REPORT DIGEST

DEPARTMENT OF
HUMAN SERVICES

FINANCIAL AUDIT

For the Year Ended:

June 30, 2004

Release Date:

April 13, 2005 

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 is also available on

the worldwide web at

http://www.state.il.us/auditor

SYNOPSIS

      This digest covers our financial audit of the Department of Human Services (Department) for the year ended June 30, 2004.  A two year compliance attestation examination and a one year financial audit will be performed for the period ended June 30, 2005.

     In planning and performing our audit, we considered the Department’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements.  As a result of considering the Department’s internal control we identified an issue related to payments made for efficiency initiative billings. 

     The issue relating to the efficiency initiative billings has been identified as a reportable condition.  In our judgment, this reportable condition could adversely affect the Department’s ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. 

     The Details relating to the efficiency initiative billings are presented in our report in the Schedule of Findings and Questioned Costs section.

{Selected financial information is summarized on the next page.}

FINANCIAL INFORMATION –
Governmental Funds (in thousands)

FY 2004

FY 2003

FY 2002

REVENUES

      Program revenues: charges for service........................

      Program revenues: operating grants .............................

      General revenue: interest and other.............................

            Total revenue....................................................

EXPENDITURES

      Health and social services............................................

      Debt service – principle................................................

      Debt services – interest................................................

      Capital outlays............................................................

            Total expenditures.................................................

OTHER SOURCES (USES)

      Appropriation from State resources............................

      Transfers in..............................................................

      Transfers out..............................................................

      Receipts collected & transmitted to State Treasurer..

      Lapsed appropriations.........................................

Other..............................................................

            Total other sources (uses)..........................

FUND BALANCE

      Increase / (Decrease) in fund balance......................

      Fund balance July 1 (as restated 2003 & 2002)............

      Fund balance June 30................................................

$      32,628

2,742,615

      19,793

$ 2,795,036

$ 5,785,566

215

56

        3,239

$ 5,789,076

$ 3,772,212

82,945

(103,569)

(707,597)

(108,674)

     (5,687)

$ 2,929,630

$    (64,410)

      73,005

$        8,595

$      35,358

2,495,554

      13,388

$ 2,544,300

$ 5,431,073

2,139

255

           694

$ 5,434,161

$ 3,647,437

72,759

(5,598)

(728,028)

(75,220) 

(7,204)

$ 2,904,146

$  14,285     

     58,720

$      73,005

$       27,808

2,347,542

       15,767

$ 2,391,117

$ 5,449,115

423

272

        6,150  

$ 5,455,960

$ 3,906,978

75,892

(8,221)

(832,924)

  (137,343)  

     (6,865)

$ 2,977,517

$   (67,326) 

      124,849

$     57,523

SELECTED ACCOUNT BALANCES – JUNE 30, Governmental Funds (in thousands)

 2004

 2003

2002

Cash and cash equivalents & investments...............................

Due from other governments – federal & local...................

Other receivables, net.........................................................

Due from other State of Illinois funds...................................

Inventories........................................................................

Unexpended appropriations...............................................

Other assets......................................................................

     Total assets..................................................................

Accounts payable & accrued liabilities..................................

Deferred Revenue............................................................

Other liabilities...................................................................

     Total liabilities..............................................................

Fund balance, reserved & unreserved..........................

     Total liabilities and fund balance..................................

$  60,338

100,038

26,562

1,955

12,851

174,162

        651

$ 376,557

$ 259,606

69,828

   38,528

$ 367,962

$     8,595

$ 376,557

$ 125,378

160,981

25,411

51,637

12,945

184,453

        866

$ 561,671

$ 219,568

166,504

 102,594

$ 488,666

$   73,005

$ 561,671

$   57,637

141,562

8,089

25,433

17,397

253,424

     2,410

$ 505,952

$ 276,330

109,421

   62,678

$ 448,429

$   57,523

$ 505,952

SECRETARY

During Audit Period:  Carol L. Adams, Ph.D.

Currently:  Carol L. Adams, Ph.D.

DHS did not receive guidance or documentation with the billings from CMS

Efficiency initiatives payments totaled $20,560,732

Efficiency payments were made from line item appropriations which had available monies

INTRODUCTION

     The Department of Human Services (Department) is a part of the executive branch of government of the State of Illinois (State) and operates under the authority of and review by the Illinois General Assembly.  The Department is organized to assist Illinois residents to achieve self-sufficiency, independence and health to the maximum extent possible by providing integrated family oriented services, promoting prevention and establishing measurable outcomes in partnership with communities.

     All amounts appropriated to the Department and all other cash received are under the custody and control of the State Treasurer, excluding all locally-held funds authorized by State law.  The financial statements of the Department are intended to present the financial position, and changes in financial position of only that portion of fund information of the State that is attributable to the transactions of the Department. 

FINDING, CONCLUSION AND

RECOMMENDATION

PAYMENTS WERE MADE FOR Efficiency Initiative BILLINGS FROM IMPROPER LINE ITEM APPROPRIATIONS

     The Department made payments for efficiency initiative billings from improper line item appropriations and funds.  Public Act 93-0025, in part, outlines a program for efficiency initiatives to reorganize, restructure and reengineer the business process of the State.  The State Finance Act details that the amount designated as savings from efficiency initiatives implemented by the Department of Central Management Services (CMS) shall be paid into the Efficiency Initiatives Revolving Fund.  The Act further requires State agencies to pay these amounts from line item appropriations where the cost savings are anticipated to occur.

     The Department did not receive guidance or documentation with the billings from CMS detailing from which line item appropriations savings were anticipated to occur.  According to Department staff, the Department was not provided any evidence of savings by CMS.  The only guidance received was the amount of payments to be taken from the General Revenue Fund and Other Funds for the September 2003 billings.

     During FY04, the Department received four billings and made payments totaling $20,560,732 to CMS for savings from efficiency initiatives.  Based on our review, we question whether the appropriate appropriations, as required by the State Finance Act, were used to pay for the anticipated savings. 

     We found the Department made payments for these billings not from line item appropriations where the cost savings were anticipated to have occurred but from line items that simply had known available funds.  The Department paid the largest amounts for the billings from personal services, contractual services, telecommunication services and lump sum purposes appropriations.  These monies were applied to the Procurement Efficiency, Information Technology, Vehicle Fleet Management and Facilities Management Consolidation initiatives.

     We recommended the Department only make payments for efficiency initiative billings from line item appropriations where savings would be anticipated to occur.  Further, the Department should seek an explanation from CMS as to how savings levels were calculated, or otherwise arrived at, and how savings achieved or anticipated impact the Department’s budget.  (Finding 04-1, pages 8 - 10)

     Department management agreed with our recommendation and stated they will review any future efficiency billings from CMS and request additional information regarding the calculations if sufficient explanation is not contained in the billing.

     Secretary Carol L. Adams, Ph.D., provided the response to our finding and recommendation.

AUDITORS' OPINION

     Our auditors state the Department's June 30, 2004 financial statements are fairly presented in all material respects.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

SPECIAL ASSISTANT AUDITORS

     Sikich Gardner & Co, LLP were our special assistant auditors for this audit.