REPORT DIGEST
ILLINOIS DEPARTMENT OF HEALTHCARE AND FAMILY SERVICES
FINANCIAL AUDIT AND COMPLIANCE
EXAMINATION
For the Year Ended: June 30, 2009
Summary of Findings:
Total this audit: 13
Total last audit: 17
Repeated from last audit: 8
Release Date: May 11, 2010
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 http://www.auditor.illinois.gov
SYNOPSIS
· The Department did not provide requested documentation to the auditors in a timely manner.
· The Department’s year-end financial reporting was not timely completed and contained weaknesses and inaccuracies.
· The Department did not have adequate controls for hospital rates that are reimbursed to the University of Illinois Hospital and Clinics for services provided to individuals.
· The Department did not charge the correct health insurance premium rates for the Teachers’ Retirement Insurance Program.
·
The Department did not contract with an
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
FAILURE TO PROVIDE REQUESTED ENGAGEMENT DOCUMENTATION IN A
TIMELY MANNER
The Department did not provide requested documentation to
the auditors in a timely manner.
During the compliance examination and financial audit, the
auditors made numerous requests from the Department during fieldwork. The auditors provided to the Department 277
specific written requests for documentation to perform our testing. These specific written requests could have
had multiple items within the requests such as samples of vouchers and
receipts.
As requested by the Department, all of the documentation
requests were to be routed through an audit liaison. It was established at the beginning of the
audit engagement that a two week turn around period would be acceptable for
most document requests.
Of the 277 requests, 128 (46%) requests were not fully
completed by the Department within the two week time frame. Of the 128 requests that were not fully
completed within the two week time frame, we received partial information for
17 (13%) requests within the two week time frame. (Finding 1, pages 13-15)
We recommended the Department ensure audit documentation is
provided to the auditors in a timely manner as required by the Illinois State
Auditing Act.
Department officials disagreed with our finding and
recommendation and stated that the auditors have shown no evidence that items
provided after the two week time frame caused any delay in completing their
audit timely. In addition, the
Department stated that the auditor’s chart of “days received after the due date
of request” is misleading.
Department officials continued to state that they take the
audit process very seriously and provide information to the auditors as quickly
as possible, and they will continue to strive to meet the two week turn around
when feasible and will continue to communicate with the auditors when they
cannot meet the two week time frame.
In an auditor’s comment, we noted that the Department’s
response is absurd. The Department is
not in a position to evaluate the effect the Department’s delays may impose on
an audit. The auditors concluded the
Department did not provide timely information to the auditors, which is
noncompliance with the Illinois State Auditing Act. The facts in the finding clearly demonstrate
this noncompliance. Audit schedules are
established on the premise that information requests will be completed in a
reasonable time period. For the
Department’s audit, a two week timeframe was established to complete audit
requests. This is a generous time frame
for a routine post audit.
As noted in the finding and the Department’s response, the
Department exceeded this two week time frame for 128 requests. Obviously, delays in receiving requested
documents will cause a delay in audit completion.
The auditors disagree with the Department’s conclusion that
the auditors’ chart, as presented in the finding, is misleading. The Department has simply taken the same data
and displayed it in arbitrary increments of days in its response. The auditors reported that 46% of the
documents were not provided within a two week period. Therefore, the Department did complete 54% of
the requests within two weeks. The
auditors’ chart indicates that the Department completed 82 of 277 (30%) of the
requests two weeks after the due date (one month from the original
request). As reflected in both the
auditors’ chart and the Department’s chart, it took three weeks to three
additional months after the two week time frame had expired for the Department
to complete the remaining 46 (16%) audit requests.
Both the finding and the Department’s response demonstrate
the difficulty the auditors experienced in obtaining timely information and
cooperation during this post audit.
FINANCIAL STATEMENT PREPARATION
The Department’s year-end financial reporting in accordance
with generally accepted accounting principles (GAAP) to the Illinois Office of
the Comptroller contained weaknesses and inaccuracies. In addition, financial reporting was not
timely.
Several errors were identified during the audit of the
Department’s draft financial statements.
Some of the more significant adjustments were as follows:
• Payments to
the federal government totaling $16.970 million were classified as accounts
payable instead of due to federal government.
• Payments to
the State’s internal service funds totaling $5.850 million were classified as
accounts payable instead of due to other funds.
• Receivables
totaling $3.207 million were recognized as revenues instead of deferred
revenue. The receipts were not collected
within the available period of 60 days.
• Revenues
from expenditures that qualify for federal reimbursement totaling $1.701
million were not recorded in the financial statements as a due from federal
government and federal operating grants.
• Cash
transactions were not calculated correctly resulting in the Cash Flows
Statement for the two proprietary funds to be incorrect.
• The
financial accounting for, and reporting of, revenue and expense accounts for
the Pension (and Other Employee Benefit) Trust Funds were incorrect. Specifically, the Department incorrectly
classified employer contributions and member contributions resulting in an
adjustment totaling $8.531 million. The
Department also did not correctly calculate revenues and expenses resulting in
an overall adjustment totaling $2.815 million to reduce revenues and expenses.
Also, we noted 15 of 32 (47%) GAAP Reporting Packages were
not submitted to the Office of the Comptroller in a timely manner. The GAAP Reporting Packages were submitted to
the Comptroller 6 to 35 days late. In
addition, the Comptroller submitted to the Department review comments for the
GAAP Reporting Packages on September 28, 2009 and October 13, 2009; however,
the Department did not provide a response to those review comments until
October 23, 2009. Further, a complete
set of the Department’s financial statements was not provided to the auditors
until February 26, 2010, eight months after the year end. To complete the Department’s financial
statements, the Department was required to obtain and include in the
Department’s financial statements actuarial valuations for purposes of
complying with the requirements of Statement No. 43 and 45 of the Governmental
Accounting Standards Board. These
actuarial valuations were not available to the auditors until January 8,
2010. (Finding 2, pages 16-17)
We recommended the Department implement additional internal
control procedures to ensure GAAP Reporting Packages are prepared in an
accurate and timely manner.
Department officials concurred with our recommendation and
stated that they are continually assessing the financial reporting process and
implementing procedures to improve upon timeliness and accuracy. As an ongoing effort the Department continues
to strive to meet the mandated deadlines, which resulted in the GAAP Reporting
Packages being submitted in a more timely manner than
in prior years.
INSUFFICIENT CONTROLS OVER THE UNIVERSITY OF ILLINOIS
HOSPITAL SERVICES FUND
The Department did not have adequate controls for hospital
rates that are reimbursed to the University of
Illinois Hospital for services provided to individuals.
During our testing, we noted the Department did not
recalculate the total per diem rate or the Hospital inpatient payment rate for
rate year 2009 (October 1, 2008 through September 30, 2009). During the 2009 fiscal year, the Department
utilized the rates that were used during rate year 2008. The 2009 rates should have been updated by
October 1, 2008.
On December 4, 2008, the Department received approval from
the Centers for Medicare and Medicaid Services for an amendment to the Medicaid
State Plan, which changed the methodology for reimbursing the Hospital and was
retro-active as of July 1, 2008.
The Department did not update the methodology for
reimbursing the Hospital to agree with the Medicaid State Plan amendment until
fiscal year 2010. Throughout fiscal year
2009, the Department continued to reimburse the Hospital using the total per
diem rate and the Hospital inpatient payment rate used during rate year
2008. Due to the Department using 2008
rates, the Hospital was overpaid $5,600,000 during fiscal year 2009. In addition, the Department failed to amend
the Interagency Agreement to reflect the new methodology for reimbursing the
Hospital. (Finding 3, pages 18-19)
We recommended the Department implement additional internal
control procedures to ensure that correct reimbursement rates are used and
updated in a timely manner.
Department officials concurred with our recommendation and
stated that they will move to update its processes and implement sufficient
controls to ensure timely updating and notification of rates to the
provider. The uncertain nature of the
rate methodology and timing shift that occurred with approval of State Plans
08-06 and 08-07 created what is expected to be a one-time delay in
implementation. Since the Department
adjusted the University's rates to be consistent with the State Plan
requirements, federal funding was not affected.
INCORRECT HEALTH INSURANCE PREMIUM RATES CHARGED
The Department did not charge the correct health insurance
premium rates for the Teacher’s Retirement Insurance Program.
The Department set the fiscal year 2009 health insurance
premium rates for Teachers’ Retirement System benefit recipient and dependent
beneficiaries by increasing the prior year rate by 5%. The Department did not take into account the
percentage that was to be paid by the Teacher Health Insurance Security
Fund. As a result, we noted that the
Department did not have an adequate rate-setting methodology used to determine
the amount of the health care premiums to be charged. In addition, the Department did not present
the rate-setting methodology (included but not limited to utilization levels
and costs) used to determine health care premiums to the Teachers’ Retirement
System by April 15th as required.
We also noted the following 2009 premium rates of Teachers’
Retirement Insurance Program health insurance were not in compliance with parameters
established in State statute.
• The monthly
health insurance premium rate charged to a Teachers’ Retirement System benefit
recipient for ages twenty-three through sixty-four selecting the medical
coverage program was $206.77; however, the health insurance premium rate should
have only been $205.12. The benefit
recipients were overcharged a total of $19,744 during fiscal year 2009.
• The monthly
health insurance premium rate charged to a Teachers’ Retirement System benefit
recipient for ages sixty-five and over selecting the medical coverage program
was $310.97; however, the health insurance premium rate should have only been
$307.38. The benefit recipients were overcharged a total of $6,570 during
fiscal year 2009.
• The monthly
health insurance premium rate charged to a Teachers’ Retirement System benefit
recipient for ages twenty-three through sixty-four selecting the major medical
coverage program was $413.53; however, the health insurance premium rate should
have only been $410.25. The benefit recipients were overcharged a total of
$297,703 during fiscal year 2009.
• The monthly
health insurance premium rate charged to a Teachers’ Retirement System benefit
recipient for ages sixty-five and over selecting the major medical coverage
program was $621.93; however, the health insurance premium rate should have
only been $614.76. The benefit recipients were overcharged a total of $61,103
during fiscal year 2009.
• The monthly
health insurance premium rate charged to a Teachers’ Retirement System dependent
beneficiary who is Medicare primary was $252.09; however, the health insurance
premium rate should have only been $232.43. The benefit recipients were
overcharged a total of $499,914 during fiscal year 2009. (Finding 4, pages
20-23)
We recommended the Department ensure health insurance
premium rates are set for the Teachers’ Health Insurance Program as required by
the State Employees Group Insurance Act of 1971. We also recommended the Department ensure adequate
rate setting methodologies are established and make annual required reports to
the Teachers’ Retirement System.
Department officials concurred with our recommendation and
stated that they will ensure health insurance premium rates are set for the
Teachers’ Retirement Insurance Program as required by the statute. Furthermore, the Department will submit the
rate-setting methodology (including but not limited to utilization levels and
costs) used to determine the amount of the health care premiums to the Teachers
Retirement System by April 15, 2010.
EXTERNAL PEER-BASED QUALITY ASSURANCE CONTRACTOR NOT LOCATED
IN ILLINOIS
The Department contracted with an entity to provide external
peer-based quality assurance reviews for the managed health care programs
administered by the Department; however, the entity did not have offices in
Illinois, nor did the entity have Illinois physicians involved in the review
process. (Finding 8, page 30)
We recommended the Department comply with the Illinois
Public Aid Code by ensuring the entity contracted to provide external
peer-based quality assurance reviews is representative of physicians licensed
to practice medicine in Illinois and has statewide geographic representation in
all specialties of medical care that are provided in managed health care
programs administered by the Department.
In addition, we recommended the review process be developed and
conducted by Illinois licensed physicians.
Department officials concurred with our recommendation and
stated that although the current contractor to provide external peer-based
quality assurance reviews for the managed health care programs meets federal
requirements, the Department will seek another vendor that complies with the
statute to review the one Managed Care Community Network operating in the
State.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by the Department. We will review the
Department’s progress toward implementation of our recommendations in our next
audit.
AUDITORS’ OPINION
Based on their audit of the Department's financial
statements for the year ended June 30, 2009, the auditors expressed unqualified
opinions on the Department’s financial statements of the governmental
activities, the business-type activities, each major fund, and the aggregate
remaining fund information.
STATE COMPLIANCE EXAMINATION –
ACCOUNTANTS’ REPORT
The auditors qualified their report on State Compliance for
findings 09-1 and 09-2. Except for the
noncompliance described in these findings, the auditors state the Department
complied, in all material respects, with the requirements described in the report.
WILLIAM G. HOLLAND, Auditor General
WGH:TLD:pp
AUDITORS ASSIGNED
This audit
was performed by the Office of the Auditor General's staff.