appropriations.

· The Office did not approve contractual agreements prior to services being provided under the contract and did not reduce these contracts to writing and file them with the State Comptroller’s Office in a timely manner.

· The Office did not bid out professional services contracts in excess of $20,000.

· The Office did not exercise adequate control over its travel expenditures.

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

GOVERNOR’S OFFICE OF MANAGEMENT AND BUDGET

FINANCIAL AND COMPLIANCE AUDIT

FOR THE TWO YEARS ENDED JUNE 30, 2005

EXPENDITURE STATISTICS

FY05

FY04

FY03

Total Expenditures

(All Treasury Held Funds).........................

$284,463,135

$260,741,046

$386,640,206

· Total Appropriated Funds......................

% of Total Expenditures.................

Personal Services.....................................

% of Total Appropriated Funds...........

Average No. of Employees.................

$283,977,134

99.80%

$1,918,465

.67%

$259,563,832

99.55%

$1,923,786

.74%

$386,261,619

99.90%

$2,502,232

.65%

Other Payroll Costs (FICA, Retirement)....

% of Total Appropriated Funds...........

$448,048

.16%

$324,014

.13%

$524,228

.14%

General and Administrative Expenditures...

% of Total Appropriated Funds...........

$563,929

.20%

$674,004

.26%

$272,944

.07%

Expenditures necessary for sale of

State bonds........................................

% of Total Appropriated Funds...........

$1,106,866

.39%

$1,588,517

.61%

$1,193,146

.30%

Expenditures pursuant to the Build

Illinois Bond Act.................................

% of Total Appropriated Funds...........

$266,084,415

93.70%

$255,053,511

98.26%

$381,769,069

98.84%

Principle, interest premium on limited

obligation revenue bonds

% of Total Appropriated Funds...........

$13,855,411

4.88%

Total Non-Appropriated Funds........

% of Total Expenditures.................

Interest liability on federal funds................

% of Total Non-Appropriated Funds....

$486,001

.20%

$486,011

100%

$1,177,214

.45%

$1,177,214

100%

$378,587

.10%

$378,587

100%

Cost of Property and Equipment................

$399,000

$386,000

$366,000

SELECTED ACTIVITY MEASURES (Not Examined)

FY 2005

FY 2004

Amount of General Obligation and Build Illinois Bonds Issued.......................................................................

$1,075,000,000

$2,142,175,000

Amount of General Obligation Certificates Issued........

$765,000,000

$850,000,000

AGENCY DIRECTOR

During Audit Period: Mr. John Filan

Currently: Mr. John Filan

Office staff stated they experienced many benefits from the savings initiatives but did not provide specific details

Efficiency initiative payments totaled $96,014 during FY04

Contract filed 105 days after approval of contract

Services began 25 to 211 days before written contracts approved and submitted to Comptroller’s Office for 5 contracts totaling $224,588

Three contracts, totaling $154,220 awarded without soliciting competitive bids for services

GOMB officials partially agree

Auditors’ Comment

Employee incorrectly reimbursed $8,474

Vouchers, totaling $12,113, submitted 9 to 70 days late

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

EFFICIENCY INITIATIVE PAYMENTS

The Office made payments for efficiency initiative billings from improper line item appropriations. Public Act 93-0025, in part, outlines a program for efficiency initiatives to reorganize, restructure, and reengineer the business processes of the State. The State Finance Act details that the amount designated as savings from efficiency initiatives implemented by the Department of Central Management Services (CMS) shall be paid into the Efficiency Initiatives Revolving Fund. The Act further requires State agencies to pay these amounts from line item appropriations where cost savings are anticipated to occur.

According to Office staff, they had experienced many benefits from the savings initiatives but did not provide specific details. The Office used $96,014 from its Electronic Data Processing line item appropriation to pay the Procurement Efficiency and Information Technology initiatives in FY04. (Finding 1, pages 11-13)

We recommended the Office only make payments for efficiency initiative billings from line item appropriations where savings would be anticipated to occur. Further, we recommended the Office seek an explanation from the Department of Central Management Services as to how savings levels were calculated, or otherwise determined, and how savings achieved or anticipated impact the Office’s budget.

Office officials agreed with our recommendation and stated in the event that future efficiency billings are received from CMS, the Office will request additional documentation and review this documentation to ensure that savings payments are made from the appropriate appropriations line.

CONTRACTS NOT APPROVED AND FILED IN A TIMELY MANNER

The Office did not approve contractual agreements prior to services being provided under the contract. In addition, the Office did not reduce these contracts to writing and file them with the State Comptroller’s Office in a timely manner. We noted 1 of 6 (17%) contract obligation documents, totaling $1,476, was filed 105 days after approval of the contract. In addition, we noted 5 of 6 (83%) contractual agreements, totaling $224,588, in which services began 25 to 211 days before the written contracts were approved and subsequently submitted to the State Comptroller’s Office. (Finding 2, pages 14-15)

We recommended the Office strengthen controls to ensure contractual agreements are approved prior to the beginning of services and that contracts are reduced to writing and filed with the State Comptroller’s Office in a timely manner.

Office officials agreed with our recommendation and stated they have reiterated to staff the importance that contracts are properly completed prior to the start of services.

CONTRACTS NOT LET OUT FOR BID

The Office did not bid out professional services contracts in excess of $20,000. The Office awarded three contracts totaling $154,220 for budget advisory services without soliciting competitive bids for the services. The Office also did not publish its notices of intent to enter into sole source contracts in the Illinois Procurement Bulletin. (Finding 3, pages 16-17)

We recommended the Office bid out contracts in accordance with the Illinois Procurement Code and publish its notice of intent to enter into a sole source contract in the Illinois Procurement Bulletin.

Office officials partially agreed with our recommendation and stated they will ensure a notice of intent to enter into a sole source contract is published in the Illinois Procurement Bulletin. The Office believes the contracts noted in the finding meet the criteria as defined in the Procurement Code that allows contracts to be awarded without the use of a competitive process when there is only one economical feasible source.

In an auditors’ comment, we pointed out that the Procurement Code requires notice of intent to enter into a sole source contract to be published in the Illinois Procurement Bulletin at least two weeks before entering into such a contract (30 ILCS 500/20-25). The purpose of the notice is to allow potential venders the opportunity to protest the designation of the procurement as sole source (44 Ill. Adm. Code 1.2025). Since the Office did not publish the required notice before entering into these three contracts, it is unknown whether other vendors could, in fact, have provided those services at an economical rate.

INADEQUATE CONTROL OVER TRAVEL EXPENDITURES

The Office did not exercise adequate control over its travel expenditures. We noted the following:

· One employee who resides in Chicago, reported a Springfield residence on travel vouchers. This employee was incorrectly reimbursed for per diem and transportation in and around their residence, totaling $8,474.

· 11 of 25 (44%) travel vouchers tested, totaling $12,113, were not submitted by the traveler on a timely basis. Vouchers were submitted 9 to 70 days late.

· 1 of 25 (4%) travel vouchers tested reimbursed the Air Transportation Revolving Fund for employee air travel, yet the departure and arrival dates did not match the employees’ travel vouchers for 2 of the flights totaling $120 included on the air travel voucher. (Finding 7, pages 21-22)

We recommended the Office enforce their policy for timely submission of travel vouchers and carefully review travel vouchers before approval and payment to minimize erroneous payments to travelers.

Office officials partially agreed with our recommendation and stated the Office closely and continuously monitors each employee’s travel to determine whether the employee’s headquarters is properly designated. In addition, the Office is re-evaluating its policy regarding the submission and approval of travel vouchers to address the timing of receipt of invoices from the Transportation Revolving Fund.

OTHER FINDINGS

The remaining findings pertain to 1) property control and reporting weaknesses, 2) incomplete personnel files, and 3) lack of documentation regarding the Regulatory Sunset Act. We will follow up on these findings during our next examination of the Office.

AUDITORS' OPINION

The auditors stated that the Build Illinois Bond Retirement and Interest Fund financial statements of the Governor’s Office of Management and Budget as of and for the years ended June 30, 2005 and June 30, 2004 are fairly stated in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

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AUDITORS ASSIGNED

The financial audit and compliance examination was conducted by the Auditor General’s staff.