REPORT DIGEST

DEPARTMENT OF CORRECTIONS - CORRECTIONAL INDUSTRIES

FINANCIAL AUDIT

For the Year Ended

June 30, 2006

COMPLIANCE EXAMINATION

For the Two Years Ended

June 30, 2006

Summary of Findings:

Total this report 7

Total last report 4

Repeated findings 2

Release Date:

June 20, 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

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

This Report Digest and the Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

¨ During our audit of the Illinois Department of Corrections – Correctional Industries (ICI) June 30, 2006 financial statements and Generally Accepted Accounting Principles (GAAP) financial reports submitted to the Office of the State Comptroller, we recommended twelve audit adjustments to various accounts for a total of $2.3 million.

¨ ICI has made limited progress in its plan to install an automated management information system and has incurred excessive costs for computer hardware, software and consulting services.

¨ ICI continues to place union employees on temporary assignment for periods beyond time limits specified by the union agreement.

¨ ICI did not timely sign/execute written contract agreements with vendors.

¨ ICI does not include any occupancy costs for the production facilities they use at the Correctional Centers in their computation of the manufacturing costs of its products. Occupancy costs should include at a minimum maintenance, utilities and any computed rent or depreciation for the facility being utilized.

{Selected expenditure and financial information is summarized on the next page.}

ILLINOIS DEPARTMENT OF CORRECTIONS - CORRECTIONAL INDUSTRIES

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For the Two Years Ended June 30, 2006

APPROPRIATION EXPENDITURE STATISTICS – Working Capital Revolving Fund		FY 2006		FY 2005
· Total Expenditures...................................................		$35,933,002		$41,611,232
OPERATIONS TOTAL..................................................		$35,933,002		$40,361,232
% of Total Expenditures............................................		100%		97.0%
Personal Services....................................................		$9,213,236		$8,705,986
% of Operations Expenditures......................................		25.6%		21.6%
Average Number of Employees..................................		164		166
Inmate Compensation...........................................		$1,770,719		$1,791,678
% of Operations Expenditures......................................		4.9%		4.4%
Other Payroll Costs (FICA, Retirement & Insurance)....		$3,788,619		$4,405,614
% of Operations Expenditures............................		10.6%		10.9%
Commodities........................................................		$17,728,416		$20,867,993
% of Operations Expenditures..................................		49.3%		51.7%
Contractual Services...................................................		$1,940,976		$2,146,375
% of Operations Expenditures...................................		5.4%		5.3%
Equipment...............................................................		$255,162		$1,472,307
% of Operations Expenditures.......................................		0.8%		3.7%
Operation of Automotive Equipment................................		$1,006,104		$799,417
% of Operations Expenditures....................................		2.8%		2.0%
All Other Items..........................................................		$229,770		$171,862
% of Operations Expenditures....................................		0.6%		0.4%
AWARDS AND GRANTS...........................................		$0		$1,250,000
% of Total Expenditures...........................................		0.0%		3.0%
FINANCIAL OPERATIONS (expressed in thousands)		FY 2006		FY 2005
Operating Revenues......................................................		$37,120		$ 39,889
Operating Expenses......................................................		38,000		41,166
Operating Income (Loss) .......................................		$ (880)		$ (1,277)
Net Non-Operating Revenues (Expenses)....................		362		(1,008)
Transfers to Other Funds...............................................		$(3,905)		(15,878)
Net (Loss) ..............................................................		$(4,423)		$(18,163)
Net Assets, Beginning of the Year.............................		22,989		41,152
Net Assets, End of the Year.....................................		$18,566		$ 22,989
SELECTED ACCOUNT BALANCES (expressed in thousands)	June 30, 2006		June 30, 2005
Cash and Cash Equivalents.......................................................	$1,277		$3,786
Property, Equipment and Livestock, net ....................................	$6,897		$7,564
Inventories...............................................................................	$8,977		$9,568
Accounts Payable....................................................................	$2,388		$2,221
SELECTED ACTIVITY MEASURES	FY 2006		FY 2005
Average Number of Inmate Workers........................................ Number of Industry Operations at June 30,................................	1,026 38		1,045 34
CORRECTIONAL INDUSTRIES' CHIEF EXECUTIVE OFFICER
During Audit Period: James R. Underwood Currently: James R. Underwood

Audit adjustments were recommended totaling $2.3 million

State law requires ICI to establish and maintain a system of internal control to prepare reliable financial reports

ICI management attributes problems to staff shortages

Limited progress made in implementing the automated management system

Significant costs incurred for computer hardware, software and consulting services

Employees are assigned to temporary assignments for extended periods

15 employees were working in temporary assignments during FY 06 and FY 05

One employee was paid $14,500 in travel costs related to their temporary assignment