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REPORT DIGEST DEPARTMENT OF MILITARY
AFFAIRS COMPLIANCE EXAMINATION For the Two Years Ended: June 30, 2004 Summary of Findings: Total this audit 11 Total last audit 5 Repeated from last audit 2 Release Date:
March 10, 2005
State of Illinois Office of the Auditor General WILLIAM G. HOLLAND 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 is also
available on the worldwide web at http://www.state.il.us/auditor |
SYNOPSIS ¨ The Department made payments for efficiency initiative billings from improper line item appropriations. ¨ The Department did not maintain sufficient controls over the accuracy and reporting of its property. ¨ The Department’s property listing was inaccurate. ¨ The Department did not have adequate controls in place to monitor Illinois Military Family Relief grants. ¨ The Department did not have adequate controls to ensure that vouchers were approved or denied within 30 days and required interest was paid. ¨ The Department failed to file the Annual Real Property Utilization Report. {Expenditures and Activity
Measures are summarized on the next page.} |
ILLINOIS DEPARTMENT OF MILITARY
AFFAIRS
COMPLIANCE EXAMINATION
For The Two Years Ended
June 30, 2004
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EXPENDITURE STATISTICS |
FY 2004 |
FY 2003 |
FY 2002 |
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! Total
Expenditures (All Funds)...................... |
$29,038,491 |
$27,210,255 |
$29,011,064 |
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OPERATIONS TOTAL..................................... % of TOTAL Expenditures................................. |
$27,109,031 93.3% |
$26,761,121 98.3% |
$27,991,586 96.5% |
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Personal Services, including reimbursable positions... % of Operations Total Expenditures................ Average No. of Employees............................ |
$11,547,580
42.6% 244 |
$11,374,832 42.5% 244 |
$11,564,622 41.3% 272 |
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Other Payroll
Costs (FICA, Retirement)................ % of Operations Total Expenditures................ |
$1,060,049 3.9% |
$1,337,091 5.0% |
$1,441,858 5.2% |
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Contractual
Services.......................................... % of Operations Total Expenditures................ |
$2,025,474 7.5% |
$2,037,646 7.6% |
$2,148,502 7.7% |
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Lincoln’s
Challenge............................................ % of Operations Total Expenditures................ |
$8,706,487 32.1% |
$8,301,668 31.0% |
$9,108,256 32.5% |
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Facilities
Operations and Maintenance % of Operations Total Expenditures................. |
$3,535,856 13.0% |
$3,288,808 12.3% |
$3,260,187 11.6% |
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All Other
Items.................................................. % of
Operations Total Expenditures..................... |
$233,585 0.9% |
$421,076 1.6% |
$468,161 1.7% |
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CAPITAL PROJECTS....................................... % of TOTAL Expenditures................................ |
$107,230 0.4% |
$99,456 0.4% |
$140,589 0.5% |
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AWARDS AND GRANTS TOTAL.................... % of TOTAL Expenditures................................ |
$1,507,864 5.2% |
$179,832 0.7% |
$716,089 2.5% |
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NON-APPROPRIATED
FUNDS Armory Rental
Fund (416)................................. % of TOTAL Expenditures............................... |
$314,366 1.1% |
$169,846 0.6% |
$162,800 0.5% |
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! Cost of Property and Equipment (See Finding 04-2) |
$150,316,343 |
$137,564,919 |
$129,090,066 |
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CASH RECEIPTS |
FY 2004 |
FY 2003 |
FY 2002 |
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Federal Reimbursements.............................................. |
$14,132,803 |
$14,482,812 |
$14,324,193 |
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Rent........................................................................... |
265,339 |
138,219 |
208,030 |
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Grant - Lincoln’s Challenge.......................................... |
0 |
0 |
500,000 |
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Sales of Property......................................................... |
62,000 |
3,000 |
0 |
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Other.......................................................................... |
102,217 |
100,342 |
59,125 |
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Total.......................................................................... |
$14,562,359 |
$14,724,373 |
$15,091,348 |
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AGENCY DIRECTOR |
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During Audit Period: Adjutant General David Harris (Through June 2003), Adjutant General Randal E. Thomas (June
2003 to present) Currently: Adjutant General Randal E. Thomas |
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Efficiency
initiative payments totaled $365,625
Department had approximately a $7.7 to $8.4 million difference between the C-15 and the Capital Asset Summary form 7 out of 75 items totaling $3,029 could not be located during property testing
13 grant applicants were awarded duplicate payments
totaling $8,000 Department failed to pay vendors interest charges totaling $949
The Department failed to file its 2003 Annual Real
Property Utilization Report |
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS PAYMENTS WERE MADE FOR
EFFICIENCY INITIATIVE BILLINGS FROM IMPROPER LINE ITEM APPROPRIATIONS The Department 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. The Department did not receive guidance or documentation with the billings from CMS detailing from which line item appropriations savings were anticipated to occur. According to Department staff, they received no evidence of savings from CMS for the amount billed. The only guidance received was the amount of payments that should be taken from General Revenue versus Other Funds for the September 2003 billings. Additionally, the May 2004 billing for facilities management consolidation indicated savings for 17 vacant positions that had been funded in the Department's budget. We question whether the appropriate appropriations, as required by the State Finance Act, were used to pay for the anticipated savings. The Department used: § $2,167 from General Revenue Fund appropriations for part of the CMS billing relative to the Procurement Efficiency Initiative. The specific appropriation was “for rehabilitation and minor construction at armories and camps.” § $8,311 from General Revenue Fund appropriations for part of the CMS billing relative to the Procurement Efficiency Initiative. The specific appropriation was “for expenses related to the care and preservation of historic artifacts.” § $369 from General Revenue Fund appropriations for part of CMS billing relative to the Procurement Efficiency Initiative. The specific appropriations were “For Lincoln’s Challenge” and “For State Officer’s Candidate School” – “For Lincoln’s Challenge Stipend Payments.” The Department received four billings totaling $1,222,507 from CMS for savings from efficiency initiatives. The Department paid a total of $365,625 for the efficiency initiative from the General Revenue Fund. (Finding 1, pages 9-12) We recommended that the Department only make payments for efficiency initiative billings from line item appropriations where savings would be anticipated to occur. Further, we recommended the Department seek an explanation from the Department of Central Management Services as to how savings levels were calculated, or otherwise arrived at, and how savings achieved or anticipated impact the Department’s budget. Department officials disagreed with the finding and, in summary, noted they believe payments were only made from line item appropriations where savings were anticipated to occur. The Department allocated forecasted savings based upon actual FY02 expenditures in the specific savings areas in relation to total expenditures for each appropriated line item. In our auditor’s comment, we noted that documentation provided by the Department to auditors references a methodology for savings that was developed in response to a May, 2003 communication with the Governor's Office of Management and Budget (GOMB). This occurred prior to the June 20, 2003 passage of Public Act 93-0025 authorizing the efficiency billings. The September 2003 CMS billings were for different amounts than those communicated by GOMB in May 2003. Furthermore, an internal Department communication indicated that when questioned about the details of the initiatives, the GOMB budget analyst did not have any details. Finally, while the Department notes that it examined FY02 expenditure patterns, this may not have been the most appropriate tool. Department officials noted that the payments were made from the specific appropriations because the Department had procurement expenditures from those appropriations in the past. However, without specific guidance from CMS regarding the nature and type of procurement saving initiatives, it is unclear whether these were the appropriate lines from which to make procurement savings payments. INADEQUATE RECONCILIATION AND REPORTING OF FIXED
ASSETS The Department did not maintain sufficient controls over the accuracy and reporting of its property. The following problems were noted: § The Department did not adequately reconcile its various reports of fixed assets to the Agency Report of State Property (C-15) filed with the Comptroller. The C-15 amount reported for the 4th quarter FY04 did not agree to Department property records at June 30, 2004. There was a $537,893 difference. § The Department had approximately a $7.7 to $8.4 million difference between the C-15 and the Capital Asset Summary form (SCO-538) which was reported on the SAMS to GAAP Reconciliation-Capital Assets Form (SCO-537) submitted to the Comptroller. § The Department did not submit their C-15’s by the reporting deadlines. § Six of eight (75%) of the C-15’s submitted contained inaccurate information for equipment additions and deletions. § Seven of eight (88%) of the C-15’s submitted did not properly report transfers-in from the Capital Development Board (CDB). § The Department did not maintain supporting documentation for the amounts reported in all eight quarterly C-15 Reports submitted during the examination period. Department personnel stated that the late filing of C-15’s, inaccurate reporting of fixed assets, improper reporting of transfers-in from CDB and inadequate supporting documentation were due to employee oversight and errors. (Finding 2, pages 13-15) This finding was first reported in 2002. We recommended that the Department establish a corrective action plan to address controls to ensure an accurate property listing and reporting for the Department. Further, the Department should file their Quarterly Fixed Asset Reports by the reporting deadlines, properly report transfers-in and maintain adequate documentation for the Fixed Asset Reports as required by SAMS. Also, we recommended the Department reconcile its fixed asset records and reports to the C-15’s on a quarterly basis to ensure completeness and accuracy of its fixed asset records. Department officials agreed with the finding and stated they will establish a corrective action plan. (For the previous Department response, see Digest Footnote #1.) NEED TO IMPROVE PROPERTY ACCOUNTING, REPORTING AND CONTROLS The Department property listing was inaccurate. Five out of 75 (7%) items tested were suspended on the property listing. Suspended items are items that have been assigned a tag number and a description on the property listing, but the purchase prices are not listed with the items. The items in question were added to the suspense files in the property records ranging from December 29, 2000 to June 24, 2004. Seven out of 75 (9%) items totaling $3,029 could not be located during our property testing.
Department
personnel stated that the person responsible for property records has since
departed the agency, and they are unable to determine reasons for these
discrepancies. (Finding 3, page 16) We
recommended the Department comply with the State Property Control Act
and the Illinois Administrative Code by ensuring all equipment under its
jurisdiction is recorded accurately and timely on its property records. Department officials agreed with the finding and stated they are in the process of obtaining an appropriately qualified staff resource to handle these responsibilities. INADEQUATE CONTROLS OVER GRANT MONITORING
The Department did not have adequate controls
in place to monitor Illinois Military Family Relief grants. Four out of 25 (16%)
grants tested in our sample were duplicate applications for the same active
duty order, totaling $4,000 in duplicate payments. The Department reviewed all grants and found a total of 13 out
of 2,571 (1%) grant applicants were awarded duplicate payments, totaling
$8,000. Two out of 25 (8%)
individuals did not have Defense Enrollment Eligibility Reporting System
(DEERS) information filled out on their forms. Department personnel stated that the agency database did not have controls to recognize families that have already received grants. Department personnel further stated that the operator did not fill out DEERS information because the individuals were on the DEERS system from prior records. (Finding 6, page 19) We
recommended the Department implement
adequate controls to ensure that applicants do not receive duplicate grants
and that applications are complete and in accordance with adopted rules. The Department should seek reimbursement
of the duplicate grants awarded. Department officials agreed with the finding and stated internal controls have been implemented so duplicate grants are not issued. Further, the Department is pursuing collection of the overpayments.
LATE APPROVAL OF VOUCHERS AND LACK OF PROCEDURES TO PAY REQUIRED INTEREST The
Department of Military Affairs (Department) did not have adequate controls to
ensure that vouchers were approved or denied within 30 days and required
interest was paid. Ten of 301 (3%) of the vouchers tested were not approved within 30 days of receipt of a proper bill. The Department does not have procedures to monitor the date of payment by the Comptroller’s Office and pay interest accrued on vouchers not paid within 60 days of receipt of a proper bill. The Department did not pay vendors interest charges totaling $949 for 5 of 301 (2%) of the vouchers tested in our sample. Department
personnel stated that late approval of vouchers was a result of the
Department not processing the vouchers timely. In addition, Department personnel stated that when the
Department monitored interest payments in the past, interest was not due. With the limited staff resources
available, the monitoring was not continued.
(Finding 7, pages 20-21) This finding was first reported in 2002. We recommended that the Department implement procedures to ensure that all vouchers are approved or denied within 30 days of receipt, monitor the date of payment by the Comptroller’s Office, and pay interest charges as required by the State Prompt Payment Rules. Department officials agreed with the finding and stated they are now receiving a monthly report identifying vouchers possibly requiring interest payment. This report is being reviewed and acted upon as needed. (For the previous Department response, see Digest Footnote #2.) FAILURE TO FILE ANNUAL
REAL PROPERTY UTILIZATION REPORT The Department of Military Affairs (Department) failed to file the Annual Real Property Utilization Report (Report) with Central Management Services for fiscal year 2003. Department personnel stated that the person responsible for filing the report has departed the agency and they were unable to determine why the report was not filed. (Finding 10, page 24) We
recommended that the Department file the Annual Real Property Utilization
Report by October 30th of each year as required by the State Property Control
Act. Department officials agreed with the finding and
stated they are in the process of obtaining an appropriately qualified staff
resource to handle this responsibility. OTHER FINDINGS The remaining findings are reportedly being addressed by the Department. We will review the Department’s progress towards the implementation of our recommendations in our next engagement. Responses were provided by the Department’s Chief Fiscal
Officer, Connie Sabo.
AUDITOR’S OPINION We conducted a compliance examination of
the Department as required by the Illinois State Auditing Act. We have not audited any financial
statements of the Department for the purpose of expressing an opinion because
the Department does not, nor is it required to, prepare financial
statements. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:GSR AUDITORS ASSIGNED
This examination was performed by the staff of the Office of the Auditor General.
DIGEST FOOTNOTES
#1 – INADEQUATE RECONCILIATION AND
REPORTING OF FIXED ASSETS – Previous Agency Response 2002: The
Department agreed with the finding.
The Department will ensure that all fixed asset additions are posted
to the property control inventory records within 30 days of acquisition. The Department will reconcile fixed asset
records and reports to the Forms C-15 on a quarterly basis as
recommended. #2 – LATE APPROVAL OF VOUCHERS AND
LACK OF PROCEDURES TO PAY REQUIRED INTEREST – Previous Agency Response 2002: The
Department agreed with the finding.
The Department will analyze its invoice approval process to identify
and implement possible changes to help ensure that vendors’ invoices are
reviewed and approved (or denied) within 30 days of physical receipt of the
bill. |