REPORT DIGEST

STATE OF ILLINOIS STATEWIDE SINGLE AUDIT REPORT

SINGLE AUDIT
For the Year Ended: June 30, 2012


Release Date:   June 20, 2013

Summary of Findings:
Total this audit: 91
Total last audit:  101
Repeated from last audit: 63

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 Full Report are also available on
the worldwide web at www.auditor.illinois.gov

SYNOPSIS

• The State expended approximately $22.9 billion from
federal awards in FY12.

• A total of 34 programs or program clusters were
classified and audited as major programs at fifteen (15)
State agencies.  These programs constituted
approximately 92% of all federal spending, or about
$21.2 billion.

• Overall, 44 State agencies expended federal financial
assistance in FY12.  Eleven (11) State agencies
accounted for about 98.4% of federal dollars spent.

Statewide Finding – Financial Reporting

• The State of Illinois does not have an adequate
process in place to permit the timely completion of a
complete and accurate schedule of federal awards.  As a
result, the State has a material weakness on all federal
programs for financial reporting.

Significant Agency Findings Classified as a Scope
Limitation Resulting in an Auditor Qualification

• The auditors were unable to obtain sufficient
documentation supporting the compliance of the State of
Illinois for the program reporting compliance
requirements for the Employment Service Cluster.

Significant Agency Findings Classified as a Material
Weakness Resulting in an Auditor Qualification

• The Department of Human Services (DHS) has material
weaknesses for:

• failing to perform eligibility redeterminations within
the timeframes prescribed by regulation for the
Temporary Assistance for Needy Families (TANF),
Children’s Health Insurance Program (CHIP), and Medicaid
Cluster programs.

• weaknesses over maintaining and controlling
beneficiary case file documents of the TANF, CHIP and
Medicaid Cluster programs.

• failing to locate case file documentation supporting
eligibility determinations for beneficiaries of the
TANF, CHIP and Medicaid Cluster programs.

• Making an improper payment to a beneficiary of the
TANF Cluster program.

• The Department of Healthcare and Family Services (HFS)
has material weaknesses for:
• using a passive process in its eligibility
redeterminations for the Children’s Health Insurance
Program (CHIP) and Medicaid Cluster programs.

• lack of documentation evidencing performance of
eligibility determinations of the CHIP and Medicaid
programs.

• failure to pay practitioner medical claims within
prescribed timeframes of the CHIP and Medicaid Cluster
programs regulations.

The Department of Children and Family Services has
material weaknesses for:

• failing to locate case file documentation to support
eligibility determinations for beneficiaries of the
Adoption Assistance program.

• failing to ensure adoption assistance recertifications
were performed on a timely basis for children receiving
recurring adoption assistance benefits.

The Department of Public Health has a material weakness
for:

• inadequately monitoring providers under the
Immunization Cluster program.

The Department of Employment Security has a material
weakness for:

• inadequate procedures to follow up on invalid social
security numbers for Unemployment Insurance (UI) program
claimants.

Findings Involving Multiple Agencies

• The Department of Children and Family Services (DCFS),
Illinois State Board of Education (ISBE), Commerce and
Economic Opportunity (DCEO), Transportation (DOT) and
Illinois Criminal Justice Information Authority (ICJIA)
have a material weakness due to inadequate and/or lack
of on-site monitoring of subrecipients of federal
awards.

Findings Regarding American Recovery and Reinvestment
Act (ARRA) and the Federal Funding Accountability and
Transparency Act (FFATA)

• The Department of Transportation (DOT) failed to
communicate ARRA information and requirements to
subrecipients and did not accurately report expenditures
in the Quarterly ARRA 1512 report.

• The Department of Human Services (DHS), Healthcare and
Family Services (DHFS), Children and Family Services
(DCFS), State Board of Education (ISBE) and Emergency
Management Agency (IEMA) had inadequate processes to
report subaward information required by the Federal
Funding Accountability and Transparency Act (FFATA).

Note:  Summary definitions (in order of significance) of
key terms used in the findings.

Material weakness (financial):  A material weakness is a
deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a
reasonable possibility that a material misstatement of
the entity’s schedule of expenditures of federal awards
will not be prevented, or detected and corrected on a
timely basis.

Material weakness (compliance):  A material weakness in
internal control over compliance is a deficiency, or
combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility
that material noncompliance with a type of compliance
requirement of a federal program will not be prevented,
or detected and corrected, on a timely basis.

Significant Deficiency (compliance):  A significant
deficiency in internal control over compliance is a
deficiency, or combination of deficiencies, in internal
control over compliance with a type of compliance
requirement of a federal program that is less severe
than a material weakness in internal control over
compliance yet important enough to merit attention by
those charged with governance.

Control Deficiency:  A deficiency in internal control
over compliance exists when the design or operation of a
control over compliance does not allow management or
employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct,
noncompliance with a type of compliance requirement of a
federal program on a timely basis.

INTRODUCTION

The Illinois Office of the Auditor General conducted a
Statewide Single Audit of the FY12 federal grant
programs.  The audit was conducted in accordance with
the federal Single Audit Act and Office of Management
and Budget (OMB) Circular A-133.

The Statewide Single Audit includes State agencies that
are a part of the primary government and expend federal
awards.  In total, 44 State agencies expended federal
financial assistance in FY12.  A separate supplemental
report has been compiled by the Illinois Office of the
Auditor General.  This report provides summary
information on federal spending by State agency.  The
Statewide Single Audit does not include those agencies
that are defined as component units such as the State
universities and finance authorities.  The component
units continue to have separate OMB Circular A-133
audits when required.

The Schedule of Expenditures of Federal Awards (SEFA)
reflects total expenditures of approximately $22.9
billion for the year ended June 30, 2012.  Overall, the
State participated in 412 different federal programs,
however, 11 of these programs or program clusters
accounted for approximately 85.2% of the total federal
award expenditures.  (See Exhibit I)

The funding for the 412 programs was provided by 22
different federal agencies.  Exhibit II shows that five
federal agencies provided Illinois with the vast
majority of federal funding in FY12.

 A total of 34 federal programs or program clusters were
 identified as major programs in FY12.  A major program
 was defined in accordance with Circular A-133 as any
 program with federal awards expended that meets certain
 criteria when applying the risk-based approach.
 Exhibit III provides a brief summary of the number of
 programs classified as “major” and “non-major” and
 related federal award expenditures.

Eleven State agencies accounted for approximately 98.4%
of all federal dollars spent during FY12 as depicted in
Exhibit IV.

 AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS THAT
 COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
 PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE

The auditors’ report contained qualifications on
compliance as summarized below.  The complete text of
the Auditors’ Report may be found on pages 26-30 of the
audit.

Internal Control Over Financial Reporting

We noted a matter involving internal control over
financial reporting for the Schedule of Expenditures of
Federal Awards (Schedule) that was considered to be a
material weakness.  A material weakness is a deficiency,
or combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable
possibility that a material misstatement of the entity’s
Schedule of Federal Awards will not be prevented, or
detected and corrected on a timely basis.  The auditors
noted that during the past ten years there have been
various errors identified and reported on the audits of
State agencies and the Office of the State Comptroller
(IOC) in its annual data gathering on the SCO forms that
are used to present the Schedule.  Thus, the auditors
recommended the Office of the Governor and the Illinois
Office of the Comptroller work together with the State
agencies to establish a corrective action plan to
address the quality and timeliness of the accounting
information provided to and maintained by the IOC as it
relates to year end preparation of the Comprehensive
Annual Financial Report and the Schedule.

Internal Control Over Compliance

We noted certain matters involving internal control over
compliance that were considered to be significant
deficiencies.  A control deficiency in an entity’s
internal control over compliance exists when the design
or operation of a control over compliance does not allow
management or employees, in the normal course of
performing their assigned functions, to prevent, or
detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely
basis.  A significant deficiency in internal control
over compliance is a deficiency, or combination of
deficiencies, in internal control over compliance with a
type of compliance requirement of a federal program that
is less severe than a material weakness in internal
control over compliance, yet important enough to merit
attention by those charged with governance.  Overall, 30
of the 91 findings reported in the single audit were
classified as compliance significant deficiencies.

Material weaknesses were also disclosed in our report.
A material weakness in internal control over compliance
is a deficiency, or combination of deficiencies, in
internal control over compliance, such that there is a
reasonable possibility that material noncompliance with
a type of compliance requirement of a federal program
will not be prevented, or detected and corrected, on a
timely basis.  Overall, 61 of the 91 findings reported
in the single audit were classified as a material
weakness.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

Exhibit V summarizes the number of report findings by
State agency, identifies the number of repeat findings,
and references the findings to specific pages in the
report.

Exhibit VI summarizes the total number of findings,
number of repeated findings and the percentage of
repeated findings for the past ten years.

THE FINANCIAL REPORTING PROCESS FOR THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS (SEFA) IS INADEQUATE TO
PERMIT TIMELY AND ACCURATE REPORTING

The State of Illinois’ current financial reporting
process does not allow the State to prepare a complete
and accurate Comprehensive Annual Financial Report
(CAFR) or the Schedule of Expenditures of Federal Awards
in a timely manner.

Accurate and timely financial reporting problems
continue to exist even though the auditors have: 1)
continuously reported numerous findings on the internal
controls (material weaknesses and significant
deficiencies), 2) commented on the inadequacy of the
financial reporting process of the State, and 3)
regularly proposed adjustments to financial statements
year after year. These findings have been directed
primarily toward the Office of the State Comptroller
(IOC) and major State agencies under the organizational
structure of the Office of the Governor.

The State has still not solved all the problems to
effectively remediate these financial reporting
weaknesses.  The process is overly dependent on the post
audit program being a part of the internal control for
financial reporting even though the Illinois Office of
the Auditor General has repeatedly informed State agency
officials that the post audit function is not and should
not be an internal control mechanism for any operational
activity related to financial reporting.

The State of Illinois has a highly decentralized
financial reporting process. The system requires State
agencies to prepare a series of complicated financial
reporting forms (SCO forms) designed by the IOC to
prepare the CAFR. These SCO forms are completed by
accounting personnel within each State agency who have
varying levels of knowledge, experience, and
understanding of generally accepted accounting
principles and of IOC accounting policies and
procedures.  Agency personnel involved with this process
are not under the organizational control or jurisdiction
of the IOC. Further, these agency personnel may lack the
qualifications, time, support, and training necessary to
timely and accurately report year end accounting
information to assist the Comptroller in preparation of
statewide financial statements in accordance with
generally accepted accounting principles (GAAP).

Internal control deficiencies have been identified and
reported relative to the SEFA financial reporting
process in each of the past ten years as a result of
errors identified during the external audits performed
on State agencies.  Examples include the following:  1)
ARRA expenditures were reported based on cash receipts
versus expenditures for the Child Support Enforcement,
CHIP, and Medicaid Cluster programs by the Illinois
Department of Healthcare and Family Services in 2012, 2)
expenditures were reported based on cash receipts versus
expenditures for the Airport Improvement Program,
Highway Planning and Construction Cluster, and High
Speed Rail programs by the Illinois Department of
Transportation in 2012, 3) expenditures of approximately
$3,294,000 were erroneously reported for federal awards
which are not subject to OMB Circular A-133 audit
requirements by the Illinois Department of Commerce and
Economic Opportunity and as a result, the Type A
threshold was reduced by approximately $5,000 and an
additional major program was identified nearly eight
months after the State’s fiscal year end, 4) other
correcting entries were required in order to accurately
state the financial information provided by various
State agencies, and 5) preparation of the SEFA has not
been completed by the State prior to March 15th in the
past ten years.

Federal regulations require that a recipient of federal
awards prepare appropriate financial statements,
including the SEFA, and ensure the required audits are
properly performed and submitted when due.  Also, the
federal regulations require recipients of federal awards
to establish and maintain internal controls designed to
reasonably ensure compliance with Federal laws,
regulations, and program compliance requirements.

Although the deficiencies relative to the CAFR and SEFA
financial reporting processes have been reported by the
auditors for a number of years, problems continue with
the State’s ability to provide accurate and timely
external financial reporting. Corrective action
necessary to remediate these deficiencies continues to
be problematic.

As a result of the errors, deficiencies and omissions
noted throughout the process used by the State in its
financial reporting process, along with the inability to
meet the required filing deadline of March 31, 2013, the
auditors identified the inadequacies as a material
weakness for all federal programs administered by the
State.  (Finding 12-01, pages 35-38)   This finding was
first reported in the Statewide Single Audit in 2002.

We recommended the Office of the Governor and the IOC
work together with the State agencies to establish a
corrective action plan to address the quality and
timeliness of accounting information provided to and
maintained by the IOC as it relates to year end
preparation of the CAFR and the SEFA.

The Office of the Governor agreed with the finding and
stated they have been working to solve some of these
problems.  The Governor’s Office negotiated with the
General Assembly and other stakeholders and won passage
of SB 3794 in order to create a statutory framework to
begin to address the basic issues with the State’s
financial reporting capabilities and they are working
with agencies to utilize the new authority that they
have to hire staff pursuant to Public Act #97-1055.  In
addition, GOMB and the Governor’s Office have been
primarily responsible for developing a plan for a
statewide financial accounting system and they will
continue working with the agencies to improve the
State’s performance both in the short term and the long
term.  (For previous agency response, see Digest
Footnote #1)

The State Comptroller’s Office accepted the
recommendation and stated the IOC will continue to work
with the Governor’s Office in their efforts to increase
the quality of departmental financial information and
they will continue to provide training and technical
assistance to State agencies and make improvements to
the financial reporting system and procedures.  (For
previous agency response, see Digest Footnote #1)

FAILURE TO PERFORM ELIGIBILITY REDETERMINATIONS WITHIN
PRESCRIBED TIMEFRAMES

The Department of Human Services (DHS) is not performing
eligibility redeterminations for individuals receiving
benefits under the Temporary Assistance for Needy
Families (TANF), Children’s Health Insurance Program
(CHIP), and Medicaid Cluster programs in accordance with
timeframes required by the respective State Plans.

During our testwork of required eligibility criteria, we
noted the State was delinquent (overdue) in performing
the eligibility redeterminations of individuals for the
three programs during June 2012 as follows:

TANF:  4,839 of 50,260 cases -- 9.63%
CHIP: 52,686 of 781,853 cases -- 6.74%
Medicaid: 92,059 of 468,695 cases -- 19.64%

Failure to properly perform eligibility redetermination
procedures in accordance with the State Plans may result
in federal funds being awarded to ineligible
beneficiaries, which are unallowable costs.  (Finding
12-02, pages 45-47)  This finding was first reported in
the Statewide Single Audit in 2003.

As a result of DHS’s failure to perform timely
redeterminations of recipient eligibility, the auditors
qualified their opinion on the TANF, CHIP and Medicaid
programs.

We recommended DHS review its current process for
performing eligibility redeterminations and consider
changes necessary to ensure all redeterminations are
performed within the timeframes prescribed within the
State Plans for each affected program.

DHS officials accepted the recommendation and stated
they will continue to work with the Department of
Healthcare and Family Services to review current
processes for performing eligibility redeterminations
and consider changes necessary to ensure all
redeterminations are performed within the prescribed
timeframes. (For previous agency response, see Digest
Footnote #2)

FAILURE TO PROPERLY MAINTAIN AND CONTROL CASE FILE
RECORDS

The Department of Human Services (DHS) does not have
appropriate controls over case file records maintained
at its local offices for beneficiaries of the
Supplemental Nutrition Assistance Program (SNAP)
Cluster, Temporary Assistance for Needy Families Cluster
(TANF), Children’s Health Insurance Program (CHIP), and
Medicaid Cluster (Medicaid) programs.

During our testwork at five separate local offices, we
noted the procedures in place to maintain and control
beneficiary case file records do not provide adequate
safeguards against the potential for loss of such
records.  Specifically, in the five local offices, case
files were generally disorganized and case files were
stacked on or around file cabinets.  We also noted case
files were generally available to all DHS personnel and
that formal procedures have not been developed for
checking case files in and out of the file rooms or for
tracking their locations.  The amount of questioned
costs that may be assessed the State due to loss or
misplaced beneficiary files could not be determined for
these four major programs whose total beneficiary
spending exceeds $9.6 billion in the aggregate.

Failure to properly maintain and control beneficiary
case file records may result in the loss of source
documentation necessary to establish beneficiary
eligibility and in unallowable costs being charged to
the federal programs.  (Finding 12-03, pages 48-49)
This finding was first reported in the Statewide Single
Audit in 2007.

As a result of DHS’ failure to properly maintain and
control case file records of beneficiaries, the auditors
qualified their opinion on the TANF, CHIP and Medicaid
Cluster programs.

We recommended DHS review its current process for
maintaining and controlling beneficiary case records and
consider the changes necessary to ensure case file
documentation is maintained in accordance with federal
regulations and the State Plans for each affected
program.

DHS officials agreed with the recommendation stating
they continue to place a high priority on proper case
file maintenance given their current fiscal, staffing
and space constraints.  DHS officials also stated they
are now utilizing an electronic document management
system that is capturing a portion of the information
that was previously printed and stored in a paper case
file which is assisting in the reduction of the
overwhelming size and amount of paper files in the
offices.    (For previous agency response, see Digest
Footnote #3)

IMPROPER TANF BENEFICIARY PAYMENT

The Department of Human Services (DHS) made an improper
payment to a beneficiary of the Temporary Assistance for
Needy Families (TANF) Cluster program.

During our testwork of TANF Cluster program beneficiary
payments, we selected 50 eligibility files to review for
compliance with eligibility requirements and to
determine that the appropriate benefits were paid.  We
noted one payment (in the amount of $113) made to a
beneficiary was improperly calculated as the result of a
child being incorrectly included in the family when
determining the benefit amount.  Upon further review, we
noted the benefit amount was subsequently corrected by
DHS on a prospective basis; however, the overpayment
identified in our sample had not been calculated,
recouped, or returned to the USDHHS as of the date of
our testing (October 2012).

Failure to properly calculate benefit payments may
result in unallowable costs being charged to the TANF
Cluster.  (Finding 12-05, pages 54-55)

As a result of DHS making an improper payment, the
auditors qualified their opinion on the TANF Cluster.

We recommended DHS review its current process for
maintaining documentation supporting eligibility
determinations and consider changes necessary to ensure
all eligibility determinations and payments are properly
made.

DHS officials agreed with the recommendation stating the
error that caused the finding was an isolated incident,
and a correction was made on the same day as the error.

INADEQUATE PROCEDURES FOR PERFORMING ELIGIBILITY
REDETERMINATIONS

Eligibility redetermination procedures implemented by
DHFS for the Children’s Health Insurance Program (CHIP)
and Medicaid Cluster (Medicaid) are not adequate.

Effective in February 2006, DHFS revised its procedures
for performing eligibility redeterminations for children
receiving services under the CHIP and Medicaid programs.
As part of the passive redetermination procedures, a
renewal form which contains key eligibility criteria is
sent through the mail to the beneficiary.  The
beneficiary (or the beneficiary’s guardian) is required
to review the renewal form and report any changes to
eligibility information; however, in the event there are
no changes to the information and there are only
children on the case, a response is not required.

Federal regulations require redetermination of client
eligibility as defined in the State Plans.  The State
Plans require an annual eligibility redetermination.  In
addition, federal regulations require the State to have
procedures designed to ensure recipients make timely and
accurate reports of any change in the circumstances that
may affect their eligibility.  (Finding 12-13, pages
73-74)  This finding was first reported in the Statewide
Single Audit in 2007.

As a result of HFS’ inadequate procedures for performing
eligibility redeterminations of beneficiaries of the
Medicaid and CHIP programs in accordance with the
federal regulations and the State Plans, the auditors
qualified their report on the CHIP and Medicaid Cluster
programs.

We recommended HFS review its current process for
performing eligibility redeterminations and consider
changes necessary to ensure redeterminations are
performed in accordance with federal regulations and the
State Plans for each affected program.

HFS officials accepted the recommendation but stated
they do not agree that its previous process failed to
comply with federal regulations and the State Medicaid
Plan and that the Department has implemented an entirely
new redetermination process in compliance with the SMART
Act (PA 97-0689).  (For previous agency response, see
Digest Footnote #4)

In an auditor comment we stated the current State Plans
require redeterminations of eligibility for all
recipients on an annual basis and to have procedures
designed to ensure recipients make timely and accurate
reports of any change in circumstances that may affect
their eligibility.  Also, we reiterated the passive
redetermination process is not used for expenditures
under the “All Kids” program, a State funded health
insurance program similar to Medicaid and CHIP, due to
concerns that beneficiaries may not report changes in
key eligibility factors in a timely manner and
therefore, we did not believe the passive
redetermination process meets the eligibility
redetermination requirements of the Medicaid and CHIP
programs.

MISSING DOCUMENTATION IN BENEFICIARY ELIGIBILITY FILES

The Department of Human Services (DHS) and the
Department of Healthcare and Family Services (DHFS)
could not locate case file documentation supporting
eligibility determinations for beneficiaries of the
Temporary Assistance for Needy Families (TANF) Cluster,
Children’s Health Insurance Program (CHIP) and the
Medicaid Cluster programs.

During our testwork of 50 TANF, 65 CHIP and 125 Medicaid
beneficiary payments for compliance with eligibility
requirements and the allowability of the relevant
benefits provided we noted the following exceptions:

Department of Human Services

• In 2 TANF case files, DHS could not locate the
required Responsibility Service Plan completed and
signed by the beneficiary.

• In 2 TANF, 21 CHIP and 19 Medicaid case files, DHS
could not locate the supporting documentation of the
redetermination completed and signed by the beneficiary
in the case file.

• In 12 CHIP and 7 Medicaid case files, DHS could not
locate adequate documentation supporting income
verification procedures were performed.

• In 2 CHIP case files, DHS could not locate adequate
documentation of the social security number of the
beneficiary being verified.

• In 2 CHIP and 2 Medicaid case files, DHS could not
locate adequate documentation of citizenship or
residence verification of the beneficiary.

• In 1 CHIP and 1 Medicaid case files, DHS could not
provide adequate documentation that cross match
verifications had been performed with regard to the
beneficiary’s personal information.

• In 4 Medicaid case files, DHS could not provide
adequate documentation that the beneficiary assigned
their right to collect medical benefit payments to the
State of Illinois.

• For 1 Medicaid case, the State improperly made medical
assistance payments on behalf of a beneficiary that was
granted temporary medical benefits until a disability
assessment could be completed.

• For 1 CHIP case file, DHS improperly excluded an
individual family member’s weekly earnings of $750 in
completing the eligibility determination completed for a
family.

Department of Healthcare and Family Services

• In 7 CHIP case files, HFS did not have supporting
documentation of the redetermination completed and
signed by the beneficiary since these were
administratively renewed.

• In 1 CHIP case file, HFS could not locate adequate
documentation evidencing income verification procedures
were performed.

As a result of DHS and HFS’ failure to locate case file
documentation supporting eligibility determinations for
beneficiaries, the auditors qualified their report on
the TANF, CHIP and Medicaid Cluster programs.  (Findings
12-04 and 12-14, pages 50-53 and 75-76, respectively).
These findings were first reported in the Statewide
Single Audit in 2001 and 2009, respectively.

We recommended DHS and DHFS review its current process
for maintaining documentation supporting eligibility
determinations and consider changes necessary to ensure
all eligibility determination documentation is properly
maintained.

DHS officials partially accepted our recommendation and
stated the Department will continue to ensure staff
understands the importance of proper and accurate filing
processes.   In addition, DHS officials stated they are
currently utilizing a document management system that
captures a portion of the information that is currently
printed and placed in a paper file. Specifically, the
Department agreed with all but one dot point regarding
the State improperly making medical assistance payments
and feel the medical payments made on behalf of the
client on the case in question were appropriate and
allowable.  (For previous agency response, see Digest
Footnote #5)

In an auditor comment, we stated we understand the
limitations of the system used by DHS in its eligibility
processes and that certain policies have been
established to accommodate those system limitations,
however, since the beneficiary was determined to be
ineligible in September 2011, benefit payments claimed
for federal reimbursement after the determination was
made are not allowable costs.

DHFS officials accepted the recommendation and stated
they are working with DHS to establish electronic data
matches for various factors of eligibility and are
moving towards electronic case records.

FAILURE TO PAY MEDICAL CLAIMS WITHIN PRESCRIBED
TIMEFRAMES

The State is not paying practitioner medical claims for
individuals receiving benefits under the Children’s
Health Insurance Program (CHIP) and Medicaid Cluster
programs in accordance with timeframes required by
federal regulations.

Federal regulations require the medical providers to
submit all medical claims within twelve months of the
date of service and require the State to pay 90% of all
clean claims within 30 days of the date of receipt and
99% of all clean claims within 90 days of the date of
receipt.  Once a medical payment has been approved for
payment, it is adjudicated, vouchered and submitted to
the Office of the Comptroller for payment.

During our review of the analysis covering practitioner
medical payments during State fiscal year 2012, we noted
medical payments were not made within the 30 day payment
timeframes required by federal regulations. Management’s
analysis identified that of the 40,150,513 claims for
$5,400,967,941 paid in State fiscal year 2012, only
73.8% were paid within 30 days of receipt, and 90.7%
were paid within 90 days of receipt.  Management
analysis also identified that of the 3,541,182 CHIP
claims for $242,376,929 paid in State fiscal year 2012,
only 77.7% were paid within 30 days of receipt and only
92.8% were paid within 90 days of receipt.   (Finding
12-15, pages 77-78)  This finding was first reported in
the Statewide Single Audit in 2008.

As a result of DHFS’ failure to pay within the
timeframes as prescribed in program regulations, the
auditors qualified their report on the CHIP and Medicaid
Cluster program.

We recommended DHFS review its current process for
paying medical payments and consider changes necessary
to ensure medical payments are made within the
timeframes prescribed within the federal regulations.

DHSF officials accepted our recommendation and stated
they have established internal medical payment pull
parameters to allow for payment within the prescribed
federal timeframes; however they noted claims may be
held for payment by the Comptroller until cash is
available. (For previous agency response, see Digest
Footnote #6)

MISSING DOCUMENTATION IN ADOPTION ASSISTANCE CASE FILES

The Department of Children and Family Services (DCFS)
could not locate case file documentation supporting the
amount of the current subsidy payments for beneficiaries
of the Adoption Assistance program.

During our testwork of 50 case files for eligibility
requirements and allowability of related benefits for
the Adoption Assistance program, we noted the Department
could not locate documentation supporting the current
amount of subsidy payments.  Specifically, we noted the
case file for three beneficiaries did not agree to the
amount of current subsidy payment and no further
documentation was on file to support the amount of the
subsidy payment.  DCFS claimed reimbursement for
adoption assistance benefits made on behalf of the
children totaling $18,554 during the year ended June 30,
2012.

As a result of DCFS’ missing eligibility documentation,
the auditors qualified their report for the Adoption
Assistance program.  (Finding 12-33, pages 114-115)
This finding was first reported in the Statewide Single
Audit in 2005.

We recommended DCFS review its procedures for retaining
current adoption subsidy agreements and implement
changes necessary to ensure such agreements are
maintained as required by program regulations.

DCFS officials agreed with the recommendation and stated
that rate changes should be the result of amended
agreements and that they will add an additional layer of
oversight on rate amendments.  (For previous agency
response, see Digest Footnote #7)

FAILURE TO ENSURE THAT ADOPTION ASSISTANCE
RECERTIFICATIONS ARE PERFORMED ON A TIMELY BASIS

The Department of Children and Family Services (DCFS)
did not ensure that adoption assistance recertifications
were performed on a timely basis for children receiving
recurring adoption assistance benefits.

The Adoption Assistance program provides funds to states
to support the payment of subsidies and non-recurring
expenses on behalf of eligible children with special
needs.

During our review of 50 recurring subsidy payments made
under the Adoption Assistance program, we noted four
instances in which DCFS could not locate a
recertification form submitted by the adoptive parent(s)
within the most recent period.   DCFS claimed
reimbursement for Adoption Assistance benefits made on
behalf of these children totaling $21,989 during the
year ended June 30, 2012.  (Finding 12-34, pages
116-117)  This finding first reported in the Statewide
Single Audit in 2006.

As a result of DCFS’ failure to ensure adoption
assistance recertification were performed timely the
auditors qualified their report for the Adoption
Assistance program.

We recommended DCFS implement procedures to ensure
recertification forms are received in accordance with
the State’s established process and maintained in the
eligibility files for children receiving recurring
adoption assistance benefits.

DCFS officials stated they agree that annual
recertification is a good business practice and is
implementing additional procedures to ensure reporting
to the Post-Adoption Unit and the reporting of follow-up
is completed.  (For previous agency response, see Digest
Footnote #8)

INADEQUATE MONITORING OF IMMUNIZATION PROVIDERS

The Department of Public Health (DPH) is not adequately
monitoring providers under the Immunization Cluster
program.  DPH receives the majority of its federal
Immunization Cluster program funding in the form of
vaccines which are distributed to medical providers
throughout the State.

During our testwork over 65 providers, we noted reviews
for five providers did not include procedures to review
medical records evidencing that vaccine recipients met
program eligibility requirements, corrective action
plans were not obtained for two providers, and
corrective action plans were not evaluated or
acknowledged as acceptable for one provider who had
findings identified in an on-site monitoring review
performed by the Department.

According to Federal regulations, a record of vaccine
administered shall be in each person’s permanent medical
records and the State is required to perform procedures
to ensure immunization records are appropriately
documented by the medical providers.  Additionally,
effective internal controls should include ensuring all
monitoring findings are communicated to providers,
corrective action plans are obtained for any
deficiencies noted and follow up procedures are
performed.    (Finding 12-44, pages 136-137)

As a result of DPH’s failure to adequately monitor
providers, the auditors qualified their report for the
Immunization Cluster program.

We recommended DPH review its monitoring procedures for
providers of Immunization Cluster Program and implement
changes necessary to ensure corrective action plans are
obtained and evaluated for all deficiencies identified
in provider reviews.

DPH agreed with our recommendation and stated new
procedures have been put into place and the Illinois
Vaccines for Children (VFC) program providers have been
notified of newly revised guidance from CDC on
documenting patient eligibility.

INADEQUATE PROCEDURES FOR FOLLOW-UP OF INVALID SOCIAL
SECURITY NUMBERS

The Illinois Department of Employment Security (IDES)
does not have adequate procedures to follow up on
invalid social security numbers for claimants of the
Unemployment Insurance (UI) program.

To be eligible to receive UI benefits, claimants must be
in the labor force, unemployment must be caused by lack
of suitable work, and the claimant must be legally
authorized to work.  As part of determining whether
claimants are legally authorized to work, IDES is
required to verify the claimant has a valid social
security number.  With the implementation of the
Illinois Benefit Information System (IBIS), IDES planned
to automate its process for verifying social security
numbers by performing a system cross-match between IBIS
and the U.S. Social Security Administration; however,
the interface between IBIS and the Social Security
Administration was not fully implemented during fiscal
year 2012.   (Finding 12-58, pages 165-166)  This
finding first reported in the Statewide Single Audit in
2009.

As a result of IDES not having adequate procedures to
verify social security numbers, the auditors qualified
their report for the Unemployment Insurance program.

We recommended IDES follow established procedures to
ensure the automated stop is generated for all invalid
social security numbers to prevent payment of benefits
to ineligible claimants.

IDES officials agreed with our recommendation and stated
they went live with real-time social security number
validation via the Social Security Administration in
December 2012.   (For previous agency response, see
Digest Footnote #9)

FAILURE TO RETAIN DOCUMENTATION IN ACCORDANCE WITH
FEDERAL REGULATIONS

The Illinois Department of Transportation (IDOT) did not
retain documentation for construction projects in the
Highway Planning and Construction Cluster (Highway
Planning) program in accordance with federal
regulations.

During our testwork over 65 contractor payments,
totaling $45,514,000, and the related procurement files
and other source documentation we noted the following:

• The affidavit of availability could not be located for
eight contractors.
• The summary of project costs approved by the chief
accountant could not be located for three contractors.
• The approved invoice could not be located for one
contractor payment totaling $405,000.
• The warrant and voucher could not be located for three
contractors (with sampled payments of $328,063).

During our review, we also noted these projects were
originally bid prior to fiscal year 2006 and the
information was purged in accordance with IDOT’s record
retention policy.  However, federal regulations require
records to be retained for a period of three years after
final payments and all other pending matters are closed
and therefore these documents should have been retained.
(Finding 12-65, pages 183-184)

As a result of IDOT not retaining documentation for
construction projects in accordance with federal
regulations, the auditors qualified their report for the
Highway Planning and Construction Cluster program.

We recommended IDOT review its current record retention
policies and procedures and implement the changes
necessary to ensure documentation is retained in
accordance with federal regulations.

IDOT officials agreed with our recommendation and stated
it is their policy to prepare all construction projects
according to federal regulations even if the contract
will not be paid with federal funds.

FAILURE TO OBTAIN CERTIFIED PAYROLLS PRIOR TO CONTRACTOR
PAYMENTS

The Illinois Department of Transportation (IDOT) did not
obtain certified payrolls prior to making payments to
contractors for the Highway Planning and Construction
Cluster (Highway Planning) program.

During our testwork of 56 contractor payments for
regular construction projects totaling approximately
$45,514,000, and 9 contractor payments for advanced
construction projects totaling approximately $878,000,
we noted the following:

• Certified payrolls for 7 contractor payments on
regular construction projects totaling approximately
$7,892,000 were received subsequent to the payments made
to the contractors ranging from 5 to 19 days.

• Certified payrolls for 30 contractor payments on
regular construction projects totaling approximately
$20,439,000 were not dated and as a result we were
unable to determine whether they were received prior to
making payments to the contractors.

• Certified payrolls and statements of compliance for
five contractor payments on advanced construction
projects totaling approximately $769,000 could not be
located for our testwork and as a result we were unable
to determine whether they were received prior to making
payments to the contractors.

• Certified payrolls for 15 contractor payments on
regular construction projects totaling approximately
$9,662,000 were not signed by either the Resident
Engineer, documentation staff, or EEO personnel and as a
result we were unable to determine whether the certified
payroll was approved prior to making payments to the
contractor.

Federal regulations require the contractor to submit a
copy of all payrolls to the resident engineer for each
week in which any contract work is performed.  Each
payroll submitted shall be accompanied by a “Statement
of Compliance” signed by the contractor.  (Finding
12-66, pages 185-186)

As a result of IDOT not obtaining certified payrolls
prior to payment, the auditors qualified their report
for the Highway Planning and Construction Cluster
program.

We recommended IDOT establish procedures to ensure
weekly payroll certifications are received prior to
making payments to the contractors.

IDOT officials agreed with our recommendation and stated
they have discussed this issue at the Annual
Construction/Materials meeting and at each of the
District Spring implementation meetings.

ISSUE INVOLVING MULTIPLE STATE AGENCIES

INADEQUATE ON-SITE MONITORING OF SUBRECIPIENTS

We noted weaknesses in on-site monitoring of
subrecipients for the following agencies: (See pdf
digest for table.)

These agencies pass-through federal funding to
subrecipients for the purpose(s) established by federal
regulations.  As pass-through entities, these agencies
monitor subrecipients primarily by reviewing grant
applications, receiving periodic financial and
programmatic reports, reviewing invoices, establishing
policies and procedures, providing training and
guidance, performing informal evaluations (on-site
reviews) and receiving OMB Circular A-133 audit reports.

According to federal regulations, a pass-through entity
is required to monitor the activities of subrecipients
as necessary to ensure that federal awards are used for
authorized purposes in compliance with laws and
regulations.  Also, effective internal controls should
include ensuring documentation of on-site review
procedures adequately supports procedures performed and
the results obtained.  These findings were first
reported in the Statewide Single Audit for DCFS (2000),
ISBE (2012), DCEO (2011, 2012), DOT (2005, 2011, 2012),
and ICJIA (2012) respectively.

As a result of these agencies’ failure to adequately
monitor subrecipients, the auditors qualified their
report for 15 programs listed in the above table.

We recommended the agencies: (1) properly report federal
awards passed through to subrecpients and implement on-
site monitoring procedures to review compliance
requirements, (2) establish measurable selection
criteria and update its monitoring instruments to
include procedures for all direct and material
compliance requirements, (3) establish procedures to
follow up on on-site monitoring findings to verify
corrective actions are being implemented, monitoring
reports are prepared timely and supervisory reviews of
fiscal on-site monitoring reviews are adequately
documented and formally communicated, (4) implement
procedures to monitor each compliance requirement
administered by its for-profit subrecipients, and (5)
establish procedures to ensure all subrecipients
receiving federal funds have audits performed in
accordance with OMB Circular A-133 and management
decisions are issued where required.

ISBE, DCEO and ICJIA accepted our findings and
recommendations.  DCFS agrees that federal awards should
be properly reported and monitored but is currently
reviewing the responses received from the federal
government and DOT agreed with two findings and
partially agreed with one finding. (For previous DCFS
and DOT responses, see Digest Footnote #10)

ISSUES INVOLVING AMERICAN RECOVERY AND REINVESTMENT ACT
(ARRA) AND FEDERAL FUNDING ACCOUNTABILITY AND
TRANSPARENCY ACT (FFATA)

FAILURE TO COMMUNICATE ARRA INFORMATION AND REQUIREMENTS
TO SUBRECIPIENTS AND INACCURATE ARRA 1512 REPORTS

The Department of Transportation (DOT) did not
communicate American Recovery and Reinvestment Act
(ARRA) information and requirements to subrecipients of
the Highway Planning and Construction Cluster (Highway
Planning), the High Speed Rail Corridors and Intercity
Passenger Rail Services – Capital Assistance Grants
(High Speed Rail), and the Surface Transportation
Discretionary Grants for Capital Investment (TIGER)
program.  In addition, DOT did not accurately report
expenditures in the quarterly ARRA 1512 report for the
Highway Planning program.

We noted DOT did not identify the federal award number,
catalog of federal domestic assistance title and number,
or the amount of the award attributable to ARRA at the
time of each disbursement.  In addition, DOT’s grant
agreements did not identify the requirements for their
subrecipients to separately report ARRA program
expenditures on the schedule of expenditures of federal
awards and the data collection form.  We also noted, one
quarterly ARRA 1512 report erroneously underreported
expenditures by $2,440.  (Findings 12-70 and 12-72,
pages 194-195 and 198-199, respectively)

We recommended DOT implement procedures to ensure ARRA
information and requirements are properly communicated
to its subrecipients and review the process and
procedures in place to prepare and submit ARRA 1512
reports to ensure amounts reported are accurate and
reconcile to DOT’s financial records.

DOT accepted our findings and recommendations

INADEQUATE PROCESS TO REPORT SUBAWARD INFORMATION
REQUIRED BY FEDERAL FUNDING ACCOUNTABILITY AND
TRANSPARENCY ACT (FFATA)

We noted weaknesses in reporting subaward information as
required by FFATA for the following agencies: (See pdf
digest for table.)

We noted DHS had not developed procedures to report and
HFS did not report information required by FFATA,  DCFS
did not report required information within required
timeframes, and ISBE and IEMA did not have an adequate
process to ensure all subaward information was properly
reported.

FFATA requires the State to report certain identifying
information related to awards made to subrecipients in
amounts greater than or equal to $25,000 under federal
grants awarded on or after October 10, 2010.

We recommended the agencies establish procedures to
identify all subawards subject to FFATA reporting
requirements and report required subaward information in
accordance with FFATA.

DHS, HFS, DCFS, ISBE and IEMA accepted our findings and
recommendations.

OTHER FINDINGS

The remaining findings pertain to other compliance and
internal control matters.  We will follow up on the
status of corrective action on all findings in our next
Statewide Single Audit for the year ended June 30, 2013.

AUDITORS’ OPINION

The auditors state the Schedule of Expenditures of
Federal Awards for the State of Illinois as of and for
the year ended June 30, 2012 is presented fairly in all
material respects.

WILLIAM G. HOLLAND
Auditor General

WHG:JSC:rt

SPECIAL ASSISTANT AUDITORS
KPMG LLP was our special assistant auditor for this
audit.

DIGEST FOOTNOTES

Previous response by the Office of the Governor and the
Office of the State Comptroller

#1: Inadequate Process for Compiling the Schedule of
Expenditures of Federal Awards

2011: (Office of the Governor) The Governor’s Office
agrees with this finding.  The Governor’s Office, the
Governor’s Office of Management and Budget (GOMB) and
the Office of the Comptroller are addressing these
challenges and have been working to solve some of these
problems.  The Governor’s Office, the Governor’s Office
of Management and Budget (GOMB) and the Office of the
Comptroller have developed a timeline for short term,
mid-term, and long range plans.  In fiscal year 2012 a
letter was signed by all agency heads asking them to
recognize the importance to the Governor of timely and
accurate reporting. In addition, GOMB continues to work
with the Department of Central Management Services to
develop job descriptions to allow agencies to hire
employees skilled in financial statement and single
audit preparation.  This is a complicated and lengthy
process.  The GOMB also requested budgetary authority
for fiscal year 2013 to hire accountants knowledgeable
about governmental financial reporting including
compiling the information for federal expenditures,
although this was not part of the legislative budget.
GOMB and the Governor’s Office have been primarily
responsible for developing a plan for a statewide
financial accounting system.  This statewide financial
accounting system would also include a grants management
module to enable preparation of the Statement of
Expenditures of Financial Awards.  A steering committee
was convened that includes representatives of agencies
with substantial federal funding.  It is comprised of
the chief information officer, members of the General
Assembly as well as representatives of the Governor’s
Office of Management and Budget, the Comptroller’s
Office and several operating agencies.  The steering
committee has met several times and has reviewed the
information available from work by prior consultants.
Currently a request for proposals (RFP) is being
developed to secure a consultant.  This consultant will
develop the necessary statewide accounting requirements
and develop an RFP for software and implementation
services to address the state’s need.  Unfortunately
capital money has not been forthcoming.  The project
cannot go forward without funding.  Once funding and a
vendor are secured it will still take several years for
completion and internal control issues will persist.
The Governor’s office will continue working with the
agencies to provide as complete information possible
given the State’s current capacities.

2011:	(Office of the State Comptroller) The Office
accepts the recommendation.  The IOC will continue to
assist the Governor’s Office in their efforts to
increase the quality of GAAP packages and provide
training and technical assistance to State agencies.  In
addition, legislation was passed by the General
Assembly, and if approved by the Governor, it would
create a Financial Accounting Standards Board whose
mission would be to improve the timeliness, quality and
processing of financial reporting for the State.

Previous responses by the Department of Human Services

#2: Failure to Perform Eligibility Redeterminations
within Prescribed Timeframes

2011: The Department agrees with the recommendation.
IDHS will continue to work with the Department of
Healthcare and Family Services to review current
processes for performing eligibility redeterminations
and consider changes necessary to ensure all
redeterminations are performed within the prescribed
timeframes.

#3: Failure to Properly Maintain and Control Case File
Records

2011:	The Department agrees with the recommendation.
Given our current fiscal constraints and continued
staffing limitations, IDHS continues to place a high
priority on proper case file maintenance.  The
Department has begun implementation of a document
management system that will capture much of the
information that is currently printed and placed in a
paper file, and route it to an electronic file.  This
will assist in the reduction of the overwhelming size
and amount of paper files in the offices, and better
track the location of case file information.

#5: Missing Documentation in Beneficiary Eligibility
Files

2011:	The Department agrees with the recommendation.
We will continue to ensure that staff understands the
importance of proper and accurate filing processes.  A
growing caseload coupled with the inability to hire
additional staff presents the potential for paper filing
errors and backlog. The Department is currently piloting
a document management system that captures much of the
information that is currently printed and placed in a
paper file, and routes it to an electronic file.  This
will assist in the reduction of the overwhelming amount
of paper in the offices, and better track the location
of case files and their contents.

Previous responses by the Department of Healthcare and
Family Services

#4: Inadequate Procedures for Performing Eligibility
Redeterminations

2011:	The Department accepts the recommendation.  DHFS
is working with federal CMS to develop a redetermination
plan that will insure program integrity while at the
same time, not violate Maintenance of Effort (MOE)
requirements under the Affordable Care Act (ACA).  DHFS
is also working with DHS to establish electronic data
matches to verify eligibility.  A plan to manually use
available electronic databases immediately and contract
with a vendor to verify eligibility within the next few
months has been proposed in Senate Bill 2840, House
Amendment 003.

#5: Missing Documentation in Beneficiary Eligibility
Files

2011:	The Department accepts the recommendation.  DHFS
is working with DHS to establish electronic data matches
for various factors of eligibility and are moving
towards electronic case records.  A plan to manually use
available electronic databases immediately and contract
with a vendor to verify eligibility within the next few
months has been proposed in Senate Bill 2840, House
Amendment 003.

#6: Failure to Pay Medical Claims within Prescribed
Timeframes

2011:	The Department accepts the recommendation.  DHFS
established internal medical payment pull parameters to
allow payments within the prescribed federal timeframes.
During the ARRA period, the Comptroller also prioritized
Medicaid claims to achieve compliance with the
regulations as allowable by available cash resources.
During fiscal year 2011, the State was in compliance
with the claims processing requirements all but 10 days,
resulting in a receipt of $1.27 billion in all funds
ARRA-enhanced federal match on its Medical Assistance
program.  In the scope of the entire Medical Assistance
budget, the number of instances (10 days, resulting in
$11.4 million of lost federal reimbursement) where
timely payment did not occur was not considered
significant.  The Department will continue to process
medical claims within the timeframes required under
federal regulations, although they may be held for
payments by the Comptroller until cash if available.

Previous responses by the Department of Children and
Family Services

#7: Missing Documentation in Adoption Assistance
Eligibility Files

2011: The Department agrees that proper documentation
should be retained for all cases.  A process was
implemented in July 2009 to review all case
documentation prior to the finalization of an adoption.
A review of the background check results is a part of
this process.  Periodic reviews are performed on cases
which opened prior to the review process initiated in
July 2009 to ensure that the proper documentation is
included in the case files.  The Department will make a
claiming adjustment for actual amount claimed, $5,338
during the fiscal year, for the beneficiary payment
questioned by the auditor.

#8: Failure to Ensure that Adoption Assistance
Recertifications Are Performed on a Timely Basis

2011:	The Department agrees that annual
recertification is a good business practice and has
implemented additional procedures to ensure reporting to
the Post-Adoption Unit and the reporting of follow-up is
completed.  The Department plans to continue the
procedure.

#10: Inadequate Monitoring of Subrecipients

2011:	The Department disagrees with the finding.
Please see the 2011 Single Audit Report pages 124-125
for lengthy response.

In an auditors’ comment we stated DCFS determined
amounts previously reported as subrecipient expenditures
were vendor payments.  As a result, DCFS did not
identify the amounts passed through to these entities as
subrecipient expenditures on the State’s schedule of
federal awards or in award communications.  DCFS notes
in their response that they will continue to perform a
review of OMB Circular A-133 reports and perform
programmatic procedures; however, since these
organizations are not considered subrecipients they are
not required to have audits performed in accordance with
OMB Circular A-133 and we were unable to obtain a
population of expenditures for testwork.  Finally,
consistent with the prior year, DCFS did not perform
fiscal monitoring procedures.

Previous responses by the Department of Employment
Services

#9: Inadequate Procedures for Follow-up of Invalid
Social Security Numbers

2011:	We accept the recommendation.  IDES has Policy
and Procedure (P&P) 5085.10 in place regarding the
verification of claimant social security number.  The
batch process to verify new claimant’s social security
numbers for our Unemployment Insurance system, IBIS, was
reinstituted on May 24, 2011.  Additionally, on February
2, 2012, IDES submitted a Security Design Plan to the
Social Security Administration, which is the first step
in enabling IDES to verify social security information
in real-time.  IDES expects this real-time social
security number verification to be in place by June 30,
2012.  This will bring IDES in full compliance with P&P
5085.10.

Previous responses by the Department of Transportation

#10: Inadequate On-Site Monitoring of Subrecipients

2011:	The Department agrees with the finding.  The
Department will develop formal policies and procedures
to perform periodic on-site reviews and will adequately
document such reviews to ensure compliance with OMB
Circular A-133.  Aeronautics will develop a random
selection process that will ensure that 20 percent of
all locally let projects receiving federal funds will
undergo an on-site review.  Detailed written procedures
will be in place for projects starting in fiscal year
2013 and will include a random selection process based
on the chronological order of executed Agency
Agreements.