INTRODUCTION
The Illinois Liquor Control Commission (Commission) was created and authorized under the Liquor Control Act of 1934 (235 ILCS 5/3-1). The Commission's function is to license and regulate the alcoholic beverage sales of retailers, distributors (operating inside and outside the State), wholesalers, manufacturers, and other liquor concerns. As mandated by the State statute, the Commission developed and distributed formal Rules and Regulations to which liquor licensees must adhere. Effective June 1, 2003, Executive Order Number 9 (2003) transferred all the powers, duties, rights, and responsibilities vested in the Commission to the Illinois Department of Revenue. As a means of easing the transition of the Commission into the Department of Revenue, management decided to report activity of the Commission through the fiscal year ended June 30, 2003.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE CONTROLS OVER EQUIPMENT
The Commission’s property control records did not accurately reflect property and equipment.
Several different types of exceptions were noted during our testing of property including problems with recording, reporting, tagging, and the valuation of the equipment.
Inaccurate property control records result in incorrect accounting information and could cause unnecessary equipment expenditures and inaccurate financial reporting. Equipment not properly tagged could lead to improper use of Commission assets. (Finding 1, pages 8-9)
We recommended that the Commission adhere to its procedures to ensure that the property and equipment records are properly maintained.
Commission officials agreed with the finding and recommendation and stated that the successor agency (Department of Revenue) will manage property control and fixed asset reporting.
IMPROPER RECONCILIATION OF RECEIPTS
The Commission did not perform monthly reconciliations of its receipts reported to the Office of the State Comptroller. As a result, Commission receipts were understated by $42,546 for the fiscal year ended June 30, 2003.
Statewide Accounting Management System (SAMS) procedure 25.40.20 requires monthly reconciliations of receipts to State Comptroller reports (Finding 2, page 10). This finding has been repeated since 2000.
We recommended the Commission prepare monthly reconciliations as required by SAMS. The process should include the reconciliation of the Commission’s accounting information and information on its licensing computer system with amounts reported to the Office of the State Comptroller. (For previous Commission responses, see Digest Footnote.)
Commission officials agreed with our finding and recommendation and stated they will be implementing the policies and procedures of the successor agency (Department of Revenue) relating to financial control and monthly reconciliation.
AUDITORS’ OPINION
We conducted a compliance audit of the Illinois Liquor Control Commission for the year ended June 30, 2003 as required by the Illinois State Auditing Act. We have not audited any financial statements of the Commission for the purpose of expressing an opinion because the Commission does not, nor is it required to, prepare financial statements.
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WILLIAM G. HOLLAND, Auditor General
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SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were Duffner & Company, P.C.
DIGEST FOOTNOTE
IMPROPER RECONCILIATION OF RECEIPTS –
Previous Agency Responses
2002: Accepted and Resolved. The Commission agrees that it improperly reported and underreported receipts in both fiscal year 2001 and fiscal year 2002. The cause of the problem was in the way the Commission reconciled its monthly receipts, especially direct deposit and in-transit items. The Commission was operating under a procedure which incorrectly reported certain deferred license revenues and omitted direct deposit items. The Commission has taken steps to correct this matter. The Commission has developed a Microsoft Access database to track and report daily deposits to reconcile to the Commission's Licensing computer system, to the Receipts Deposit Transmittal, and to the Comptroller’s Monthly Revenue Report, in accordance with SAMS procedure 25.40.20.
2000: The Commission agrees that it under reported receipts in both fiscal year 1999 and 2000. The cause of the problem lies in the way the Commission reconciles its year-end receipts, especially in-transit items. The Commission was operating under a procedure, which incorrectly reported certain deferred license revenues. In addition, the Commission received a late payment via electronic funds transfer (EFT) in fiscal year-1999 for reimbursement for Food and Drug Administration contract expenses that should have been reported as in-transit versus actual year. The program was new and the Commission was unfamiliar with the technicalities of EFT. The Commission has taken steps to develop a written procedure on the recording and reconciling of receipts each month and at the close of the fiscal year.
