REPORT DIGEST

 

DEPARTMENT OF
HUMAN SERVICES

CENTRAL OFFICE

 

FINANCIAL AUDIT

For the Year Ended

June 30, 2007

 

COMPLIANCE EXAMINATION

For the Two Years Ended

June 30, 2007

 

Summary of Findings:

Total this report†††††††††††   31

Total last report†††††††††††   37

Repeated findings           16

 

 

Release Date:

June 12, 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 Department of Human Services (Department) overstated liabilities in their financial records at June 30, 2006 and June 30, 2007.

 

®       The Department opened and operated locally held bank accounts without notifying the Office of the State Comptroller of the establishment of the accounts.Further, the Department did not file the required quarterly reports with the Office of the State Comptroller.

 

®       The Department had various internal control weaknesses over commodities inventories at several locations.

 

®       Two of the Departmentís Centers failed to comply with requirements to be certified as eligible Medicare or Medicaid service providers.Department personnel estimated lost revenue in the millions of dollars.

 

®       The Department had numerous internal control weaknesses in the Home Services Program.

 

®       The Department failed to establish a structured security administration function which contributed to several security weaknesses.

 

®       The Department had inadequate procedures for the disposal of confidential information.

 

®       The Departmentís mental health and developmental centers, schools (facilities) and Central Office did not obtain all required signatures on contracts before the start dates.

 

®       The Department purchased 39 high capacity paper shredders during fiscal year 2006.Approximately one year later 22 of the shredders still had not been installed.

 

®       The Departmentís fiscal year 2007 annual financial reporting forms for its Federal Projects Fund included five concluded programs with unspent grant funds of which the Department had not determined the final disposition.

 

®       The Department did not maintain adequate records for Department owned vehicles.

 

 

 

{Expenditures and Selected Activity Measures are summarized on the next page.}


 

 

 

DEPARTMENT OF HUMAN SERVICES - CENTRAL OFFICE

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Two Years Ended June 30, 2007

 

EXPENDITURE STATISTICS (expressed in thousands)

FY 2007

FY 2006

FY 2005

  • Total Expenditures (All Funds)...........................................

OPERATIONS TOTAL..............................................................

†† % of Total Expenditures.........................................................

††††† Personal Services..................................................................

††††† % of Operations Expenditures..............................................

††††† Average Number of Employees...........................................

Other Payroll Costs (FICA, Retirement)..........................

††††† % of Operations Expenditures

††††† Contractual Services............................................................

††††† % of Operations Expenditures..............................................

††††† Commodities..........................................................................

††††† % of Operations Expenditures...............................................

††††† Telecommunications..............................................................

††††† % of Operations Expenditures...............................................

Medical Preparation and Food Supplies............................

% of Operations Expenditures.............................................

††††† All Other Items.......................................................................

††††† % of Operations Expenditures................................................

GRANTS TOTAL.........................................................................

†† % of Total Expenditures............................................................

PERMANENT IMPROVEMENTS TOTAL................................

†† % of Total Expenditures............................................................

REFUNDS TOTAL.........................................................................

†† % of Total Expenditures..............................................................

Cost of Property and Equipment..................................................

$ 4,518,071

$755,444

16.7%

$††† 296,827

39.2%

*14,318

$††††† 72,167

9.6%

$††† 120,649

16.0%

$††††† 23,509

3.1%

$††††† 10,165

1.3%

$††† 187,732

24.9%

$††††† 44,395

5.9%

$ 3,755,657

83.2%

$††††††† 1,837

0.0%

$††††††† 5,133

0.1%

$92,517,015

$ 4,457,375

$728,937

16.4%

$††† 281,712

38.5%

*14,610

$††††† 61,662

8.5%

$††† 120,713

16.6%

$††††† 21,803

3.0%

$††††† 10,873

1.5%

$††† 185,545

25.5%

$††† 46,629

6.4%

$ 3,723,052

83.5%

$††††††† 1,846

0.0%

$††††††† 3,540

0.1%

$97,579,755

$†† 4,386,877

$720,938

16.4%

$††††† 291,913

40.5%

*14,651

$††††††† 85,405

11.8%

$††††††† 65,459

9.1%

$††††††† 19,538

2.7%

$††††††† 11,687

1.6%

$††††† 180,801

25.1%

$††††††† 66,135

9.2%

$†† 3,660,855

83.5%

$†††††††††††† 640

0.0%

$††††††††† 4,444

0.1%

$103,977,586

SELECTED ACTIVITY MEASURES (unaudited)

FY 2007

FY 2006

FY 2005

Office of Mental Health and Developmental Disabilities:

†††† Average cost per day Ė Mental Health................................................

†††† Residents in State facilities Ė Mental Health......................................

†††† Staff to resident ratio Ė Mental Health................................................

†††† Average cost per day Ė Developmental Disabilities.........................

†††† Residents in State facilities Ė Developmental Disabilities...............

†††† Staff to resident ratio Ė Developmental Disabilities..........................

Human Capital Development:

††† Average number of TANF families engaged each month..................

††† Average number of children served Ė Child Care, per month..

††† Average Child Care cost per child, per month....................................

Home Services:

†† Persons receiving in-home services to prevent institutionalization......

†† Average monthly cost of in-home service, per client........................

Addiction Treatment and Related Services:

†† Number of patients served (unduplicated) .........................................

Vocational Rehabilitation:

†† Persons in supported employment.......................................................

†† Average hourly wage earned by participating customers................

 

$603

1,373

1.88

$423

2,539

1.80

 

6,566

176,359

$270

 

36,858

$1,144

 

88,947

 

2,506

$9.41

 

$557

1.322

1.87

$385

2,670

1.80

 

8,634

192,471

$243

 

35,916

$1,082

 

91,719

 

2,589

$9.43

 

$576

1,402

1.90

$390

2,758

1.70

 

7,149

197,334

$256

 

32,549

$1,073

 

90,725

 

2,851

$9.01

DEPARTMENT SECRETARY

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

Currently:Carol L. Adams, Ph.D.

* Includes employees for the entire Department of Human Services including individual Mental Health and Developmental Facilities, Centers for Rehabilitation and Education, and Schools for the Deaf and Visually Impaired.

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilitieswere overstated

 

 

 

 

 

 

Overstatement necessitated a restatement of the Departmentís financial statements

 

 

 

 

 

 

 

 

 

 

 

 

Department relied on unsubstantiated data to record liabilities

 

 

 

 

 

 

Material weakness in internal control

 

 

 

 

 

 

 

 

 

 

 

 

 

Department agrees with auditors

 

 

 

 

 

 

 

Locally held bank accounts opened without notifying and reporting activity to the State Comptrollerís Office

 

 

 

 

 

 

 

 

 

 

 

Two accounts had $462,000 in cash at June 30, 2007 that was not included in the Departmentís financial records

 

 

 

 

 

 


Noncompliance with State law

 

 

 

 

 

Material weakness in internal control

 

 

 

 

 

 

 

 

 

 

 

 


Department agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

Auditors could not determine propriety of $497,607 of recorded inventory

 

 

 

Auditors noted discrepancies or weaknesses at 75% of locations tested

 

 

 

Numerous internal control problems related to inventory

 

 

 

 

 

 

 

Department attributes problems to staffing shortages and the outdated system

 

 

 

Material weakness in internal control

 

 

 

 

 

 

 

 

 

 

 

 

Department agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Centers were subject to several site visits noting compliance violations

 

 

 

 

 

 


Lost revenue estimated in millions of dollars

 

 

Violations attributed to inadequate administrative oversight and inability to maintain the quality of staff

 

 

 

Material weakness in internal control

 

 

 

 

 

 

 

 

 

 

 

 

 

Department agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal control weaknesses from prior audit period remain uncorrected

 

 

 

 

 

 

 

Only 10% of the case files are being reviewed annually

 

 

 

 

Insufficient monitoring of case files

 

 

 

Insufficient controls in the payroll system for processing of the personal assistantsí payroll

 

 

 

 

 

 

 

 

 

 

 

 

 

Department agrees with auditors

 

 

 

 

 

 

 

 

 


Failure to establish a structured security administration function

 

 

 

Improper disposal and loss/theft of confidential information

 

 

 

 

 

 

 

Security assessment had not been performed

 

Department believes they had an adequate security administration

 

 

Material weakness in internal control

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department disagrees with auditors

 

 

 

 

 

 


Auditorís comment

 

 

 

 

 

 

 

 

 

 

 

 

 

Confidential information found unsecured

 

 

 

 

 

 

Department maintained a significant amount of obsolete data in its warehouses

 

 

 

 

 

 

 

 

 

 

 

 


Department agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53 contracts tested at facilities reflected start dates prior to all required signatures being obtained

 

 

 

Central Office contractual arrangements started prior to all required signatures being obtained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department partially agrees with auditors

 

 

 

 

 

 

 

 

 

Equipment not installed timely

 

 

Some equipment remains uninstalled 14-18 months after purchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shredders cost $5,149 each

 

 

 

 

 

 

 

 

 

 

 

 

Department disagrees with auditors

 

 

 

 

 

 

 

 

Auditorís comment

 

 

 

 

 

 

 

 

 

Unspent balances due to grantor agencies

 

 

 

 

 

 

$413,000 in deferred revenue account from a grant period that ended in fiscal year 2001.

 

 

 

 

 

 

 

 


$226,000 in deferred revenue account from a grant period that ended in fiscal year 1999.

 

 

 

 

 

 

 

 

Department notes staffing shortages

 

 

 

 

 

 

 

 

 

Department agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

Missing information

 

 

 

 

 

 

 

 

 

Lack of polices or procedures to ensure assigned vehicles are maintained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Departmentagrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

†††† This report presents our audit of the financial statements of the entire Department of Human Services (Department) for the year ended June 30 2007, and a State compliance examination of the Departmentís Central Office operations for the two years ended June 30, 2007.Limited scope compliance examinations for the two years ended June 30, 2007 were also performed at 8 Developmental Centers, 8 Mental Health Centers, 2 combination Mental Health / Developmental Centers and 3 Rehabilitation Service Facilities.Separate reports for each of these Centers have also been issued.

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

Liabilities payable from future appropriations overstated

 

††† The Department overstated liabilities payable in their financial records from future appropriations for the Community Mental Health Medicaid Trust Fund by $20.963 and $19.266 million for fiscal years 2006 and 2007, respectively and the Early Intervention Services Revolving Fund by $7.384 and $10.000 million for fiscal years 2006 and 2007, respectively.

 

††††† The June 30, 2006 overstatements necessitated a restatement to correct the fund balance amount on the Departmentís financial statements at that date.The June 30, 2007 overstatements necessitated a current fiscal year auditor adjustment to the Departmentís financial records.

 

†††† The Fiscal Control and Internal Auditing Act notes State agencies shall establish and maintain a system of internal fiscal and administrative controls, which shall provide assurance that revenues, expenditures, and transfers of assets, resources, or funds applicable to operations are properly recorded and accounted for to permit the preparation of accounts and reliable financial and statistical reports and to maintain accountability over the State's resources.

 

†††† Department personnel stated in order to meet the Office of the State Comptrollerís (Comptroller) deadline for preparing fund financial information, the Departmentís fiscal department had to rely on unsubstantiated data to record liabilities.Subsequent to the submission of the fund financial information (GAAP package) to the Comptroller, additional information to better compute the liabilities became available,it was then determined the amount originally reported for the liabilities should have been much less.

 

†††† Because of the significance of the restatements and the Departmentís failure in the operation of its internal control to timely identify the errors, we are considering this to be a significant deficiency in the Departmentís internal control and a material weakness.A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a misstatement of the financial statements will not be prevented or detected by the Departmentís internal control. (Finding 07-1, pages 17-18)

 

†††† We recommended Department personnel document their procedures, methodologyand computations for determining estimated liabilities so the GAAP package preparer has documentation to review and can evaluate the reasonableness of the amount(s).

 

††††† Department officials agreed with our recommendation and indicated they will develop a process to more thoroughly evaluate the estimates that were used as backup for the liability calculations.

 

Unrecorded and unreported locally held bank accounts

 

†††† The Department opened and operated five locally held bank accounts (accounts) without notifying the State Comptroller of the establishment of the accounts, and did not file the required quarterly reports. In addition, the Department did not record the activity or related assets of the accounts on the Departmentís financial accounting records, and did not report the accounts to the Office of the Auditor General, as required by State law.

††

†††† The Vending Facility Program for the Blind (VFPB) Fund is composed of three of the accounts noted above.Receipts in the VFPB fund totaled $2,572,164 and $1,907,650 for fiscal years 2006 and 2007, respectively.Disbursements from the VFPB fund totaled $2,641,755 and $1,889,249 for fiscal years 2006 and 2007, respectively.The accounts had balances of $110,741 and $129,142 at June 30, 2006 and 2007, respectively.

 

†††† The two other accounts were established during fiscal year 2007 to administer the redemption of vouchers for the Women, Infants and Children (WIC) Farmersí Market Nutrition Program and the Senior Farmersí Market Nutrition Program.It was determined the accounts had $462,000 in cash at June 30, 2007 that was not included in the Departmentís financial records or appropriate reports regarding locally held accounts filed with the State Comptroller.These two accounts have subsequently been closed.

 

††† †The accounts were not established or reported in accordance with the State Officers and Employees Money Disposition Act (Act)†† Failure to disclose the accounts to the Auditor General is a direct violation of the Act, reduces the effectiveness of government oversight, and creates the potential for misstated financial statements at both the Department and Statewide level.

 

†††† Because of the significance of the exceptions noted, specifically the weaknesses in establishing, reporting and recording locally held bank accounts, we are considering this to be a significant deficiency in the Departmentís internal control over State compliance and a material weakness.A material weakness is a significant deficiency or combination of significant deficiencies that result in more than a remote likelihood that material noncompliance will not be prevented or detected by the Departmentís internal control.(Finding 07-3, pages 21-22)

 

†††† We recommended the Department comply with State law and Comptrollerís Statewide Accounting Management System (SAMS) procedures and make program personnel aware of the laws and regulations governing its activities so any new locally held accounts are properly established, reported and included in the Departmentís financial records.

 

Department officials agreed with our recommendation and indicated they will issue an Administrative Directive detailing the procedures for reporting any bank account changes.In addition, it was indicated Department officials will approve all new or changed bank accounts and will maintain a list of all bank accounts within the Department.

 

INADEQUATE CONTROLS OVER COMMODITIES

 

†††† During our testing we noted several exceptions and weaknesses over commodity inventories.The weaknesses were noted at various locations including warehouses and at mental health and developmental facilities and schools.Some of the inventory problems noted were:

 

        The auditors were not able to determine the propriety of recorded inventory totaling $497,607 at one facility.

 

        16 locations were tested with discrepancies and/or weaknesses noted at 12 (75%) of these locations.

 

        Manual adjustments were made for financial statement purposes for 10 facilities.One facility required an inventory reduction adjustment of $439,784; the facility did not record coal usage which accounted for $411,688 of the adjustment.

 

  • Testing at the sites revealed problems related to inadequate written inventory procedures, inadequate segregation of duties, failure to make timely adjustments to inventory records, counts that could not be reconciled, inadequate records supporting additions or withdrawals from inventory, and areas being disorganized.

 

        One facility operated an independent inventory system in addition to the Department inventory system.

 

The Department stated they have established a centralized oversight for commodities; however, staffing shortages and the outdated system continue to contribute to the weaknesses noted for commodity inventories.

 

†††† Because of the significance of the exceptions noted, specifically the overall weaknesses in the inventory and oversight function over commodities, we are considering this to be a significant deficiency in the Departmentís internal control over State compliance and a material weakness.A material weakness is a significant deficiency or combination of significant deficiencies that result in more than a remote likelihood that material noncompliance will not be prevented or detected by the Departmentís internal control.(Finding 07-4, pages 23-26)†† This finding was first reported in 1999.

 

We recommended the Department improve its centralized oversight function related to commodities to allow for strengthened inventory controls.

 

Department officials agreed with our recommendation and stated they have made significant effort and progress regarding commodity inventories.The Department went on to note they have instituted various policies and procedures to improve the process. (For the previous Department response, See Digest footnote #1.)

 

Failure to comply with Medicare and Medicaid certification requirements

 

Two of the Departmentís Centers were decertified as eligible Medicare and Medicaid service providers during the engagement period.As a result, the Department cannot bill and be reimbursed for certain services.There is an immediate and continuing loss of revenue until the centers are recertified.Failure to maintain eligible Medicare and Medicaid status not only results in lost revenue to the State, but is indicative of a diminished level of care for residents of these facilities.

 

The Tinley Park Mental Health Center (Tinley) received notification its Medicare provider agreement terminated effective February 23, 2007.The Howe Developmental Center received notification it would be terminated from the program effective March 8, 2007.Both of the Centers were subject to several site visits, each containing serious compliance violations.Despite opportunities to rectify the violations, the Department was unable to comply.

 

Department personnel estimated the lost revenue for the engagement period was approximately $50,000 for one Center and from $4 to $29 million for the other Center.The Department plans to seek certification for both centers during fiscal year 2008.

 

Department officials stated the violations were the result of inadequate administrative oversight for one center.For the other center, the Department indicated they were unable to maintain the quality of staff due to the anticipated closure of the facility.

 

Because of the significance of the failure in the operations of the Departmentís internal control to maintain the Medicaid and Medicare certification at the Centers, we are considering this to be a significant deficiency in the Departmentís internal control over State Compliance and a material weakness.A material weakness is a significant deficiency, or combination of significant deficiencies that results in more than a remote likelihood that material noncompliance will not be prevented or detected by the Departmentís internal control.(Finding 07-6, pages 30-31)†††

 

We recommended the Department continue its efforts to apply for certification of Medicare and Medicaid services at its two facilities that were decertified during fiscal year 2007.In addition, the Department should ensure the remaining facilities are in compliance with certification requirements to ensure continued funding status.

 

Department officials agreed with our recommendation and stated at Howe Developmental Center they have implemented operational changes and hired nationally recognized consultants to provide technical assistance and training on all aspects regarding rules, regulations and service standards and to develop a plan of correction.

 

††††† Department officials went on to respond the Tinley Park Mental Health Center has reapplied for recertification and expect the facility to be re-surveyed around June 2008.Tinley Park Mental Health Center was able to move the facility from decertification from Joint Commission to conditional accreditation.

 

INTERNAL CONTROL WEAKNESSES IN THE HOME SERVICES PROGRAM

††††††

The Home Services Program allows individuals with disabilities (customers) who are at risk of placement in a nursing home to remain in their homes.During the prior engagement period the Department hired an independent contractor (public accounting firm/consultant) to perform a review of the program.The review noted numerous internal control weaknesses in the program.We noted through our testing and discussions with Department personnel that weaknesses were still prevalent during the current engagement period.Some of the weaknesses noted were:

 

        The Quality Assurance Unit reviews between 150-175 case files per month.This is an average of 3-4 case files each month per office.This review process results in less than 10% of case files being reviewed each year which is not adequate to ensure staff are compliant with program requirements.

 

        There was insufficient monitoring of case files to ensure program objectives were being met.Management stated statewide average caseload per counselor is between 200 and 300 cases.

 

        There are insufficient controls in the payroll system for processing of the personal assistantsí payroll.Department management stated the Home Servicesí CPS payroll system allows coordinators to override controls to process payroll without taking additional steps or obtaining approval from the counselor or the supervisor when the hours budgeted for the customer have been exceeded.

 

Adequate review, monitoring and staffing are important to provide internal controls over the Home Services Program due to the size and decentralization of the program.(Finding 07-7, pages 32-34)

 

We recommended the Department implement a number of procedures to strengthen internal controls over the Home Services Program.

 

The Department agreed with our recommendation and noted the Home Services Program will investigate alternate methods to monitoring timekeeping for Personal Assistants and will review the work of the Quality Assurance unit to determine compliance with program directives.

 

Inadequate security administration function

 

The Department failed to establish a structured security administration function, which contributed to several security weaknesses.For example, we found the Department failed to:

 

        Establish a centralized security administration function and process for responding to security incidents.

 

        Establish detailed physical security requirements and guidelines, which resulted in a breakdown of physical security at some Department facilities.

 

        Enforce security policies and establish a formal security awareness program, which contributed to improper disposal and loss/theft of confidential information.

 

        Establish a formal process for assuring prompt assessment and subsequent notification of security breaches.

†††

We also found the Department had not performed a security assessment to identify all confidential information, or evaluated existing security implementation.

 

Department officials stated they believed they have adequate security administration.

 

Because of the significance of the exceptions noted, specifically the weaknesses in the security administration function, we are considering this to be a significant deficiency in the Departmentís internal control over State compliance and a material weakness.A material weakness is a significant deficiency or combination of significant deficiencies that result in more than a remote likelihood that material noncompliance will not be prevented or detected by the Departmentís internal control.(Finding 07-8, pages 35-37)

 

We recommended the Department establish a formal centralized Department-wide security administration function.In addition, we also recommended the Department establish a security awareness program to educate users about Department security policies and procedures, including the need to keep confidential information secured.
We also recommended the Department establish formal procedures for reporting security incidents, and ensure prompt assessment and subsequent notification of security breaches.†††††

†††††

The Department disagreed with the recommendation and indicated computer, building and HIPAA security exist at the Department as separate components and each area has formalized procedures and security awareness mechanisms in place.The Department does not believe the creation of a higher level function will increase security or prevent any of the issues addressed in the finding.

†††††
In an auditorís comment, we noted
the Department had multiple instances of security weaknesses identified during the audit.In fact, three additional findings (7-9, 7-10, 7-29) outlined serious deficiencies in the administration of security at the Department.In addition, the last compliance examination for the Department (period ending June 30, 2005) included four security related findings (5-20, 5-25, 5-26, 5-27).

 

Thus, it is abundantly clear that serious deficiencies in security administration have existed for the last two audit periods.While we agree that there are various methods of implementing security administration, it is clear the current approach is not working.

 

INADEQUATE PROCEDURES FOR THE DISPOSAL OF CONFIDENTIAL INFORMATION

 

While performing a walkthrough at the Department, we found confidential and personal information (travel and payment vouchers with names and social security numbers) in or near trash/recycle bins.We also found sensitive information including a check copy and technical computer information (security IDs, dataset names, and computer logs) in trash/recycle bins.

 

In addition, we found the Department maintained a significant amount of obsolete data (including confidential data) in its warehouses.Specifically, we found two pallets of hard-disk drives, diskettes, and tape media that had not been wiped to ensure confidential or sensitive data had been removed.We also observed approximately 216 pallets containing over 8,600 boxes of paper files (including case files and materials with expiration dates of up to 20 years) were being stored until a means to appropriately dispose of them was determined.(Finding 07-9, pages 38-39)

 

We recommended the Department assess its procedures (including all facilities) for safeguarding, retention and subsequent disposal of all confidential information.Procedures should be Department-wide and include clearly defined procedures for disposing of confidential information on electronic media.

 

Department officials agreed with the recommendation and noted they will initiate an update through Policy regarding the need for all confidential records to be shredded.The Department is purchasing two industrial cross cut shredders to be used in Springfield and the Chicago area to dispose of Department confidential and protected health information.All Department confidential and protected health information will be brought to these two cites in secured Department trucks.

 

UNTIMELY SIGNING AND EXECUTION OF WRITTEN CONTRACT AGREEMENTS

 

During our testing of contractual expenditures we noted the Departmentís mental health and developmental centers and schools (facilities) and Central Office did not obtain all the required signatures on the contracts before their starting date.The contracts tested were for a variety of goods or services ranging from medical, pharmaceutical, administrative and laboratory services to repairs and maintenance.We noted the following during our testing:

 

  • Exceptions were identified at 9 of the 19 facilities tested.Auditors identified that 53 of 141 (38%) contracts tested were not signed by all parties prior to the beginning date as set forth in the contract agreement.The average length of time between the beginning date of the contract and the final required signature was 99 days, with a range of 4 days to 365 days.

 

  • Testing of administrative contracts was performed at the Departmentís Central Office in which we noted 6 of 30 contracts tested were not signed by all parties prior to the beginning date as set forth in the contract agreement.The average length of time between the beginning date of the contract and the final required signature was 62 days, with a range of 17 days to 167 days.

 

Department management stated contracts were not signed in a timely manner due to the Departmentís internal process of preparing and approving all required forms, number of contracts processed by the Department, and the time it takes to approve a contract at the facility and route it through the Department.

 

Failure to have the contract agreements signed before the beginning of the contract period does not bind the service provider for compliance with applicable laws, regulations and rules.(Finding 07-17, pages 55-56)

 

We recommended the Department implement procedures to ensure contracts are signed before the beginning date as set forth in the contract agreements.

 

Department officials partially agreed with the recommendation and indicated they have critical contracts and emergency situations when a contract may not be completely processed prior to the beginning date in the agreement, but it is the policy of the Department to not make payment to a vendor without a signed contract in place.

 

INADEQUATE PLANNING FOR THE PURCHASE AND INSTALLATION OF EQUIPMENT

 

The Department purchased shredders for its 115 Family Community Resource Centers (FCRC) located throughout the State.The Department worked with the Department of Central Management Services (CMS) to draft specifications for the purchase and ultimate purchase of 39 high-capacity shredders and 76 mid-capacity shredders.The shredders were shipped from June 21, 2006 through October 19, 2006.As of September 6, 2007, 22 of the 39 (56%) high capacity shredders had not been installed and made ready for operation.As of January 7, 2008, seven shredders still had not been installed.

 

The State Property Control Act requires the Department to be accountable for the supervision, control and inventory of all property under its jurisdiction.The Department has the responsibility for planning for equipment purchases and for tracking the receipt, installation and use of State property in a timely manner.

 

Department staff indicated the delays in installing the shredders were due to a lack of available electrical current and in some cases, space.Since the office space for the FCRCs are leased, CMS had to work with property owners to obtain their approval prior to making the necessary changes to accommodate the shredders.

 

The high capacity shredders cost $5,149 each for a total of $200,811.Failure to plan for the timely installation of equipment purchases is an inefficient use of State property and State resources.(Finding Code No. 07-18, pages 57-58)

 

We recommended the Department implement procedures to adequately plan for future purchases of equipment to ensure the infrastructure is capable of supporting the equipment without significant modifications and monitor equipment purchases to ensure the equipment meets the requirements for which it is intended and is operational in a timelier manner.

 

Department officials disagreed with the recommendation and indicated the locations where the equipment was installed are managed by CMS and the Department communicated with CMS prior to the purchase of the equipment regarding the space and infrastructure requirements.The Department indicated they continued to monitor the progress and remind CMS of the importance of installing the equipment as the orders were shipped and received and believe they did adequately plan for both the purchase and the installation.

 

†††† In an auditorís comment, we noted that adequate planning should encompass utilizing equipment purchases in a timely manner from the date of initial purchase.The Department should have ensured the infrastructure was capable of supporting the equipment without significant modifications, or had a firm timeline as to when necessary modifications were going to be completed prior to purchasing the equipment.

 

FAILURE TO TIMELY DETERMINE THE DISPOSITION OF UNSPENT GRANT FUNDS

 

We noted several programs that had concluded in previous years with balances in the deferred revenue and unearned deferred revenue accounts that would indicate unspent balances due to grantor agencies.Programs with unspent grant funds noted were:

 

        The Employment Service Program reported unearned deferred revenue totaling $32,000.The grant period ended in fiscal year 2003.

 

        The Special Education Ė Grants for Infants and Families with Disabilities Program reported deferred revenue totaling $413,000.The grant period ended in fiscal year 2001.

 

        The Ten State Performance Indicator Pilot Project Program reported deferred revenue totaling $72,000.The grant period ended in fiscal year 2005.

 

        The Consolidated Knowledge Development and Application Program reported deferred revenue totaling $23,000.The grant period ended in fiscal year 2006.

 

        The Cooperative Agreements for State-Based Diabetes Control Program and Evaluation of Surveillance Systems Program reported deferred revenue totaling $226,000.The grant period ended in fiscal year 1999.

 

The Department should follow sound program / grant management practices and expend all grant funds in accordance with the purpose for which they were originally received to maximize the program potential.

The Department stated the final disposition was not determined timely due to staffing shortages; however, they stated they have already received and reconciled the funds.Maintaining these unspent funds exposes these funds to loss or misappropriation due to the general lack of attention directed toward these concluded programs by Department personnel.(Finding No. 07-20, pages 60-61)

 

We recommended the Department determine the availability of these funds for expenditure or return them after proper consultation with the respective grantor.

 

Department officials agreed with the recommendation and indicated they will review the funds and determine the proper disposition of the funds.

 

INADEQUATE RECORDS FOR STATE VEHICLES ASSIGNED TO DEPARTMENT EMPLOYEES

 

†††† During the engagement period, the Department had 533 vehicles, 31 of which were specifically assigned to Department employees.The Department tracks mileage and maintenance for all vehicles on a fleet database.We tested records for all 31 personally assigned vehicles during the engagement period, some of the exceptions noted were:

 

          24 of 31 personally assigned vehicles tested had missing mileage and maintenance information in the database.

 

          3 of 31 employees personally assigned a vehicle failed to file the required annual certification relating to license and insurance coverage.

 

          One vehicle was involved in an accident, but the database contained no record reflecting repair charges.

 

          The Department does not have policies or procedures to ensure that assigned vehicles are maintained.It is assumed the operator of an assigned vehicle will have the oil changed, but they are not required to do so.

 

Complete and accurate information is critical to effectively manage the Departmentís fleet of vehicles.In addition, good business practice requires the Department to have a system in place to provide the vehicle coordinator with the proper information needed to properly monitor the Departmentís vehicles.Department personnel stated there were two different vehicle coordinators during the engagement period.†† (Finding 07-25, pages 68-70)This finding was first reported in 2003.

†††† We recommended the Department enter and maintain complete, accurate and timely information in its fleet database.We also recommended the Department monitor the assignment of vehicles and ensure all the required certifications are obtained on a timely basis and that the Department implement polices and procedures to ensure assigned vehicles are maintained.†††

 

†††† Department officials agreed with our recommendation and indicated the Administrative Directive will be revised to include maintenance responsibility on assigned vehicles.The Department will also send a memo to all assigned vehicle drivers that all maintenance done to an assigned vehicle must be noted on that vehicleís monthly report.(For the previous Department response, see Digest footnote #2.)

 

OTHER FINDINGS

 

††††† The remaining findings are reportedly being given attention by the Department.We will review the Departmentís progress toward the implementation of our recommendations in our next engagement.

 

 

 

AUDITORSí OPINION / REPORT

 

††††† The auditorsí opinion stated the June 30, 2007 financial statements of the Department are fairly presented.

 

††††† We also conducted a compliance examination of the Department as required by the Illinois State Auditing Act.The Accountantsí Report noted the Department did not comply in all material respects with requirements regarding applicable laws and regulations, including the State uniform accounting system, in its financial and fiscal operations as well as requirements regarding obligating, expending, receiving and using public funds of the State.

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

 

SPECIAL ASSISTANT AUDITORS

 

††††† The public accounting firm of Sikich LLP was our special assistant auditor for this engagement.

 

DIGEST FOOTNOTES

 

#1 INADEQUATE CONTROLS OVER COMMODITIES Ė Previous Department Response

 

2006:††† Agree:The Department is currently standardizing the commodity inventory numbers that are used by all areas using the Commodity Control System (CCS).A feasibility study has been conducted to determine the resources required to move commodities in CCS to WCS.Research is still being conducted to determine whether an alternative software package should be purchased instead.A central oversight function will be implemented along with detailed procedures and monitoring tools in order to strengthen commodity controls.†††††

 

#2 INADEQUATE RECORDS FOR STATE VEHICLES ASSIGNED TO DEPARTMENT EMPLOYEES - Previous Department Response

 

2005:††† Agree:Procedures have been put in place that will alleviate this problem.Seventy-five percent of assigned vehicle personnel signed an Insurance Certification form on April 5, 2006.A reminder e-mail was sent on May 12, 2006 informing the other 25% that the form is due.The packets sent to staff that have personally assigned vehicles includes a statement that it is their responsibility to ensure upkeep and maintenance of the vehicle.The vehicle database was cleaned up since we have had permanent staff handling this for the last year.