REPORT DIGEST

REPORT DIGEST

DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION

FINANCIAL AUDIT

AND COMPLIANCE EXAMINATION

For the Year Ended:

June 30, 2006

Summary of Findings:

Total this audit 29

Total last audit 34

Repeated from last audit 22

Release Date:

May 24, 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 Full Report are also available

on the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

¨ The Department has not consolidated many aspects of its administrative processes as intended by the Governor’s Executive Order Number 6 (2004).

¨ The Department’s process to monitor interagency agreements was inadequate.

¨ The Department’s Division of Professional Regulation’s Enforcement Unit did not perform and/or document enforcement activities in a timely or sufficient manner.

¨ The Department’s Division of Financial Institution’s Consumer Credit Section did not comply with various statutory requirements.

¨ The Department’s Division of Insurance failed to issue timely refunds to insurance companies for overpayment of the annual privilege tax as required by the Illinois Insurance Code.

¨ The Department did not perform timely reconciliations of Department receipt records to the State Comptroller records.

¨ The Department did not maintain adequate controls over the processing, approval and payment of vouchers as required by the Illinois Administrative Code and Department policy.

¨ The Department is not maintaining time sheets for certain employees in compliance with the State Officials and Employee Ethics Act.

¨ The Department did not have a current, tested disaster contingency plan that addresses the recovery of computer systems for all of its divisions.

¨ The Secretary of the Department did not appoint the required number of members to the various Boards in order to fill vacancies.

¨ The Department did not fully implement three of nine recommendations presented in the Management Audit of Group Workers’ Compensation Self-Insured Pools.

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

DEPARTMENT OF FINANCIAL AND PROFESSIONAL REGULATION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2006

EXPENDITURE STATISTICS

FY 2006

FY 2005

Total Expenditures (All Funds)........................

$81,981,481

$81,855,692

Personal Services..................................................

% of Total Expenditures...................................

Average Number of Employees.......................

Average Salary per Employee..........................

$45,692,058

55.7%

804

$57,204

$46,599,681

56.9%

825

$56,484

Other Payroll Costs (FICA, Retirement)................

% of Total Expenditures...................................

$17,994,784

22.0%

$22,027,566

26.9%

Contractual Services..............................................

% of Total Expenditures...................................

$8,493,036

10.4%

$3,963,300

4.8%

Electronic Data Processing.....................................

% of Total Expenditures...................................

$1,958,455

2.4%

$1,627,986

2.0%

Travel....................................................................

% of Total Expenditures...................................

$1,758,128

2.1%

$1,767,361

2.2%

Lump Sum and Awards and Grants........................

% of Total Expenditures...................................

$2,202,915

2.7%

$1,936,494

2.4%

Other Expenditures................................................

% of Total Expenditures...................................

$1,928,721

2.3%

$1,914,421

2.3%

Non-Appropriated Funds Total.............................

% of Total Expenditures...................................

$1,953,384

2.4%

$2,018,883

2.5%

Cost of Property and Equipment........................

Total Cash Receipts Collected..........................

$14,305,902

$511,987,555

$15,329,889

$536,418,399

SELECTED ACTIVITY MEASURES (not examined)

FY 2006

FY 2005

Examinations Completed:

Financial Institutions..................................

Insurance Financial Statement Analysis......

Insurance Field Financial/Pension Fund......

Insurance Market Conduct........................

Banks and Trust Companies......................

Thrift and Mortgage..................................

Number of Licensees:

Financial Institutions..................................

Insurance (New/Renewal Processed)........

Banks and Trust Companies......................

Residential Finance....................................

Professions (New/Renewals Received)......

Enforcement:

Complaints Received.................................

Complaints Closed....................................

Cases Closed at Investigations...................

Cases Referred to Prosecution..................

Cases Closed at Prosecution.....................

3,210

425

146

489

191

3,389

64,810

1,388

2,236

496,108

9,682

9,381

4,937

2,029

1,214

2,798

437

148

542

451

3,249

66,823

1,411

1,985

339,004

9,195

9,548

431

3,590

1,293

AGENCY HEAD

During Audit Period: Mr. Fernando Grillo (until 9/05); Mr. Dean Martinez (beginning 9/05)

Currently: Mr. Dean Martinez

Many aspects of the Department not consolidated as intended by Governor’s Executive Order #6 (2004)

Lack of standardized controls and consistent department-wide procedures were the cause of many of the findings in this report

Lack of consolidation

Computer disaster contingency plan not standardized

Multi-year $699,880 agreement with a consultant to assist with the consolidation

The Department will be well into its third or fourth year of existence until recommendations can be implemented

Department officials disagreed with the finding

Auditors’ comment

Inadequate process to monitor interagency agreements

Interagency agreements were not signed before the effective date of the contract

Failure to document allocation methodology

Services performed prior to effective date of agreement

Failure to document enforcement activities in a timely or sufficient manner

Investigative files could not be located

Files did not include an Investigative Report

Prosecution case files could not be located

The Chief Prosecutor was late in reviewing and assigning cases

Probation files could not be located

Files did not include the acknowledgement letter sent to the complainant

The Department did not agree with our conclusion

Auditors’ comment

Consumer Installment Loan licensee files

Annual examination lacking

Examinations were filed late

Department disagrees

Auditors’ comments

Refunds were issued late

FY 06 monthly receipt reconciliations were not started until FY 07 and were not completed until September 2006

Department officials stated the receipt reconciliations are complicated by several legacy financial systems