REPORT DIGEST

ILLINOIS JOINING FORCES FOUNDATION

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  March 17, 2022

FINDINGS THIS AUDIT:  4

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 3 -- 3
Category 2:  0 -- 1 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 4 – 4

FINDINGS LAST AUDIT: 5

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

The auditors expressed an ADVERSE
OPINION on the Foundation’s basic
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.”

This digest covers the Foundation’s
financial audit for the year ended
June 30, 2020. The Foundation’s
compliance examination covering the
year ended June 30, 2020, will be
released under a separate cover.

SYNOPSIS

• (20-01) The Foundation did not
present adequate financial statements
and related note disclosure for Fiscal
Year 2020.
• (20-02) The 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.
• (20-03) The Foundation failed to
maintain adequate controls over its
Board of Directors and did not take
certain actions as required by its
bylaws.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

FAILURE TO PRESENT ADEQUATE FINANCIAL
STATEMENTS AND NOTES

The Foundation did not present
adequate financial statements and
related note disclosures for Fiscal
Year 2020. During testing, some of the
more significant issues we noted
included the following instances where
the Foundation did not present the
financial statements and related note
disclosures in accordance with the
Financial Accounting Standards Board
(FASB) Accounting Standards
Codification (ASC):

• The Foundation did not disclose all
of its material related-party
transactions for Fiscal Year 2020. The
Foundation received and failed to
disclose donations totaling $92,000
from one of its board members during
Fiscal Year 2020.

• The Foundation did not disclose
required information in the notes to
the financial statements regarding the
restatement of its beginning balance
for net assets.

• The Foundation did not make the
appropriate note disclosure regarding
the transfer of financial assets with
Operation Her Story, where the
Foundation acts as an intermediary or
other recipient entity by accepting
cash from donors on behalf of
Operation Her Story.

We noted the following instances where
the Foundation did not present the
financial statements and related note
disclosures in accordance with sources
such as practices that are widely
recognized and prevalent, either
generally or in the industry,
including good business practices:

• The Foundation disclosed in Note 6
(Line of Credit) a net borrowing on
its line of credit to be ($5);
however, the Foundation paid the line
of credit in full, closing the line of
credit prior to June 30, 2020. Hence,
the Foundation no longer has this line
of credit and the disclosure should be
omitted. In addition, the Foundation
disclosed an interest rate of 5% in
Note 6; however, we noted the terms of
the line of credit agreement indicated
a variable rate of interest. The
variable rate ranged from 5.5% to
7.25% during the examination period
and was 5.5% as of June 30, 2020.

• The Foundation did not present all
concentrations of risk in Note 7
(Concentrations of Risk). Due to this
omission, Note 7 is incomplete. In
addition, Note 7 is inaccurate due to
the concentration of risk percentages
not agreeing to the auditor
recalculation based on the underlying
accounting records. We noted two
contributors who, together,
contributed 78% of the Foundation’s
revenue. The Foundation also stated in
Note 7 that it receives contributions
from agencies of the State of
Illinois; however, this statement does
not agree to supporting documentation,
and should be omitted from the
disclosure unless such transactions
between the Foundation and the State
of Illinois occur.

• The Foundation recorded the Small
Business Administration loan as
$154,000; however, the loan appears to
be for $150,000. While the Foundation
did receive $154,000 total from the
U.S. Small Business Administration,
$4,000 of that total amount was
received two months prior to the
$150,000 loan and was not included in
the terms of the $150,000 loan
agreement. The Foundation was unable
to provide support for the $4,000
receipt from the U.S. Small Business
Administration; hence, we are unable
to determine the correct
classification of the $4,000 on the
statement of financial position. Due
to this error, the schedule of future
monthly payments to the Small Business
Administration does not agree to the
loan agreement which states the first
payment is due twelve months from the
date of the note. We noted the current
and noncurrent portions of the “note
payable – SBA” reported on the
statement of financial position is
inaccurate. The Foundation reported a
current liability of $7,692 instead of
$641 plus the portion of the $4,000
receipt that was a current liability,
if any. The noncurrent portion would
change in relation to the current
portion change. (Finding 1, pages
22-29)
This finding has been repeated since
2018.

We recommended the Foundation utilize
professional tools, such as
checklists, to improve the
completeness and quality of its
financial statements and related note
disclosures. Additionally, we
recommended the Foundation develop and
consistently apply a method for
classifying and allocating expenses on
its statement of functional expenses.

The Foundation agreed with the
recommendation.

INADEQUATE INTERNAL CONTROL STRUCTURE

The 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. Some of the more significant
deficiencies we noted included the
following:

• The Foundation did not maintain
adequate control or have formal
policies in place over personnel
records and payroll to minimize the
risk of payroll errors through
miscommunication and/or lack of
documentation, as described below:

— The Foundation did not compute
employee payroll deductions correctly
for the following disbursements
selected for detail testing. For 23 of
23 (100%) payroll transactions tested,
totaling $269,612, the amount withheld
for State and Federal Taxes were not
accurately computed for 4 of 7
employees (57%) tested. The Foundation
over withheld an absolute total of
$5,392.

— The Foundation does not have a
system or process in place to track
employee attendance.

— Payroll is automatically processed
in full on a bi-weekly basis. The
Foundation does not have adequate
review and communication procedures to
ensure any necessary payroll changes
would be caught and adjusted timely.

— Employee requests for time off are
not formally documented.

• The Foundation has inconsistencies
between its bylaws and its internal
Financial Controls Policy. The bylaws
require dual approval from both the
Board’s treasurer and another Board
member for expenses over $5,000.
However, the Financial Controls Policy
limits the Executive Director’s
expenditure authority to disbursements
of up to $1,000 and requires dual
approval for all expenses exceeding
$1,000. Per discussion with the chair
of the Board, the Executive Director
was later given the ability to approve
expenditures of up to $5,000; however,
written documentation of this change
to the Financial Controls Policy was
not provided to the auditors, and we
could not positively determine when
this change had taken effect. As a
result, we were unable to determine
whether transactions were properly
approved. (Finding 2, pages 30-32)

This finding has been repeated since
2016.

We recommended the Foundation’s
management and Board meet and agree on
specific internal control objectives,
policies, and practices. We also
recommended Board members and
management formally develop and update
written policies and procedures to
facilitate the Foundation’s operations
and perform and document ongoing
reviews of financial records and
activities, including contracts and
bank reconciliations, to ensure
objectives, policies, and practices
are being adhered to closely.

The Foundation agreed with the
recommendation.

INADEQUATE CONTROLS OVER BOARD
MEMBERSHIP

The Foundation failed to maintain
adequate controls over its Board of
Directors (Board) and did not take
certain actions required by its
bylaws.

The Foundation did not monitor and
document compliance with statutory
term limits for its Board members.
During testing of statutory Board
requirements, we noted the following:

• The Foundation did not document the
appointment or start date for one
Board member’s term. As a result, we
were unable to determine if the member
was serving on an expired term.

• Two Board members were serving on
expired terms. The Board members had
served 1,177 and 1,394 days beyond
each individual’s term expiration as
of June 30, 2020.

The Foundation’s planning and
organizational documents were not
updated during Fiscal Year 2020. As a
result, these documents continued to
contain inconsistencies regarding
descriptions of the Foundation’s
executive committee, working groups,
and task forces and did not accurately
reflect the Foundation’s current
operational model, which focuses on
fulfilling its mission using a veteran
service community development and
outreach initiative. Specifically, we
noted the following:

• The Foundation's currently adopted
Board composition is not consistent
with the Act. The Foundation adopted a
7-7-7 model: 7 mandated members, 7
task force leaders, and 7 civic
members. The Foundation did not ensure
its bylaws or the Act (20 ILCS
2805/37(d)) were updated to reflect
the changes to its Board composition.
(Finding 3, pages 33-35)

We recommended the Foundation ensure
all Board member information,
including but not limited to
appointments, terms, and periods of
vacancies, is consistently monitored
and accounted for. Also, we
recommended the Foundation
periodically review and update its
planning and organizational documents
to properly reflect its operations;
specifically, by amending its bylaws
and continuing to seek legislative
change to the Department of Veterans’
Affairs Act in order to reflect
changes in the Board’s structure.
Further, we recommended the Foundation
maintain record of all meetings and
post meeting minutes to its website in
accordance with the Foundation’s
bylaws and State law.

The Foundation agreed with the
recommendation.

OTHER FINDINGS

The remaining finding pertains to lack
of documentation to substantiate
compliance with grant agreements.  We
will review the Foundation’s progress
towards the implementation of our
recommendation in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the Foundation as of and
for the year ended June 30, 2020 are
not fairly stated in all material
respects.

This financial audit 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

FJM:JDP