Total Expenditures

! Cost of Property and Equipment

A Claim (See schedule on page 123)

Accounts Payable and Accrued Liabilities (General Fund) (Page 42) (in thousands)

Currently: Ms. Jackie Garner (effective March 1, 2001)

The Department was unable to provide evidence of substantial improvements to the integrity of the data in the Key Information Delivery System (KIDS), which has resulted in the Department’s inability to validate the Child Support Enforcement accounts receivable balances at June 30, 2000. This finding has been repeated since 1998.

During the audit period, the Department formed a workgroup to determine the extent to which noted problems had been resolved or still existed and what corrective actions were needed. During our review of the workgroup results and discussions with Department personnel, we noted:

Based on our FY98 and FY99 audits, the conditions described above and the conditions described in other findings in our current audit related to Child Support issues, we concluded there were not adequate controls over data integrity related to child support accounts receivable balances.

Due to the lack of competent evidential matter related to the integrity of accounts receivable balances, the Child Support Trust funds have been omitted from the financial statements and we have issued a qualified opinion on the financial statements for the third year in a row.

As also reported in our FY99 and FY98 audits, due to the data integrity problems noted during the Federal Certification Review process, the KIDS system is conditionally certified by the Federal government. The Department was in the process of cleansing data during our fieldwork in an effort to address the federal certification.

Good internal controls would require the Department to maintain sufficient records and financial reports to properly account for assets when a governmental unit is functioning as an agent to another party. Failure to maintain accurate records of child support activity not only affects the financial reporting of the Department of Public Aid, but also increases the risk of material misstatements in the State's general-purpose financial statements. (Finding 1, pages 14 – 15)

We recommended the Department continue with its efforts to identify and correct data integrity problems in KIDS and to obtain unconditional certification by the Federal government. We further recommended the Department strengthen its controls over financial reporting by performing periodic internal tests of account balances and evaluating the reasonableness of child support financial reports.

Department officials accepted our recommendation to continue with its efforts to identify and correct data integrity problems in KIDS and to obtain unconditional certification by the Federal government. However, the Department noted it was officially informed by the federal government in April 2001 that data integrity conditions were fully satisfied. Department officials further stated that the Department is applying all necessary resources to ensure KIDS meets the additional federal requirements for Federal Welfare Reform and the needs of the State, within the constraints of available state and federal appropriations and cash resources. (For previous Department responses, see Digest Footnote 1.)

In an auditor’s comment, we noted our point regarding the KIDS system being conditionally certified by the Federal government was accurate according to information available during our audit fieldwork that ended December, 2000. Additional information was not provided to us regarding this issue until April, 2001. We will evaluate this information during our next compliance audit of the Department.

The Department did not obtain reports necessary to monitor, evaluate and report activity of the State Disbursement Unit (SDU).

The SDU, required by a 1996 Federal law, processes the collection and disbursement of child support payments. The Department executed a contract during February 1999, ultimately totaling $24 million, with the Office of the Clerk of the Circuit Court of DuPage County. The contract required DuPage to develop, establish and operate the SDU.

We noted the Department did not obtain nine reports from DuPage which were required by the contract during FY00. These reports included a monthly report of the total number of transactions processed, total dollars collected by the SDU and total dollars disbursed by the SDU; an exception report of all payments received but not disbursed by the SDU; and an exception report of all unapplied payments received by the SDU.

Additionally, we noted the Department did not audit or contract for an audit of the SDU to determine the reliability of SDU financial information. An audit report would provide assurances as to the effectiveness and efficiency of internal controls over financial reporting.

Other deficiencies related to the SDU were noted in a management audit issued by the Auditor General in March, 2000. The status of the recommendations from the management report are discussed later in this digest. (Finding 2, pages 16-17)

We recommended the following:

The Department accepted our recommendation with one reservation. The Department did not accept the recommendation to fully implement audit recommendations made in the Auditor General’s Management Audit of the SDU. The Department noted it did not accept all of the recommendations made by the Auditor General in the Management Audit and will implement those it did accept. The Department also responded the contract with the DuPage County Clerk expired on June 30, 2000 and the Department is currently operating the SDU. The Department will monitor future SDU vendor contracts to ensure that the reports required in the contract are provided on a timely basis.

The Department did not maintain adequate controls over property and equipment. We noted the Department did not have a complete property listing as of June 30, 2000. The Department’s listing did not include equipment purchased for the SDU totaling $1,943,091 and its Medical Warehouse System totaling $4,207,225. Lack of a complete listing at June 30, 2000 caused various reports filed with the State Comptroller to be inaccurate.

In August 2000 the Department identified and recorded the above items. In November 2000 the Department reported the omissions to the State Comptroller. (Finding 3, pages 18-19)

We recommended the Department supervise, monitor and report all equipment under its jurisdiction. We further recommended the Department devote adequate resources to ensure accurate and timely reporting of equipment.

The Department officials responded they had implemented our recommendation. The Department noted it concurred that original inventory records provided to the auditors were not all inclusive of these two categories of equipment; efforts/ correction actions were well under way during the course of the audit to correct these conditions. Both of these equipment issues were a result of contractual relationships as opposed to direct purchases of equipment. The Department has strengthened its controls in this area to ensure that all equipment is promptly tagged and recorded in the appropriate system.

The Department’s Bureau of Internal Audit (BIA) did not comply with provisions of the Fiscal Control and Internal Auditing Act.

During our audit, we noted BIA did not perform the scheduled audits, as outlined by the BIA’s audit plan for Fiscal Year 2000. The audit plan had three major system audits (Agency Organization & Management, Purchasing/Contracting/Leasing and Revenues and Receivables) scheduled; however, none of these audits were performed.

The Fiscal Control and Internal Auditing Act requires that audits of major systems of internal accounting and administrative control be conducted on a periodic basis so that all major systems are reviewed at least once every two years. (Finding 4, page 20)

We recommended BIA devote adequate resources to ensure audits of major systems are conducted at least once every two years as required by the Fiscal Control and Internal Auditing Act.

Department officials accepted our recommendation and stated three vacant positions have been filled; and there are two vacant positions. The Department also responded it is BIA’s intention to complete all audits with the available resources.

The Department did not perform monthly reconciliations between its records and cash reports of State Comptroller for the Child Support Enforcement Trust Fund (#957) and the Public Assistance Recoveries Trust Fund (#421).

According to Statewide Accounting Management System procedures, a reconciliation of cash should be performed monthly and the Office of the State Comptroller notified of any unreconcilable difference so necessary corrective action can be taken to locate the differences and correct the accounting records.

Failure to properly reconcile the ending balance of available cash in a timely manner could result in inaccurate financial reporting. (Finding 6, page 23)

We recommended the Department prepare complete, accurate and timely reconciliations of the monthly Comptroller report to ensure the accuracy of accounting records and to monitor available funds.

Department officials agreed with the finding and noted the Department has allocated the necessary resources needed to reconcile these funds. The 957 fund has been reconciled and is current. Staff is working on the 421 fund and expect to have it current June 30, 2001.

The Department’s State Case Registry did not contain driver’s license number for the Custodial Parent or phone number of the Non-Custodial Parent's employer, as required by statute.

During our audit we noted:

We recommended the Department continue its efforts to obtain all information for the State Case Registry as required by the Illinois Public Aid Code.

The Department accepted our recommendation.

The Department of Public Aid has made limited progress in implementing findings from the Office of the Auditor General’s Management Audit of the Child Support State Disbursement Unit (SDU). Significant problems remain outstanding.

The audit made 15 recommendations to the Department of Public Aid and the DuPage County Circuit Clerk who was the SDU vendor. Of the 15 recommendations, 2 were implemented, 7 were partially implemented, and 6 were not implemented. The status is summarized in the exhibit on the next page.

Some of the recommendations from the management audit not implemented included:

Conduct Audit of KIDS: The management audit recommended that the Department should conduct a detailed audit of the KIDS (Key Information Delivery System) computer system to identify the nature and cause of its deficiencies. In our follow-up work, the Department reported that it was having an audit done of the Child Support Program which includes the KIDS system, but did not provide any documentation of that audit.

Remove SDU Inactive Cases: The management audit recommended that the SDU and Public Aid, with the assistance of circuit clerks, should take the steps necessary to remove inactive or duplicate cases from the SDU database and ensure that the remaining data in the SDU system is accurate. Our follow-up work found that the Department did not remove a significant number of inactive or duplicate cases from the SDU system. In the management audit we reported that there were over 800,000 cases in the SDU system. On January 4, 2001, the Department reported that there were still 798,467 cases in the system. We spoke with 7 circuit clerks during this follow-up audit work and most reported that the Department had not worked with them to eliminate duplicate cases.

Reconcile Case Information: The management audit recommended that the Department should continue its efforts to reconcile IV-D case information with the circuit clerks and ensure that non-custodial parents' account balances are accurately stated. In our follow-up work, we found that the Department had contracted with a private vendor to scrub the data in the SDU system. However, this contract did not include work to correct receivable balances. Child Support officials previously stated that they planned to begin an internal process to reconcile account balances in June 2000; however, in October 2000, Child Support officials told us that the reconciliation project had been discontinued.

We also conducted follow-up work related to the $10 million issued in emergency checks by the Department between October 19, 1999 and January 5, 2000. Approximately $9.7 million of the emergency payments have not been recouped by the Department. In a formal opinion, the Attorney General determined that federal law prohibits the Department from recouping emergency payments without the custodial parents' permission. In his February 21, 2001 budget address, the Governor stated that the State should not attempt to recoup emergency payments.

In our follow-up work, we reviewed 55 accounts with large dollar emergency checks, ranging from $2,030 to $8,100 apiece. For most of these cases, our review of the SDU payment history database showed that backlogged payments appeared to be caught up with payments being regularly disbursed by February 2000. In fact, in 7 cases (13%) the emergency payment was made on the same date or after regular child support payments had been disbursed.

Neither a contractor hired by the Department nor the Department's Inspector General had reviewed emergency payments to determine whether any of the checks issued were unnecessary (because regular child support payments were current at the time the emergency check was issued) or duplicative. The Department had not determined the extent to which individual accounts may have been overpaid because of emergency payments, and the Inspector General's review of emergency payments to identify possible fraudulent activity is on-going.

The remaining findings are reportedly being given attention by the Department. We will review the progress towards the implementation of our recommendations in our next compliance audit.

Mr. Eappen Thomas, Acting Chief Internal Auditor for the Department, provided written responses to our findings and recommendations on April 24, 2001.

Our auditors stated the Department’s financial statements as of and for the year ended June 30, 2000 were fairly presented in all material respects except for the effect of the omissions of Child Support Enforcement Trust Funds #957, #1957, and #2957. The Child Support Enforcement Trust Funds should be included in order to conform with generally accepted accounting principles.

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WILLIAM G. HOLLAND, Auditor General

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Pandolfi, Topolski, Weiss & Co., LTD. were our special assistant auditors for this audit.