REPORT DIGEST

DEPARTMENT OF CENTRAL MANAGEMENT SERVICES

FINANCIAL AUDIT

For the Year Ended:

June 30, 2006

and

COMPLIANCE EXAMINATION

For the One Year Ended:

June 30, 2006

Summary of Findings:

Total this audit                      18

Total last audit                      22

Repeated from last audit       10

Release Date:

May 24, 2007

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

                    740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (217) 888-2887

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

• CMS did not recognize a liability to the federal government for overcharges made in two internal service funds.  CMS over billed federal programs by approximately $13 million.

• CMS' contract files lacked certain documentation for 5 of 10 contracts we tested.  The maximum award amount for these 10 contracts totaled approximately $151 million.

• CMS evaluated vendor proposals using evaluation criteria that were not stated in the RFP.  Specifics of the scoring methodology and weighting of pricing alternatives were not included in the original RFP, and in some cases, not communicated to proposing vendors or reflected in any addendums.

• CMS does not have an adequate process in place to assess the State’s needs for master contracts.

• CMS has not established a property management function to effectively manage occupancy costs and revenues.

• CMS had deficiencies in processing, recording and collecting of receivables.

• CMS circumvented the appropriation process and violated the State Finance Act when it temporarily transferred personnel paid from the Facilities Management Revolving Fund to two other revolving funds.

• CMS did not maintain time sheets for its employees as required by the State Officials and Employees Ethics Act.

• The CMS Office of Internal Audit did not complete audits of all major systems of internal accounting and administrative control as required by law.

• The CMS process for monitoring interagency agreements was inadequate.

{Expenditures and Activity Measures are summarized on the next page.}

STATEMENT OF ACTIVITIES INFORMATION

(expressed in thousands)

Governmental Activities

Business-Type Activities

PROGRAM REVENUES

Charges for Services.........................................................

EXPENSES

General Government.........................................................

Interest.............................................................................

Insurance Programs...........................................................

Total Expenses..................................................................

NET (EXPENSE) REVENUES...................................

Total General Revenues and transfers...............................

CHANGE IN NET ASSETS..........................................

Net Assets July 1, 2005....................................................

NET ASSETS, JUNE 30, 2006....................................

       $434,444

       $530,890

                247

                    0

       $531,137

       $(96,693)

$243,767

$147,074

           $6,933

       $154,007

$0

$0

0

  0

$0

$0

$(52,041)

$(52,041)

$52,041

$0

STATEMENT OF NET ASSETS INFORMATION

(expressed in thousands)

Governmental Activities

Business-Type Activities

Cash equity with State Treasurer........................................

$72,706

$0

Cash and cash equivalents..................................................

$5,605

$0

Investments.......................................................................

$1,918

$0

Capital Assets, net.............................................................

$284,188

$0

Other Assets.....................................................................

$93,992

$0

Total Assets....................................................................

$458,409

$0

Accounts Payable..............................................................

$37,539

$0

Long Term Obligations.......................................................

$247,037

$0

Other Liabilities.................................................................

$19,826

$0

Total Liabilities...............................................................

$304,402

$0

Net Assets, invested in capital assets, net of debt.................

$236,316

$0

Net Assets, restricted.........................................................

$3,441

$0

Net Assets, unrestricted.....................................................

        $(85,750)

$0

Total Net Assets.............................................................

$154,007

$0

SELECTED ACTIVITY MEASURES (unaudited)

FY06

FY05

FY04

Number of flexible spending account participants.................

Number of equipment items transferred out of surplus........

Percent of Workers’ Compensation claims paid within 90 days..

Total gallons of gasohol sold (in millions)..............................

Number of facilities participating in I-cycle........................

7,705

2,616

31.28%

1.1

251

8,286

5,093

89.6%

1.1

251

6,839

3,638

97.94%

1.3

251

EXECUTIVE DIRECTOR

During Audit Period:  Mr. Paul J. Campbell (through March 9, 2007)

Currently:  Ms. Maureen O’Donnell (Acting Director beginning March 10, 2007)

Failure to recognize liability to the federal government

Internal services funds

CMS over billed federal programs by approximately $13 million during FY 04 and FY 05

FY 06 liability currently indeterminable

Failure to perform annual review

5 of 10 contract files reviewed did not include all documents pertinent to the decision making process

CMS evaluated vendor proposals using criteria that was not stated in the Request for Proposals

10 contracts or solicitations tested with maximum award amount of approximately $151 million

Master contract for leasing and purchasing computers

Contract for federal revenue maximization services

Actual usage on a $3.8 million master contract was only $20,000

Process used was not adequate to assess the State’s needs

No system in place to effectively monitor master contract usage once awarded

Failure to establish a property management function to effectively manage occupancy costs and revenues

The Department currently manages 706 State owned or leased properties

Untimely billings to agencies have had a negative impact in the development of FY 06 budgets and FY07 forecasting

Failure to make timely payments to vendors

230 leases in holdover status

CMS has been exposed to litigation as a result of failing to timely renew or terminate holdover leases

At the end of FY 06, the Department had not posted over $18 million in receipts to the accounts receivable system

Uncollectible amounts owed by State and federal government agencies increased from $75,730 in FY 05 to $512,650 in FY 06

Procedures used result in improper timing in recognition of revenue

Estimated uncollectible accounts receivable is not representative of historical results

Appropriation process circumvented

The Department transferred 100% of the payroll costs from the Facilities Management Fund to other funds for three pay periods in FY 06

CMS disagrees

Auditor Comment

Failure to maintain time sheets in compliance with the State Officials and Employees Ethics Act (Act)

Failure to comply with the Fiscal Control and Internal Auditing Act