REPORT DIGEST


DEPARTMENT OF NATURAL RESOURCES


FINANCIAL AND COMPLIANCE AUDIT
For the Year Ended:
June 30, 1996


Summary of Findings:

Total this audit 28
Total last audit* 26
Repeated from last audit* 15



Release Date:
April 30, 1997




State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

*Agencies Merged

SYNOPSIS

  • The Department had inadequate controls over its property including:
    • inadequate accounting records, and
    • inadequate documentation to support the deletion of items from its property and equipment inventory.
  • The Department's failure to develop adequate controls over the review of unemployment benefit claims and payments resulted in instances of unemployment benefits being paid by the State to employees who were still receiving a paycheck from the Department and to one person who never worked for the Department.
  • The Department's practice of hiring intermittently scheduled employees resulted in additional costs to the State in the form of unemployment-benefit payments to such employees when they were on scheduled layoffs.
  • Rules for ensuring the safety and inspection of boats that carry passengers for hire or are rented were not implemented. This condition has existed since 1988.
  • The Department did not monitor all the federal financial assistance grant programs and did not detect certain instances of noncompliance with federal regulations.
  • There were questioned federal program costs as a result of:
    • expenditures totaling $117,730 being made after the grant term had expired for the Environmental Management Program,
    • the completion of $113,880 of disaster work after the federal deadlines for completion, and
    • the failure to report an accumulation of $3,862 in refunds that had not been appropriately credited to the grant program.

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

 

DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AND COMPLIANCE AUDIT
FOR THE YEAR ENDED JUNE 30, 1996

APPROPRIATION ANALYSIS

FY 1996

Final Appropriation

Expenditures

  • Appropriated
  • Unappropriated
  • Total Expenditures

Balances - Appropriations
Less Reappropriation
Lapsed Balances

$349,823,349




$186,223,025
2,333,771
$188,556,796

$163,600,324
153,689,902
$9,910,422

EXPENDITURES

FY 1996

Personal Services
Contractual Services
Travel
Printing
Commodities
Equipment
Electronic Data Processing
Telecommunications
Operation of Automotive
Interfund transfers
Awards and Grants
Highway & Waterway Construction
Permanent Improvements
Refunds
Total Expenditures

$96,166,673
19,537,659
1,143,451
1,303,164
4,749,663
7,654,541
695,247
1,999,263
2,206,975
11,752
33,515,952
9,946,158
8,905,341
720,957
$188,556,796

SELECTED SUPPLEMENTARY INFORMATION

FY 1996

Average Number of Employees:
  • Regular
  • Part-time

Property and Equipment, at cost
Total Accounts Receivable
Liability for Accrued Vacation and Sick Pay

Cash Receipts:

License and Fees
Federal Government
Fines, Penalties or Violations
Rentals
Sales
Donations
Other
Total Cash Receipts per Agency Records


2,037
361


$631,977,000
$10,187,000
$21,631,000



$31,438,200
19,920,700
557,500
4,566,200
1,176,900
398,700
713,100
$58,771,300

AGENCY DIRECTOR
During Audit Period: Brent Manning
Currently: Brent Manning

 












Executive Order merges departments















Inadequate accounting records

















Inadequate documentation

















Unemployment benefits paid to State employees who were simultaneously receiving a paycheck from the Department
















Intermittent employees eligible for unemployment benefits
















Failure to implement rules for safety and inspection of Illinois boats

















System for monitoring the administration of grants did not encompass all programs
















Expenditures of EMP funds after grant term




















Disaster project work completed after due dates

















Failure to report adjustments to federal programs

INTRODUCTION

This is the initial audit of the Department of Natural Resources. The Department was established on July 1, 1995 when the functions of the former Department of Conservation , Department of Mines and Minerals, the Abandoned Mined Lands Reclamation Council, portions of the Department of Energy and Natural Resources and the Division of Water Resources from the Department of Transportation were merged by an Executive Order of the Governor. Single Audits for the one year ended June 30, 1995 of three of the predecessor Agencies, the Departments of Conservation and Mines and Minerals and the Abandoned Mined Lands Reclamation Council, were performed concurrently with the Single Audit of the Department of Natural Resources for the one year ended June 30, 1996. All of the findings from the 1995 audits have been followed-up in the 1996 audit report.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

LACK OF CONTROL OVER PROPERTY

The Department's internal accounting records for property and equipment were not adequate. The deficiencies resulted primarily from the increased work load after the merger of the various agencies and the termination of computer software used to accumulate information and reconcile purchases to appropriation expenditures.

The Department is now responsible for property and equipment having a recorded acquisition value in excess of $631 million. Purchase additions during the current year were approximately $2 million, and other additions and deductions totaled $20 million and $763 thousand respectively. (Finding 1, page 10.)

The Department agreed to complete development of a new automated report which will accumulate transaction records and document the needed reconciliations.

The Department did not have adequate documentation to support the deletion of individual items from its property and equipment inventory.

The Mines and Minerals Division recorded deletions from its property and equipment inventory totaling approximately $656,139. Of this amount, approximately $402,256 of the deletions were not supported by proper documentation. Limitations with respect to manpower and time allotted to the project of combining the property inventories contributed significantly to the documentation deficiency. (Finding 6, page 17.)

The Department concurred with our recommendations and stated they are reviewing the deletions and will ensure adequate documentation is prepared for these adjustments. Department officials also stated monitoring of deletions has been centralized in the Property Control Unit which should prevent the recurrence of similar instances.

LACK OF CONTROLS IN MONITORING UNEMPLOYMENT COMPENSATION

The Department's failure to develop adequate controls over the review of unemployment benefit claims and payments resulted in instances of unemployment benefits being paid, by the State, to employees who were still receiving a paycheck from the Department and, in one case, to someone who never worked for the Department.

We were unable to review the timeliness of filing unemployment benefit claim protests. The Department had a 10-day period in which to file protests. The Department had documentation on only 5 of 25 cases sampled. For the claim forms that were available we found that: all were marked with "still employed" by the Department; none were signed and dated to indicate if the protest was timely; and, in some instances the claim forms were not received by the responsible personnel until after the "reply due date" on the form. Failure to protest timely results in payments to individuals that may not be entitled to benefits.

The Department also has the responsibility to review quarterly statements of benefits paid, furnished by the Department of Employment Security , and protest questionable charges. We selected 25 cases to test the appropriateness of the payments. In 24 percent of the cases, benefit recipients were working at the Department while they were also receiving unemployment benefits. The Department failed to protest the charges. Another benefit recipient had not worked for the Department. The total amount of questionable payments was approximately $3,000 for FY 96. (Finding 2, pages 11 and 12.)

The Department agreed to develop procedures to strengthen controls over its review of claims and charges. It also stated it would work with IDES to investigate and seek reimbursement where appropriate.

OVERALL COST TO THE STATE IN THE USE OF INTERMITTENTLY SCHEDULED EMPLOYEES NOT CONSIDERED

The Department's use of intermittently scheduled employees resulted in additional costs to the State in the form of unemployment-benefit payments that are not reflected in the Department's budget. Intermittent employees are eligible to receive unemployment benefits when they are on scheduled layoffs. State moneys used to pay unemployment benefits to State workers are appropriated to the Illinois Department of Employment Security and not the individual government agencies. During FY 96 the State paid $226,760 in unemployment benefits to employees reportedly laid off by the Department of Natural Resources.

Department officials indicated they had not conducted a formal cost study of using intermittently scheduled employees. A common management tool utilized in the private sector is to carefully plan for unemployment at the time employees are hired. Since unemployment benefit payments are charged back to the State, unemployment planning could result in significant savings to the State. (Finding 3, page 13)

While the Department concurred with our recommendations to conduct a formal cost study and to evaluate the cost of unemployment benefits when hiring, they indicated their belief that the use of intermittently scheduled employees is cost effective.

FAILURE TO IMPLEMENT RULES FOR BOAT INSPECTION

The Department did not meet its statutory mandate to implement rules for safety and inspection of Illinois boats that either carry passengers for hire or are offered for rent. This finding has been repeated since 1988.

The Boat Registration and Safety Act, effective January 1, 1988, requires the Department to develop rules and regulations to prescribe methods of inspection to determine the weight capacity for each boat carrying passengers for hire or for rent and to satisfy the Department that each boat is of a suitable structure and in a condition to warrant the belief that it may be used in navigation with safety to life and property. The Act further indicates that it is the duty of the Department to see that all such boats comply with the standards prescribed in the Act and the rules and regulations of the Department. (625 ILCS 45/7-3 and 7-5)

Failure to develop the mandated rules prescribing safety inspection procedures or to enforce such inspection procedures negates the statutory intent to protect the public safety. In FY '94 the Department had licensed 159 boat rental operators and 227 operators to carry passengers for hire. (Finding 9, page 20)

The Department concurred with our finding and said rules for the inspection of boats for hire were submitted to JCAR and formally approved in December 1996. (For previous agency responses, see Digest Footnote 1.)

LACK OF COORDINATION OF FEDERAL GRANT MONITORING

The Department's system for monitoring the administration of its grants did not include all grant programs and did not detect certain instances of noncompliance.

The Department administered 7 major and 26 non-major federal programs which received $22,524,903 in FY '96. Several of these programs were administered on a decentralized basis by various units of the Department without a coordinated effort to determine that the Department was in compliance with federal and State regulations. (Finding 20, page 186)

The Department responded it is continuing its efforts to fully implement the grant coordination policy to ensure that general and specific grant requirements are met for all federal grant programs. Department officials also stated that in FY 1997 they implemented revisions to their programmatic accounting system, which will be used by all divisions to document costs on federal programs and will assist their efforts to monitor and coordinate all federal assistance programs.

QUESTIONED FEDERAL PROGRAM COSTS

The Department's subgrantee incurred costs and completed an Upper Mississippi River Environmental Management Program (EMP) project after a grant had expired. The project was to be completed by September 30, 1995. The Department requested and received a no-cost extension until November 30, 1995, however, the project continued until January 31, 1996.

Failure to obtain extensions of grant agreements can result in the loss of federal reimbursements. The Department claimed and received federal reimbursement for $117,730 of costs incurred after the federally extended grant term of November 30, 1995.

The Department did not request time extensions for completing federally funded disaster assistance projects and performed disaster-related work after the required due dates. (Finding 23, page 190)

Project completion deadlines are set from the date that a major disaster or emergency is declared. Debris removal and emergency work must be completed within 6 months and permanent work must be completed within 18 months (44 CFR 206.204).

The Department had completed $9,450 of disaster work after the federal deadlines for completion. Furthermore, approximately $1,335,000 of additional work had not yet been completed, for which there had been no request for a deadline extension. The Department's predecessor agency, Conservation, completed $104,430 of disaster work after the federal deadlines for completion during its final fiscal year ended June 30, 1995. Failure to obtain such extensions could cause the State to repay federal funds and could also cause a loss of future federal revenue. (Finding 31, page 200)

The Department's predecessor agency, the Department of Mines and Minerals, had not reported various small adjustments to federal programs resulting from refunds. Refunds and reimbursements of $3,862.11 dating back to 1984 were accumulated in the agency's 765 fund cash balance that had not been appropriately credited to the federal grant program.

Failure to report these amounts is a violation of the grant agreement and results in the unauthorized holding of federal funds by the Department. (Finding 35, page 204)

The Department concurred with all of these findings and stated they would work to resolve the questioned costs cited in the findings.

OTHER FINDINGS

The remaining findings were less significant and have been given appropriate attention by the Department. We will review progress towards the implementation of our recommendations in our next audit.

Mr. Brent Manning, Director of the Department of Natural Resources, provided the responses.

AUDITOR'S OPINION

In our auditors' opinion the Illinois Department of Natural Resources' combined financial statements are fairly presented at June 30, 1996.



___________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:TEE:pp

SPECIAL ASSISTANT AUDITORS

Sleeper, Disbrow, Morrison, Tarro & Lively were our special assistant auditors for this audit.

DIGEST FOOTNOTES

#1: BOAT INSPECTION RULES - Previous Agency Responses.

1988: "We concur."

1990: "We concur. As noted by the auditors, the Department previously identified the need for additional rules in this area and has initiated their development."

1992: "We concur. As noted by the auditors, the Department is currently exploring alternatives for meeting this mandate given current funding and staff limitations."

1994: "We concur. Rules to establish the required inspection program have been drafted and currently are being reviewed by Agency staff."