REPORT DIGEST

 

ILLINOIS

CONSERVATION

FOUNDATION

 

FINANCIAL AUDIT

AND COMPLIANCE EXAMINATION

(In Accordance with the
Single Audit Act and OMB Circular A-133)

For the Year Ended:

June 30, 2006

 

Summary of Findings:

Total this report††††††††††† ††††††††††† 6

Total prior report††††††††† ††††††††† 10

Repeated findings†††††††              5

 

Release Date:

March 22, 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

 

 

®   The Foundation did not timely prepare a financial budget for the fiscal year 2006 projected revenues and expenses.

 

®   During our audit of the Foundationís June 30, 2006 financial statements, we recommended extensive adjustments and corrections to the Foundationís accounting records and financial statements.

 

®   The Foundation did not comply with certain parts of the Fiscal Control and Internal Auditing Act, the State Comptroller Act and the Illinois Procurement Code as follows:

 

-     The internal control certification was not timely filed with the Office of the Auditor General.

-     Information on locally held funds was not submitted to the Office of the State Comptroller.

-     Copies of grants in excess of $10,000 were not filed with the Office of the State Comptroller.The Foundation awarded 23 grants to sub-grantees in excess of $10,000.

 

®   We found the Foundation was not following its procedures and policy of obtaining two signatures on all checks written for more than $5,000.We identified 23 checks totaling over $2.6 million, contained only one signature.

 

 

 

 

 

 

 

 

 

 

{Financial and supplementary information are summarized on the reverse page.}

 

 

 

 

 

ILLINOIS CONSERVATION FOUNDATION

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

FOR THE YEAR ENDED JUNE 30, 2006

 

OPERATING STATEMENT (Governmental Funds)

FY 2006

FY 2005

Revenues:††††††

Donations - Restricted.......................................................

Grants and Receipts from Other Governments....................

Donations Ė Unrestricted...................................................

Merchandise Sales Ė Restricted.........................................

Investment Income - Unrestricted......................................

Investment Income - Restricted.........................................

Increase /(Decrease) In Fair Value Of Unrestricted Investments

On-Behalf Payments........................................................

Publication Sales - Restricted............................................

Change in Prepaid Expenses.............................................

†††† Total Revenue........................................................

Expenditures:

Administrative................................................................ ††††††††††††††††††

††† Natural Resources and Recreation Programs....................

††† On-Behalf Payments.......................................................

Change in Prepaid Expenses...........................................

Total Expenditures.................................................

Change In Net Assets.....................................................

Net Assets, Beginning of Year.......................................

Net Assets, End of Year.................................................

 

$2,476,768

1,075,803

125,482

87,414

218,072

4,733

(9,392) 

62,117

7,776

            0 

$4,048,773

 

$†† 294,838

4,113,467

†††† 62,117 

††††††††† 241

$4,470,663

$ (421,890)

3,884,312 

$3,462,422

 

$††† 609,391

1,269,244

96,895

104,499

120,009

7,030

80,608 

115,075

46,303

†††††† 1,180 

$2,450,234

 

$†††† 451,302 

2,917,840

†† 115,075 

††††††††††††† 0 

$3,484,217

$(1,033,983)

4,918,295 

$3,884,312

STATEMENT OF NET ASSETS (Governmental Activities)

June 30, 2006

June 30, 2005

Assets:††††††††††††† Cash And Cash Equivalents.....................

††††††††††††††††††††††††† Accounts Receivable...............................

††††††††††††††††††††††††† Accrued Investment Income....................

††††††††††††††††††††††††† Inventory................................................

††††††††††††††††††††††††† Prepaid Expenses...................................

††††††††††† ††††††††††††††Investments............................................

††††††††††††††††††††††††††††††††††† Total Assets.................................

Liabilities:†††††† Accounts Payable And Accrued Expenses..

†††††††††††††††††††††††† Deferred Revenue...................................

Total Liabilities..............................

Net Assets:††††† Natural Resources & Recreation - Restricted...

†††††††††††††††††††††††† Endowment/Nonexpendable Ė Restricted..........

†††††††††††††††††††††††† Unrestricted....................................................

††††††††††††††††††††††††††††††††††† Total Net Assets..................................

$††† 767,500

135,099

12,765

12,208

7,577

2,701,789 

$3,636,938

$†† 121,652 

††† 52,864 

$†† 174,516 

$1,906,870

70,836

1,484,716 

$3,462,422

$983,822

65,044

6,944

21,134

7,818

2,890,313 

$3,975,075

$†††† 50,400 

†††† 40,363 

$†††† 90,763 

$2,475,584

70,836

1,337,892 

$3,884,312

SUPPLEMENTARY INFORMATION

FY 2006

FY 2005

% of Administrative Expenditures to Total Expenditures..............

6.6%

13.0%

% of Total Expenditures From Federal Sources..........................

23.5%

37.5%

FOUNDATION CHIEF EXECUTIVES

During Engagement Period:Executive Director: Jess Hansen (through 05-01-2006).Chairman: Joel Brunsvold (through 12-13-2005), Sam Flood (starting 01-01-2006).

Currently:Executive Director: vacant.Chairman: Sam Flood.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The formal annual financial budget was not presented to the Board until May 3, 2006

 

 

 

 

 

Operating policies require a budget to be prepared and approved by the Board of Directors

 

 

 

 

 


Reportable condition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounting records required 23 audit adjustments totaling $458,377 to correct errors and omissions

 

 

 

 

 

 

 

 

 

 

Reportable condition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Required internal control certification not timely submitted to the Office of the Auditor General

 

 

 

 

 

 

 

 

 

Information on locally held funds was not submitted to the Office of the Comptroller

 

 

 

 


Copies of grants in excess of $10,000 were not filed with the Office of the Comptroller

 

 

 

 

 

The Foundation awarded 23 grants to sub-grantees in excess of $10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attorney General opinion on applicability of statutes pending

 

 

 

 

 

 

 

 

 

 

 

23 checks over $5,000 contained only one required signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

Our report covers the compliance examination and the financial audit of the Illinois Conservation Foundation (Foundation) performed in accordance with the Single Audit Act and OMB Circular A-133 for the fiscal year ended June 30, 2006. The Foundation was authorized to be created by the Illinois Department of Conservation, currently the Illinois Department of Natural Resources (IDNR) by statute on August 20, 1994.The role of the Foundation is to provide additional funding for IDNRís conservation programs that are not receiving adequate State funding or cannot be implemented because State funding is not available.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

FINANCIAL BUDGET FOR FISCAL YEAR 2006 WAS NOT TIMELY PREPARED

 

†††† The Foundation presented their financial budget for the Foundationís fiscal year 2006 projected revenues and expenses to the Board on May 3, 2006.The Foundation received $4,048,773 from contributions, grantors and other sources during fiscal year 2006 and spent $4,470,422 on various projects, grants and general administration.

 

†††† The Foundationís operating procedures require an annual budget to be prepared and be presented to the Board of Directors for discussion, amendment and approval.In addition, generally accepted accounting principles set forth that governmental units should prepare a comprehensive annual budget covering all funds for each fiscal year.

 

†††† Budgeting is considered an essential element of an entityís financial planning, control and evaluation process.Without a budget the Foundation runs the risk of incurring unnecessary expenditures, and of not using their resources in the most efficient manner.

 

This finding is considered to be a reportable condition.In our judgment, the reportable condition can adversely affect the Foundationís ability to expend and use funds of the Foundation in accordance with the purpose for which such funds have been authorized.

 

†††††††††† We recommended Foundation management prepare an annual budget and submit it to the Board of Directors on a timely basis for approval.(Finding 1, page 17)

 

††††† Foundation management agreed with our recommendation and noted they had been operating for most of the year under a budget that was not formally adopted by the Board.In addition, management noted the Board at their May 3, 2006 meeting approved the FY 06 and FY 07 budgets.

 

WEAKNESSES IN THE FOUNDATIONíS ACCOUNTING RECORDS AND PREPARATION OF FINANCIAL STATEMENTS

 

During our audit of the Foundationís June 30, 2006 financial statements we recommended extensive adjustments and corrections.As a result of audit procedures performed we recommended 23 adjustments to various accounts within the Foundationís financial records for a total amount of $458,377.Most of the adjustments were caused by coding and misclassification errors made during the year.

 

It is the responsibility of the Foundation to maintain their accounting records and prepare their financial statements in accordance with generally accepted accounting principles, (GAAP), and that the accounting records and financial statements be materially free of errors and omissions.

 

This finding is considered to be a reportable condition.In our judgment, the reportable condition can adversely affect the Foundationís ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements.

 

We recommended the Foundation devote sufficient resources to its financial accounting function such that the financial information is properly recorded and accounted for to permit the preparation of reliable and timely financial statements.(Finding 2, pages 18)

 

Foundation management agreed with our recommendation and noted they hired the current fiscal officer in December of 2005 and most of the adjustments noted occurred prior to the hire date of the current fiscal officer. In addition, the adjustments noted have been made and the Board is being provided with reliable and timely financial information.

 

NONCOMPLIANCE WITH STATUTORY MANDATES

 

As part of our engagement we tested the Foundationís compliance with certain statutory mandates.We noted three instances where, through our interpretation of the statutory mandates, the Foundation was not complying.

 

First, we noted the Foundation did not timely file its annual certification of their systems of internal control with the Office of the Auditor General as required by the Fiscal Control and Internal Auditing Act (FCIAA).The Foundation filed their annual certification on June 15, 2006.The certification was due to be filed on May 1, 2006.Foundation management indicated they filed the certification late due to oversight.

 

Second, we noted the Foundation was not filing documentation of the establishment of their locally held funds/accounts or quarterly reports of locally held fund/account activity with the Office of the State Comptroller as required by the State Comptroller Act.†††††††††

 

The Foundation has two locally held funds/accounts that are maintained outside of the State Treasury.  Foundation management noted they did not believe the locally held fund requirements apply to them as the Foundation was created as a not-for-profit corporation under the General Not for Profit Corporation Act of 1986.

 

Third, the Foundation was not filing copies of their grants in excess of $10,000 with the Office of the Comptroller as required by the Illinois Procurement Code (Code).The Illinois Conservation Foundation Act notes the Foundation is exempt from the Code when only private funds are used for procurement expenditures.During fiscal year 2006 the Foundation received approximately $1.075 million of federal grant funds.Grant funds maintain their public identity until they are expended for goods or services and would not be considered private funds.

 

The Foundation awarded 23 grants over $10,000 during fiscal year 2006 from the federal funds they received.Foundation management indicated the language to exempt the Foundation from the Code when private funds are used for procurement expenditures was added to clarify the Foundation is exempt from the Code.

 

Failure to comply with the Fiscal Control and Internal Auditing Act, State Comptroller Act and the Illinois Procurement Code are violations of statutorily mandated responsibilities.

 

We recommended the Foundation either comply with the applicable requirements set forth in the statutes or seek a formal written interpretation from the State of Illinois Office of the Attorney General regarding the applicability of the statutes to the Foundation.(Finding 3, pages 19-20)This finding was first reported in 2003.

 

Foundation management responded that they have sought an interpretation from the State of Illinois Attorney General on May 25, 2004 regarding the Foundationís status as a State agency.It was noted that a response from the State of Illinois Attorney General has not yet been received.Foundation management have agreed to file the FCIAA certification and indicated the FY 06 certification was not timely filed as a result of taking sufficient time to make a complete review of the Foundationís system of internal control(For the previous Foundation response, see Digest Footnote #1.)

 

 

DISBURSEMENT PROCESSING WEAKNESS

 

During our testing of cash disbursements, we found the Foundation was not following its procedures and policy of obtaining two signatures on all checks written for more than $5,000.In our testing of 50 disbursements we identified 23 (46%) checks each equal to or greater than $5,000 and totaling over $2.6 million, contained only one signature.

 

Foundation personnel stated the exceptions were due to time constraints and the inability to get two signatures in a timely fashion.

 

We recommended the Foundation strengthen controls over disbursement processing by following its policy and procedures to ensure checks over $5,000 are properly signed by two authorized signers.(Finding 6, page 24)

 

Foundation management agreed with our recommendation and indicated they have taken steps to strengthen controls over processing checks greater than $5,000.

†††††††††††

OTHER FINDINGS

 

†††††††† The remaining findings are reportedly being given attention by the Foundation.We will review the Foundationís progress towards the implementation of our recommendations during our next engagement.

 

AUDITORSí OPINION

 

†††††††† Our auditors state the June 30, 2006 financial statements of the Foundation are fairly presented in all material respects.

†††††

 

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

 

 

 

SPECIAL ASSISTANT AUDITOR

 

†††††††† Kyle E. McGinnis, CPA was our special assistant auditor.

 

DIGEST FOOTNOTE

 

#1†† -NONCOMPLIANCE WITH STATUTORY MANDATES Ė Previous Foundation Response

 

2005:The Department of Natural Resources has sought an interpretation from the State of Illinois Office of the Attorney General regarding the Foundationís status as a State Agency.This determination would assist both the Foundation and the Auditor General in determining whether statutory mandates are applicable.The Department has not yet received a response from the Attorney General regarding the Foundationís status as a State agency.

 

Since the inception of the Foundation in 1996, the Foundation has complied with the laws regulating not for profit entities and prior to fiscal year 2003 no material findings were issued indicating that the Foundation is required to comply with these Acts.There were no material findings of non-compliance disclosed by the Auditor General as part of the financial and compliance audit of the Foundation for the year ended June 30, 2002.In addition, the fiscal year 2002 audit report commended the Foundation for maintaining an effective system of internal controls.However, the financial and compliance audit for the year ended June 30, 2003, included findings of non-compliance with these same three cited Acts even though the Foundation had not made any operational changes during the fiscal year.This finding is based upon the Auditor Generalís interpretation of statutory mandates.Again, the applicability of those mandates is an open issue.The Foundation will continue to cooperate with the Auditor General.