STATE OF ILLINOIS
ILLINOIS DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF CAPITAL ASSETS ACCOUNT
For the Year Ended June 30, 2011
Performed as Special Assistant Auditors for
the Auditor General, State of Illinois
STATE OF ILLINOIS
ILLINOIS DEPARTMENT OF NATURAL RESOURCES
FINANCIAL AUDIT OF CAPITAL ASSETS ACCOUNT
For the Year Ended June 30, 2011
TABLE OF CONTENTS
AGENCY OFFICIAL,S .................................................................................................... .
FINANCIAL REPORT
Summary ...................................................................................................................... 2
Independent Auditors' Report...................................................................................... 3
Financial Schedule
Schedule of Capital Assets.......... ............... ...... ........ ....... ...... ................................... 5
Notes to Schedule of Capital Assets ........................................................................ 6
Supplementary Information
Schedule of Changes in Capital Assets... ........ ... ..... ..... .... ............................. ........... 11
Independent Auditors' Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government A uditing Standards........................................................................... 12
Schedule of Findings............................... .... ............................ ..................................... 14
Prior Findings Not Repeated .......... ....................... ............. ......................................... 15
STATE ()F ILLINOIS
ILLINOIS DEPARTMENT OF NATURAL RESOURCES
AGENCY OFFICIALS
Director
Assistant Director
Deputy Director (separated 5/1 1)
Deputy Director (separated 4/81 11)
Deputy Director
Chief of Staff (effective 7/2/10)
Office of Fiscal Management (acting)
Office of Legal Counsel
Chief Internal Auditor
Office of Architecture, Engineering and Grants (acting)
Office of Land Management
Office of Law Enforcement
Office of Mines and Minerals
Office of Realty and Environmental Planning (acting)
Office of Resource Conservation
Office of Scientific Research and Analysis
Office of Strategic Services
Office of Water Resources (separated 12/31/10)
Office of Water Resources (acting 113/11 6/151ll)
Office of Water Resources
Department main headquarters is located at:
One Natural Resources Way
Springfield, Illinois 62702-1271
I
Marc Miller
John Rogner
Leslie Sgro
Debbie Stone
Travis Lloyd
Jay Curtis
Damon Stotts
Mitchell Cohen
Lisa LaBonte
John Evans
Ron House
Rafael Gutierrez
Joe Angleton
Todd Rettig
James Herkert
Damon Stotts
Kristin Dicenso
Gary Clark
Arlan JuhI
Arlan JuhI
STATE OF ILLINOIS
IlEPARTMENT OF NATURAL RESOURCES
FINANCIAL REPORT
SUMMARY
The audit of the accompanying Schedule of Capital Assets of the State of Illinois, Illinois
Department of Natural Resources (Department) was performed by Washington, Pittman &
McKeever, LLC.
Based on their audit, the auditors expressed an unqualified opInIon on the Department's
Schedule of Capital Assets.
EXIT CONFERENCE
The financial report was reviewed by Damon Stotts, Chief Fiscal Officer. The Department
waived a formal exit conference.
2
INDEPENDENT AUDITORS' REP()RT
Honorable William G. Holland
Auditor General
State of Illinois
As Special Assistant Auditors for the Auditor General, we have audited the accompanying
Schedule of Capital Assets of the State of Illinois, Department of Natural Resources as of
June 30, 2011. This schedule is the responsibility of the State of Illinois, Department of Natural
Resources' management. Our responsibility is to express an opinion on this schedule based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
Schedule of Capital Assets is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the schedule. An audit also
includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall schedule presentation. We believe that our audit
provides a reasonable basis for our opinion.
As discussed in Note the schedule presents only the Capital Asset Account and does not
purport to, and does not, present fairly the financial position of the State of Illinois, Department
of Natural Resources as of June 30, 2011 and its changes in financial position for the year then
ended in conformity with accounting principles generally accepted in the United States of
America.
In our opinion, the Schedule of Capital Assets referred to above presents fairly, in all material
respects, the Capital Asset Account of the State of Illinois, Department of Natural Resources, as
of June 30, 2011 in conformity with accounting principles generally accepted in the United
States of America.
3
In accordance with we a report dated February
17, 2012 on our consideration of the Illinois, Department Natural Resources' internal
control over financial reporting the Capital Account and on our tests of the State of
Illinois, Department Natural compliance with certain provisions of laws,
regulations, contracts and and other matters as they relate to the Capital Asset
Account. The of that report is to describe the scope of our of internal control
over financial reporting and compliance and the results of that testing, and not to provide an
opinion on the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
Our audit was conducted for the purpose of forming an opinion on the Schedule of Capital
Assets of the State of Illinois, Department of Natural Resources. The accompanying Schedule of
Changes in Capital Assets is presented for the purpose of additional analysis and is not a required
part of the Schedule of Capital Assets. The Schedule of Changes in Capital Assets has been
subjected to the auditing procedures applied in the audit of the Schedule of Capital Assets and, in
our opinion, is fairly stated in all material respects in relation to the Schedule of Capital Assets
taken as a whole.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, the Comptroller, and agency
management, and is not intended to be and should not be used by anyone other than these
specified parties.
Chicago, Illinois
February 17, 2012
vJ~r/~~ t{~t~ UG
WASHINGqON, PITTMAN & MCKEEVER, LLC
4
,JUNE 30, 2011
(expressed in thousands)
Capital Assets not being depreciated:
Land and land improvements $ 371,413
Construction in progress 55
Internally assets in development 372
Easements/rights of way/water-timber-mineral rights
Total Capital Assets not being depreciated:
Capital Assets being depreciated:
Site improvements 425,976
Building and building improvements 258,893
Equipment 63,516
Capital lease-equipment 14
Infrastructure 51,462
Non-internally generated software 36
Internally generated software 3,360
Easements/rights of way/water-timber-mineral rights 1,484
Other intangible assets 6,939
Total Capital Assets being depreciated: 811
Less Accumulated Depreciation for:
Site improvements 227,992
Building and building improvements 130,021
Equipment 54,993
Capital lease-equipment 9
Infrastructure 28,287
Non-internally generated software 36
Internally generated software 3,360
Easements/rights of way/water-timber-mineral rights 996
Other intangible assets 273
Total Accumulated Depreciation 445,967
Total Capital Assets being depreciated, net 365,713
Total Capital Assets, net $ 815,056
The accompanying Notes to Schedules of Capital Assets are an integral part of this schedule.
5
STATE OF ILLIN()IS
DEPARTMENT OF NATURAL RESOURCES
NOTES TO SCHEDULE ()F CAPITAL ASSETS
.June 30,2011
1. DESCRIPTION OF CAPITAL ASSET ACCOUNT
The State of Illinois, Illinois Department of Natural Resources (the Department) maintains a
Capital Asset Account. Capital assets include construction in progress, infrastructure,
intangibles, land and land improvements, site improvements, buildings, building
improvements, equipment, and all other tangible assets that are used in operations and that
have expected useful lives extending beyond a single reporting period.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Schedule of Capital Assets (Schedule) maintained by the Department have been
prepared in accordance with accounting principles generally accepted in the United States of
America (GAAP), as prescribed by the Governmental Accounting Standards Board
(GASB). To facilitate the understanding of data included in the Schedule, summarized
below are the more significant accounting policies.
(a) Reporting Entity
As defined by GAAP, the financial reporting entity consists of a primary government,
as well as its component units, which are legally separate organizations for which
elected officials of the primary government are financially accountable. Financial
accountability is defined as:
(1) Appointment of a voting majority of the component unit's board and either (a)
the primary government's ability to impose its will, or (b) the possibility that the
component unit will provide a financial benefit to or impose a financial burden
on the primary government; or
(2) Fiscal dependency on the primary government.
Based upon the required criteria, the capital asset account does not have component
units, nor is it a component unit of any other entity. However, because the Capital
Asset Account is not legally separate from the State of Illinois (State), it is included in
the financial statements of the State. The State's Comprehensive Annual Financial
Report may be obtained by writing to the State Comptroller's Office, Financial
Reporting Department, 325 West Adams Street, Springfield, Illinois, 62704-1871.
6
N()TES TO SCHEDULE OF CAPITAL ASSETS (Continued)
June 30,2011
SUMMARY
not purport
Department as of June
applicable, for the
accepted in the
(b) Basis of Presentation
POLICIES Continued
rIorhTl ...... c'tCll .. "',rt by the Department and
financial position of the
in its financial position, where
ended in conformity with accounting principles generally
of
The Capital Asset Account balances are reported in the State's Comprehensive Annual
Financial Report. For its reporting purposes, the Department has presented the
Schedule of Capital a columnar format that presents capital assets, net of
accumulated depreciation, as of June 30, 2011.
(c) Basis of Accounting
The Capital Asset Account is reported using the economic resources measurement
focus and the accrual basis of accounting.
(d) Use of Estimates
The preparation of the Schedule of Capital Assets in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and accumulated depreciation at the date of the schedule. Actual results could
differ from those estimates.
(e) Valuation
Capital assets are reported at cost or estimated historical cost or, if donated, at their
fair value at the time of acquisition. Historical costs include the amount paid for the
asset and ancillary charges necessary to place the asset into its intended location and
condition for use. Assets acquired in various amounts for a single purpose which may
not individually meet the capitalization threshold are capitalized if the estimated total
of the project exceeds the capitalization threshold.
F or capital assets that are depreciated, expenditures that extend the useful lives of
capital assets beyond their initial estimated useful lives (preservation costs) or improve
their efficiency (improvements) or capacity (additions) are capitalized, whereas
expenditures for repairs and maintenance are expensed.
Capital assets are depreciated using the straight-line method.
7
DEPARTMENT (IF NATURAL RESOURCES
NOTES TO SCHEDULE (IF CAPITAL ASSETS (Continued)
June 30, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued
(f) Capitalization Policies
Capitalization thresholds and the estimated useful lives are as follows:
Capital Asset Category Capitalization Estimated
Threshold Useful Life
Land $ 100,000 N/A
Infrastructure 250,000 30
Site Improvements 25,000 30
Buildings 100,000 30
Building Improvements 25,000 30
Equipment 5,000 7
Capital Leases - Equipment 5,000 Varies/depends
on contract
Intangible Asset Type Capitalization Estimated
Threshold Usend Life
Easement other than row $25,000 Indefinite
indefinite
Water rights indefinite 25,000 Indefinite
Right of way indefinite 25,000 Indefinite
Software internally 1,000,000 3
generated
Software websites 1,000,000 3
Land easements finite 25,000 Varies/depends
on contract
Software purchased 25,000 3
Conservation land rights 25,000 V aries/depends
finite on contract
Right of way finite 25,000 V aries/depends
on contract
8
I>EPARTMENT OF NATURAL RESOURCES
NOTES TO SCHEDULE OF CAPITAL ASSETS (Continued)
.June 30, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued
(g) Infrastructure
The Department maintains infrastructure a;:);:)',",L;:). including 'J.ft:l'Tt3f"1'J.ft:l1"C
and drainage C"Ct't:>"'1C
dams, tunnels,
In the majority of cases, a legal title document was not created when these assets were
constructed or placed into service. The Department capitalizes all infrastructure assets
supported by purchasing documentation (e.g., contracts, requisitions, purchase orders,
payment documents, etc.). In cases where infrastructure assets are jointly developed
or constructed by the Department and neighboring states or local municipalities, the
Department capitalizes only those assets, which are maintained by the Department and
legal title has not been established by another legal entity.
(h) Historical Treasures and Works of Art
The Department maintains extensive collections of historical treasures and works of
art. Items meeting the following conditions are not capitalized: 1) held for public
exhibition, education, or research in furtherance of public service, rather than financial
gain; 2) protected, kept unencumbered, cared for, and preserved; and 3) subject to an
organizational policy that requires the proceeds from sales of collection items to be
used to acquire other items for collections. All Department historical treasures and
works of art meet these conditions, and are not capitalized in the Schedule of Capital
Assets.
(i) Intangible Assets
The Department maintains various types of intangible assets. These assets lack
physical substance, are nonfinancial in nature, and have an initial useful life extending
beyond a single reporting period. Examples of intangible assets include, but are not
limited to, software (both internally generated and non-internally generated),
easements and rights of way, and water and land use rights. Intangible assets are
capitalized and depreciated based on conventions listed in Capitalization Policies
table.
9
DEPARTI\'1ENT ()F NATURAL RES()URCES
N()TES TO SCHEDULE OF CAPITAL ASSETS (Continued)
.June 30,2011
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued
U) Construction in "'t'r'\c.t',t3C!C!
The Department maintains assets that are constructions in progress. This includes
costs incurred during construction of assets. Those accumulated costs are held in the
Construction in category until such time as the project is determined to be
"'substantially complete" (i.e. ready for its intended use). At that time the asset is
moved to proper asset category and capitalized and depreciated based on conventions
listed in Capitalization Policies table. The Department considers infrastructure and
bikeways to be a series of networks and sub-systems. As such those assets have met
the requirement of being ready for intended use and therefore not held in the
Construction in Process category.
(k) Networks and Sub-Systems
The Department maintains networks and sub-systems. A network is composed of all
assets that provide a particular type of service for the State or an agency. A network of
assets may be only one asset that is composed of many components. A subsystem is
composed of all assets that make up a portion or segment of a network. Assets
acquired in various amounts for a single purpose which may not individually meet the
capitalization threshold may be capitalized if the estimated total of the project exceeds
the capitalization threshold. Also, for capital assets that are depreciated, expenditures
that extend the useful lives of capital assets beyond their initial estimated useful lives
(preservation costs) or improve their efficiency (improvements) or capacity (additions)
are capitalized, whereas expenditures for repairs and maintenance are expensed.
3. CAPITAL ASSET MANAGEMENT SYSTEM
The Department maintains a capital asset management system which includes, for all capital
assets, the major asset category, description of asset, date of acquisition, method of
acquisition, cost or other value, responsible organizational unit, location of asset,
identification of applicable network or subsystem (for infrastructure assets), estimated life,
estimated salvage value, annual and accumulated depreciation, and appropriation.
4. REPORTING REQUIREMENTS
The Department is required to complete and submit the SAMS TO GAAP Reconciliation -
Capital Assets (SCO-537) and Capital Asset Summary (SCO-538) forms to the Illinois
Office of the Comptroller as part of the year-end reporting process related to capital assets.
Amounts reported on these forms have been reconciled to the Schedule of Capital Assets.
10
STA TE OF ILLINOIS
ILLINOIS DEPARTMENT OF NATURAL RESOURCES
Schedule of Changes in Capital Assets
For the Year Ended June 30, 2011
(expressed in thousands)
Balance At Balance At
June 30,2010 Additions Deletions l\el Transfers June 30,2011
Capital Assets not being depreciated:
Land and land improvements $ 369,355 $ 2,482 $ 524 $ $
Construction in progress 55 55
Internally generated intangible assets in development 327 45
Easements/rights of way/water-timber-mineral rights
Total Capital Assets not being depreciated: 443,368 6.399 524
Capital Assets being depreciated:
Site improvements 419,837 4,679 64 1,524
Building and building improvements 258,424 50 19 438
Equipment 64,175 1,216 464 1,411 ) 16
Capital leases-equipment 14
Infrastructure 50,929 533 ,462
Non-internally generated software 36
Internally generated software 3,360
Easements/rights ofway/water-timber-mineral rights 1,484 1,484
Other intangible assets
Total Capital Assets being depreciated: 798245 13,431 547 551 81
Less Accumulated Depreciation for:
Site improvements 2]6,078 11,988 64 (10)
Building and building improvements 122,689 7,363 (31
Equipment 54.369 2,668 457 (1,587)
Capital leases-equipment 9
Infrastructure 27,074 1,213 28,287
Non-internally generated software 36
Internally generated software 3,360
Easements/rights of way/water-timber-mineral rights 887 lO9
Other intangible assets
Total Accumulated Depreciation 424,493
Total Capital Assets being depreciated, net 373,752 (lO,192) 26 2,179 365,713
Total Capital Assets, net $ 817.120 $ (3,793) $ 550 $ 2279 $ 815,056
The accompanying Notes to Schedule Assets are an part of this schedule.
11
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED
ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Honorable William G. Holland
Auditor General
State of Illinois
As Special Assistant Auditors for the Auditor General, we have audited the Schedule of Capital
Assets of the State of Illinois, Department of Natural Resources, as of and for the year ended
June 30, 2011, and have issued our report thereon dated February 17, 2012. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
Management of the State of Illinois, Department of Natural Resources is responsible for
establishing and maintaining effective internal control over financial reporting. In planning and
performing our audit, we considered the State of Illinois, Department of Natural Resources'
internal control over financial reporting as a basis for designing our auditing procedures for the
purpose of expressing our opinion on the Schedule of Capital Assets, but not for the purpose of
expressing an opinion on the effectiveness of the State of Illinois, Department of Natural
Resources' internal control over financial reporting. Accordingly, we do not express an opinion
on the effectiveness of the State of Illinois, Department of Natural Resources' internal control
over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct misstatements on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement of the State of Illinois, Department of
Natural Resources' Schedule of Capital Assets will not be prevented, or detected and corrected
on a timely basis.
12
Our consideration over financial reporting was for the limited purpose
described in the first and was not to identify all deficiencies in
the internal control over financial that might be deficiencies, significant deficiencies or
We did not identify any deficiencies in internal control over financial
reporting that we to material as defined above.
As part of obtaining reasonable assurance about whether the State of Illinois, Department of
Natural Resources' Schedule of Capital Assets is free of material misstatement, we performed
tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements, noncompliance with which could have a direct and material efTect on the
determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such
an opinion. The results of our tests disclosed no instances of noncompliance or other matters
that are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, and the State of Illinois Department
of Natural Resources' management, and is not intended to be and should not be used by anyone
other than these specified parties.
Chicago, Illinois
February 17, 2012
t;J~f 'I~ ~ P1ct~JLY
WASHINGTON, PITTMAN & MCKEEVER, LLC
13
STATE ()F ILLINOIS
ILLINOIS I>EPARTMENT OF NATURAL RES()URCES
SCHEDULE OF FINI>INGS
For the Year Ended .June 30, 2011
There were no findings disclosed during this audit.
14
STATE Of." ILLIN()IS
ILLIN()IS DEPARTMENT OF NATURAL RESOURCES
PRIOR FINDIN(;S N()T REPEATED
For the Year Ended June 30, 2011
A FINDING: (Inadequate controls over capital
During the prior audit, the State of Illinois, Department of Natural Resources
(Department) did not have adequate policies or procedures to ensure that assets
categorized as Construction in Progress (CIP) were properly recorded.
During the current year, the Department developed and implemented policies and
procedures to ensure that CIP was properly recorded as of June 30, 2011. (Finding Code
No. 10-1)
15
