REPORT DIGEST

ILLINOIS LIQUOR CONTROL COMMISSION

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

Summary of Findings:

Release Date:
June 11, 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

SYNOPSIS

• The Commission did not have adequate controls over its license certificates to ensure a complete recording of license certificates issued and to protect against unauthorized use.

• The Commission did not consistently follow established procedures for processing license applications. Applications were not always completed properly and several late applications were not assessed a late fee.

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

FY 1996

FY 1995

FY 1994

• Total Expenditures (Dram Shop Fund)

OPERATIONS TOTAL
% of Total Expenditures

 

Personal Services
% of Operations Expenditures
Average No. of Employees

 

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

 

Contractual Services
% of Operations Expenditures

 

Retailer Education Program
% of Operations Expenditures

 

Tobacco Study
% of Operations Expenditures

 

Enforcement Enhancement Initiative
% of Operations

 

All Other Operations Items
% of Operations Expenditures

• Property and Equipment (at cost)

$3,229,169

$3,229,169
100%

$1,660,235
51.41%
54

$472,777
14.64%

$309,341
9.58%

$218,496
6.77%

$288,354
8.93%

0
0

$279,966
8.67%

$538,997

$3,144,331

$3,144,331
100%

$1,568,494
49.88%
54

$471,026
14.98%

$243,270
7.74%

$232,780
7.40%

$293,015
9.32%

0
0

$335,746
10.68%

$474,378

$2,553,080

$2,553,080
100%

$1,247,676
48.87%
48

$369,249
14.46%

$161,905
6.34%

$192,253
7.53%

$149,915
5.87%

$229,216
8.98%

$202,866
7.95%

$449,316

FY 1996

FY 1995

FY 1994

• License Receipts
• Number of Licenses Issued
• Investigations/Inspections Performed
• Citations

$3,888,201
24,360
26,707
5,650

$3,736,834
23,120
23,066
4,290

$3,665,071
25,379
17,048
6,973

AGENCY DIRECTOR(S)

During Audit Period: John M. Dorgan, Arabel Alva Rosales
Currently: Arabel Alva Rosales

Untimely recording of license certificates and lack of reconciliations

Failure to adequately monitor the timeliness and completeness of license applications

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

INADEQUATE CONTROL OVER LICENSE CERTIFICATES

The Commission's internal controls over license certificates were not adequate to ensure a complete recording of license certificates issued and prompt identification of unauthorized use of the certificates.

The Commission uses a tracking log to document the license certificates issued. However, the Commission does not record in a timely manner the license certificates issued. In addition, the Commission does not reconcile the number of certificates issued with the certificates recorded in the tracking log, the actual licenses issued, or the cash receipts for licenses issued. This finding has been repeated since 1992.

The untimely recording of license certificates and the lack of reconciliations create a risk that unauthorized licenses may be issued or that fees collected may be misappropriated.

We recommended the Commission update its tracking log on a daily basis and prepare a reconciliation between the number of certificates issued and the number of actual licenses issued as well as the amount of cash receipts for licenses. (Finding 1, page 12)

The Commission responded it has developed a computerized tracking log to replace its manual system. (For previous agency responses, see Digest Footnote 1.)

INCONSISTENCIES IN PROCESSING LIQUOR LICENSE APPLICATIONS

The Commission did not consistently follow its procedures to ensure license applications were timely and complete. The Liquor Control Act (235 ILCS 5/1-1et seq.) requires liquor license applicants to provide certain information on the application form. In addition, renewal applications must be submitted prior to the expiration of the existing license or be subject to a $25 late fee. (Finding 2, pages 14-15)

Our review of 200 applications showed deviations from Commission procedures including:

• The Commission did not assess late fees for five renewal applications submitted after the expiration of the existing license.

• Sixteen applications were not date stamped while three applications did not have the document control numbers which are used to track applications.

• Ninety three percent (130 out of 140) applications did not contain information regarding the applicant's Federal Tax Stamp as required under the Liquor Control Act, 235 ILCS 5/7-1(14).

Failure to adequately monitor the timeliness and completeness of license applications may cause the State to lose revenues or applicants to be licensed without all information required by law.

We recommended the Commission ensure late filing fees are collected and all required information is included on the application before its approval. The Commission generally agreed with the recommendation.

AUDITORS' OPINION

Our auditor states that the Commission's financial statements for the Dram Shop Fund for the years ended June 30, 1995 and June 30, 1996 are fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITOR

Our Special Assistant Auditor was Gila J. Bronner, C.P.A.

DIGEST FOOTNOTES

#1 INADEQUATE CONTROL OVER LICENSE CERTIFICATES - Previous Agency Responses

1994: "The Commission will immediately modify procedures to ensure that the manual-based tracking log of numbered license certificates is updated on a daily basis. The tracking log will also be matched against deposit records to guarantee that a fee has been processed for each certificate issued. In April of 1995, the Commission will be installing a new, computer-based license issuance system which will automatically track license certificates to deposit records. All voided or damaged certificates will be maintained for audit recordkeeping purposes."

1992: "The Commission has placed a printing order with the Department of Central Management Services to produce license certificates imprinted with paper control numbers. These new license certificate will be delivered to the Commission on or before March 8, 1993. In addition to this, the Executive Director has reorganized the Licensing Division to insure that adequate supervision is maintained over operations in both the Chicago and Springfield offices. The Supervisor of the Licensing Division will be charged with the responsibility of developing written procedures and controls over all aspects of the licensing operation. This effort will include the development of a computer-based inventory control system that will reconcile licenses issued, licenses destroyed, licenses canceled or revoked to a central registry of paper control numbers. This system will also match records with the license-generating database (the SALOON System) to insure that there is a paper control number for each license that is issued. The licensing Supervisor will be required to reconcile records at the close of each business day to guard against loss or improper use of license certificates."