|
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
IDNR’s 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 Foundation’s 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 Foundation’s 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 entity’s 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
Foundation’s 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
FOUNDATION’S ACCOUNTING RECORDS AND PREPARATION OF FINANCIAL STATEMENTS
During our audit of the Foundation’s 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 Foundation’s
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 Foundation’s 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 Foundation’s 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 Foundation’s 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 Foundation’s
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 Foundation’s progress towards the
implementation of our recommendations during our next engagement.
AUDITORS’ 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 – 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 Foundation’s 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 Foundation’s 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
General’s interpretation of statutory mandates. Again, the applicability of those mandates is an open
issue. The Foundation will continue
to cooperate with the Auditor General.
|
