REPORT DIGEST ILLINOIS CONSERVATION FOUNDATION FINANCIAL AUDIT AND COMPLIANCE EXAMINATION FOR THE YEAR ENDED: JUNE 30, 2012 Release Date: February 6, 2013 Summary of Findings: Total this audit: 3 Total last audit: 4 Repeated from last audit: 3 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 www.auditor.illinois.gov SYNOPSIS • The Illinois Conservation Foundation (Foundation) does not have sufficient internal controls over the financial reporting process. • The Foundation lacks adequate segregation of duties over its accounting functions. • The Foundation did not present information on the internet concerning their investment of public funds as required by the Accountability for the Investment of Public Funds Act. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE FINANCIAL REPORTING PROCESS The Illinois Conservation Foundation (Foundation) does not have sufficient internal controls over the financial reporting process. Several errors were identified during the audit of the Foundation’s financial statements. The Foundation’s financial statements were adjusted for the following reporting errors: • The Foundation failed to make numerous adjusting entries to present the financial statements in accordance with Generally Accepted Accounting Principles (GAAP). • The Foundation did maintain records to indicate the balances of accounts payable and accounts receivable. However, no entries were posted to record the activity. • The Foundation had realized and unrealized gains posted to opposite accounts in error. A net audit adjustment of $109,282 was recorded to correct the balances in the realized and unrealized gain accounts. • The Foundation does not track vacation accrual for employees. An audit adjustment of $23,704 was made to record the liability for the Foundation. • Noncash contributions of materials, facilities, and services are not being tracked by management. An audit adjustment of $25,300 was made to record noncash contributions. • Noncash contributions of items used by the Foundation during special events are not recorded or tracked. The Foundation is unable to determine the amount of items received and utilized during special events throughout the year. (Finding 1, page 13-14) This finding was first reported in 2011. We recommended the Foundation implement additional internal control procedures to ensure financial statements are prepared in accordance with GAAP. Foundation management accepted our recommendation. NEED TO IMPROVE INTERNAL CONTROLS The Foundation lacks adequate segregation of duties over its accounting functions. The Foundation has two employees, an Executive Director and a property manager, and two contractual employees, the Chief Financial Officer and the Contract Federal Grant Director. Because of the small size of the Foundation staff, all of the accounting functions are performed by one employee which creates a segregation of duties issue. (Finding 2, page 15) This finding was first reported in 2009. We recommended the Board of Directors remain involved in the financial affairs of the Foundation to provide oversight and independent review functions. Foundation management accepted our recommendation. (For the previous Foundation response, see Digest Footnote #1.) NONCOMPLIANCE WITH ACCOUNTABILITY FOR THE INVESTMENT OF PUBLIC FUNDS ACT (ACT) The Foundation did not present information on the internet concerning their investments of public funds as required by the Act. The Foundation had various investment balances (debt securities, equity securities, commodities, real estate, other assets) totaling $2,575,588 that would be classified as public funds at June 30, 2012. The Accountability for the Investment of Public Funds Act (30 ILCS 237) requires each State agency to make available on the internet, and update as least monthly by the 15 of the month, sufficient information concerning the investment of any public funds held by the State Agency to identify the amount of funds held by the agency on the last day of the preceding month or the average daily balance for the preceding month, the total monthly investment income and the yield for all funds invested, the asset allocation of the investments, and a complete listing of all approved depository institutions, commercial paper issuers, and broker- dealers approved to do business with the agency. (Finding 3, pages 16-17) This finding was first reported in 2008. We recommended the Foundation comply with the requirements of the Act and ensure the information concerning the investment of public funds is updated monthly by the 15th of each month. Foundation management respectfully disagreed with our recommendation and stated they will seek legislation to clarify its exemption from the Investment of Public Funds Act. (For the previous Foundation response, see Digest Footnote #2.) AUDITORS’ OPINION The auditors expressed a qualified opinion on the Foundation’s financial statements for the year ended June 30, 2012. The auditor’s qualified their opinion on the financial statements because the Foundation did not maintain sufficient documentation to determine the value of noncash contributions made to the Foundation’s special events held throughout the year. WILLIAM G. HOLLAND Auditor General WGH:APA AUDITORS ASSIGNED Kemper CPA Group, LLP was our special assistant auditor. DIGEST FOOTNOTES #1 – NEED TO IMPROVE INTERNAL CONTROLS – Previous Foundation Response 2011: The Foundation agrees. #2 – NONCOMPLIANCE WITH ACCOUNTABILITY FOR THE INVESTMENT OF PUBLIC FUNDS ACT (ACT) – Previous Foundation Response 2011: The Foundation respectfully disagrees. The Foundation will seek legislation to clarify its exemption from the Investment of Public Funds Act.