REPORT DIGEST

DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2023

Release Date:  December 19, 2024

FINDINGS THIS AUDIT: 9

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  3 -- 6 -- 9
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  3 -- 6 -- 9

FINDINGS LAST AUDIT: 8

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

INTRODUCTION

The digest covers the Department’s Financial
Audit as of and for the year ended June 30,
2023. A separate digest covering the
Department’s State Compliance Examination
for the two years ended June 30, 2023, will
be released at a later date.

SYNOPSIS

• (23-01) The Department does not have
sufficient internal control over accounting
for grant transactions resulting in material
misstatements to the draft financial
statements.

• (23-02) The Department does not have an
adequate understanding of the suitability of
the design of internal control or the
operating effectiveness of internal control
in place over all data recorded in its
financial statements for transactions
initiated by other State agencies and
recorded in the Department’s financial
statements.

• (23-03) The Department does not have
sufficient internal control over accounting
for intergovernmental expense transactions.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE INTERNAL CONTROLS OVER ACCOUNTING
FOR FEDERAL AWARDS

The Department of Human Services
(Department) does not have sufficient
internal control over accounting for grant
transactions resulting in material
misstatements to the draft financial
statements.

For financial reporting purposes, the
Department (Fiscal Services) tracks grant
data for purposes of accruing grant
receivables, unearned revenue, unavailable
revenue and payable balances, all of which
impact Federal Operating Grant Revenue,
using Office of Comptroller required SCO
forms including SCO-563 Grant/Contract
Analysis, SCO-567 Interfund Transfers –
Grantee Agency, and SCO-568 Interfund
Transactions – Grantor Agency.

In preparing the SCO forms, the Department
made errors in reporting expenditure
amounts, including expenditure adjustments,
and cash receipts, including lapse period
receipts, for its federal awards programs,
resulting in errors in the financial
statements for grant transactions.
Additionally, based on audit procedures
performed, the SCO forms required multiples
revisions throughout calendar year 2024.
Some of the most significant errors are as
follows:

• In the General Revenue Fund (0001),
expenditures were overstated by $476
thousand and grant receipts were understated
by $2.7 million in the SCO-563 form. This
resulted in an understatement of unearned
revenue and overstatement of Federal
Operating Grant Revenue by $3.2 million.
Further, certain opening balances in the
SCO-563 form were not accurate, which
resulted in an understatement of unearned
revenue and overstatement of Federal
Operating Grant Revenue of $1.1 million.

• In the General Revenue Fund (0001),
assistance listing number (ALN) 10.561
included COVID-related funding with the non-
COVID related funding. When working with the
Department to split the activity between
COVID-related funding and non-COVID related
funding, an overstatement of Unearned
Revenue and understatement of Federal
Operating Grant Revenue of $2.7 million was
identified.

• In the Employment and Training Fund
(0347), expenditures in the SCO-563 form
were overstated by $94.5 million resulting
in an overstatement of Federal Operating
Grant Revenue, Unavailable Revenue and Due
from Other Governments – Federal.

• In the Employment and Training Fund
(0347), expenditures in the SCO-563 form
were overstated by $68.8 million due to
inclusion of expenditures and grant receipts
to be reported by the Department of Children
and Family Services in Fund 0220. This
resulted in an overstatement of Due from
Other Governments – Federal by $7.4 million
and Federal Operating Grant Revenue by $68.8
million, and an understatement of Unearned
Revenue by $61.4 million.

• In the Food Stamp and Commodity Fund
(1245), the SNAP major program expenditure
report for ALNs 10.551 and 10.542 did not
include June activity. This resulted in an
understatement of Federal Operating Grants
Revenue and Health and Social Services
Expenses of $376.8 million. Further, the
activity recorded for fiscal year 2024 did
not include emergency allotment funding.
This resulted in an understatement of
Federal Operating Grant Revenue and Health
and Social Services expenditures of $91
million.  (Finding 1, pages 73-76)

We recommended the Department strengthen its
internal control over preparing the SCO
Forms by including a reconciliation of
Federal grant receipts and expenditures by
ALN included in each SCO Form to the general
ledger for each fund (the ERP System).
Deposits of Federal draws should be recorded
in the fund(s) that incurred the associated
expenditures. Once prepared, balances
reported in the SCO forms should be compared
to the draft financial statements, by fund,
to conclude if amounts are reasonable.
Additionally, large balances in Due from
Other Governments – Federal, Unearned
Revenue and Unavailable Revenue should be
investigated as they are unusual for
reimbursement type grant awards in which the
Department can generally draw funds monthly
upon the incurrence of qualifying
expenditures.

The Department accepted our recommendation
and indicated corrective action is planned.

MEDICAL ASSISTANCE PROGRAM FINANCIAL
INFORMATION

The Department of Human Services
(Department) does not have an adequate
understanding of the suitability of the
design of internal control or the operating
effectiveness of internal control in place
over all data recorded in its financial
statements for transactions initiated by
other State agencies and recorded in the
Department’s financial statements.

During our testing of the financial
statements and supporting documentation, we
noted the following:

• The Department could not provide
documentation of the preparation or the
Department’s review of expenditure
reconciliations for Federal Medical
Assistance Program (MAP) funds or the State
Children’s Health Insurance Program (CHIP)
(Funds 0120, 0142, 0211, 0365, 0502, 0509,
0718) between amounts reported in the
Department’s general ledger system (ERP) and
amounts reported in the Grant/Contract
Analysis Forms (Form SCO-563s) provided to
the Office of Comptroller (IOC) which
support the receivable and revenue
calculation for financial reporting. The
amount per the Form SCO-563s (totaling
approximately $424 million for total
reimbursable costs “TRC” for Assistance
Listing Numbers (ALN) 93.767 and 93.778), is
a computed amount (a formula), essentially
the amount needed to achieve the reported
receivable balance provided by the
Department of Healthcare and Family Services
(HFS), a separate State agency, or a maximum
amount for funds which have a statutory
deposit limit. The Department does not
retain a reconciliation between what is
reported on the Form SCO-563s (claimable
expenditures) and within ERP (all
expenditures) for each fund which identifies
which expenditures were used for claiming
the federal award. Additionally, there is no
documentation maintained by the Department
to support the calculation and methodology
used by HFS in preparing the net federal
receivable amount (approximately $16.1
million for the two ALNs).

• During testing of expenditures and
liabilities, we determined that the
Department is not monitoring or reviewing
the payments submitted by HFS, or the
liabilities calculated by HFS, on behalf of
the Department and reported in the
Department’s financial statements. When HFS
submits a request for payment to the IOC, a
summary file is also sent to the Department
which goes through an interface and is
recorded into ERP. An employee in the
Department’s Office of Fiscal Services
reconciles the payments between ERP and the
IOC before accepting them into ERP. Although
the Department has documented their
understanding of how transactions for DHS
programs are processed within HFS, the
Department was unable to provide auditors
with documentation of their monitoring
performed over the amounts reported in the
Department’s financial statements.

• Additionally, the Department is placing
reliance on the internal control over the
applicable HFS system without recent
independent verification of the system.
Currently, the Department receives
summarized information from HFS and records
the transactions into ERP and the SCO-563
forms without performing sufficient
procedures to determine the accuracy of the
information.  (Finding 2, pages 77-79)

We recommended the Department assume more
responsibility for the transactions and
balances reported in its financial
statements that are initiated/estimated by
other State agencies, including the
following:

• The Department should enter into an
interagency agreement (IA) with HFS that
details the responsibilities of each agency
with regards to initiating, processing and
recording transactions, and how the
sufficiency of internal control over
Department transactions will be monitored
(i.e. annual internal audit, SOC 1 Type 2
audit, or other).

• Once an IA is executed, on a regular
basis, the Department should determine if
the control system and related monitoring
agreed to through the IA is sufficient to
prevent and detect significant financial
statement errors. The sufficiency of
internal control should be monitored each
time there is a major change to Federal MAP/
CHIP programs or IT systems used for those
programs.

• Expenditure and accrual amounts provided
by HFS in connection with year-end reporting
of Federal MAP receivables should be
reconciled to ERP or agreed to reports and
source data compiled by HFS.

The Department accepted our recommendation
and indicated corrective action is planned.

INTERGOVERNMENTAL EXPENSES

The Department of Human Services
(Department) does not have sufficient
internal control over accounting for
intergovernmental expense transactions.

In contractual services expenditures for the
General Revenue Fund (0001), three
transactions totaling $9 million out of 46
transactions totaling $97.3 million tested
for the year ended June 30, 2023, were
expenditures incurred in the year ended June
30, 2022. Of the three transactions, two
were intergovernmental charges from the
Department of Innovation and Technology
(DoIT).

In equipment expenditures for the General
Revenue Fund (0001), two transactions
totaling $6.2 million out of 12 transactions
totaling $13.6 million tested for the year
ended June 30, 2023, were expenditures
incurred in the year ended June 30, 2022.
Both transactions were intergovernmental
charges from the DoIT.

Upon further investigation, it was
determined there were approximately $53.5
million of contractual services and other
expenditures incurred by DoIT to be billed
out to the Department, of which only
approximately $37.5 million had been
recognized in accounts payable during fiscal
year 2022. The Department reported nearly
$15.9 million in expenditures for the year
ended June 30, 2023, that were incurred for
data center charges, supplemental IT charges
and communication charges in the year ended
June 30, 2022.

As a result of the errors noted above,
expenditures in the prior year financial
statements were understated and expenditures
in the current year financial statements
were overstated by $15.9 million.  (Finding
3, page 80)

We recommended the Department utilize
information provided by the Illinois Office
of Comptroller (IOC) SCO-565 Inter-Fund
Payable/Receivable form in preparing and
reviewing its final inter-fund balances.

The Department accepted our recommendation
and indicated corrective action is planned.

OTHER FINDINGS

The remaining findings pertain to improper
classification of fund balance, inadequate
disaster recover controls over the
Integrated Eligibility System (IES),
inadequate general information technology
(IT) controls over IES, inadequate controls
over eligibility determinations and
redeterminations, insufficient review and
documentation of provider enrollment, and
inadequate general IT controls over the
Illinois Medicaid Program Advanced Cloud
Technology (IMPACT) system.  We will review
the Department’s progress towards the
implementation of our recommendations in our
next financial audit.

AUDITOR’S OPINION

The auditors stated the financial statements
of the Department of Human Services as of
and for the year ended June 30, 2023 are
fairly stated in all material respects.

This financial audit was performed by RSM US
LLP.

JANE CLARK
Division Director

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

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