REPORT DIGEST

ILLINOIS LITERACY FOUNDATION

COMPLIANCE EXAMINATION
FOR THE TWO YEARS ENDED JUNE 30, 2019

Release Date:  June 11, 2020

FINDINGS THIS AUDIT:  1

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 0 -- 1
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  1 -- 0 -- 1

FINDINGS LAST AUDIT: 1

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

INTRODUCTION

The Illinois Literacy Foundation
(Foundation) was created to promote
literacy among the residents of the State
of Illinois by supporting literacy
programs and enhancing Statewide literacy
awareness, to make grants and gifts in aid
and support of the goal, and to engage
generally in other lawful endeavors
consistent with the foregoing purposes.

This digest covers the compliance
examination of the Foundation for the two
years ended June 30, 2019. The
Foundation’s financial audit covering the
two years ended June 30, 2019 will be
released under a separate cover.

SYNOPSIS

• (19-1) The Foundation did not maintain
accurate inventory records for the years
ended June 30, 2018 and June 30, 2019.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INACCURATE INVENTORY RECORDS

The Foundation did not maintain accurate
inventory records for the years ended June
30, 2018 and June 30, 2019.

During our testing of inventory, the
Foundation was unable to provide inventory
records to support the number of books
accepted for each fiscal year and the
Foundation did not have any inventory
listings as of June 30, 2018 and June 30,
2019.

The Foundation did provide a listing of
the number of books that were distributed
to each school for each fiscal year.
During our testing over the distribution
listings provided by the Foundation, we
were unable to verify the amounts that
were recorded on financial statements as
inventory expense for both fiscal years
2018 and 2019.  During our testing, we
noted the following exceptions to the
distribution listing:

• The distribution listing for fiscal year
ending June 30, 2018 did not identify the
books by type; therefore, we were unable
to recalculate the total value distributed
in fiscal year 2018.

• The fiscal year 2019 distribution
records did not agree to the fiscal year
2019 final inventory summary.  We noted
differences of 33 picture books, (714)
chapter books and 8 easy read books.
These differences totaled ($1,112).

The Foundation utilized a website which
provides an online marketplace for books
to value its inventory at the beginning of
fiscal year 2018. The Foundation selected
a sample of 50 books from each category to
determine the average price per type of
book. The Foundation carried forward the
averages obtained from the website for the
remainder of the engagement period. In our
inventory pricing testing, we sampled 20
books to verify the Foundation was using
the lowest price listed on the website to
calculate the average inventory cost that
was used to price inventory. Testing of
this process was the only manner the
auditors could test the Foundation’s
inventory pricing. Of the books tested, we
noted 14 of the 20 (70%) books had a
difference in cost per the website than
listed by the Foundation in their sample
pricing. The cost difference totaled $1.32
for the 14 books noted with differences.
Due to the inaccurate inventory records,
this cost difference cannot be
extrapolated over the entire inventory
population to determine the material
effect on the financial statements. The
Foundation did not preserve documentation
of its initial pricing exercise.

We recommended the Foundation strongly
emphasize the importance of maintaining
accurate inventory records throughout the
year and reconcile those to Foundation
records. Finally training and ongoing
education should be provided to all
employees involved in the inventory
process.

Foundation officials concurred with the
recommendation.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Foundation for the two
years ended June 30, 2019, as required by
the Illinois State Auditing Act.  The
accountants stated the Foundation
complied, in all material respects, with
the requirements described in the report.

This compliance examination was conducted
by Sikich, LLP.

JANE CLARK
Division Director

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

FJM:sdw