REPORT DIGEST DEPARTMENT OF TRANSPORTATION FINANCIAL AUDIT AND COMPLIANCE EXAMINATION
For the Year Ended: June 30, 2007 Summary of Findings: Total this audit 26 Total last audit 11 Repeated from last audit 7 Release Date: May 8, 2008
State of Illinois Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
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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.auditor.illinois.gov |
INTRODUCTION
This report digest covers both the Financial Audit and
State Compliance Examination of the Department of Transportation for the year
ended June 30, 2007. The Financial
Audit Report contains three Findings (numbers 1-3). The State Compliance Examination Report contains 23 Findings
(numbers 4-26). SYNOPSIS
{Expenditures and Activity Measures are summarized on the reverse page.} |
DEPARTMENT OF TRANSPORTATION
FINANCIAL AUDIT AND COMPLIANCE EXAMINATION
For The Year Ended June 30, 2007
EXPENDITURE STATISTICS |
FY 2007 |
FY 2006 |
|||
· Total Expenditures (All Appropriated Funds) |
$4,065,193,109 |
$3,786,467,365 |
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OPERATIONS TOTAL.......................... % of Total Expenditures.................. |
$653,086,724 16.07% |
$586,982,926 15.50% |
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Personal Services............................ % of Operations Expenditures.... Average No. of Employees........ |
$367,317,070 56.24% 5,469 |
$346,429,630 59.02% 5,647 |
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Other Payroll Costs (FICA, Retirement)............................................ % of Operations Expenditures.... |
$70,512,215 10.80% |
$56,538,667 9.63% |
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Contractual Services....................... % of Operations Expenditures.... |
$105,172,036 16.10% |
$100,100,667 17.05% |
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All Other Operations Items.............. % of Operations Expenditures.... |
$110,085,403 16.86% |
$83,913,962 14.30% |
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GRANTS TOTAL................................... % of Total Expenditures.................. |
$1,459,997,979 35.91% |
$1,398,345,623 36.93% |
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CONSTRUCTION TOTAL......................... % of Total Expenditures.................. |
$1,944,421,571 47.83% |
$1,796,580,236 47.45% |
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CAPITAL IMPROVEMENTS
TOTAL... %
of Total Expenditures...................... |
$7,686,835 0.19% |
$4,558,580 0.12% |
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CAPITAL ASSETS – GROSS Infrastructure......................................
All
Other............................................ Total............................................ |
$22,467,463 2,571,266 $25,038,729 |
$21,808,196 2,508,588 $24,316,784 |
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SELECTED ACTIVITY MEASURES (Not
Examined) |
FY
2007 |
FY
2006 |
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·
Number of bridges maintained/improved................ |
274 |
255 |
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·
Percent of bridges in need of repair...................... |
10% |
9% |
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·
Number of lane miles of pavement maintained....... |
42,774 |
42,774 |
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·
Construction investment/lane mile......................... |
$44,326 |
$40,995 |
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·
Miles of pavement maintained/improved................ |
908 |
820 |
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·
Percent of roads in need of repair ........................ |
13% |
13% |
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AGENCY SECRETARY(S) |
|||||
During
Audit Period: Mr. Timothy Martin
(07/01/07-01/26/07) Mr. Milton Sees (01/26/07 – current)
Currently: Mr. Milton Sees |
|||||
Proper cut-off
policies and standards not followed Liabilities were
understated by $84,211,000
Lack of supporting
documentation Payroll charges of
$301,665 not supported Building rent totaling $13,658 paid twice No support for
$9,845 in Graphic Designer billings Inadequate controls
Payments totaling
$22,881 were made in error Vendors return
duplicate payments
Date on invoice was
changed
No review of
employee overrides 1,752 bridge
inspections were delinquent according to Department intervals Problems noted with
data accuracy regarding bridge inspection intervals No individual was
formally appointed as the Bridge Inspection Program
Manager
Department states
some of the bridges noted in the finding were not their responsibility and some of the bridge inspections were not
actually delinquent
Auditors’ Comment Procedures for awarding contracts were not followed Negotiation not made with the bidder with the highest
responsiveness points Contract awarding
process not documented adequately Department
partially agrees
Auditors’ Comment Notification of
award to other than lowest bidder not posted on the Illinois Procurement
Bulletin
Procurement files
did not document the proper handling of vendor price proposals Inadequate controls Grantee paid
$3,288,660 and no inspections or monitoring performed
No evidence of
monitoring reports or a final report Reports not received
and no evidence of monitoring Inadequate controls
over vehicles Failure to track
all costs
Report missing
critical information
Accidents were
reported late Interagency
agreements signed 24 to 89 days late $79,656 in services invoiced prior to the effective date
Agreement with the Governor’s Office and ISBE to share employee’s services Paid $20,065 more than
the agreements required
Reimbursement not
received from ISBE Inadequate controls
for securing computer resources
Shared
responsibility with DCMS over computer security Security Weaknesses |
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS NEED TO IMPROVE ACCOUNTS
PAYABLE CUT-OFF PRACTICES The
Department did not adhere to proper cut-off policies and standards required
by the State and generally accepted accounting principles (GAAP). During
the review of subsequent expenditure reports for August through February
2008, approximately 1,500 exceptions were noted in which invoices relating to
goods received or services performed prior to the year-end date were not
accrued as of June 30, 2007. These inaccurately recorded expenditures
resulted in an understatement of liabilities totaling $84,211,000 in the
following funds: 1) Road Fund, 2) Grade Crossing Protection Fund, 3) Federal
Local Airport Fund, 4) Transportation Bond Series B Fund, and 5) State
Construction Account Fund. An adjusting journal entry was recorded by the
Department to correct these differences. In
addition, differences pertaining to the:
1) General Fund for $83,382, 2) the Road Fund for $827,294, 3) State
Construction Account for $996,158, and 4) six non-major funds for $987,448
were identified. The Department did
not record the proposed auditor adjustment to the financial statements for
these amounts since they viewed these differences to be immaterial. The
auditors classified these conditions noted in this finding as a material
weakness in internal control over financial reporting. (Finding 1, pages 49-50 in the Financial
Statement Audit) We
recommended the Department prepare written instructions to be included as a
part of the accounting policies and procedures manual which indicates both
the concepts of proper cut-offs and the individuals responsible for accruing
payables at the accounting period end. We further suggested development of a
report to track unpaid vouchers at year end. Department
officials agreed with the finding and stated the current protocol has been in
place for several decades. They also
stated the GAAP reporting protocols are being studied and enhanced as
necessary. Further, once the new protocols are in place, the Department will work with
personnel and vendors to accurately accrue liabilities. INADEQUATE SUPPORT
FOR PAYMENTS MADE FOR CONSOLIDATED SERVICES The
Department made payment for Information Technology and Graphic Designers
(consolidated services) to the Department of Central Management Services
(DCMS) without supporting documentation. Public Act 93-25 authorized DCMS to consolidate Information Technology (IT) functions of State government. In addition, Public Act 93-839 authorized DCMS to consolidate Professional Services (Graphic Designers) of State government. As a result of the consolidations, DCMS billed the Department for services rendered on their behalf. Each month DCMS provided the Department a billing statement indicating the total charged to the Department. The Department did not receive sufficient supporting documentation to ensure the charges were for services incurred on their behalf. During our examination, we reviewed 10 IT billings, totaling $318,699, noting the Department did not obtain detailed support for payroll charges of $301,665. The Department received a spreadsheet indicating the charge for each employee; however, there was no detail to determine if the employee worked on behalf of the Department. Additionally, during our review of the Department’s District One IT Billings, we noted the Department had been billed and paid $13,658 in Building Rent. However, the Department had been billed and paid for the same space utilization through the Facility Management billings. In addition, we reviewed 13 Graphic Designer billings, totaling $9,845, noting the Department did not obtain detailed support for the charges. (Finding 4, pages 11-12 in the Compliance Report)
We recommended the Department obtain adequate supporting documentation to ensure all charges billed by DCMS for consolidated services are on behalf of the Department. Department
officials agreed with the finding and stated they will no longer pay IBIS
billings without proper documentation. INADEQUATE CONTROLS TO PREVENT
INAPPROPRIATE PAYMENTS TO VENDORS The Department did not have adequate controls to prevent inappropriate payments to vendors. A report of potential duplicate
vouchers using auditing software was
obtained and the following 6 of 25 (24%) payments tested were paid twice by the Department:
·
$1,946 to the
State Garage Revolving fund for gas purchases;
·
$1,810 for
installation of new septic pump;
·
$198 for hotel
rooms;
·
Two vouchers
totaling $1,762 and $1,702 to the Communications Revolving Fund for phone services; and
·
$116 for tire
service. Three Department refunds were received
when vendors returned duplicate payments:
·
Two different
accounting entities paid the same invoice Totaling $2,349.
·
A vendor was paid
$9,442 in two different fiscal years for the same invoice.
·
Another invoice
totaling $3,556 was paid in error. We also noted the invoice was dated 2/27/06 on the initial invoice while the
date on the same invoice used for the second payment had been changed in
black to 8/27/06. We further noted
the second invoice totaling $6,756 ($3,556 + 3,200 deposit) had part of the
description marked out in black marker.
The portion that was marked out stated the invoice was for shipping
charges and the dates the items were shipped (4/10/06 and 5/12/06). The Department’s accounting system
invokes a warning for duplicate payments for invoices if the invoice number
already exists or if the payee identification and invoice dollar amount are
the same, but the same individual who enters the voucher can override the
alert. In addition, there is no
centralized report to allow management to review all employee overrides for
reasonableness. Further, the system
only warns for duplicates within the same accounting entity and fiscal
year. The Department has 35
accounting entities that enter vouchers and also have reappropriated accounts
that do not lapse at the end of the fiscal year. (Finding 5, pages 13-16 in
the Compliance Report) We recommended the Department implement
controls to review employee overrides for duplicate payments. We also recommended controls be
implemented to prevent duplicate payments between accounting entities and
over different fiscal years for the reappropriated accounts. We further recommended the Department
obtain refunds for the duplicate payments made. Department officials agreed with the finding and stated they will obtain refunds for the duplicate payments
made and a BIP Action Request has been created to modify the FOA accounting
system allowing duplicate payment checks across all accounting entities. FAILURE TO TIMELY PERFORM BRIDGE INSPECTIONS
The Department and
local agencies were delinquent in performing bridge inspections during
FY07. In addition, the Department
needs to improve the quality of the bridge inspection data. The Department also did not have an
individual appointed as the State Bridge Inspection Program Manager as required
by federal regulations.
Using
the intervals established by the Department, a total of 1,752 (6.6%) bridges
were delinquent in receiving an inspection.
The Department was delinquent in conducting 108 bridge inspections. Of these, 19 bridges were more than six
months delinquent; 13 were more than one year delinquent. Of the 19 bridges that were more than six
months delinquent, 2 were rated structurally deficient. For local agencies, 1,644 bridges were
delinquent for an inspection. Of
these, 274 were more than six months delinquent for an inspection; 221 were
more than one year delinquent. Of the
274 bridges that were more than six months delinquent, 20 were rated
structurally deficient.
Some
bridges in the data provided by the Department contained blank inspection
intervals (554) or a “0” (84) for the interval. This does not include bridges listed as closed. A few bridges (5) also were listed at
routine inspection intervals above the maximum allowable by federal
regulation (48 months). There are
also problems related to data accuracy involving other codes in the bridge
inspection data. From
December 2006 through June 2007, the Department did not have an individual
formally appointed as the Bridge Inspection Program Manager as is required by
federal regulations. (Finding 6, pages
17-22 in the Compliance Report)
We recommended the
Department ensure all bridge inspections
are conducted within allowable intervals established by federal regulations
and the Department. We also
recommended the Department review the intervals being used and the accuracy
of information in its data system for bridges for accuracy and
reasonableness. Further, we
recommended the Department ensure a qualified individual is formally
appointed as the Bridge Inspection Program Manager.
Department officials agreed with the recommendation and primarily attributed the concerns noted in the finding to reporting, entry, and maintenance of bridge inspection data. After their subsequent review of the
allowable intervals and data provided to the auditors from their data base,
the Department stated the following: 99 Railroad bridges and 24 pedestrian
structures identified in the audit as delinquent were not the responsibility
of the Department or local agencies, 26 bridges identified as delinquent were
adjacent State’s responsibility, 80
State bridges and 1367 local bridges, identified
as delinquent at the time the data file was created
were within the FHWA approved time period allowed for data entry, and the data provided to the auditors
included 3 bridges that were identified as being under staged
construction.
In an auditors’ comment we noted of the 108 delinquent bridges attributable to the Department, none were pedestrian crossing and only one appeared to carry a railroad. We further noted that all bridges on Illinois highways are the Department’s responsibility according to federal regulations. For 18 of the 26 bridges the Department identified as the responsibility of other states, the Department is the Reporting Agency. The auditors were unable to evaluate the Department’s claims regarding the bridges that would not be considered delinquent as we used the data provided during fieldwork. In addition, we noted there was nothing in the federal regulations that suspends the routine interval due to construction. IMPROPER PROCUREMENT PROCEDURES
The Department did not
follow its own procedures for procuring professional and artistic contracts
and did not maintain adequate documentation to substantiate its procurement
activities. The Department inappropriately issued a non-professional and artistic Request for Proposals (RFP) for services that were professional and included accounting, auditing, and financial review services.
The
winning vendor received an average of 480 total responsiveness points from
the selection committee while another vendor received an average of 586 total
responsiveness points, and no negotiation or contact was made with the vendor
with the highest points. In addition, the Department changed the scope of
services to be performed and could not provide evidence it communicated the
change to the vendors.
The
Department awarded a contract for a media buy and did not document the
process adequately. The selection
committee scored four proposals received for a traffic safety media buy. The Department then stated they invited
the top three vendors to do oral presentations and two vendors attended. No
documentation was maintained other
than a second round of scoring sheets completed by the selection committee after the oral presentations. In addition, the contract overview
document did not accurately
document the reason for rejecting bids.
(Finding 8, pages 26-33 in the Compliance Report) We recommended the Department ensure it
is following all the appropriate, required procedures when issuing RFPs and
evaluating vendor proposals. We also
recommended, if changes to the scope of services are found to be necessary,
an addendum be timely published on the Illinois Procurement Bulletin. In addition, we recommended the Department
maintain a record of all communications with proposing vendors during the
procurement process, including oral presentations. Lastly, we recommended the Department ensure its procurement
files accurately document the reasons for rejecting bids.
The Department partially agreed with the finding and recommendation. The Department agreed the solicitation should have been issued as a Professional and Artistic RFP rather than being issued as a Competitive Sealed Proposal. The Department did not agree however, that the process used to select a winning vendor under the Competitive Sealed Proposal approach was in error or that there was a change in the scope of services. The Department also stated on March 31, 2006, after this RFP had been issued, they established an internal policy requiring all general services (excluding Information Technology procurements) to be handled as professional and artistic based on a previous audit finding. In an auditors’ comment, we noted although the Department stated it was unsure whether the services were purely professional and artistic, their Departmental Order 6-3 states accounting services including auditing, accountants, and actuarial services are always professional and artistic. Further, it
should be noted that the winning vendor proposed a price for the first three
tasks and a blended hourly rate for the task for possible additional avenues
of review, so it was an open ended bid which required an additional amount to
be complete. The recommendation letter submitted by Department personnel and
approved by Department management was 18 days prior to formulation of total
points using all 4 tasks. The total
points and price on that letter only used the bid from the winning vendor for
the first three tasks. The Department
solicited a best and final offer with a blended hourly rate for task no. 4
(one week after formulation of the contract and 18 days after the decision
memo to award the contract to the other vendor). No documentation showed the Department informed the losing
bidder that task no. 4 would change from tasks that may occur as appropriate
to 1,500 hours. NEED TO IMPROVE DOCUMENTATION IN PROCUREMENT FILES AND NOTIFICATION
PROCESS The Department failed to provide proper notifications in the Illinois Procurement
Bulletin and did not maintain adequate documentation in its procurement
files. The Department did not provide the required notification on the Illinois Procurement Bulletin that contracts were awarded to the vendors without the lowest bid for 2 of 10 (20%) procurements tested totaling $3,752,840. In addition, one of the contracts for a vendor to perform ISO 9001:2000 registration consulting services was executed on February 1, 2007, and the award notice was not published until February 7, 2007.
Two
of 10 (20%) procurement files tested did not adequately document the proper
handling of vendor price proposals.
One file’s evaluation of vendor cost proposals was not signed and
dated by the recorder or witness, and the other file in which the procurement
was cancelled and re-issued did not contain documentation of the original
bids received from the two responding vendors. Four of 10 (40%) procurement files tested did not contain conflict of interest forms for the employees on the technical review committee. (Finding 9, pages 34-37 of the Compliance Report) We recommended the Department ensure all required notifications are made in
the Illinois Procurement Bulletin and its procurement files contain proper
documentation. Department officials agreed with the finding and stated they are implementing a procurement file checklist that will address when to publish awards, signatures and maintenance of cost proposal forms, the maintenance of cost proposals, and they now require all technical review team members to sign conflict of interest forms. NEED TO IMPROVE CONTROLS OVER GRANT AGREEMENTS The Department did not have adequate controls over its grant agreements.
· The Department could not provide documentation that it adequately administered and monitored grant funds provided to a large city for the municipal maintenance of State highways. The grant agreement required quarterly installment payments subject to an inspection for satisfactory maintenance and operation of covered streets. The Department paid four quarterly payments on January 16, 2007, totaling $3,288,660, and could not provide documentation of any inspections or other monitoring.
We recommended the Department review grant agreements to ensure all requirements are met prior to payments being made. We also recommend the Department adequately monitor its grants to ensure all required reports are received by the grantee and reviewed by the Department. We further recommend the Department adequately document its monitoring efforts. Department officials agreed with the
finding and stated they will require
grantees to submit the required reports prior to payment. They further stated they will revise the
requirements for Participation Agreements to be applicable to
non-construction projects. NEED TO ENHANCE CONTROLS OVER THE ADMINISTRATION OF STATE VEHICLES The
Department did not have adequate controls over tracking the costs and usage
of State vehicles, the assignment of State vehicles to employees, and its
reporting of vehicle accidents to the Department of Central Management
Services (DCMS). Tracking
Costs and Usage The 2004 State of Illinois Fleet Efficiency Review Final Report recommended the Department replace its Maintenance Management Information (MMI) system with different software and the Department should use the software for all fleet and related equipment transactions. Currently, the Department is still using the same MMI fleet tracking system, and this software does not track all the costs associated for the fleet or related equipment transactions. Vehicle Assignments The
Department’s assignment of vehicles to employees is authorized by Directors
and District Engineers. According to
the Department’s vehicle report to DCMS, there were 1,333 employees with take
home vehicles as of June 2007. We
noted the report provided to DCMS was missing critical information including:
the justification for having a take home vehicle (12%), the date assigned
(86%), payroll classification or title of the individual assigned the vehicle
(2%), average monthly mileage (5%), current vehicle mileage (3%), days per
month business stops made (1%), and the miles from home to headquarters
(1%). Although all the assignments
were approved by a Director or District Engineer, without this data it is
difficult to determine whether there is justification for assigning the
employee a take home vehicle. We also noted three of 20 (15%) employees were assigned to a new vehicle during FY07 and the vehicle changes were not timely reported to DCMS. Vehicle Reporting Three of 10 (30%) vehicle accidents tested were reported to DCMS from 14 to 40 days late. Department management stated the accidents were not timely reported due to late reports from field personnel. (Finding 12, pages 46-51 in the Compliance Report) We
recommended the Department implement the recommendations in the Fleet
Efficiency Review Report and ensure its tracking system for vehicles is
adequate. Also, the Department should
thoroughly review the employees with assigned vehicles in order to ensure vehicle
information is up-to-date and that there is clear justification for the
vehicles being assigned to individuals to take home. Further, all changes in vehicle
assignments and vehicle accidents should be reported to DCMS as required and
adequate documentation of vehicle usage should be maintained for all vehicles
including pool vehicles. Department officials agreed with the
finding and stated they were implementing changes to its vehicle tracking and
reporting procedures. INADEQUATE MONITORING OF INTERAGENCY AGREEMENTS The
Department’s process to monitor interagency agreements was inadequate.
·
One of 14 (7%)
interagency agreements had services totaling $79,656 invoiced prior to the
effective date of the agreement.
·
The Department
entered into an agreement for the sharing of an employee’s services with the
Office of the Governor (Office) dated March 1, 2006. The agreement required the Department to
pay $10,224 of the employees’ payroll and the Office to pay $46,576 for a
total annual salary of $56,800. The
Department, the Office, and the Illinois State Board of Education (ISBE)
entered into a subsequent agreement for the same employee effective February
1, 2007 with payroll to be divided between ISBE ($48,000), the Department
($10,000) and the Office ($49,000) for a total annual salary of $107,000. According to those agreements, the
Department should have paid approximately $10,129 during FY07 for the
employee’s payroll expenses. The Department instead paid $30,194,
approximately $20,065 more than the agreements required. The Department
agreed on May 30, 2007 to pay ISBE’s payroll costs of $8,000 for May and June
2007 and then agreed on June 7, 2007 to pay the remaining payroll costs of
$12,000 for February through April. Both letters indicated ISBE would
reimburse the Department; however, the Department could not provide evidence
of any receipts from ISBE as of December 7, 2007. (Finding 13, pages 52-55 in the Compliance Report) We recommended the Department ensure
interagency agreements are approved prior to the effective date and prior to
services being rendered. We further
recommended the Department ensure the terms of the agreement are followed and
all amounts owed are collected. Department officials agreed with the finding and stated they
will now coordinate with the originating agency to revise the execution
process so that signatures are affixed timely. They also stated an invoice to ISBE was issued, but ISBE would
not pay the invoice and the Department will submit it to the Court of Claims
for a proper resolution. FAILURE TO ESTABLISH ADEQUATE COMPUTER SECURITY
CONTROLS The Department in conjunction with the
Department of Management Services (DCMS) did not establish adequate controls
for securing its computer resources. The Department had established computer systems throughout the State in order to meet its mission and mandate. The Department processes and maintains critical, confidential and sensitive information on computer systems. Many of the Department’s IT functions were consolidated into DCMS, with a physical move of equipment in October 2006. As a result, the Department and DCMS have a shared responsibility over computer security.
Although the Department had a draft version of a revised Information Technology Policy, the Policy currently in effect, dated May 15, 2000, is over seven years old and did not reflect the current environment. In addition, during our testing of computer security, we noted:
We recommended the Department formally communicate to DCMS its security requirements, and establish and document guidelines that outline both the Department’s and DCMS responsibilities. We also recommended the Department work with DCMS to strengthen its security parameters. In addition, we recommended the Department finalize and implement the draft Information Technology Policy. Department
officials agreed with the finding and stated they will
continue to work with DCMS to implement the recommendations. The Department also stated they will
implement a revised IT Policy and Security Awareness Program during FY08. OTHER FINDINGS The remaining findings are reportedly being given attention by the Department. We will review the Department’s progress toward implementation of our recommendations in our next examination. AUDITORS’ OPINION Our auditors state the basic financial statements of the Department as of and for the year ended June 30, 2007 are fairly presented in all material respects. STATE
COMPLIANCE EXAMINATION – ACCOUNTANT’S REPORT The auditors qualified their report on State Compliance for findings 07-6, 07-8, 07-9, 07-11 and 07-12. Except for the noncompliance described in these findings, the auditors state the Department complied, in all material respects, with the requirement described in the report. ____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:GR:pp
AUDITORS ASSIGNED The compliance examination was performed by the Auditor General’s staff. BKD, LLP were our special assistant auditors for the financial audit. |