REPORT DIGEST

DEPARTMENT OF
COMMERCE AND
COMMUNITY AFFAIRS

FINANCIAL AND COMPLIANCE AUDIT
(In accordance with the
Federal Single Audit Act and
OMB Circular A-133)
For the Two Years Ended:
June 30, 1998

Summary of Findings:

Total this audit 4
Total last audit 7
Repeated from last audit 1

Release Date:
March 18, 1999


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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046 or TDD (217) 524-4646
This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

  • The Department is not following its internal procedures with respect to obtaining two approval signatures for some federal grant disbursements.
  • The Department needs to take a comprehensive approach to addressing its noncompliance with some of its over 600 statutory mandates.
  • Certain executive level personnel and others have inappropriately delegated their signature authority to lower level staff.



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


DEPARTMENT OF COMMERCE AND COMMUNITY AFFAIRS
FINANCIAL AND COMPLIANCE AUDIT
For The Two Years Ended June 30, 1998

 

EXPENDITURE STATISTICS

FY 1998

FY 1997

FY 1996

  • Total Expenditures (All Funds)
OPERATIONS TOTAL
% of Total Expenditures
Personal Services
% of Operations Expenditures
Average No. of Employees
Other Payroll Costs (FICA,
Retirement, Group Insurance)
% of Operations Expenditures
Contractual Services
% of Operations Expenditures
All Other Operations Items
% of Operations Expenditures
AWARDS AND GRANTS TOTAL
% of Total Expenditures
DEBT SERVICE TOTAL
% of Total Expenditures
PERMANENT IMPROVEMENTS AND
REFUNDS TOTAL
% of Total Expenditures
  • Cost of Property and Equipment

$479,912,710

$ 81,870,917
17.1%
$ 18,236,199
22.3%
511

$ 4,304,772
5.2%
$ 6,683,452
8.2%
$ 52,646,494
64.3%
$385,088,245
80.2%
$ 12,498,183
2.6%

$ 455,365
0.1%

$ 10,884,000

$406,961,736

$ 74,317,169
18.3%
$ 17,579,741
23.6%
516

$ 3,838,603
5.2%
$ 6,767,988
9.1%
$ 46,130,837
62.1%
$316,156,282
77.9%
$ 13,617,469
3.3%

$ 2,040,937
0.5%

$ 9,999,000

$417,083,494

$ 70,710,558
16.9%
$ 17,063,302
24.1%
504

$ 3,763,956
5.3%
$ 6,161,662
8.7%
$ 43,721,638
61.9%
$327,305,031
78.5%
$ 13,583,692
3.3%

$ 5,484,213
1.3%

$ 10,250,000

CASH RECEIPTS

FY 1998

FY 1997

FY 1996

From Federal Agencies
From State Programs
Loan repayments/interest
Other
Total

$305,961,240
127,206,934
13,125,544
3,410,270

$449,703,988

$292,105,490
55,437,223
14,333,033
6,945,951

$368,821,697

$320,745,799
49,548,486
9,497,054
8,288,286

$388,079,625

SELECTED ACTIVITY MEASURES (unaudited)

FY 1998

FY 1997

FY 1996

Job Training Assistance to Dislocated Workers
Ill. Home Weatherization Program Participants
Companies Receiving International Marketing Assistance
Jobs Created or Retained by Small Businesses Served
by the Department

20,705
5,112
528

7,676

24,306
6,200
1,038

5,089

30,588
7,643
1,300

8,526

AGENCY DIRECTOR(S)
During Audit Period: Dennis R. Whetstone (July 1, 1996 - April 15, 1997)
E. Norman Sims (April 16, 1997 - June 30, 1998

Currently: Pam McDonough, Acting Director






JTPA grants were inappropriately approved





















Compliance is not possible for some of the Department's mandates


















For one deputy director, we noted seven different individuals could approve travel vouchers.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

APPROVAL POLICY FOR GRANT DISBURSEMENTS NOT FOLLOWED
 
The Department did not always follow its internal procedures with respect to approval of grant disbursements. The Department makes several hundred million dollars of grants to various subgrantees. Before a disbursement can be made, Departmental procedures require two signature approvals, one from Accounting personnel and one from Program Management personnel. For one major program, the Job Training Partnership Act, both approvals were being signed by Accounting personnel. The requirement for having two approvals is to ensure both fiscal and programmatic compliance matters are addressed before releasing funds. (Finding 98-1, page 22)
 
We recommended the Department comply with its own procedures. The Department responded that it will revise operating procedures to ensure proper programmatic review of all disbursement requests, but it believes sufficient compensating controls were in place to negate any potential risks for the grant money in this case.
 
NONCOMPLIANCE WITH CERTAIN STATUTORY MANDATES
 
The Department has over 600 statutory mandates. For some of the mandates, the Department feels compliance is not possible due to lack of adequate funding and other factors. In some cases, the mandate is obsolete. For example, during the current audit, we found the Department was not in compliance with the Export Trading Act, which requires the Department to provide technical assistance to the Illinois Export Council, which does not exist. Both the current and previous years' findings of noncompliance with statutory mandates indicate the need for the Department to take a comprehensive approach to addressing its problem in this area. (Finding 98-2, pages 23-24) This finding has been repeated since 1990.
 
We recommended the Department allocate staff and resources necessary to ensure that applicable statutory mandates are complied with. Also, the Department should form a task force to review mandates that are obsolete, not feasible, not practical, or otherwise not able to be performed.
 
The Department responded that it will form a task force to review statutory mandates and deal with specific findings related to current and prior year mandates. (For previous Department responses, see Digest footnote #1)
 
DELEGATION OF SIGNATURE AUTHORITY
 
Certain executive level personnel and others have inappropriately delegated their signature authority to lower level staff. For executive level and division managers, the Department allows others to sign the supervisors' signature as if the supervisors had reviewed the document themselves. Approvals include telecommunications vouchers, printing vouchers, travel vouchers, and other key documents and correspondence. Because of the number of persons authorized to sign, it is possible for a document to be released without the responsible supervisor ever reviewing it. For one deputy director we noted seven different individuals could approve travel vouchers which could undermine the effectiveness of control procedures. (Finding 98-3, page 25)
 
We recommended the Department review their policy for delegation of signature authority to ensure internal controls procedures are not compromised. The Department response stated they will review their procedures for the delegation of signature authority by deputy directors and key personnel.
 
OTHER FINDING
 
The remaining finding, which dealt with computer disaster contingency planning, was less significant. We will review progress towards implementation of all recommendations in our next compliance audit.
 

AUDITORS' OPINION

Our auditors stated the Department's financial statements as of June 30, 1997 and June 30, 1998 were fairly presented except for the effects of such adjustments, if any, as might have been determined to be necessary had they been able to examine evidence regarding year 2000 disclosures.

 

___________________________________
WILLIAM G.HOLLAND, Auditor General

WGH:KMC:pp
 

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were Friedman Eisenstein Raemer and Schwartz, LLP
 

DIGEST FOOTNOTE

#1 NONCOMPLIANCE WITH STATE MANDATES - Previous Agency Responses.
 
1996: "Accepted. A) Corridors of Opportunity and Development Act The Department will pursue legislation to rescind this Act. B) Local Government The Department will pursue legislation to amend this Act to reflect the current activities performed under the Act. C) Unfunded Mandates". (Response goes on to list four other mandates to which each the Department stated it will pursue legislation to rescind this Act.)
 
1994 "The Department "Agreed" to the recommendation to pursue legislation to have three of the five identified mandates rescinded. It "Partially Agreed" to the recommendation for the other two mandates, indicating they would attempt to amend the statute to more accurately reflect the Department's approach and resources for one of the mandates. In the case of the other mandate they indicated there was no funding currently available, but thought the program may be revised in future years and therefore would not take any action to rescind the statute."
 
1992: "Partially Agree. We concur with the finding and recommendation only to the extent that the Department has on several occasions tried to recommend legislation to either fund or rescind various cited provisions." (Response continues with explanations of past efforts and efforts to be undertaken.)
 
1990: "We concur with the finding and recommendation only to the extent that the Department has on several occasions tried to recommend legislation to rescind various of the cited provisions, and in at least one example, has almost been successful in securing funding for the requirement." (Response continues with explanations of past efforts and efforts to be undertaken.)