REPORT DIGEST

DEPARTMENT OF EMPLOYMENT SECURITY
FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 1997
AND
COMPLIANCE AUDIT
(In Accordance with the Federal Single Audit
Act of 1984, and OMB Circular A-128)
FOR THE TWO YEARS ENDED JUNE 30, 1997




Summary of Findings:

Total this audit 4
Total last audit 4
Repeated from last audit 0




Release Date:
March 26, 1998




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
















SYNOPSIS

  • The Department's internal audit program did not execute its audit plan to the extent required by the Fiscal Control and Internal Auditing Act. The two-year audit plan included 33 scheduled reviews, however, only 12 were completed. Further, the audits conducted during the audit period covered only 7 of the Department's 10 major systems.
  • Three disbursements paid from a petty cash fund maintained at the Department's administrative office represented only a portion of total payments made to vendors on a particular day (stringing of purchases). The items were rung up separately thereby generating individual receipts that were less than the mandated ceiling of $50.









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


ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY
FINANCIAL AND COMPLIANCE AUDIT
For The Two Years Ended June 30, 1997

EXPENDITURE STATISTICS

FY 1997

FY 1996

FY 1995

  • Total Expenditures (All Funds)

    OPERATIONS TOTAL
    % of Total Expenditures
    Personal Services
    % of Operations Expenditures
    Average No. of Employees

    Other Payroll Costs (FICA, Retirement, Group Insurance)
    % of Operations Expenditures

    Contractual Services
    % of Operations Expenditures

    Unemployment Compensation Benefits
    To Former State Employees
    % of Operations Expenditures

    Telecommunications Expenditures
    % of Operations Expenditures

    All Other Operations Items
    % of Operations Expenditures

    GRANTS TOTAL
    % of Total Expenditures


  • Cost of Property and Equipment

 

$169,104,996

$166,025,754
98.2%
$82,603,738
49.8%
2,071


$21,693,742
13.0%

$29,477,720
17.8%


$10,019,175
6.0%

$4,074,813
2.5%

$18,156,566
10.9%

$3,079,242
1.8%


$36,151,000

$168,420,564

$164,688,637
97.8%
$80,876,416
49.1%
2,100


$21,107,598
12.8%

$29,047,634
17.3%


$10,470,633
6.2%

$3,926,160
2.3%

$20,260,196
12.3%

$3,731,927
2.2%


$34,768,000

$171,809,359

$169,528,795
98.7%
$80,689,271
47.6%
2,193


$21,414,557
12.6%

$30,207,372
17.8%


$11,868,057
7.0%

$4,079,348
2.4%

$21,270,190
10.9%

$2,280,564
1.3%


$38,106,000

SELECTED ACTIVITY MEASURES

FY 1997

FY 1996

FY 1995

  • Average Quarterly State Unemployment Rate
  • Average Quarterly National Unemployment Rate

4.69%

5.02%

 

5.28%

5.39%

5.17%

5.60%


AGENCY DIRECTOR
During Audit Period: Lynn Quigley Doherty
Currently: Lynn Quigley Doherty

 

















Only 7 of the Department's 10 major internal control systems were tested




Only 12 of the 33 audits in the two year audit plan were completed















Three petty cash disbursements were identified as part of multiple payments to vendors, stringing purchases, this appeared to be done to circumvent the $50 petty cash limit.

INTRODUCTION

Our 1997 audit of the Department is presented in two parts. The compliance part, for the two years ended June 30, 1997, with our findings and recommendations, as well as federal Single Audit disclosures is presented in one document. The financial part, which is for the year ended June 30, 1997, contains the opinion on the Department's financial statements and is presented in a separate document.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NONCOMPLIANCE WITH FISCAL CONTROL AND INTERNAL AUDITING ACT

The Fiscal Control and Internal Auditing Act requires the Department's internal audit department to develop a two-year program which sets forth a schedule of planned audits. The audit plan is to be developed so that audits of all major systems of internal accounting and administrative controls are performed at least once every two years.

For fiscal year 1996 and 1997 the Department considered ten of its processing systems as "major". The fiscal year 1996 and 1997 audit plan included examinations of activities within each of these systems. The actual audits conducted during the audit period covered only 7 of the 10 major systems. The two-year audit plan included 33 scheduled reviews, however, only 12 were completed.

The lack of sufficient resources in the internal audit department appears to be the primary cause for the Department's failure to fully execute its audit plan. The Department's noncompliance with the Act is a violation of State law and increases the possibility of improprieties or irregularities in the Department's "major" processing systems going undetected. (Finding 1, page 15)

We recommended the Department revisit its 1998-1999 audit plan while considering the resources necessary for its execution.

The Department concurred with the recommendation and indicated the current audit plan covers all the major systems and its primary focus will be on completing audits of the major systems.

PETTY CASH STRINGING OF PURCHASES

Of 50 petty cash disbursements examined, three represented only a portion of a total payment made to a single vendor on a particular day. The total payments made to the respective vendors on these three separate occasions ranged from $98 to $283. The items purchased were rung up separately thereby generating individual receipts less than $50. These receipts were then submitted to and reimbursed by petty cash through the issuance of multiple checks (three to six), all in sequence, and payable to the same individual. This situation appears to represent an intentional circumvention of Department policies and procedures and CUSAS procedures.

CUSAS procedure 09.10.40, page 6 states "payments for individual orders for goods or services amounting to $50 or more are not to be made from petty cash funds and that stringing' payments to the same vendor (individually less than $50 but exceeding $50 in an individual order) is not an approved use of petty cash funds."

The Department's failure to comply with petty cash rules could result in inappropriate arrangements in the procurement of small purchases. (Finding 4, page 18)

We recommended the Department review the State-wide petty cash policies and procedures with personnel and regularly review and investigate any unusual activity.

The Department concurred with the recommendation. The Department indicated they will inform managers of the prohibition against "stringing of purchases", and will retrain petty cash fund managers to monitor the funds for unusual activity.

OTHER FINDINGS

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

Mr. Wess Butler, Inspector General, Department of Employment Security, provided the responses to our findings and recommendations.

AUDITORS' OPINION

Our auditors state the Department's general purpose financial statements at June 30, 1997 are fairly presented.

_____________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were KPMG Peat Marwick LLP.