REPORT DIGEST

RECEIPT/EXPENDITURE STATISTICS	FY 2003	FY 2002	FY 2001
! Total Cash Receipts (All Funds)	$1,688,952,399	$1,776,681,939	$1,690,883,079
Total Expenditures (All Funds)	$504,900,504	$523,086,086	$519,955,343
OPERATIONS Personal Services % of Total Expenditures Average No. of Employees Regular Positions Extra Help	$156,515,635 31.0% 3,633 402	$153,363,844 29.3% 3,816 381	$146,960,285 28.3% 3,785 400
Other Payroll Costs (FICA, Retirement) % of Total Expenditures	$27,617,291 5.5%	$26,524,428 5.1%	$24,925,127 4.8%
Contractual Services % of Total Expenditures	$35,057,697 6.9%	$37,558,444 7.2%	$35,192,042 6.8%
All Other Operations Items % of Total Expenditures	$56,365,912 11.2%	$70,146,409 13.4%	$59,767,182 11.5%
AWARDS AND GRANTS TOTAL % of Total Expenditures	$222,995,430 44.2%	$230,061,665 44.0%	$239,787,582 46.1%
REFUNDS & PERMANENT IMPROVEMENTS - TOTAL % of Total Expenditures	$6,348,539 1.2%	$5,431,296 1.0%	$13,323,125 2.5%
! Cost of Property and Equipment (Cash basis)	$407,673,846	$394,335,364	$392,607,102

	FISCAL YEAR
SELECTED ACTIVITY MEASURES	2003	2002	2001
! Passenger Car Plates	7,375,597	7,702,477	7,957,960
! Truck and Bus Plates	1,830,181	1,872,751	1,994,806
! Driver's Licenses	3,135,283	3,029,266	2,405,208
! Driver's Histories	5,876,103	5,349,987	4,750,640
! Registered Corporations	337,842	326,292	319,271
! Equity Securities Registered (billions)	$74.2	$87.1	$81.2

82 State vehicles were personally assigned to office employees	FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS STATE VEHICLES ASSIGNED TO EMPLOYEES WITHOUT A DOCUMENTED BUSINESS PURPOSE Secretary of State employees have been assigned State vehicles without documentation of a business need for the vehicles. As of June 2003, 82 State vehicles were personally assigned to Office employees (excluding Secretary of State Police). However, the Office did not have documentation on file providing justification for the business purpose of personally assigning these vehicles. The Secretary of State Physical Services Department Support Services Division/Property Control Unit Vehicle Operators Rules Manual lists four criteria for the individual assignment of vehicles. However, the Secretary of State did not document whether employees assigned a vehicle met any of these criteria. During our review, we noted one employee with a position of "private secretary" who was assigned a State vehicle. The employee works in Springfield, but lives in Centralia, which is a one-way commute of approximately 100 miles. Available records indicated the automobile was primarily used for commuting purposes. Secretary of State management stated the employee stopped to make facility visits while driving to and from work, but could not substantiate those visits. The Secretary of State did include the value of $3/day in the employee’s taxable wages for commuting in accordance with Internal Revenue Service regulations. However, the actual cost to the State is approximately $72/day. We were unable to determine exactly how the employee used the vehicle as no log or purpose of travel is required from employees driving personally assigned State vehicles. (Finding 1, pages 12-14) We recommended the Secretary of State require documentation justifying the business need of assigning a State vehicle to any Office employee. In addition, the Office should review its assignment of State vehicles on a quarterly basis to ensure that all employees who have been personally assigned State vehicles continue to have an adequate business purpose for using that vehicle, and document this review. Agency officials accepted our recommendation and stated that they have created a personally assigned vehicle (PAV) form that must be filled out annually by the operator of the vehicle. The Agency is also now requiring that all departments that have motor pool vehicles or employees who drive PAV’s appoint a motor vehicle coordinator. The coordinator would ensure that all paperwork and documents relating to vehicles in their departments are completed correctly and on time. The coordinators will, on a quarterly basis, review the need for persons within their department to have a PAV and will submit a letter to the Department of Physical Services – Property Control Officer, stating that the need still exists or no longer exists. INADEQUATE PROCEDURES REGARDING STATE VEHICLES The Secretary of State did not have adequate procedures over its State vehicles. We noted accidents involving State vehicles were not reported in a timely manner, receipts supporting gasoline usage were not maintained, and employees were driving motor pool vehicles for extended periods and were not reporting commuting mileage. Specific problems noted were as follows: During our review of accidents involving State vehicles, we tested 10 of 35 accidents and noted that 6 of the 10 accidents were not reported to DCMS on a timely basis. The DCMS "Vehicle Guide" states that accident reports are "to be submitted to (DCMS) Risk Management no later than seven calendar days following the accident." We noted the reports were submitted between 5 and 124 days late. Secretary of State employees assigned State vehicles were not providing receipts supporting their gasoline usage. We noted that 6 of the 25 employees tested had not submitted their Monthly Automotive Cost Reports for one or both months tested. Of the 19 employees who had submitted the reports, 5 had incomplete information, 6 had missing gas receipts, and 15 had gas receipts with incomplete information. Two Chicago motor pool vehicles were used by Secretary of State employees for 6 and 8 months, respectively, without adjustment of the employees’ wages for the value of the personal use of those vehicles. As a result, the two employees had not filed a "Personal Use of State Vehicle" form. Without a properly completed form, the Secretary of State is unable to compute an appropriate gross income upon which to base withholding and results in the employees not paying taxes on the additional benefit they derive from using a State vehicle. (Finding 2, pages 15-17) We recommended that the Secretary of State strengthen its controls regarding State vehicles by: Communicating the requirement to file accident reports in a timely manner to those employees whose jobs involve travel. Enforcing the requirement that employees file properly completed Monthly Automotive Cost Reports in a timely manner. Monitoring the Chicago motor pool activity to ensure that motor pool vehicles are not treated as personally assigned vehicles without following the appropriate procedures.
6 of 10 accidents not reported timely Gasoline usage not supported Personal use not included in wages of 2 employees

Need to review vehicle installment payment procedures	Agency officials accepted our recommendation and stated that all persons who use a motor pool vehicle will be given a short memo before taking a vehicle that outlines what to do in case of an accident. Also, the Office is now requiring all departments that have a motor pool vehicles or employees who drive PAV’s appoint a motor pool coordinator. The coordinator will be responsible for collecting the monthly Automotive Cost Report of its employees driving a PAV and logs of each non-assigned vehicle to ensure the report is correct. The reports will be sent to property control by the 7^th of every month. CERTIFICATE OF DEPOSIT IN EXCESS OF FDIC COVERAGE The Secretary of State accepted a certificate of deposit with a balance that exceeded the $100,000 Federal Deposit Insurance Corporation (FDIC) coverage. The Office is accepting certificates of deposit as guarantees of future installment payments. These certificates of deposit are accepted as security from vehicle owners who elect to pay the flat weight tax in semi-annual installments as provided by the Illinois Vehicle Code. These securities are to be deposited with the State Treasurer and have a current market value in the amount payable to the State of Illinois. Large trucking companies often pay the flat weight tax for a large number of vehicles and guarantee the second semi-annual installment with a large-value certificate of deposit. At June 30, 2003, certificates of deposit totaled $1,261,748, with amounts exceeding FDIC insurance coverage by $145,014. If a certificate of deposit exceeds the federally insured threshold of $100,000, it leaves the State vulnerable should the financial institution at which the certificate is held dissolve or become unable to redeem the certificate. (Finding 3, pages 18) We recommended the Secretary of State only accept surety bonds or certificates of deposit that are fully collateralized or insured in order to avoid unnecessary exposure for the State. Agency officials accepted our recommendation and stated they have implemented additional internal controls to ensure that only surety bonds or certificates of deposit that are fully collateralized or insured are accepted.
Noncompliance with Fiscal Control and Internal Auditing Act (FCIAA)	NONCOMPLIANCE WITH FISCAL CONTROL AND INTERNAL AUDITING ACT The Secretary of State did not comply with the Fiscal Control and Internal Auditing Act (FCIAA). During our testing, we noted that no internal audits of grants received or made by the Secretary of State were performed during the audit period. The FCIAA requires audits of grants received or made at least once every two years. The Internal Audit Department’s two-year audit plan for FY02 and FY03 included audits of grants programs. During our testing, we also noted that the FCIAA Certifications for both FY02 and FY03 were not filed timely. The FY02 certification was not filed until October 10, 2002 and the FY03 certification was not filed until August 11, 2003. The FCIAA Certifications are to be filed with the Auditor General by May 1 of each year. (Finding 4, page 19) We recommended that the Secretary of State comply with the requirements of the Fiscal Control and Internal Auditing Act. Agency officials accepted our recommendation and stated they will comply with the FCIAA regarding the audit of grants received or made by the Secretary of State and FCIAA Certification. They will also ensure they are completed in a timely manner.
	OTHER FINDINGS The remaining findings were less significant and are reportedly being given attention by the Office of the Secretary of State. We will review progress toward implementing all recommendations in our next audit. Agency responses to the findings were provided by Mr. Al DiSilvestro, Chief Auditor for the Office of the Secretary of State. AUDITORS' OPINION Our auditors stated the financial statements of the Office of the Secretary of State as of June 30, 2003, and for the year then ended are fairly presented in all material respects. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:GSR SPECIAL ASSISTANT AUDITORS Our special assistant auditors for this audit were Sikich Gardner & Co, LLP.