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REPORT DIGEST OFFICE OF THE FINANCIAL
AUDIT For
the Year Ended: June
30, 2007 and COMPLIANCE
EXAMINATION For the Two Years Ended: June 30, 2007 Summary of Findings: Total this audit 6 Total last audit 9 Repeated from last audit 3 Release Date: June 5, 2008
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 the Full Report are also available on the worldwide web at www.auditor.illinois.gov |
SYNOPSIS ¨ The Secretary of State did not have adequate reviews of estimations of building and building improvement useful lives on preparation of the Office’s financial statements. ¨ The Secretary of State did not require employees to submit time sheets in compliance with the State Officials and Employees Ethics Act. ¨ The Secretary of State permits multiple employees to have access to the same cash drawers at the Drivers License Facilities. ¨ The Secretary of State purchased postage at the end of the fiscal year in excess of reasonably expected usage for the beginning of the next fiscal year. {Receipts, Expenditures and Activity Measures are summarized on the reverse page.} |
FINANCIAL
AUDIT AND COMPLIANCE EXAMINATION
For The Two Years Ended June 30, 2007
|
RECEIPT/EXPENDITURE STATISTICS |
FY 2007 |
FY 2006 |
FY 2005 |
|
·
Total
Cash Receipts (All Funds)........................... |
$2,039,119,437 |
$2,033,518,851 |
$2,024,903,118 |
|
·
Total Expenditures (All Funds).............................. |
$520,355,963 |
$482,711,558 |
$486,856,273 |
|
OPERATIONS
Personal Services.......................................
% of Total Expenditures........................
Average No. of Employees
Regular Positions..................................
Extra Help........................................... |
$168,797,954
32.4%
3,444
401 |
$158,146,734
32.8%
3,403
347 |
$153,040,125
31.4%
3,545
340 |
|
Other Payroll Costs (FICA,
Retirement).......
% of Total Expenditures........................ |
$32,816,636
6.3% |
$24,701,684
5.1% |
$35,987,653
7.4% |
|
Contractual Services...................................
% of Total Expenditures........................ |
$32,165,422
6.2% |
$34,046,531
7.1% |
$31,281,083
6.4% |
|
All Other Operations Items..........................
% of Total Expenditures........................ |
$53,152,125
10.2% |
$45,872,810
9.5% |
$48,632,828
10.0% |
|
AWARDS AND GRANTS TOTAL....................
% of Total Expenditures............................. |
$225,183,882
43.3% |
$211,550,336
43.8% |
$211,318,668
43.4% |
|
REFUNDS & PERMANENT IMPROVEMENTS -
TOTAL...................................................................
% of Total Expenditures...................................... |
$8,239,944
1.6% |
$8,393,463
1.7% |
$6,595,916
1.4% |
|
·
Cost
of Property and Equipment (Cash basis). |
$476,245,342 |
$438,350,136 |
$423,055,816 |
|
|
FISCAL
YEAR |
||
|
SELECTED ACTIVITY MEASURES (unaudited) |
2007 |
2006 |
2005 |
|
· Passenger Car Plates........................................ |
8,023,508 |
8,098,518 |
7,617,742 |
|
· Truck and Bus Plates......................................... |
1,884,152 |
2,285,415 |
1,867,193 |
|
· Driver's Licenses................................................ |
3,259,258 |
3,238,104 |
3,157,186 |
|
· Driver's Histories................................................ |
5,628,565 |
5,591,412 |
5,606,970 |
|
· Registered Corporations..................................... |
374,096 |
366,721 |
357,114 |
|
· Equity Securities Registered (billions)................. |
$103.6 |
$148.2 |
$135.0 |
|
AGENCY HEAD |
|
During Audit Period:
Honorable Jesse White
Currently: Honorable
Jesse White |
|
Useful lives of
buildings and building improvements was changed Corrections of
$116.4 million Employees are
assumed to be working unless otherwise noted Multiple employees
access the same cash drawers Approximately $7
million in postage on hand at June 30, 2006 and 2007
|
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS LACK OF
FINANCIAL REPORTING REVIEW PROCEDURES The Office of the Secretary of State did not have adequate reviews of estimations of building and building improvement lives in the preparation of the Office’s financial statements. The Office had previously depreciated all buildings over a 20 year period and all building improvements over a 10 year period. This includes such structures and related improvements as the Howlett office building, the Willard Ice Building, and the Illinois State Capitol, for which the Secretary of State is the responsible State agency. During the year ended June 30, 2007, Office management determined that the lives over which buildings and improvements were depreciated was not reasonable and that a life range of 30 to 75 years should be applied for buildings and a life range of 10 to 25 years should be applied to related building improvements. The result of this change required the Office to make a correction of $116.432 million to the undepreciated cost of its capital assets as of July 1, 2006. Adequate management oversight over financial reporting is essential to provide accurate and meaningful information to the users of the Office financial statements. (Finding 1, page 11) We recommended the Office maintain adequate review procedures over its financial reporting, including reviews of accounting estimates used in preparation of its financial statements. Secretary of State officials responded they have implemented the auditor’s recommendation. TIME SHEETS NOT REQUIRED The Secretary of State
did not require its employees to submit time sheets in compliance with the
State Officials and Employees Ethics Act (Act). Employees’ time is
tracked using a “negative” timekeeping system whereby the employee is assumed
to be working unless otherwise noted.
An original year-to-date attendance form is maintained for each
employee. This form is updated by an
attendance clerk only when an employee takes any type of leave. The Office requires employees and the division
supervisors to sign year-to-date attendance forms acknowledging their accuracy. The Act requires that the Office adopt and
implement personnel policies which require each Secretary of State employee
to periodically submit time sheets documenting the time spent each day on
official State business to the nearest quarter hour. Secretary of State personnel stated that
they were in the process of revising their timekeeping policy and procedures
to be compliant with the Act and that these changes will be effective in FY
08. (Finding 2, pages 12-13) We recommended the
Secretary of State continue in its efforts to amend its policies and
procedures to require all employees to submit time sheets documenting the
time spent each day on official State business to the nearest quarter hour as
required by the Act. Secretary of State
officials accepted the recommendation and stated they have revised the
attendance system to reflect the presence of employees at work. INADEQUATE
CONTROL OF CASH AT DRIVERS LICENSE FACILITIES The Secretary of State permits multiple employees to have access to the same cash drawers at the Drivers License Facilities (facilities). During our fieldwork, we visited 4 of the Office’s 138 facilities. We determined that multiple employees at three of these facilities could access the same cash drawers. Secretary of State personnel indicated the excessive access to the cash drawers is a byproduct of the emphasis placed on prompt service and minimal customer wait time. By permitting employees to access more than one cash drawer, the Office is reducing the wait time that could occur when employees leave their terminals for any reason, thus permitting another employee to continue processing at the terminal without switching out the cash drawers and restarting the terminal. (Finding 4, page 16) We recommended the Secretary of State ensure that each employee utilizes an individual cash drawer and not be permitted to access the drawer of another employee. At the end of the employee’s shift, the contents of the drawer should be reconciled by the employee and the facility manager, or designee, to ensure its contents are complete. Officials accepted our finding and stated they have installed new computers at all Drivers License Facilities that will utilize biometric keyboards whereby an employee can access the computer/terminal by scanning their fingerprint. This will restrict computer access and any discrepancies detected between the validation total and drawer amount at the close of business by facility personnel can be traced to a specific employee, thus increasing accountability. YEAR END CARRYOVER OF POSTAGE The Secretary of State purchased postage at the end of fiscal years 2006 and 2007 in excess of reasonably expected usage for the beginning of the next fiscal year. For the years ended June 30, 2006 and 2007, the Office expended contractual services appropriations for postage in the amounts of $6,157,389 and $5,772,468 respectively, in the final quarters of those fiscal years. End of year postage on hand represented 78.44% and 64.50% of the total postage used for those respective years. A summary of postage for fiscal years 2006 and 2007 follows. FY 06 FY 07 Postage Postage on Hand on Hand Beginning of Year $6,307,000 $6,977,358 Purchased/expenditures 9,565,353 8,881,154 Postage Used (8,894,995) (8,953,219) End of Year $6,977,358 $6,905,293 The practice of expending remaining appropriations in such a fashion that postage is accumulated beyond current needs circumvents the appropriation process and does not effectively use State resources. (Finding 5, page 17) This finding was first reported in 2003. We recommended the Secretary of State limit expenditures for postage to amounts actually needed for current operations taking into account the amounts already on hand. Secretary of State officials accepted our recommendation and stated they will continue to strengthen controls over postage purchases. (For the previous Office response, see Digest Footnote #1.) OTHER FINDINGS The remaining findings are reportedly being given attention by the Office of the Secretary of State. We will review progress toward implementing all recommendations in our next compliance engagement.
AUDITORS' OPINION Our auditors stated the financial statements of the Office of the Secretary of State as of June 30, 2007, and for the year then ended are fairly presented in all material respects. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KMA:pp SPECIAL ASSISTANT AUDITORS Sleeper, Disbrow, Morrison, Tarro & Lively, LLC were our special assistant auditors for this audit. DIGEST FOOTNOTES
#1 YEAR END CARRYOVER OF
POSTAGE – Previous Office Response
Accepted. The Secretary of State had adopted
policies and procedures to enable an annual analysis of postage
expenditures. The Office has already
ended the practice of holding uncashed postage warrants, and will continue to
improve on our other postage processes. |