REPORT DIGEST
DEPARTMENT OF COMMERCE AND ECONOMIC OPPORTUNITY
COMPLIANCE EXAMINATION
For the Two Years Ended: June 30, 2010
Summary of Findings:
Total this audit: 6
Total last audit: 10
Repeated from last audit: 3
Release Date: April 21, 2011
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 Full Report are also available on the worldwide web at www.auditor.illinois.gov
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SYNOPSIS
• The Department did not ensure proper controls were
established in the administration of its grant programs during the examination
period.
• The Department did not maintain adequate documentation of
the methodology for determining the allocation of shared legal services paid
during the examination period.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
NEED TO MAKE IMPROVEMENTS TO GRANT ADMINISTRATION
The Department did not ensure proper controls were
established in the administration of its grant programs during the examination
period.
The Department expended $1,568,742,003 for awards and
grants, or 92% of its $1,702,397,720 total expenditures during the examination period. We tested 94 grant agreements totaling
$36,502,863, or 2%, of the awards and grants expenditures for the examination
period for six program areas.
We noted the Department failed to follow-up on the timely
submission of programmatic and financial reports of its grantees, thus
hindering its ability to monitor the grantees’ activities in a judicious
manner.
The following are examples of specific weaknesses noted in
the grant program areas tested:
Workforce Development:
• Five required reports were submitted 8 to 76 days after
the report deadline. The Department
could not provide evidence to support its follow-up on the delinquent reports.
Business Development:
• Six required reports were not submitted and ranged 391 to
544 days delinquent as of our testing.
The Department could not provide evidence to support its follow-up on
these delinquencies.
• A Department site visit noted $75,000 had been paid to a
grantee but questioned why the grantee had not reimbursed those funds to
eligible subgrantees. We noted no
documented follow-up related to the Department’s concern.
Recycling and Energy:
• Eleven of the required reports were submitted late and one
required report was not submitted at all causing report submissions to be from
3 to 621 days delinquent as of our testing.
The Department could not provide evidence to support its follow-up of
ten of the missing or late reports.
During fiscal year 2010, the Department implemented eGrants,
which was part of several initiatives by the Department to improve its grant
administration in response to this finding from the previous examination. eGrants allows the Department to provide
informational tools and vehicles for communicating expectations to grant
recipients throughout the life cycle of the grant and allows the entire grant
process, from application to close-out, to be completed in an online
portal. Grant managers and other
Department staff were trained on the uses and requirements of the system during
November 2009.
Department management stated they were aware that the prior
manual reporting processes were inefficient and burdensome for staff to use to
follow-up with grantees who did not submit reports timely. Many employees communicated and followed-up
with grantees on their reporting requirements through individual emails and
phone calls and their efforts were not documented. (Finding 1, pages 12-15)
We recommended the Department strengthen its controls by
performing the necessary follow-up on delinquent reports and adequately
document the dates the reports are received, the follow-up action taken, and
the reasons for any delinquencies for all remaining grants not processed on
eGrants.
Department officials agreed with our recommendation and
stated they have implemented several new controls for grantee reporting in
fiscal year 2010. The new control
environment in eGrants provides an efficient method for staff to follow-up on
grantee delinquent reports and documents the date reports are received and
approved. The Department also stated
they are committed to continuing to strengthen their monitoring controls and
will begin development of a monitoring quality assurance program. The monitoring quality assurance program will
ensure Department-wide monitoring policies and procedures are established and
each office has completed an assessment of the risks for their program.
LACK OF DOCUMENTATION FOR SHARED EXPENSE METHODOLOGY
The Department did not maintain adequate documentation of the
methodology for determining the allocation of shared legal services paid by the
Department during the examination period.
The Office of the Governor entered into contracts for legal
services during the examination period for advice and representation on
litigation related to issues involving the grant funds and other matters. The Department entered into interagency
agreements with the Office of the Governor, as described below, for payment of
an allocable share of the legal fees incurred.
However, the interagency agreements were silent on the methodology
utilized to determine the allocation of shared legal services to be paid by the
Department.
Department management stated it remains the common practice
for interagency agreements for legal services, which are external to the
Department, not to include the methodology for determining the allocable share
to be paid by the agency. (Finding 2, pages 16-17)
Department officials accepted our recommendation to require
adequate methodology supporting its allocable portion of shared expenses
affecting multiple State agencies.
OTHER DISCLOSURES
GRANT OF $1 MILLION TO THE LOOP LAB SCHOOL
The Loop Lab School had utilized the grant funds provided
through the Department to purchase a condominium in downtown Chicago. At that time, the school had not secured any
other funds and was unable to move forward with opening the school. The only asset the school possessed was the condominium,
which was on the market at June 30, 2010 and throughout the duration of our
fieldwork. The receivable owed to the
Department was $1,000,000 at June 30, 2010.
Department management stated the Loop Lab School grant was
referred to the Office of the Attorney General in fiscal year 2010 for
collection efforts. The Office of the
Attorney General filed the debt with the Circuit Clerk of Cook County Court in
September 2009. Department management
explained the intent of the process was to utilize any proceeds when the
condominium was sold to repay the debts owed by the Loop Lab School. During the examination period, the court
brought in an independent receiver to report monthly on the status of the property. No collections were expected until the
property sold.
On February 10, 2011, the Circuit Court of Cook County
issued an Agreed Order of Dismissal regarding the settlement reached between
the condominium association and the Loop Lab School by and through the
independent receiver. In turn, on the
same day, after a review of the matter, an order was issued by the Circuit
Court of Cook County to discharge the matter between the State and the Loop Lab
School without costs. The Loop Lab
School paid the Department $89,687.66 with a check dated February 21, 2011, as
a result of its settlement with its condominium association and the liquidation
of its only asset. The funds were
deposited into the State’s clearing account on February 24, 2011, and into the
State Treasury on March 23, 2011. The
$89,687.66 was 9% of the $1,000,000 owed to the Department.
OTHER FINDINGS
Other findings are reportedly being given attention by
Department management. We will review
progress toward implementation of our recommendations in our next State
compliance examination.
WILLIAM G. HOLLAND
Auditor General
WGH:JAC
SPECIAL ASSISTANT AUDITORS
Sikich LLP were our Special Assistant Auditors for this
engagement.