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FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS
PAYMENTS WERE MADE FOR EFFICIENCY INITIATIVE BILLINGS FROM IMPROPER
LINE ITEM APPROPRIATIONS AND FUNDS
The
Department made payments for efficiency initiative billings from improper
line item appropriations and funds. Public Act 93-0025, in part, outlines a
program for efficiency initiatives to reorganize, restructure and reengineer
the business processes of the State.
The State Finance Act details that the amount designated as savings
from efficiency initiatives implemented by the Department of Central
Management Services (CMS) shall be paid into the Efficiency Initiatives
Revolving Fund. The Act further
requires State agencies to pay these amounts from line item appropriations
where cost savings are anticipated to occur.
The
Department did not receive guidance or documentation with the billings from
CMS detailing from which line item appropriations savings were anticipated to
occur. According to Department staff,
while they requested via telephone information that detailed where savings
were to occur – no information was received. The only guidance received was
the amount of payments that should be taken from General Revenue Funds
($5,248,180) versus Other Funds ($6,642,615) for the September 2003
billings.
The
Department made payments for these billings not from line item appropriations
where the cost savings were anticipated to have occurred but from line items
that had available funds. For
example, the Department used:
·
$4,079,624 from the General Revenue Fund for the CMS
billing relative to the Information Technology Initiative. The specific appropriation within the
Medical Assistance Division under the Illinois Public Aid Code and the
Children’s Health Insurance Program Act, was “For Other Related Medical
Services and for development, implementation, and operation of managed care and
children’s health programs including operating and administrative costs and
related distributive purposes.” An
additional $11,171 from the General Revenue Fund for the CMS billing relative
to the Vehicle Fleet Management Initiative was also paid from this
appropriation.
·
$3,000,000 from personal services line item
appropriations from the Child Support Administrative Fund (Fund #0757) for
part of the CMS billings relative to the Information Technology
Initiative. State law (305 ILCS
5/12-10.2a) details that “Moneys in the Fund may be used…only for the
Department of Public Aid’s child support administrative expenses, as defined
in this Section.”
·
$991,100 from personal services line item
appropriations (i.e. regular positions, retirement, social security contributions
and State paid retirement) from the Office of the Inspector General function
within the Department to make payments for the CMS billing for the
Procurement Efficiency Initiative.
The
Department paid a total of $11,890,795 for the efficiency initiative from
various funds. (Finding 1, pages 10-13)
We recommended that the Department only make payments for
efficiency initiative billings from line item appropriations where savings
would be anticipated to occur.
Further, the Department should seek an explanation from the Department
of Central Management Services as to how savings levels were calculated, or
otherwise arrived at, and how savings achieved or anticipated impact the
Department’s budget.
Department
officials concurred with our finding and stated they will make savings
payments from appropriation lines from which it anticipates obtaining
savings.
INACCURATE FINANCIAL
REPORTING DUE TO CODING ERROR
The
Department’s methodology used for calculating significant accounting
estimates for the medical claim liability for County Hospital Services Fund
(Fund 329) did not include all data extracts pertinent to calculating an
accurate accrual amount for the Fund.
This methodology was not sufficient to ensure proper financial
reporting.
During our
review of the estimated medical claim liability, we identified
inconsistencies in the calculation from 2003 to 2004 which resulted in an
understatement of the medical claim liability. Proposed adjustments to this calculation included the following
increases: medical accrual liability of approximately $204 million, deferred
revenue of approximately $254 million, account receivable due from other
government – local of approximately $129 million, and federal financial
participation account receivable of approximately $101 million and health and
social services expenses of approximately $204 million. Proposed adjustments also included a
decrease in operating grants revenue of approximately $24 million. Such amounts were significant and resulted
in reporting inaccurate financial information to the Comptroller. (Finding 2, pages 14-15)
We
recommended that the Department develop procedures and controls to ensure
consistent and reasonable calculations of significant accounting estimates.
Department
officials concurred with our finding and stated that the historic medical
claims history data for the County Hospital Provider Fund, used to project
medical claim liability, was understated due to a data collection error. The Division of Finance has acknowledged
the data error and has prepared written procedures that detail the
methodology for projecting the incurred liability to avoid errors in the
future.
OTHER FINDING
The remaining finding is less significant and is reportedly
being given attention by the Department.
We will review the progress towards the implementation of our
recommendations in our next compliance examination.
Director Barry Maram provided responses to the
recommendations in correspondence dated December 23, 2004.
AUDITORS’ OPINION
Our auditors state the June 30, 2004 financial statements are
fairly presented in all material respects.
___________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:GSS:pp
SPECIAL ASSISTANT AUDITORS
BKD, LLP were our special assistant auditors.
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