REPORT DIGEST

ILLINOIS JOINING FORCES FOUNDATION

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2016

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2016

Release Date:  MAY 3, 2018

FINDINGS THIS AUDIT:  3

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  3 -- N/A -- 3
Category 2:  0 -- N/A -- 0
Category 3:  0 -- N/A -- 0
TOTAL:  3 -- N/A -- 3

FINDINGS LAST AUDIT: N/A

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

INTRODUCTION

We performed a financial audit of the
Foundation for the year ended June 30, 2016,
and a compliance examination of the
Foundation for the two years ended June 30,
2016.  This is our first audit and
examination of the Foundation since its legal
establishment.  The Foundation received no
appropriations from the General Assembly and
its funds were not held within the State
Treasury.  The auditors expressed an adverse
opinion on the Foundation’s financial
statements.  The Codification of Statements
on Auditing Standards (AU-C § 705.09) states
auditors “should express an adverse opinion
when the auditor, having obtained sufficient
appropriate audit evidence, concludes that
misstatements, individually or in the
aggregate, are both material and pervasive to
the financial statements.”

SYNOPSIS

• (16-01) The Foundation did not retain
sufficient documentation to facilitate
financial reporting, lacked adequate control
over its bank account and related records,
and its personnel frequently overrode
controls established in the Foundation’s
bylaws.

• (16-02) Personnel of the Foundation did not
adhere to the Foundation’s bylaws and/or
internal policies, which constituted the
Foundation’s internal control structure. In
addition, discrepancies existed between the
Foundation’s bylaws and internal policies.

• (16-03) The Foundation failed to retain
documentation and records to substantiate
compliance with grant agreements.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE FINANCIAL REPORTING AND CONTROLS

The Illinois Joining Forces Foundation
(Foundation) did not retain sufficient
documentation to facilitate financial
reporting, lacked adequate control over its
bank account and related records, and its
personnel frequently overrode controls
established in the Foundation’s bylaws.
During testing, some of the more significant
issues we noted included the following:

• During accounts payable testing, we
identified two payments made by the
Foundation subsequent to Fiscal Year 2016,
totaling $10,120, which were improperly
excluded from the Foundation’s accounts
payable balance as reported on the June 30,
2016, financial statements.  In addition,
subsequent to Fiscal Year 2016, the
Foundation’s Board of Directors discovered a
member of management had obligated the
Foundation to vendors for liabilities
exceeding $250,000, unbeknownst to the
Foundation’s Board of Directors or the
independent fiscal agent.  These liabilities
consisted of services rendered by vendors,
including website maintenance, strategic
communications, and consulting services.  A
lack of supporting documentation limited our
ability to conclude on when those services
were rendered and if accounts payable were
understated by additional amounts as of June
30, 2016.  The accounts payable records
maintained by the Foundation’s fiscal agent
did not include amounts owed to these
vendors, and payments to these vendors were
not being issued.  As a result, we were
unable to conclude whether accounts payable
reported on the Foundation’s June 30, 2016,
financial statements were complete and
accurately presented.

• We noted the Foundation’s equipment at
cost, accumulated depreciation, and
depreciation expense balances reported on its
June 30, 2016, financial statements were
inaccurate. We identified two other likely
equipment disbursements to the same vendor
for identical amounts or amounts greater than
the fixed asset value identified on the
financial statements and related footnotes.
These disbursements were selected for
disbursement testing; however, due to the
lack of supporting documentation, and the
absence of a property listing, we were unable
to quantify the adjusting entry needed to
correct the June 30, 2016, financial
statements and related footnotes.

• The Foundation was unable to provide
supporting documentation, such as original
receipts or invoices, for 15 of 62 (24%)
disbursements selected for testing, totaling
$9,437. Four of these transactions, totaling
$2,407, were expense reimbursements for
Foundation employees and contractors.  The
only documentation available to substantiate
these transactions was the expense
reimbursement request form itself. No
original receipts were attached to the
reimbursement forms to support the
reimbursement of the employee or contractor.
The remaining 11 disbursements tested,
totaling $7,030, were carried out through the
use of a debit card.  Receipts or invoices
could not be provided to support these
expenses. (Finding 1, pages 12-17)

We recommended the Foundation:
• ensure original bank statements are
retained;
• ensure bank reconciliations are performed;
• ensure the persons preparing the
reconciliations, as well as performing
reviews, document their involvement in the
process;
• ensure records maintained are accurate and
complete, including original receipts and
vendor invoices for each transaction;
• improve communications between employees,
the Board of Directors, and the fiscal agent
to facilitate accurate and complete reporting
of accounts payable activity and contracting
activity;
• develop a property listing to facilitate
proper reporting of fixed asset activity and
to ensure accountability for all capital
assets owned by the Foundation;
• perform a review of the Foundation’s
services and subsequent events activity
related to Fiscal Year 2016 to prepare an
accurate Statement of Financial Position as
of July 1, 2016, to enable accurate financial
reporting in future periods; and,
• perform intensive and ongoing monitoring of
financial activity to ensure controls, such
as those incorporated in the Foundation’s
bylaws, are not being overridden by employees
or others in positions of authority.

Foundation personnel agreed with the finding
and noted they have taken corrective action
through the adoption of our recommendation in
their updated policies and procedures.

INADEQUATE INTERNAL CONTROL STRUCTURE

Personnel of the Foundation did not adhere to
the Foundation’s bylaws and/or internal
policies, which constituted the Foundation’s
internal control structure. In addition,
discrepancies existed between the
Foundation’s bylaws and internal policies.
During testing, some of the more significant
issues we noted included the following:
• One of four (25%) grant agreements selected
for testing, totaling $150,000, was executed
by the Foundation’s Executive Director.  The
Foundation’s bylaws require the Board’s chair
or treasurer to execute all grants of the
Foundation.

• The Foundation did not maintain adequate
control over contracts entered into with
vendors.

– The Foundation was unable to provide three
contractual agreements requested, pertaining
to 9 of 62 (15%) disbursements tested.  These
9 disbursements totaled $67,872.

– Two contractual agreements tested, totaling
$35,203, pertaining to 3 of 62 (5%)
disbursements tested, were improperly signed
and executed by the Foundation’s Executive
Director.

– Two contractual agreements tested, totaling
$31,785, pertaining to 3 of 62 (5%)
disbursements tested, were not signed by
either the Foundation or the vendor. The
Foundation’s bylaws require the Board’s chair
or treasurer to execute all contracts of the
Foundation.

• The Foundation’s Executive Director
obtained a debit card, linked to the
Foundation’s account, for which the consent
of the Foundation’s Board could not be
located, and executed 172 transactions during
Fiscal Year 2016, totaling $17,858 and
individually ranging from $1 to $1,808, with
the unauthorized card. A receipt was located
and reviewed by us for only one of those
debit card transactions, totaling $1,633.
However, due to a lack of receipts or other
documentation, we could not determine if the
other 171 debit card transactions, totaling
$16,225, were proper and related to
Foundation functions and business. Further,
we could not determine if purchases made via
the debit card constituted fringe benefits
which should have been reported to the
Internal Revenue Service (IRS) as
compensation.  (Finding 2, pages 18-20)

We recommended the Foundation’s personnel and
Board meet and agree on specific internal
control objectives, policies, and practices;
thereafter, Board members and management
should perform ongoing reviews of financial
records and activities to ensure those
objectives, policies, and practices are being
adhered to closely and/or updated as changes
arise.  In addition, the Foundation’s
personnel and Board should communicate
openly, clearly, and frequently as to the
financial and operational status of the
Foundation.

Foundation personnel agreed with the finding
and noted they have taken corrective action
through the adoption of our recommendation in
their updated policies and procedures.

LACK OF DOCUMENTATION TO SUBSTANTIATE
COMPLIANCE WITH GRANT AGREEMENTS

The Foundation failed to retain documentation
and records to substantiate compliance with
grant agreements.  We noted the following
conditions:

• The Foundation was unable to provide a
signed grant agreement for one of four (25%)
grants selected for testing. For the other
three (75%) grants selected for testing, the
Foundation was only able to provide limited
documentation, such as the completed grant
application. Foundation personnel indicated
the required expense reports and status
reports were provided to the grantor
organizations via informal presentations;
however, the Foundation did not retain
documentation of those presentations.

• The Foundation did not properly classify
and account for its temporarily restricted
assets in its financial statements. The
Foundation reported temporarily restricted
assets totaling $75,000, relating to a
$150,000 grant received in June 2016. The
grant agreement specified all funds were to
be used for innovative solutions for Illinois
veteran outreach and communication. At the
time the grant monies were received, the
Foundation had a bank account balance of
$1,780. Foundation expenses from that date
through the end of the fiscal year totaled
$61,241. However, we could not determine if
the $61,241 expended during that timeframe
was used solely for the purposes specified in
the grant agreement or if the grant monies
received were applied to expenses already
incurred on a retroactive basis. We were
unable to determine the extent, if any, of
the misclassification or if the terms of the
grant agreement were violated due to a lack
of documentation.

The Foundation is heavily reliant upon grant
funds received to continue their operations
and mission.  During Fiscal Year 2016, the
Foundation received a total of $300,000 in
grant monies from two identified funding
organizations. This dependence on a small
number of funding organizations makes it
imperative the Foundation retain all
necessary records and documentation to ensure
compliance with grant agreements and to
prevent situations where the Foundation may
be required to return grant funds to
providing organizations due to noncompliance.
(Finding 3, pages 21-22)

We recommended the Foundation ensure full
records are maintained for each grant
received, including the completed
application, signed grant agreement, expense
records, and any progress reports or other
information required to be submitted to the
grantor. Further, we recommended the
Foundation’s management and Board of
Directors perform ongoing reviews to ensure
all terms and conditions within its grant
agreements are complied with by the
Foundation.

Foundation personnel agreed with the finding
and noted they have taken corrective action
through the adoption of our recommendation in
their updated policies and procedures.

We will review the Foundation’s progress
towards the implementation of our
recommendations in our next financial audit
and compliance examination.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Foundation as of and for the year
ended June 30, 2016, are not fairly stated in
all material respects.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Foundation for the two
years ended June 30, 2016, as required by the
Illinois State Auditing Act.  Because of the
effect of the noncompliance described in
Finding 2016-001, 2016-002, and 2016-003, the
accountants stated the Foundation did not
comply with the requirements described in the
report.

This financial audit and compliance
examination was conducted by the Office of
the Auditor General’s staff.

JANE CLARK
Division Director

This report is transmitted in accordance with
Section 3-14 of the Illinois State Auditing
Act.

FRANK J. MAUTINO
Auditor General

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