REPORT DIGEST

DEPARTMENT OF NATURAL RESOURCES

FINANCIAL AUDIT OF THE CAPITAL ASSET ACCOUNT
FOR THE YEAR ENDED JUNE 30, 2016

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2016

Release Date:  October 12, 2017

FINDINGS THIS AUDIT:  17

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 3 -- 3
Category 2:  4 -- 10 -- 14
Category 3:  0 -- 0 -- 0
TOTAL:  4 -- 13 -- 17

FINDINGS LAST AUDIT: 16

Category 1: Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State laws
and regulations (material noncompliance).
Category 2: Findings that are significant
deficiencies in internal control and
noncompliance with State laws and
regulations.
Category 3: Findings that have no internal
control issues but are in noncompliance with
State laws and regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, 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

• (16-1) The Department did not exercise
adequate controls over operations of its
World Shooting and Recreational Complex.
• (16-2) The Department did not exercise
adequate controls over its reporting of
accounts receivable.
• (16-5) The Department did not monitor and
enforce concessionaire lease agreements.
• (16-9) The Department did not maintain
adequate controls over its cash receipts.
• (16-10) The Department’s internal audit
function failed to comply with the Fiscal
Control and Internal Auditing Act and the
State Finance Act.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER THE WORLD SHOOTING
AND RECREATIONAL COMPLEX’S OPERATIONS

The Department did not exercise adequate
controls over operations of its World
Shooting and Recreational Complex (WSRC) in
Sparta, Illinois. The Department opened the
WSRC in 2006 and it consists of over 1,500
acres of land devoted to shooting and outdoor
recreation, including 1,000 camp sites, areas
for trap, skeet, and sporting clay shooting,
a cowboy action/pistol berm, a vendor mall,
and an event center.

During testing, some of the more significant
exceptions noted include:

• We requested the Department and WSRC
provide the population of events and related
facility use agreements entered into during
the examination period. In response to this
request, the Department provided a listing of
events held at the WSRC. We noted the
population provided by the WSRC was derived
from a separated employee’s archived
electronic calendar, which we were unable to
reconcile to the Department’s facility use
agreement population or to any other
information source or calendar.

Due to these conditions, we were unable to
conclude whether the Department’s population
records were sufficiently precise and
detailed under the Attestation Standards
promulgated by the American Institute of
Certified Public Accountants (AT-C § 205.35)
to test the Department’s compliance with its
facility use agreements.

Although the population limitations noted
above hindered the ability of the accountants
to conclude whether selected samples were
representative of the population as a whole,
the accountants selected a sample of 60
events from the listing provided by the
Department and performed testing:

– Facility use agreements were not provided
by WSRC staff for 10 of 60 (17%) events
selected for testing. Therefore, we were
unable to determine if a reservation deposit
was paid, the WSRC paid for event awards,
extra amenities were requested, insurance
information was obtained prior to the event,
or if a comprehensive vendor list was
received.

– For 18 of 60 (30%) events tested, the
facility use agreements were not signed by
WSRC staff, the renter, or both parties.

– For two of 60 events tested (3%), WSRC
staff did not provide support for payment of
required reservation deposits.

• The Department has not established an
operations manual, administrative rules, or
procedures to govern operations of the WSRC.
While certain Department-wide procedures and
rules guide some of the WSRC’s operations and
functions, such as camping and equipment, the
Department has not established guidance for
operational areas that are specific to the
WSRC, such as event rentals, operations of
the various shooting areas, handling of
Department-owned firearms, and responsibility
and recordkeeping for sponsorships and in-
kind items received.

• We noted three of 17 (18%) instances tested
where it could not be determined how many
shooters were present and what price each
shooter was charged in relation to cash
deposits from the event as a whole. (Finding
1, pages 15-18)

We recommended the Department take action to
establish internal controls over its
operations at the WSRC. Specifically, the
Department should:
1) establish an operations manual for the
specific operations of the WSRC;
2) maintain proper documentation of cash
receipts for individual shooters;
3) ensure the WSRC has an accurate and
complete listing of events held;
4) ensure the WSRC’s facility use agreements
received are properly filled out and
submitted with all supporting documentation;
5) ensure the WSRC’s facility use agreements
are enforced; and,
6) implement adequate audit trails regarding
the maintenance and retention of records at
the WSRC.

Department officials agreed with this
finding.

INADEQUATE CONTROLS OVER ACCOUNTS RECEIVABLE

The Department did not exercise adequate
controls over its reporting of accounts
receivable. We performed detail accounts
receivable testing on the following funds:
the State Boating Act Fund (039), the State
Parks Fund (040), the Wildlife and Fish Fund
(041), the Plugging and Restoration Fund
(137), and the Underground Resources
Conservation Enforcement Fund (261). During
testing, some of the weaknesses we noted
included the following:

• The Department’s accounts receivable
reporting process is cumbersome, relies on
numerous subsystems, and requires manual
entry. During testing of the Department’s
quarterly accounts receivable reporting, we
noted these reports were manually compiled
from multiple accounts receivable systems in
order to issue a single report. For example,
we identified reports for Funds 137 and 261
were compiled using an outdated computer code
called Paradox; Fund 039 was comprised of
Automated Clearing House (ACH) accounting
reports, phone/internet deposit slip forms,
fund transfer reports from the Comptroller,
and returned check aging reports; and, Funds
040 and 041 lacked documentation for some
large farm lease adjustments calculated by
the Department, which were as much as $3.3
million.

• The Department did not maintain a detailed
accounts receivable subsidiary ledger to
support the current quarter accounts
receivable additions reported on the
quarterly reports. Rather, the Department
took the amount collected during the quarter,
subtracted the beginning quarterly receivable
balance, and added the ending quarterly gross
receivable balance to calculate the accounts
receivable additions for the quarter.

• The Department was unable to provide
support for adjustments made to Funds 040,
041, and 261. Adjustments for Funds 040 and
041 were for in-kind services provided in
lieu of cash; however, there was no
description of what services were provided
and how the value of those services was
determined. The adjustment for Fund 261 was
for write-offs that were not accounted for in
prior periods. These adjustments occurred
during the second quarter of Fiscal Year 2015
and the fourth quarter of Fiscal Year 2016
and ranged from $24 thousand to $3.3 million.

• The Department was unable to provide
support for estimated uncollectible amounts
reported for Funds 137 and 261 in each
quarter of the engagement period. The
Department’s reported estimated uncollectible
balance for Fund 137 ranged between $819
thousand and $1.1 million and ranged between
$636 thousand and $2 million for Fund 261
during the engagement period. (Finding 2,
pages 19-24)

We recommended the Department implement the
necessary internal controls to consistently
and accurately report accounts receivable. We
also recommended the Department ensure that
accounts receivable are timely pursued for
collection and, if not collectible, submitted
for uncollectible certification and
subsequently written off.

Department officials agreed with the finding.

FAILURE TO ENFORCE CONCESSIONAIRE LEASE
AGREEMENTS

The Department failed to monitor and enforce
concessionaire lease agreements regarding
rental and reserve payments.

During the examination period, the Department
had lease agreements with approximately 77
concessionaires located at State parks
throughout the State. The Department’s
concession coordinators are responsible for
negotiating and enforcing lease terms,
overseeing the site, approving rates charged,
and collecting rental payments. The
Department received rental fees from
concessionaires totaling $612,310 and
$594,560 during Fiscal Years 2015 and 2016,
respectively.

During our sample testing of eight concession
and lease agreements, we noted eight of 32
(25%) rental payments were remitted to the
Department in an untimely manner, ranging
from one to 87 days late.

We also tested the Department’s four largest
concessionaires, as measured by rental
payments and/or deposits, and some of the
conditions we noted follow:

• Two of four (50%) concessionaires did not
submit deposit slips for their respective
reserve accounts in a timely manner, ranging
from one to 18 days late. For most
concessionaires, they are contractually
required to deposit a specific amount into
this account each month, which ensures money
has been set aside to fund future repairs and
improvements at their facility. The
submission of the deposit slip indicates the
monthly deposit was made.

• Two of four (50%) concessionaires’ reserve
deposit slips tested were not date stamped.
As a result, we were unable to determine if
these reserve deposit slips were remitted
timely. (Finding 5, pages 28-30)  This
finding has been repeated since 2006.

We recommended the Department monitor
concessionaires to enforce its contractual
agreements and send concessionaires formal
written communication when they fail to
comply with their contractual obligations to
the Department.

Department officials agreed with the finding
and reported they are now sending notices/
letters to the lessee reminding them of the
deadline when the reports are due and
contacting the lessee to request items that
are past due. (For the previous Department
response, see Digest Footnote #1.)

INADEQUATE CONTROLS OVER RECEIPTS

The Department did not maintain adequate
controls over its cash receipts.

During testing, some of the weaknesses we
noted included the following:

• Timeliness of deposit could not be
determined for four of 40 (10%) hunting and
fishing receipts tested, totaling $2,472. The
Department’s support did not include the
receipt date and/or deposit date for the
receipts.

• Three of 25 (12%) refunds tested, totaling
$96,567, were deposited from two to five days
late.

• One of 10 (10%) hunting and fishing paper
product vendors tested had credits, totaling
$890, which were not carried forward from
License Year 2015 and applied to License Year
2016.

• One of 40 (3%) boating registration
applications tested was not charged the
correct registration fee, resulting in a $32
revenue loss to the Department.

• Amounts reported on the Fiscal Year 2015
Fee Imposition Report did not trace to
Department records. Commercial permits,
special wildlife licenses, and permit fees
reported to the Office of the Comptroller
were understated by $44,208. (Finding 9,
pages 37-39)

We recommended the Department ensure receipt
and deposit dates are documented for all
receipts, deposits are made in a timely
manner with the State Treasurer, and hunting
and fishing vendor file documentation is
complete and that accounts are properly
credited. We also recommended the Department
verify the correct fee is paid before
processing boat registrations. Finally, we
recommended the Department remind employees
of the need to maintain accurate and complete
records, reconciliations, and fee databases.

Department officials agreed with the finding.

INTERNAL AUDIT DEFICIENCIES

The internal audit function at the Department
failed to comply with the Fiscal Control and
Internal Auditing Act and the State Finance
Act.

During testing, we noted the following:

• The Department’s internal audit function
did not conduct reviews of the design of
major new electronic data processing (EDP)
systems and major modifications to existing
EDP systems.

• The Department’s internal auditing function
did not audit the Department’s major systems
of internal accounting and administrative
controls on a periodic basis so that all
major systems are reviewed at least once
every two years.

• The Department’s internal audit staff did
not perform audits of petty cash funds when
reimbursements to the funds exceeded $5,000
in a single fiscal year.

• The Department’s internal audit staff did
not follow up on previously issued reports to
ensure the Department took appropriate
corrective action. As such, the Department’s
internal audit function could not prepare a
written report to the Department’s Director
on the extent the Department had implemented
its recommendations. (Finding 10, pages
40-42)

We recommended the Department ensure its
internal audit function complies with the
provisions of the Fiscal Control and Internal
Auditing Act and the State Finance Act.

Department officials agreed with the finding.

OTHER FINDINGS

The remaining findings pertain to (1)
inadequate controls over voucher processing,
workforce reports, overtime, fuel
reconciliations, financial reporting,
property and fixed asset records and related
reporting, and expenditure reconciliations;
(2) noncompliance with mandated
responsibilities, (3) a lack of contingency
planning or testing to ensure recovery of
computer systems, (4) weaknesses with payment
card industry data security standards, and
(5) weaknesses regarding the security and
control of confidential information. We will
review the Department’s progress towards the
implementation of our recommendations in our
next compliance examination.

AUDITOR’S OPINION

The auditors stated the Department’s Schedule
of Capital Assets as of and for the year
ended June 30, 2016, was fairly stated in all
material respects.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Department for the two
years ended June 30, 2016, as required by the
Illinois State Auditing Act. The accountants
qualified their report on State compliance
for Findings 2016-001, 2016-002, and
2016-003. Except for the noncompliance
described in these findings, the accountants
stated the Department complied, in all
material respects, with the requirements
described in the report.

This financial audit and compliance
examination was conducted by the Office of
the Auditor General’s staff.

JANE CLARK
Division Director

This report is transmitted in accordance with
Section 3-14 of the Illinois State Auditing
Act.

FRANK J. MAUTINO
Auditor General

FJM:cmd

DIGEST FOOTNOTES

#1 – Failure to Enforce Concessionaire Lease
Agreements – Previous Department Response

2014 – The Department agrees with the finding
and is now sending notices/letters to the
lessees reminding them of the deadline when
these reports are due and contacts the lessee
to request items that are past due.