REPORT DIGEST

FINANCIAL AND COMPLIANCE AUDIT
For the Two Years Ended:
June 30, 1998

Summary of Findings:

SYNOPSIS

• Invoice vouchers were not approved by Department personnel within 30 days of physical receipt as required by the Illinois Administrative Code. 

• The Department had bank balances in excess of FDIC insurance coverage limits that were not collateralized.

• Settlement awards relating to workers' compensation claims were not properly approved in accordance with Department policy.

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

FY 1998

FY 1997

FY 1996

Total Expenditures

• Cost of Property and Equipment

$537,918,892
69,490,248
39,000,000
729,760,549
99,885,879

113,979,139
94,752,662
60,384,128
57,463,958
46,951,657
30,952,513
9,226,975
1,241,921
2,265,822
2,066,501

$1,895,340,844

$549,992,000

$492,875,660
69,345,500
16,116,000
635,310,176
94,783,386

98,727,439
83,991,038
57,997,495
56,431,475
44,700,192
30,343,341
8,103,073
1,231,786
2,226,516
2,165,097

$1,694,348,174

$512,295,000

$413,067,258
56,990,537
0
576,775,544
92,544,917

83,513,068
72,730,743
59,977,891
55,870,817
31,776,103
28,695,223
8,265,445
1,498,131
1,997,508
1,941,100

$1,485,644,285

$490,021,000

FY 1998

FY 1997

FY 1996

$732,043,194
106,514,538

116,510,388
61,887,779
75,154,770
46,441,849
31,103,276
13,898,034
$1,183,553,828

$676,664,192
103,196,601

100,650,021
58,838,849
69,810,677
39,220,662
31,197,983
13,460,900
$1,093,039,885

$625,360,620
96,821,524

84,756,580
56,894,937
49,294,576
36,631,887
26,863,899
14,191,112
$990,815,135

FY 1998

FY 1997

134,876
322,920
2,175
22,768
37,514
41,560
65%
247
8,571,000

136,945
317,238
2,600
20,400
37,276
37,900
56%
225
9,470,000

AGENCY DIRECTOR

During Audit Period: Michael Schwartz
Currently: Michael Schwartz

 

Invoice vouchers not approved timely

Workers' compensation awards not properly approved

INTRODUCTION

Our audit of the Department of Central Management Services is issued in two reports. The Compliance Audit Report contains the audit findings and the supplementary financial information. The Financial Audit Report contains the opinion on the financial statements.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INVOICE VOUCHERS NOT APPROVED PROMPTLY

 

During the two-year audit period, we noted that 28 invoice vouchers out of a sample of 160 invoice vouchers (18%) were not approved by authorized personnel within 30 days of physical receipt as required by the Illinois Administrative Code. This resulted from the lack of appropriate review procedures. (Finding 98-1, page 14)

 

We recommended the Department institute procedures which will enforce the approval or disapproval of payment of invoice vouchers within 30 days of receipt.

 

Department officials concurred with our recommendation. They stated they have developed a monthly report to monitor this situation and are currently reviewing procedures in each Bureau.

LACK OF COLLATERALIZATION OF BANK DEPOSITS

 

During our audit testing we noted the Department maintains accounts with banks outside of the Treasurer's Office for its Group Insurance Division vendors who process claims. As of June 30, 1997 and 1998, the Department had bank balances in some of these accounts in excess of FDIC insurance coverage limits that were not collateralized. At June 30, 1998, balances in excess of FDIC insurance limits which were not collateralized were $2,155,000. At June 30, 1997, uninsured and uncollateralized balances were $11,246,000. (Finding 98-2, page 15)

We recommended the Department review all outside bank accounts and determine the level of collateral necessary to cover the variances in these accounts. In addition, the Department should secure written collateral agreements with the banks, which ensure the market value of the collateral is sufficient to cover anticipated maximum outstanding deposits. The agreement should also specify the collateral be held in the Department's name.

 

Department officials concurred with our recommendation and indicated they have closed all uninsured and uncollateralized accounts.

PAYMENTS FOR WORKERS COMPENSATION SETTLEMENTS NOT PROPERLY AUTHORIZED

 

During our testing of workers' compensation claims we noted six settlement awards were not properly approved in accordance with Department policy. Per Department policy, there should be proof of proper authorization indicated before settlement awards are processed. In addition the Bureau of Benefits division Manager must approve all settlements over $50,000.

 

We identified five settlement awards over $50,000 which were not properly approved by the Bureau of Benefits Division Manager and one settlement award which had no documentation of authorization. The total amount of the six settlement awards identified was $416,826. (Finding 98-7, page 21)

 

We recommended the appropriate Department policies be followed in approving settlement awards for payment.

 

Department Officials concurred with our recommendation and indicated a procedure has been established to document proper authorization pursuant to Bureau policy.

 

OTHER FINDINGS

 

The remaining findings and recommendations are less significant and have been given appropriate attention by the Department. We will review progress toward the implementation of our recommendations in our next audit.

Mr. Michael Schwartz, Director, provided the Department's responses.

 

AUDITORS' OPINION

Our auditors stated the financial statements of the non-shared funds of the Department at June 30, 1998 are fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

 

SPECIAL ASSISTANT AUDITORS

Clifton Gunderson L.L.C. were our special assistant auditors for this audit.