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Agency did not receive guidance or documentation with
the billings from CMS
Efficiency initiative payments were made from line
items that had available monies
Efficiency initiative payments totaled $386,693
A $1 million computer system does not meet the needs of
the Agency
Lack of training has led to inaccurate data being
entered into the system
Daily receipts are not reconciled to the general ledger
Fees assessed are not reconciled to fees collected
Accounts receivable balances of $631,855 and $449,207
at June 30, 2004 and 2003, respectively, were not adequately monitored
Vehicle logs were not maintained
Two unassigned vehicles were used 73% and 62% of the
time for commuting purposes during the period
Savings Bank Examiner Training Foundation was not
established as required by law
Vacancy was not filled for 173 days
Fourteen of 25 licensees did not submit an annual
report within required timeframe
203 of 515 examinations were conducted 1 to 20 months
late
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INTRODUCTION
This report presents our State compliance
examination for the two years ended June 30, 2004. In March 2004, the Governor issued Executive Order #6 to
reorganize agencies by the transfer of the functions of the Department of
Financial Institutions, the Department of Insurance, the Department of Professional
Regulation and the Office of Banks and Real Estate into the newly created
Department of Financial and Professional Regulation. This Executive Order consolidated the
powers, duties, rights, responsibilities, and functions of the four agencies
into one new agency. The Executive
Order was filed with the Secretary of State on April 1, 2004, and went into
effect July 1, 2004. The Office of
Banks and Real Estate was considered abolished as of July 1st, and
is now part of the new Department of Financial and Professional Regulation.
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
PAYMENTS WERE MADE FOR EFFICIENCY INITIATIVE BILLINGS FROM IMPROPER
LINE ITEM APPROPRIATIONS AND FUNDS
The Agency
made payments for efficiency initiative billings from improper line item
appropriations and funds. Public Act 93-0025, in part, outlines a program for
efficiency initiatives to reorganize, restructure and reengineer the business
processes of the State. The State
Finance Act details that the amount designated as savings from efficiency
initiatives implemented by the Department of Central Management Services
(CMS) shall be paid into the Efficiency Initiatives Revolving Fund. The Act further requires State agencies to
pay these amounts from line item appropriations where cost savings are
anticipated to occur.
The Agency did not receive guidance or
documentation with the billings from CMS detailing from which line item
appropriations savings were anticipated to occur. According to Agency staff, they received no documentation or
information from CMS detailing the nature and/or type of savings that CMS
anticipated. The only guidance
received on the billings was the amount of payments that should be taken from
General Revenue Funds ($263,930) versus Other Funds ($122,763) for the
September 2003 billings. The Agency
adjusted its payments for the billings since it did not receive any General
Revenue Fund appropriations for FY04.
The Agency made payments for these billings not
from line item appropriations where the cost savings were anticipated to have
occurred but from line items that had available monies. For example, the Agency used:
·
$78,859 from the Savings and Residential Finance
Regulatory Fund (Fund #0244) for parts of the CMS billings relative to the
Procurement Efficiency, Information Technology and Vehicle Fleet Management
Initiatives. State law (205 ILCS
105/7-19.1 (b)) details that “Moneys in the Savings and Residential Finance
Regulatory Fund may not be appropriated, assigned, or transferred to another
State fund. The moneys in the Fund
shall be for the sole benefit of the institutions assessed.” When specifically asked how the use of
this Fund for the efficiency billings was in accordance with the law, the
Agency replied, “These payments were made at the direction of the
Governor’s Office of Management and Budget pursuant to Public Act
93-0025.”
·
$187,234 from the Bank and Trust Company Fund (Fund
#0795) for parts of the CMS billings relative to the Procurement Efficiency,
Information Technology and Vehicle Fleet Management Initiatives. State law (205 ILCS 5/48 (3) (c)) details
that administrative expenses can be paid with monies in the Fund. Additionally, the law states that expenses
are payable “all to the extent that those expenditures are directly incidental
to such examinations or administration.”
When specifically asked how the use of this Fund for the efficiency
billings was in accordance with the law, the Agency replied, “These payments
were made at the direction of the Governor’s Office of Management and Budget
pursuant to Public Act 93-0025.”
The Agency paid a total of $386,693 for the efficiency initiative
from various funds. (Finding 1, pages 10-12)
We recommended that the Agency only make
payments for efficiency initiative billings from line item appropriations
where savings would be anticipated to occur.
Further, the Agency should seek an explanation from the Department of
Central Management Services as to how savings levels were calculated, or
otherwise arrived at, and how savings achieved or anticipated impact the
Agency’s budget.
Agency officials concurred with our finding and stated they
have continued to seek identification of these savings.
DEFICIENCIES IDENTIFIED WITH
THE LICENSING, ENFORCEMENT, AND REGULATORY COMPUTER SYSTEM
The Agency’s Credentialing
Licensing Enforcement And Regulation system (CLEAR) had significant
deficiencies. The CLEAR system was
implemented in February 2003. This
computerized licensing, enforcement and regulatory system was developed by a
contractor with a total cost of approximately $1 million.
During our
review of the Mortgage Banking Division, we found the CLEAR system was not
meeting the needs of the Agency. The
following problems were identified:
·
Inability to accurately count fees and reconcile to
dollar amounts.
·
Entities are billed more than once for the same
transaction.
·
Licenses were not automatically listed as inactive
when renewal timeframes were not met.
·
Access to the system was not effectively
controlled. We identified former
employees with active access rights and staff with excessive rights based on
job duties.
·
A user manual to guide staff on the efficient and
effective use of the system had not been developed.
Additionally, the lack of user training has led to inaccurate
information being entered into the CLEAR system causing incorrect fees to be
assessed. (Finding 2, pages 13-14)
We recommended that the Agency evaluate
the CLEAR system and develop a corrective action plan to enhance the system
to ensure that it meets the needs of the users.
Agency officials concurred with the
finding and indicated they are in contact with the vendor to ascertain the
feasibility of certain system changes and/or enhancements. In addition, the Agency also indicated
that procedures will be developed and training provided to the users.
NEED TO IMPROVE CONTROLS OVER REVENUE PROCESSING
The
Agency did not have adequate controls over its revenue processing. The Agency was comprised of the following
four Bureaus:
1.
Bureau of Banks
and Trust Companies,
2.
Bureau of Real
Estate Professions,
3.
Bureau of
Residential Finance and
4.
Bureau of
Administration.
Each
of these Bureaus process revenues to varying degrees and these revenues are
ultimately sent to the Fiscal Office in the Bureau of Administration for
final processing and posting to the general ledger. The Agency collected approximately $42,872,046 and $30,919,687
through 27 and 25 different fee categories in FY04 and FY03,
respectively.
We noted the following deficiencies with revenue
processing:
·
Checks are not logged immediately after receipt in all divisions.
· Checks are not immediately restrictively endorsed in all divisions.
·
Daily receipt logs, if maintained, are not reconciled to deposits or
entries in the Credentialing Licensing Enforcement And Regulation (CLEAR)
system.
·
Receipts entered into the CLEAR system are not reconciled to the
general ledger.
·
Fees assessed are not reconciled to fees collected.
·
The Agency does not maintain a listing of NSF/returned checks to
promote adequate monitoring and follow-up.
·
Divisions within the Bureau of Real Estate Professions and Bureau of
Residential Finance do not have procedures in place to adequately monitor and
track accounts receivable. The total
accounts receivable balances for these divisions were $631,855 and $449,207
at June 30, 2004 and 2003, respectively.
·
General policies and procedures for revenue processing have not been
developed.
·
The Mortgage Banking division does not adequately segregate the billing
function from the payment receipt function.
(Finding 4, pages 16-17)
We
recommended that the Agency develop and implement adequate and consistent
internal controls over revenue processing.
We further recommended that the Agency adequately segregate the
billing functions from the receipt functions.
Agency officials concurred with the finding
and stated that they plan to centralize the receipt processing function,
which will provide stricter oversight.
In addition, the Agency has submitted a request to the vendor for an
estimate of costs to change the CLEAR System in respect to controls over
revenue processing.
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