REPORT DIGEST DEPARTMENT OF LABOR COMPLIANCE EXAMINATION For the Two Years Ended: June 30, 2013 Release Date:   April 22, 2014 Summary of Findings: Total this audit: 9 Total last audit:  10 Repeated from last audit: 9 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 • Controls over revenues and related reporting were not adequate. • The Department lacked adequate control over accounts receivable records and reporting. • The Department failed to record and report State property accurately and timely. • The Department’s Special State Trust Fund expenditures were not properly supported with detailed or accurate records. • The Department did not perform adequate and/or accurate expenditure and fund accounting reconciliations. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS NEED TO IMPROVE CONTROLS OVER REVENUES AND RELATED REPORTING The Department did not exercise adequate controls over revenues and related reporting. Some of the conditions noted follow: • Four of 60 (7%) receipts tested, totaling $903, were deposited between 1 and 11 days late. • For 5 of 60 (8%) receipts tested, totaling $1,729, Treasurer’s Drafts were submitted to the Office of the State Comptroller between 3 and 40 days late. • The Department did not maintain documentation to support amounts reported on their Agency Fee Imposition Reports.  The Fiscal Year 2012 and Fiscal Year 2013 report had a $1,500 and $116,494 understatement, respectively, due to a misclassification of fees collected.  (Finding 1, pages 8-11)  This finding was first reported in 2005. We recommended the Department comply with the State Officers and Employees Money Disposition Act by making timely deposits into the State Treasury and documenting the date that receipts are received and ensure collection of revenues and adequate documentation is maintained and readily available for all transactions. Further, the Department should maintain accurate documentation to support amounts reported on their Agency Fee Imposition Reports and carefully review reports to ensure all fees collected are reported and to ensure accuracy of the Agency Fee Imposition Report before submission to the Office of the State Comptroller. Department officials agreed with the recommendation and stated they are in the process of hiring additional employees and have updated procedures to expedite processing and allow for better controls.  (For previous agency response, see Digest Footnote #1) NEED TO IMPROVE CONTROLS OVER ACCOUNTS RECEIVABLE RECORDS AND REPORTING The Department did not exercise adequate controls over accounts receivable records and reporting.   Some of the conditions noted follow: • For 3 of the 8 (38%) quarters selected for testing, the Department did not complete a Collections Activity for Accounts over 180 Days Past Due report or a Quarterly Reporting of Accounts Receivable Activity Concerning the Collection of Accounts Over 180 Days Past Due and Accounts Over $15,000 report. • Two of the 2 (100%) Quarterly Summary of Accounts Receivable, Aging of Total Gross Receivables reports prepared by the Department selected for testing were not properly supported by a Department prepared aging schedule. • The Department did not maintain adequate accounts receivable records for 2 of 4 (50%) accounts receivable balances selected for testing.  We noted a difference totaling $3,104. • Four of 16 (25%) Quarterly Summary of Accounts Receivable reports were submitted to the Office of the State Comptroller between 28 and 106 days late.  (Finding 2, pages 12-14)  This finding was first reported in 2005. We recommended the Department review all reports before submission to the Office of the State Comptroller to ensure accuracy.  Also, the Department should maintain detailed records and supporting documentation of all billings and collections to support accounts receivable balances reported. Department officials agreed with the recommendation and stated they are in the process of hiring additional employees and have updated procedures to expedite processing and allow for better controls.  (For previous agency response, see Digest Footnote #2) NEED TO IMPROVE CONTROLS OVER PROPERTY The Department did not exercise adequate control over the accuracy and timeliness of reporting State Property.  Some of the conditions noted follow: • Eight of 8 (100%) Quarterly Reports of State Property prepared by the Department and submitted to the Office of the State Comptroller did not accurately reflect Department equipment transactions.  We noted differences between the addition, deletion, transfer, and ending balance amounts reported and the Department’s quarterly transaction spreadsheets. • Fifteen of 40 (38%) items tested, totaling $3,665, appeared on the Department’s property inventory register but could not be located within the Department. • Property additions, totaling $208,411, could not be traced to the Department’s property inventory register. • The Department’s property inventory register did not include a purchase date for 10 of 40 (25%) items tested, totaling $580.  In addition, 9 of 40 (23%) items tested did not include a purchase price. • Seventeen of 80 (21%) items tested, totaling $4,848, were found in another location other than the proper location according to the Department’s property inventory register. (Finding 3, pages 15-18)  This finding was first reported in 2003. We recommended the Department strengthen controls over the recording and reporting of State property by reviewing their inventory and recordkeeping practices to ensure compliance with statutory and regulatory requirements. Also, the Department should ensure all equipment is accurately and timely recorded on the Departments’ property records and properly valued.  Further, the Department should thoroughly review all reports prepared from internal records for accuracy before submission to the Office of the State Comptroller and the Department of Central Management Services. Department officials agreed with the recommendation and stated they have created a new position and are filling another position to strengthen controls over State property.  (For the previous agency response, see Digest Footnote #3) INADEQUATE CONTROLS OVER SPECIAL STATE TRUST FUND The Department did not exercise adequate controls over its Special State Trust Fund (Fund 251).  We noted the following: • The Department did not maintain a ledger of claimants and corresponding dollar amounts comprising the balance held in the Special State Trust Fund.  The Office of the State Comptroller records showed balances of $2,189,159 and $2,182,989 as of June 30, 2012 and June 30, 2013, respectively. • For 5 of 40 (13%) of Fund 251 expenditures tested,  the Department’s records for amounts due to a claimant did not agree to underlying supporting documentation. • The Department had not transferred funds out of Fund 251 to the General Revenue Fund.  Checks totaling $11,739, which had been held in Fund 251 for more than one year, had not been transferred into the General Revenue Fund. (Finding 4, pages 19-20)  This finding was first reported in 2007. We recommended the Department maintain detailed records for all Special State Trust fund transactions.  We also recommended that case files and proposed claimant expenditures are thoroughly reviewed for accuracy prior to authorization.  Further, the Department should comply with the Minimum Wage Law by transferring the required funds from the Special State Trust fund to the General Revenue Fund. Department officials agreed with our recommendation and stated they are in the process of making staff changes to help maintain the ledger and have implemented new procedures for the accounting of funds.  (For previous agency response, see Digest Footnote #4) INADEQUATE MAINTENANCE AND RECONCILIATION OF EXPENDITURE RECORDS The Department did not perform adequate and/or accurate expenditure and fund reconciliations. In addition, the Department did not maintain accurate expenditure records. The Department operated 7 funds during the examination period.  We noted the following regarding the Department’s reconciliations: • Errors were noted in 7 of the 73 (10%) reconciliations performed for Fiscal Year 2012 and in 24 of the 70 (34%) reconciliations performed in Fiscal Year 2013. • The Department was unable to locate documentation to support the reconciliations performed for 5 of the 70 (7%) reconciliations performed in Fiscal Year 2013. • Two of 73 (3%) monthly reconciliations were not signed off and dated by the preparer or reviewer for Fiscal Year 2012.  In addition, 10 of 73 (14%) reconciliations performed in Fiscal Year 2012 were not prepared in a timely manner. • The Department was unable to locate documentation to support the “Ending Balance of Available Cash” for all 144 fund reconciliations.  (Finding 6, pages 24-25)  This finding was first reported in 2007. We recommended the Department implement procedures to ensure the completeness and accuracy of expenditure records maintained. Also, the Department should also perform and document the results of all monthly reconciliations of Department expenditure and fund balance records to Office of the State Comptroller records and promptly notify the Office of the State Comptroller of any irreconcilable differences noted. Department officials agreed with the recommendation and stated they are in the process of making staff changes to be able to perform accurate and timely expenditure reconciliations.   (For previous agency response, see Digest Footnote #5) OTHER FINDINGS The remaining findings are reportedly being given attention by the Department.  We will follow up on the findings during the next examination of the Department. AUDITORS’ OPINION We conducted a compliance examination of the Illinois Department of Labor as required by the Illinois State Auditing Act.  We have not audited any financial statements of the Illinois Department of Labor for the purpose of expressing an opinion because the Illinois Department of Labor does not, nor is it required to, prepare financial statements. WILLIAM G. HOLLAND, Auditor General WGH: mfp AUDITORS ASSIGNED Our special assistant auditors for this engagement were CliftonLarsonAllen, LLP. DIGEST FOOTNOTES #1 - NEED TO IMPROVE CONTROLS OVER REVENUES AND RELATED REPORTING - Previous Agency Response 2011:  The Department of Labor agrees with the recommendation and on developing a corrective action plan. #2 - INADEQUATE CONTROLS OVER ACCOUNTS RECEIVABLE RECORDS AND REPORTING - Previous Agency Response 2011:  The Department of Labor agrees and will continue its review and analysis of the detail comprising the accounts and receivable balance. #3 - NEED TO IMPROVE CONTROLS OVER PROPERTY - Previous Agency Response 2011:   The Department of Labor agrees and is developing a corrective action plan. #4 - INADEQUATE CONTROLS OVER SPECIAL STATE TRUST FUND - Previous Agency Response 2011:  The Department of Labor agrees and is seeking funding to upgrade its computerized systems. #5 - INADEQUATE MAINTENANCE AND RECONCILIATION OF EXPENDITURE RECORDS- Previous Agency Response 2011:  The Department of Labor agrees and contributes many of these differences to timing differences between Office of the State Comptroller and the Department’s Records.