REPORT DIGEST ILLINOIS ARTS COUNCIL COMPLIANCE EXAMINATION FOR THE TWO YEARS ENDED JUNE 30, 2017 Release Date: June 28, 2018 FINDINGS THIS AUDIT: 6 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 4 -- 2 -- 6 Category 3: 0 -- 0 -- 0 TOTAL: 4 -- 2 -- 6 FINDINGS LAST AUDIT: 4 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 • 2017-001 The Illinois Arts Council did not draft or adopt formal agency rules. • 2017-002 The Illinois Arts Council did not have adequate controls over grant procedures. • 2017-003 The Illinois Arts Council failed to maintain controls over accounts receivables. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS FAILURE TO ADOPT FORMAL RULES FOR AGENCY AND GRANT PROCEDURES The Illinois Arts Council (Council) did not draft or adopt formal agency rules, including rules relating to grant procedures. Grant expenditures were $4,240,275 and $817,365 for Fiscal Years 2017 and 2016, respectively. (Finding 1, page 9) This finding has been repeated since 2007. We recommended the Council draft organizational rules and grant procedures, then contact the Joint Committee on Administrative Rules (JCAR) for assistance with the formal adoption process. The Council agreed with the finding and stated they would continue to seek guidance from the Office of the Governor. Additionally, the Council stated they lacked the resources to engage consultants with expertise to formalize its rules. The Council also stated they met all state and federal requirements and their internal policies do cover important areas in JCAR rules. (For the previous Council response, see Digest Footnote #1.) INADEQUATE CONTROLS OVER GRANT PROCEDURES The Council did not have adequate controls over grant procedures. The Council failed to follow internal policies and procedures for grantees who filed their final reports late. Of the 60 grant files examined, 9 (15%) grantees had filed their final reports late. (Finding 2, page 10) We recommended the Council enhance grant monitoring procedures to ensure all grant requirements are met and documented. The Council agreed with the finding and stated they would enhance their grant monitoring procedures to ensure all grant requirements are met and documented. LACK OF CONTROLS OVER ACCOUNTS RECEIVABLE The Council failed to maintain controls over accounts receivables. Upon finalization of a grant, the grantee is to return to the Council unused grant funds. However, the Council did not maintain records of grant funds that were due back to the Council and as such did not maintain a record of accounts receivable at June 30, 2017 and 2016. (Finding 3, page 11) We recommended the Council implement controls to properly identify and record accounts receivable from unspent grant funds. The Council agreed with the finding and stated they will implement controls to properly identify and record accounts receivable from unspent grant funds. OTHER FINDINGS The remaining findings pertain to (1) employee evaluations not performed timely, (2) inadequate controls over property and equipment, and (3) noncompliance with the Arts Council Act. We will review the Council’s progress towards the implementation of our recommendations in our next compliance examination. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Illinois Arts Council for the two years ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants stated the Illinois Arts Council complied, in all material aspects, with the requirements described in the report. This compliance examination was conducted by Winkel, Parker & Foster, CPA PC. 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:mkl DIGEST FOOTNOTES #1 – Failure to Adopt Formal Rules for Agency and Grant Procedures – previous Council response 2015: Agreed. The Illinois Arts Council Chairman will continue to seek guidance from the Office of the Governor, specifically for resources to engage consultants with the expertise necessary to draft rules and procedures beyond those currently in place. The Council will continue to meet all state and federal requirements.