REPORT DIGEST

DEPARTMENT OF INNOVATION AND TECHNOLOGY

COMPLIANCE EXAMINATION
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  June 2, 2021

FINDINGS THIS AUDIT:  28

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  2 -- 11 -- 13
Category 2:  3 -- 12 -- 15
Category 3:  0 -- 0 -- 0
TOTAL:  5 -- 23 -- 28

FINDINGS LAST AUDIT: 30

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

SYNOPSIS

• (20-01) The Department failed to comply
with the provisions of Executive Order
2016-01: Executive Order Consolidating
Multiple Information Technology Functions
Into A Single Department of Innovation
and Technology.
• (20-02) The Department failed to
maintain controls over its property and
related records.
• (20-05) The Department did not review
the billing rates utilized to bill
agencies IT and telecommunication
services.
• (20-12) The Department did not have
controls in place to control, track, and
monitor end-user software use

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

FAILURE TO COMPLY WITH EXECUTIVE ORDER
2016-01

The Department of Innovation and
Technology (Department) failed to comply
with the provisions of Executive Order
2016-01: Executive Order Consolidating
Multiple Information Technology Functions
Into A Single Department of Innovation
and Technology.

The Executive Order, effective March 27,
2016, and subsequently the Department of
Innovation and Technology Act (Act) (20
ILCS 1370/1-10), effective July 20, 2018,
required the Department and 38 agencies
(agencies) to transfer identified
employees, and personnel records, books,
correspondence and other property; both
real and personal to the Department as of
July 1, 2016.

During our testing, as of June 30, 2020,
the Department and the agencies had not
transferred:
• 12 agencies personnel, and
• 6 agencies real and personal property.

The Department had entered into
Intergovernmental Agreements (IGAs) with
the agencies documenting the rights and
duties of each party as they relate to
personnel, assets, contracts, and funding
during the transition period.  However,
we noted the Department had not entered
into IGAs with 24 and 12 agencies for
Fiscal Years 2019 and 2020, respectively.
(Finding 1, pages 13-14)

We recommended the Department work with
the agencies to complete the transfer of
personnel and real and personal property
as required by the Executive Order and
the Act.

Department management agreed with the
finding and agreed it should work with
agencies to complete the transfer of
personnel and property as required by the
Executive Order and Public Act 20 ILCS
1370.  The Department also stated it has
provided IGAs for signature to all
transferring agencies and will follow up
to ensure these agreements are in place.

FAILURE TO MAINTAIN CONTROLS OVER
PROPERTY

The Department failed to maintain
controls over its property and related
records.

Agency Report of State Property

During our testing of the Agency Report
of State Property (Form C-15) filed with
the Office of Comptroller, we noted:
• Two of eight (25%) quarterly C-15
Reports required to be filed during
Fiscal Years 2020 and 2019 were submitted
four and five days late.

• For the Fiscal Year 2019 C-15 Reports:
– The Capital Development Fund’s (Fund
0141) Construction in Progress (CIP) was
understated by $60,998,718 on the C-15
Report. The CIP pertained to the
Enterprise Resource Planning (ERP)
Implementation.  The Department corrected
the CIP on the first quarter of Fiscal
Year 2020’s C-15 Report.
– Equipment, totaling $230,564,777 at
June 30, 2019, did not agree with the
Department’s property listing.  The
discrepancy totaled $35,811,746.
– Property additions did not agree with
the detailed list of additions provided
by the Department.  The discrepancies
totaled $19,639,030.
– Property deletions did not agree with
the detailed list of deletions provided
by the Department.  The discrepancies
totaled $854.
– Net transfers did not agree with the
detailed list of net transfers provided
by the Department.  The discrepancies
totaled $23,893.
– The Department did not maintain
supporting documentation for equipment
deletions recorded on the Department’s
fixed asset transaction summary totaling
$61,862,248.
– The CIP additions totaling $90,741,342
were incorrectly reported as adjustment
to deletions.

• For the Fiscal Year 2020 C-15 Reports:
– Equipment, totaling $228,896,401 at
June 30, 2020, did not agree with the
Department’s property listing.  The
discrepancy totaled $9,411,705.
– Property additions did not agree with
the detailed list of additions provided
by the Department.  The discrepancies
totaled $2,038,753.
– Property deletions did not agree with
the detailed list of deletions provided
by the Department.  The discrepancies
totaled $20,665.
– Net transfers did not agree with the
detailed list of net transfers provided
by the Department.  The discrepancies
totaled $13,395,352.
– The Department did not maintain
supporting documentation for additions
reported on the C-15 Reports for the
Technology Management Revolving Fund
(Fund 0304) and Government Funds (General
Revenue Fund (Fund 0001) and Capital
Development Fund (Fund 0141)), totaling
$3,117,823 and $53,721,522, respectively.
Additionally, supporting documentation
was not maintained for Fund 0304 net
transfers totaling $97,044,004.

Annual Certification of Inventory

• The Department submitted the annual
certification of inventory for 2019 to
the Department of Central Management
Services (DCMS) two days late from the
approved extension date. Additionally,
the Department was not able to provide
the listing of property per location code
as reported in the annual certification
of inventory for 2019.

Population Completeness
We requested the Department to provide
the population of its property in order
to determine if property had been
properly recorded.  In response to the
request, the Department provided a
population; however, given the noted
exceptions above we were unable to
conclude the Department’s population
records were sufficiently precise and
detailed under the Professional Standards
promulgated by the American Institute of
Certified Public Accountants (AT-C §
205.35).

Even given the population limitations
noted above, we performed testing on a
sample of the property population.

Detailed Testing

Property Additions
• Three of 60 (5%) property additions
received after May 3, 2019, totaling
$279,090, were recorded 100 to 305 days
late.

Property Deletions and Unlocated
Computers
• Eight of 60 (13%) property deletions
completed after May 3, 2019, totaling
$564,295, were recorded 168 to 1,023 days
late.
• The Department did not provide
documentation to determine if:
– 43 of 60 (72%) property deletions
totaling $7,325,678, were properly
processed, approved, supported, and
timely recorded;
– 28 of 28 (100%) deleted computers,
totaling $2,989,345, had confidential
data and were properly wiped; and
– 23 of 32 (72%) unlocated computers,
totaling $70,854, had confidential
information stored and were properly
wiped out.

Physical observation of equipment

During testing, we noted:
• 21 of 60 (35%) items, totaling
$131,621, were not found at the location
indicated on the Department’s property
listing.
• One of 60 (2%) items, totaling $2,047,
was reported as a deletion on the Fiscal
Year 2019 C-15 report but was still
included in the Department’s property
listing as of June 30, 2020.
• Two of 60 (3%) items were not recorded
in the property records.  The Department
did not provide documentation to
determine the cost of the items.
(Finding 2, pages 15-19)

We recommended the Department implement
controls to ensure all property is
accounted for in accordance with the
Illinois Administrative Code and the
Statewide Accounting Management System
Manual.  In addition, we recommended the
Department ensure the reporting to DCMS
and the Office of Comptroller is accurate
and reconciled to the Department’s
records.

Department management agreed with the
finding and stated they began using a new
accounting system and asset management
system at the start of FY19 and continues
to gain experience using the new system
to complete the quarterly reports and
maintain support.

LACK OF REVIEW OF BILLING RATES

The Department did not review the billing
rates utilized to bill agencies for
Information Technology (IT) and
telecommunication services.

During our testing, we noted:

• The Department added an administrative
mark up to the telecommunication rate;
however, the Department did not have a
methodology to determine the
administrative mark up.

• The Department had not developed a
methodology to determine the monthly rate
to be charged to agencies who utilize the
State’s Enterprise Resource Planning
System (ERP).  Additionally, the
Department did not provide documentation
of the approved budgeted cost or the
actual expenditures for the ERP project
as of June 30, 2020.

• The Department did not bill for
specific server usages in a timely
manner. The specific server usage was
billed annually instead of a monthly
basis. In addition, the rate charged for
the specific server usage was incorrect.

• There were several IT and
telecommunication service rates posted on
the Department’s website which were not
on the Department’s list of approved
rates. In addition, several rates posted
on the Department’s website differed from
the Department approved rates.  Further,
the list of IT and telecommunication
rates posted on the Department’s website
included services no longer being
offered.

• The Department had not reviewed the
billing rates since 2018.  The latest
rate structure available on the
Department website was effective
September 1, 2018.  (Finding 5, pages
23-25)

We recommended the Department develop a
methodology for determining the rates to
be charged for the usage of the ERP and
the telecommunication administrative mark
up.  Additionally, we recommend the
Department review all rates at least
annually to ensure the appropriateness of
the charges and ensure approved rates are
published for the services provided.

Further, we recommended the Department
establish and approve a cost budget for
the ERP.

Department management agreed with finding
and stated a complete rate review is
performed annually in the spring in
conjunction with the annual Statewide
Cost Allocation Plan (SWCAP) submission.
The administrative mark-up to the
telecommunication rate has historically
been a cost-plus cost methodology. The
mark-up is reviewed and evaluated through
the annual SWCAP to determine if there
are large over- or under-recovery
occurrences. The Department continues to
work with the Governor’s Office of
Management & Budget on establishing the
rate and accounting for the costs
incurred.

Department management also stated when
the new rates were established, the
website update inadvertently omitted the
new individual rates.  The website will
be updated to reflect the rates currently
in place.

Department management further stated
regarding the monthly billing, due to
rapid growth, it was known that the final
effective rate would be much lower than
had been established.  It was determined
it would be less of a detriment to user
agencies by delaying the billing at a
lower rate than to overcharge throughout
the year and issue a large credit at the
end of the year.

FAILURE TO CONTROL AND MONITOR SOFTWARE
LICENSING

The Department did not have controls in
place to control, track, and monitor end-
user software use.

The Department had not developed
procedures for controlling, monitoring,
and tracking the use of software
licenses. In addition, the Department
could not provide an inventory of
software licenses purchased and the
number of software licenses that was
actually deployed. As a result, we were
unable to determine if the Department was
in compliance with contractual licensing
agreements.  (Finding 12, pages 37-38)

We recommended the Department develop and
implement procedures to control, monitor,
and track software licenses.
Additionally, we recommended the
Department develop a mechanism to track
the software licenses purchased and
utilized and at least annually reconcile
their software license inventory to
vendor software inventory to ensure
software is deployed in accordance with
the terms of procurement.

Department management agreed with finding
and stated during the audit period, the
Department implemented a corrective
action plan to address software asset
management deficiencies. Progress
continues on the corrective action plan
with a software asset management tool
scheduled for implementation later this
year.

OTHER FINDINGS

The Department has many other findings
described within its Compliance
Examination Report.  We will review the
Department’s progress towards the
implementation of our recommendations in
our next compliance examination.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Department for the two
years ended June 30, 2020, as required by
the Illinois State Auditing Act.  The
accountants qualified their report on
State compliance for Findings 2020-001
through 2020-013.  Except for the
noncompliance described in these
findings, the accountants stated the
Department complied, in all material
respects, with the requirements described
in the report.

This compliance examination was conducted
by Roth & Company.

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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