FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE RECONCILIATION OF DEPARTMENT FIXED ASSET RECORDS
The Department did not adequately reconcile its fixed asset records to the
quarterly reports filed with the Office of the State Comptroller. In addition 6 equipment
purchase vouchers, of 25 vouchers examined, could not be traced to the Department’s
property control records.
The additions and net transfers reported to the Comptroller from the first quarter
through the third quarter of the fiscal year ended June 30, 2001 did not agree with the
Department’s records. During the fiscal year ended June 30, 2002, we noted that there
were no supporting documents for the additions and net transfers from the second quarter
through the fourth, or for $42,137 of deletions on the second and third quarter reports
filed with the Comptroller.
Department personnel stated that a reconciliation could not be performed to address
these exceptions because necessary information could not be located after the retirement
of the person in charge of property records. (Finding 1, pages 11-12)
Department officials agreed with our finding and stated they will ensure that all fixed
asset additions are posted to the property records within 30 days of acquisition. They
further stated proper reconciliation would be performed quarterly as recommended.
CERTAIN IMPROVEMENT VOUCHERS WERE NOT CONSIDERED FOR INCLUSION AS STATE PROPERTY
The Department did not appropriately evaluate permanent improvement vouchers
(vouchers charged to account code 6600) to determine if they should be included in its
State Property Reporting System (Property Report) during fiscal year 2001 or 2002.
In compiling its Property Report, the Department did not consider assets coded to
account series 6600 - Permanent Improvements. The Department has not determined the amount
of permanent improvement additions that should be included in the Property Report, as the
6600 code series also has excludable amounts such as repair and maintenance items.
The Illinois Administrative Code (44 IL Adm. Code 5010.400) states that agencies are
required to adjust property records within 30 days of acquisition, change, or deletion of
fixed asset items, including assets coded as permanent improvements.
Due to the large number of items coded to "6600 - Permanent Improvements",
the Department did not estimate the amount of unreported fixed asset additions. Total
vouchers coded to these accounts amounted to approximately $585,000 and $1,095,000 for
fiscal year 2001 and 2002 respectively. (Finding 3, page 14)
Department personnel agreed with our finding and stated they will review the "6600
- Permanent Improvements" coded vouchers for fiscal years 2001 and 2002 and adjust
their records and reports accordingly. Further, for FY 03 and forward, the Department will
appropriately capitalize all permanent improvements.
INACCURATE REPORTING OF CAPITAL ASSETS
The Department did not maintain adequate records of its capital assets for
financial reporting purposes. Specifically, the Department inappropriately excluded
$27,860,000 in individual assets for financial reporting purposes. The Department did not
record buildings and the related accumulated depreciation for items that were acquired
prior to 1948 and were above the capitalization threshold for financial reporting
purposes. The buildings and improvements appeared to be excluded because of the date of
their acquisition. For buildings still in use, they should be capitalized and depreciated
over their remaining estimated useful life.
Governmental Accounting Standards Board Statement No. 34 requires all State agencies to
restate the beginning of year balances (June 30, 2001) for capital assets. The restatement
records the effect of depreciation as well as deletions of capital assets that will no
longer be reported as capital assets within the financial statements because they fall
below the capitalization threshold for financial reporting purposes.
The Department also inappropriately capitalized land assets totaling $501,780 when
individually each parcel was below the capitalization threshold of $100,000. The
Department said the problems noted were the results of turnover of key staff in the
financial reporting area. (Finding 5, pages 17-18)
Department personnel agreed with our finding and stated they would make the necessary
adjustments in order to be in compliance with GASB 34 and our recommendations.
LINCOLN’S CHALLENGE ACADEMY PAY REPORT ROSTERS MISSING STUDENT SIGNATURES
Certain students were given a monthly allowance without signing the "Pay
Report Roster by Team".
Students enrolled in the Lincoln’s Challenge Academy receive a weekly allowance
while they are in the residence phase of the Academy. Allowances are paid to the students
in cash. Upon receipt of the cash, the student is required to sign a roster as proof that
the funds were received. We examined two pay rosters and found students' signatures
missing. The first roster supported 76 student allowance payments of $45 each, for a total
of $3,420. Twelve signatures were missing from this report, representing $540. The second
report supported 47 student allowance payments of $30 each, for a total of $1,410. One
student signature was missing from this report.
According to the Department, bank personnel were disbursing the funds and were
responsible for obtaining the students signatures. Procedures for payment of student
allowances, when students were not available during pay processing, were not adequate to
ensure funds were being disbursed to authorized individuals. During fiscal years 2001 and
2002, approximately $266,000 and $216,000 was paid in allowances, respectively. (Finding
4, pages 15 - 16)
The Department agreed with our finding. Department personnel stated new procedures have
been developed and implemented to ensure that signatures are properly obtained and to
provide for adequate documentation of the re-deposit of the cash if it is not disbursed.
They further stated a process to review all pay reports for compliance with these
procedures has also been established.
OTHER FINDINGS
The remaining finding is considered less significant and corrective action is
reportedly in process. We will review progress towards the implementation of our
recommendations in our next audit.
Responses were provided by the Department’s Adjutant General, David Harris.
AUDITOR’S OPINION
We conducted a compliance audit of the Department as
required by the Illinois State Auditing Act. We have not audited any financial statements
of the Department for the purpose of expressing an opinion because the Department does
not, nor is it required to, prepare financial statements.
_____________________________________
WILLIAM G. HOLLAND, Auditor General
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SPECIAL ASSISTANT AUDITORS
Our special assistant auditors for this audit were McGladrey & Pullen, LLP.
