REPORT DIGEST

OFFICE OF THE GOVERNOR

COMPLIANCE EXAMINATION

For the Two Years Ended:

June 30, 2005

Summary of Findings:

Total this audit 6

Total last audit 4

Repeated from last audit 2

Release Date:

March 30, 2006

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

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740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

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SYNOPSIS

¨ The Office of the Governor paid for an efficiency initiative billing from improper line item appropriations. An efficiency payment totaling $100,947 was made in fiscal year 2004.

¨ The Office of the Governor did not timely sign/execute 8 of 25 (32%) contract agreements tested for $81,423.

¨ The Office of the Governor did not return $42,826 of grant funds to the grantor after the grant term had expired.

{Expenditures and Selected Account Balances are summarized on the reverse page.}

OFFICE OF THE GOVERNOR

COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2005

EXPENDITURE STATISTICS

FY 2005

FY 2004

FY 2003

Total Expenditures (All Funds)...................

$7,478,276

$7,546,099

$8,155,288

OPERATIONS TOTAL..................................

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

$7,473,601

99.9%

$7,546,099

100.0%

$8,095,828

99.3%

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

% of Operations Expenditures...........

No. of Employees at June 30.............

Average Employee Salary................

$4,788,758

64.1%

$50,944

$5,204,412

69.0%

101

$51,529

$5,454,607

67.4%

$67,341

Other Payroll Costs (FICA, Retirement)..

% of Operations Expenditures...........

$1,114,031

14.9%

$864,288

11.5%

$1,076,694

13.3%

Contractual Services...............................

% of Operations Expenditures...........

$665,366

8.9%

$619,530

8.1%

$668,940

8.3%

Telecommunications........................................

% of Operations Expenditures.......................

$413,726

5.5%

$391,221

5.2%

$342,755

4.2%

Electronic Data Processing..............................

% of Operations Expenditures.......................

$125,015

1.7%

$127,271

1.7%

$108,555

1.3%

Celebrations, Receptions & Events...................

% of Operations Expenditures.......................

$49,154

0.7%

$62,122

0.8%

$65,119

0.8%

Executive Mansion Trust Fund.........................

% of Operations Expenditures.......................

$45,886

0.6%

$38,316

0.5%

$97,886

1.2%

Transition...............................................

% of Operations Expenditures...............

0.0%

$25,204

0.3%

All Other Operations Items.....................

% of Operations Expenditures...........

$271,665

3.6%

$238,939

3.2%

$256,068

3.2%

GRANTS TOTAL..........................................

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

$4,675

0.1%

0.0%

$59,460

0.7%

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

$7,202,717

$7,471,440

$7,262,280

SELECTED ACCOUNT BALANCES

FY 2005

FY 2004

FY 2003

Illinois Executive Mansion Trust Fund:

Proceeds from Private Event Activities.............

$94,795

$83,825

$88,796

Account Receivable Balances..............................

$10,558

$12,629

$12,228

GOVERNOR

During Examination Period: Honorable Rod R. Blagojevich

Currently: Honorable Rod R. Blagojevich

The Office paid an efficiency initiative billing of $100,947 during fiscal year 2004

The Office did not receive guidance or documentation with the billing from CMS

Efficiency payment was made from line item appropriations which had available monies

Eight of 25 contract agreements tested were not signed/executed timely

$42,826 was not returned to the grantor after the grant term expired

Office thought grant receipts could be spent until used up regardless of grant term

Office of the Governor disagrees

Auditor’s comment

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

PAYMENT WAS MADE FOR AN EFFICIENCY INITIATIVE BILLING FROM IMPROPER LINE ITEM APPROPRIATIONS

The Office of the Governor (Office) received an efficiency initiative billing of $100,947 for fiscal year 2004. The Office paid the billing during the fiscal year 2004 lapse period from improper line item appropriations. Public Act 93-0025, in part, outlines a program for efficiency initiatives to reorganize, restructure and reengineer the business process 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 the cost savings are anticipated to occur.

The Office did not receive guidance or documentation with the billing from CMS detailing from which line item appropriations savings were anticipated to occur. The only guidance received was the amount of payment to be taken from the General Revenue Fund (GRF) verses Other Funds for the billing. According to Office staff, the Office received no evidence of savings nor had the Office experienced any savings for the amount billed.

The Office contacted CMS and the Office of Management and Budget (GOMB). GOMB indicated they could pay the billing from any line item and any fund or combination of funds and line items. Based on our review, we question whether the appropriate appropriations, as required by the State Finance Act, were used to pay for the anticipated savings. The Office did not receive any efficiency initiative billing during fiscal year 2005.

We found the Office made payment for the billing not from line item appropriations where the cost savings were anticipated to have occurred but from line items where staff determined there were excess appropriations. The Office paid the largest amounts for the billing from personal services and other payroll related appropriations. These monies were applied to the Procurement Efficiency and Information Technology initiatives.

We recommended the Office only pay for efficiency initiative billings from line item appropriations where savings would be anticipated to occur. Further, the Office should seek an explanation from CMS as to how savings levels were calculated, or otherwise arrived at, and how savings achieved or anticipated impact the Office’s budget. (Finding 1, pages 9-10)

Office management concurred with our finding and recommendation and stated the Office has adjusted procedures to require documentation addressing anticipated savings and will pay any future billings from appropriation lines where those savings occur.

UNTIMELY SIGNING/EXECUTION OF WRITTEN CONTRACT AGREEMENTS

We found eight of 25 (32%) contract agreements tested had not been signed by all parties before the earliest date of service allowed by the contract agreement terms. The average length of time between the beginning date of the contract agreements and their final required signature was 32 days (with a range of 15 days to 73 days). The contract agreements were for rental and maintenance of photocopiers, fax machines, postage meters, and subscriptions to access legal and news services, and totaled $81,423. Five of 8 referenced contracts were in excess of $10,000.

Contract agreements should be signed/executed by all required parties prior to the beginning of the contract agreement term. In addition, contract agreements in excess of $10,000 are required to be filed with the Office of the Comptroller within 15 days of their execution.

Failure to have the contract agreements signed before the beginning of the contract period does not bind the service provider for compliance with the applicable laws, regulations and rules. Office management stated that contracts were sent to vendors before the contract period but were not returned in a timely manner.

We recommended Office management take the necessary steps to ensure contract agreements are signed/executed by all the required parties in a timely manner. (Finding 2, page 11)

Office management noted they implemented procedures in December 2003 after the last compliance engagement report was finalized to insure that contract agreements were signed/executed by all the required parties in a timely manner.

Excess grant receipts not returned to the grantor upon expiration of the grant agreement

The Office received a grant in fiscal year 2002 for $85,000 to address various objectives. Expenditures totaling $42,174 were made during the grant term from July 1, 2001 to June 30, 2002. Grant receipts, which were not used for the purpose of the grant during the grant term totaling $42,826, were not returned after June 30, 2002. Rather, a total of $42,499 was continuously used through fiscal year 2003. The remaining $327 balance has not been used and was being held in the Governor’s Grant Fund at June 30, 2005.

The terms and conditions of the grant agreement required any grant receipts not expended for the purpose of the grant during the grant term to be immediately returned to the grantor. Office management stated it was their understanding the grant receipts could be used for the purpose for which the grant was provided until all the grant receipts were used up, regardless of the term of the grant.

We recommended Office management provide adequate oversight to ensure the Office complies with grant agreements. We also recommended the Office contact the grantor and inquire if the grant receipts expended after the grant term and any remaining unexpended balance should be returned. (Finding 4, pages 13-14)

Office management respectfully did not concur with the finding. Office management stated the grant period ended in 2002 with a remainder of $327 and that this is the 2^nd compliance audit completed before this finding was reported and that this should be reported as an immaterial finding. The Office went on to indicate they have been in contact with the grantor requesting advice on how to proceed.

The auditors included a comment to the response noting the significance of the finding is that the Governor’s Office expended $42,499 or 50% of the original grant proceeds during fiscal year 2003, which was after the term of the grant agreement. The determination of the placement of the finding is related to the significance of the finding, not the timing of the event that led to the finding. This issue was considered to be significant and therefore included in the compliance report.

OTHER FINDINGS

The remaining findings are reportedly being given attention by the Office. We will review the Office’s progress towards the implementation of our recommendations during our next engagement.

The responses to our findings and recommendations were provided in a letter dated March 16, 2006 by Ms. Mary Fanning, Fiscal Director, Office of the Governor.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

E.C. Ortiz & Co., LLP were our special assistant auditors for this engagement.