STATE OF ILLINOIS OFFICE OF THE AUDITOR GENERAL MANAGEMENT AND PROGRAM AUDIT REND LAKE CONSERVANCY DISTRICT SEPTEMBER 2004 WILLIAM G. HOLLAND AUDITOR GENERAL SPRINGFIELD OFFICE: CHICAGO OFFICE: ILES PARK PLAZA MICHAEL A. BILANDIC BLDG. • SUITE S-900 740 EAST ASH • 62703-3154 160 NORTH LASALLE • 60601-3103 PHONE: 217/782-6046 PHONE: 312/814-4000 FAX: 217 /785-8222 • TTY: 888/261-2887 FAX: 312/814-4006 OFFICE OF THE AUDITOR GENERAL WILLIAM G. HOLLAND To the Legislative Audit Commission, the Speaker and Minority Leader of the House of Representatives, the President and Minority Leader of the Senate, the members of the General Assembly, and the Governor: This is our report of the Management and Program Audit of the Rend Lake Conservancy District. The audit was conducted pursuant to Public Act 93-0275, which became effective July 22, 2003. The audit was conducted in accordance with generally accepted government auditing standards and the audit standards promulgated by the Office of the Auditor General at 74 Ill. Adm. Code 420.310. The audit report is transmitted in conformance with Section 3-14 of the Illinois State Auditing Act. WILLIAM G. HOLLAND Auditor General Springfield, Illinois September 2004 INTERNET ADDRESS: [email protected] RECYCLED PAPER • SOYBEAN INKS REPORT DIGEST SYNOPSIS The management and program audit, and the financial audit, MANAGEMENT AND which were conducted pursuant to Public Act 93-0275, concluded that PROGRAM AUDIT the Rend Lake Conservancy District has significant deficiencies in virtually all aspects of its management, including: planning; water and FINANCIAL AUDIT sewage operations; personnel; contract management; property and For the Year Ended: equipment management; performance monitoring; and internal controls. April 30, 2004 The management and program audit, which identified REND LAKE deficiencies in 16 areas and recommended more than 70 specific actions, concluded the following: CONSERVANCY DISTRICT • Board. The Board of Trustees needs to fulfill its fiduciary responsibility over the Rend Lake Conservancy District (District). • Budget. The District lacked a proper budget for FY04; revenues were Summary of Findings: over $12 million but the Board authorized $25 million in expenditures. Management and Program Audit: 16 • Losses. The District’s recreational businesses lost $900,000 in FY04. Financial Audit: 15 • Consultants. Outside engineering and legal consultants were paid more than $500,000 in FY04 when a Board ordinance called for internal engineering and legal departments. • Personnel. There was no written staffing plan that analyzed staffing needs and the District lacked an adequate number of Released: September 2004 managers with a business background. • Planning. The District lacked a mission statement, goals and objectives, and a strategic or business plan. The District’s operations did not collect adequate performance data. • Contracts. Contracts were not bid as required by the River Conservancy Districts Act, there was no list of contracts, and tenants were not monitored. The District lacked basic information, such as acres of farmland leased or number of oil wells on District property. • Water. The water billing system made errors; no supervisory reviews were performed to verify the accuracy of bills. Residential customers were on self-determined billing cycles – some paid monthly, some annually, and some in between. • Expenditures. Some expenditures sampled did not appear to State of Illinois benefit the District. The General Fund (which obtains revenues Office of the Auditor General from taxes) was used to make charitable donations and to buy turkeys at Thanksgiving for employees, trustees, and consultants. WILLIAM G. HOLLAND AUDITOR GENERAL The financial statement audit contained 15 findings which included the following: • Controls. Internal controls were materially deficient and included: To obtain a copy of the report contact: – Weaknesses in segregation of duties. Office of the Auditor General – Lack of evidence of supervisory review and approval in 35 of Iles Park Plaza 40 employee timesheets used to prepare payroll. 740 East Ash Street Springfield, IL 62703 – Inadequate controls over cash disbursements. (217) 782-6046 or • Policies. The policies and procedures manual was incomplete. TTY: (888) 261-2887 • Pension Plan. The District failed to enroll employees in the Illinois Municipal Retirement Fund (IMRF) in accordance with IMRF rules This Report Digest is also available on the and regulations. We noted 23 of 51 employees tested who should worldwide web at: have been enrolled into IMRF were not for FY04. http://www.state.il.us/auditor • Purchases. The District did not use purchase orders for non-water purchases and did not use receiving reports for purchases. MANAGEMENT, PROGRAM, AND FINANCIAL AUDIT OF THE REND LAKE CONSERVANCY DISTRICT REND LAKE CONSERVANCY DISTRICT FINANCIAL AUDIT For The Year Ended April 30, 2004 SUMMARY OF General Land in ACTIVITIES Total Government Water Development Recreation Sewage General Revenues: Taxes: Property ....................... 573,529 Personal replacement 55,883 Investment earnings ....... 77,656 Miscellaneous................. (2,358) Transfers - Total General Revenues and Transfers ............. 704,710 Net Program (Expense) Revenue...................... 1,345,236 Change in Net Assets....... 2,049,946 Net Assets, Beginning....... 20,783,455 Cumulative Effect of Accounting Change ..... 1,084,381 Net Assets, Ending $23,917,782 Program Revenues: Charges for Services...... $11,528,421 $ 6,848 $ 7,916,910 $ 149,240 $ 3,245,838 $ 209,585 Operating Grants and Contributions ............... 36,270 18,135 - - 18,135 - Capital Grants and Contributions ............... 96,000 - 96,000 - - - Total Program Revenues 11,660,691 24,983 8,012,910 149,240 3,263,973 209,585 Expenses: Governmental activities: General government .... 781,935 781,935 - - - - Business-type activities: Water............................ 5,228,577 - 5,228,577 - - - Land in Development .. 57,465 - - 57,465 - - Recreation .................... 3,891,833 - - - 3,891,833 - Sewage ......................... 355,645 - - - - 355,645 Indirect Expense Allocation: Governmental activities: General Government (477,357) (477,357) - - - - Business-type activities: Water............................ 211,597 - 211,597 - - - Land in Development .. - - - - - - Recreation .................... 265,760 - - - 265,760 - Sewage ......................... - - - - - - Total Expenses ................. 10,315,455 304,578 5,440,174 57,465 4,157,593 355,645 Net Program (Expense) Revenue........................... $ 1,345,236 $ (279,595) $ 2,572,736 $ 91,775 $ (893,620) $ (146,060) SELECTED ASSET AND LIABILITY ACCOUNT BALANCES Cash and Investments ............................................................................................................................................. $5,564,349 Capital Assets, Net of Accumulated Depreciation.................................................................................................. $23,050,479 Notes Payable......................................................................................................................................................... $5,635,316 Net Assets............................................................................................................................................................... $23,917,782 GENERAL MANAGER During the Audit Period: Mr. Terry Black (Interim) through 6/3/03; Mr. Gary May, 6/4/03 through 6/30/04 Currently: Mr. Glenn Poshard (Interim), beginning 7/6/04 ii MANAGEMENT, PROGRAM, AND FINANCIAL AUDIT OF REND LAKE CONSERVANCY DISTRICT INTRODUCTION Pursuant to Public Act 93-0275, the Office of the Auditor General conducted the management and program audit, and the financial audit of the Rend Lake Conservancy District (District). The audits concluded that the District has significant deficiencies in virtually all aspects of its management, including: planning; water and sewage operations; personnel; contract management; property and equipment management; performance monitoring; and internal controls. The financial statement audit contains 15 findings and recommendations. The management and program audit identified deficiencies in 16 areas and recommended 70 specific actions that the District needed to take. This Report Digest summarizes the findings of both the management and program audit and the financial audit. MANAGEMENT AND PROGRAM AUDIT The management and program audit of the Rend Lake Conservancy District reported many findings in the areas that were audited. These findings indicate that the Board of Trustees (Board) needs to fulfill its fiduciary responsibility over the Rend Lake Conservancy District. • There was no proper budget for the District, the Expense Committee was not functioning, tenants and contractors were not being The Board needs to monitored, and outside engineering and legal consultants were paid fulfill its fiduciary more than $500,000 in fiscal year 2004 when a Board ordinance responsibility over called for internal engineering and legal departments. the Rend Lake • The District’s recreational businesses (e.g., golf, restaurant, and Conservancy shooting) lacked a business plan and lost approximately $900,000 District. after depreciation in fiscal year 2004. • The District did not have a written mission statement, goals and objectives, or complete written policies and procedures. • The District lacked an adequate number of professional managers with a business background.