REPORT DIGEST

DEPARTMENT OF LABOR

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2015

Release Date:  June 30, 2016

FINDINGS THIS AUDIT:  14

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 5 -- 5
Category 2:  6 -- 3 -- 9
Category 3:  0 -- 0 -- 0
TOTAL:  6 -- 8 -- 14

FINDINGS LAST AUDIT: 9

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

• (15-01) The Department failed to ensure
adequate controls were maintained over
revenues and related reporting.
• (15-02) The Department lacked adequate
controls over accounts receivable records
and related reporting.
• (15-03) The Department did not ensure
adequate controls were maintained over its
Special State Trust Fund.
• (15-04) The Department performed
inadequate expenditure and cash balance
reconciliations during the examination
period.
• (15-05) The Department exercised
inadequate controls over the accuracy,
completeness, and timeliness of State
property records and related reporting.


FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER REVENUES AND
RELATED REPORTING

The Illinois Department of Labor
(Department) did not exercise adequate
controls over revenues and related
reporting. Some of the conditions noted
follow:

• The Department did not maintain
documentation to support amounts reported
on its Agency Fee Imposition Reports
(Report) prepared for Fiscal Years 2014
and 2015. This resulted in discrepancies
with Department records of $202,104 and
$421,023, respectively. In addition, the
Department filed its Fiscal Year 2015
Report 209 days late.

• The Department could not provide
reconciliations of agency receipts to the
Monthly Revenue Status Report for any
months during Fiscal Year 2014 or 2015.
This includes 190 monthly reconciliations
for eight different funds: General Revenue
Fund, Amusement Ride and Patron Safety
Fund, Special State Trust Fund, Child
Labor Law Enforcement Fund, Employee
Classification Fund, Department of Labor
Federal Projects Fund, Federal Industrial
Services Fund, and Wage Theft Enforcement
Fund.

• The Department did not process deposits
for checks received during the months of
March, April, May and June 2015. Per
discussion with Department personnel,
these checks were held by the Department
for deposit at a later date while the
Department attempted to resolve errors and
discrepancies noted between their records
and their clearing account. Department
personnel indicated the checks were
deposited during Fiscal Year 2016. In
addition, the Department did not process
Treasurer’s Drafts or Receipt Deposit
Transmittals for this same time period. We
were unable to quantify the dollar value
of the activity that was carried over into
Fiscal Year 2016 from this time period.
(Finding 1, pages 10-14) This finding has
been repeated since 2005.

We recommended internal controls over
receipts be enforced by the Department to
ensure timely collection of revenue occurs
and adequate documentation is maintained
and readily available for all
transactions. We also recommended the
Department implement procedures to
segregate the duties involved with the
receipts processing function. Further, we
recommended the Department ensure all
receipts and refunds are entered into a
system that is able to generate reports,
provide balances, and produce transaction
listings. Also, monthly reconciliations
should be completed and reviewed for
accuracy and any differences should be
investigated. In addition, the Department
should document all collection efforts on
returned checks and past due amounts owed
and perform timely follow ups on these
amounts. Lastly, we recommended the
Department ensure all Fee Imposition
Report Forms are adequately supported and
filed timely with the State Comptroller.

Department personnel accepted our
recommendations and reported they are
working closely with the State’s Chief
Information Officer in establishing the
necessary platform for a new case
management and receipts processing and
reporting system to address the
deficiencies noted. (For the previous
Department response, see Digest Footnote
#1.)

INADEQUATE CONTROLS OVER ACCOUNTS
RECEIVABLE RECORDS AND RELATED REPORTING

The Department did not exercise adequate
controls over accounts receivable records
and related reporting. Some of the
conditions we noted follow:

• The Department was unable to provide
certain requested accounts receivable
records, including a listing of accounts,
history of collection attempts, records of
billings/collections, or records showing
referral of accounts to the Comptroller’s
Offset system and/or the Attorney
General’s Office. In the absence of this
information, we were unable to determine
the accuracy and completeness of accounts
receivable activities reported to the
Office of the State Comptroller.

• The Department was unable to provide
current policies or procedures for the
handling and reporting of receivables. We
obtained a draft copy of policies and
procedures from the Department dated
January 9, 2009. We could not determine if
these policies and procedures had been
approved by management or were currently
practiced by the Department.

• Four of 8 (50%) Quarterly Summary of
Accounts Receivable Reports (C-97) and
Aging of Total Gross Receivable Reports
(C-98) for the General Revenue Fund
contained revenue source codes that were
not listed in the Statewide Accounting
Management System Manual. (Finding 2,
pages 15-17) This finding has been
repeated since 2005.

We recommended the Department review all
accounts receivable reports to ensure
accuracy before timely submission to the
Comptroller. In addition, the Department
should maintain detailed records and
supporting documentation of all billing
and collection activity to support
accounts receivable balances reported and
to accurately estimate amounts that may be
uncollectible.

Department personnel accepted our
recommendation and reported they are
taking steps to implement proper internal
controls. (For the previous Department
response, see Digest Footnote #2.)

INADEQUATE CONTROLS OVER SPECIAL STATE
TRUST FUND

The Department did not exercise adequate
controls over its Special State Trust Fund
(Fund 251). The Department operates Fund
251 as an agency fund in the State
Treasury. The purpose of this fund is to
hold wage claims collected from employers
by the Department on behalf of Illinois
workers (claimants) and hold those monies
until the claimants can be located and
properly paid. Some of the conditions we
noted follow:

• The Department did not maintain a ledger
of claimants and corresponding dollar
amounts comprising the balance held in
Fund 251. Comptroller records showed
balances of $2,332,105 and $1,279,400 held
in Fund 251 as of June 30, 2014 and June
30, 2015, respectively.

• Department receipt records were unable
to be reconciled to the Comptroller’s
Monthly Revenue Status (SB04) report for
Fiscal Year 2015. The irreconcilable
amount noted of $116,884 is approximately
44% of the total receipts amount reported
on the Comptroller’s SB04 report as of
June 30, 2015. The Department was unable
to provide reconciliations to explain the
difference noted.

• The Department transferred funds,
totaling $1,052,457, from Fund 251 to the
General Revenue Fund, via voucher, during
the engagement period. However, the
Department could not provide documentation
to substantiate the funds transferred were
held for more than one year. Also, the
Department could not provide support for
how it determined which funds were
required to be transferred. (Finding 3,
pages 18-20) This finding has been
repeated since 2007.

We recommended the Department maintain
detailed records for all Fund 251
transactions. These records should include
a ledger of claimants and monthly
reconciliations of the balance in the Fund
to the State Comptroller’s SB04 reports.
Finally, we recommended the Department
comply with the Minimum Wage Law (820 ILCS
105/12(b)) by transferring the required
amounts from Fund 251 to the General
Revenue Fund and maintaining documentation
of these transfers.

Department personnel accepted the
recommendations and reported taking
remedial actions to address the conditions
noted. (For the previous Department
response, see Digest Footnote #3.)

FAILURE TO PERFORM ADEQUATE AND/OR
ACCURATE RECONCILIATIONS

The Department did not perform adequate
and/or accurate expenditure and/or cash
balance reconciliations during the
examination period. The Department
operated 8 funds during the examination
period: the General Revenue Fund, the
Amusement Ride and Patron Safety Fund, the
Special State Trust Fund, the Child Labor
Law Enforcement Fund, the Employee
Classification Fund, the Department of
Labor Federal Projects Fund, the Federal
Industrial Services Fund, and the Wage
Theft Enforcement Fund. The Department
should have performed 190 expenditure
reconciliations during Fiscal Years 2014
and 2015. Some of the conditions we noted
follow:

• The Department failed to prepare 106 of
190 (56%) monthly reconciliations to the
Comptroller’s Monthly Appropriation Status
(SB01) report. As a result, we were only
able to test 84 monthly reconciliations.

• Twenty-six of 84 (31%) monthly
reconciliations prepared by the Department
did not actually reconcile with the SB01
report.

• Twenty-five of 84 (30%) monthly
reconciliations were not signed or dated.
As a result, we could not determine if the
reconciliations were prepared in a timely
manner. (Finding 4, pages 21-23) This
finding has been repeated since 2007.

We recommended the Department implement
procedures to ensure all monthly
reconciliations are complete, accurate,
and prepared in a timely manner and update
expenditure records when circumstances
warrant. Further, we recommended the
Department maintain all reconciliations
and supporting documentation as required
by the State Records Act.

Department personnel accepted our
recommendation and reported implementing
corrective action to address the issues
noted. (For the previous Department
response, see Digest Footnote #4.)

STATE PROPERTY CONTROL WEAKNESSES

The Department did not exercise adequate
control over the accuracy, completeness,
and timeliness of State property records
and related reporting. Some of the
conditions we noted follow:

• We were unable to reconcile equipment
additions reported on the Department’s
Quarterly Reports of State Property
(C-15s) to equipment expenditures noted on
records maintained by the Office of the
State Comptroller. Differences noted
totaled $6,500 in Fiscal Year 2014 and
$14,254 in Fiscal Year 2015. In addition,
Department personnel were unable to
provide support for additions, deletions,
and transfers reported on the C-15s.

• Two of 8 (25%) C-15s filed with the
Office of the State Comptroller during the
examination period were not filed timely.
They were filed 9 and 18 days late.

• The Department did not perform a
physical inventory of all property items
and certify the inventory to the
Department of Central Management Services
(DCMS) during Fiscal Year 2015 as
required. The certification was due to
DCMS by July 1, 2015. In addition, the
Department could not provide a complete
property listing as of June 30, 2015 to us
for testing purposes. (Finding 5, pages
24-27) This finding has been repeated
since 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. In addition, the
Department should ensure all equipment is
accurately and timely recorded on the
Department’s property records, equipment
additions are properly tagged and charged
to proper detail object codes, and the
Department should maintain documentation
of any equipment additions, deletions and
transfers. Lastly, we recommended the
Department thoroughly review all reports
prepared from internal records for
accuracy before timely submission to the
Comptroller and DCMS.

Department personnel accepted the
recommendations and stated they are making
a concerted effort to improve controls
over the recording and reporting of State
property. (For the previous Department
response, see Digest Footnote #5.)

OTHER FINDINGS

The remaining findings pertain to 1)
noncompliance with the Fiscal Control and
Internal Auditing Act, 2) lack of disaster
contingency planning or testing to ensure
recovery of computer systems, 3)
inadequate controls over personal
services, 4) inadequate controls over
voucher processing, 5) incomplete and
inaccurate agency workforce reports, 6)
noncompliance with the Employee
Classification Act, 7) inadequate controls
over travel expenditures, 8) failure to
maintain leave of absence documentation,
and 9) inadequate monitoring and controls
over contract and grant agreements. We
will review the Department’s progress
toward implementation of our
recommendations during our next regularly
scheduled compliance examination.

ACCOUNTANT’S OPINION

We conducted a compliance examination of
the Department for the two years ended
June 30, 2015 as required by the Illinois
State Auditing Act. The accountants
qualified their report on State Compliance
for findings 2015-001 through 2015-005.
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.

FRANK J. MAUTINO
Auditor General

FJM:cmd

AUDITORS ASSIGNED

This examination was performed by the
Office of the Auditor General’s staff.

DIGEST FOOTNOTES

#1 – Inadequate controls over revenues and
related reporting – Previous Department
Response

2013 – The Department is in the process of
hiring two Account Tech II positions to
increase the Fiscal Division to three
employees. The procedures for processing
checks have been changed, and all checks
are now submitted to the Fiscal Division
which will expedite processing and allow
for better controls.

#2 – Inadequate controls over accounts
receivable records and related reporting –
Previous Department Response

2013 – The Department is in the process of
hiring two Account Tech II positions to
increase the Fiscal Division to three
employees. The procedures for processing
accounts receivable information have been
changed, and all such information is now
submitted to the Fiscal Division which
will expedite processing and allow for
better controls.

#3 – Inadequate controls over Special
State Trust Fund – Previous Department
Response

2013 – The Department began a ledger in
Fiscal Year 2013. The Department is
working diligently in Fiscal Year 2014 to
ensure the ledger contains all necessary
information regarding Fund 251 and the
balance in Fund 251. The Department is
also in the process of employing two
Account Tech II positions which should
allow enough staff to maintain the ledger.
In addition, the Department has
implemented new procedures for the
accounting of funds and centralized fiscal
responsibilities. The Department will
continue in its efforts to comply with the
State statutes.

#4 – Failure to perform adequate and/or
accurate reconciliations – Previous
Department Response

2013 – The Department is in the process of
increasing the Fiscal Division personnel
to three by employing two additional
Account Tech II positions. With the
additional staff, the Department should be
able to perform accurate and timely
expenditure reconciliations.

#5 – State property control weaknesses –
Previous Department Response

2013 – The Department is in the process of
hiring two Account Tech II positions to
increase the Fiscal Division to three
employees. In addition, the Department has
created a Chief Information Officer
position. The Fiscal Division and the
Chief Information Officer will work
together in strengthening controls over
state property held by the Department.