REPORT DIGEST

STATE OF ILLINOIS

STATEWIDE SINGLE AUDIT REPORT

(excluding Component Units)

(Performed in Accordance with the Single Audit Act and OMB Circular - A-133)

For the One Year Ended:
June 30, 2000

Summary of Findings:

Total this audit 36
Total last audit 50*
Repeated from last audit 14**

*Findings in the FY 99 Departmental Single Audits
**Findings Repeated from the FY 99 Departmental Single Audits

Release Date:
June 22, 2001

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS
Background

  • The State expended $11.3 billion from federal awards in FY 00.
  • The State participated in 292 different federal programs. 10 of these programs or program clusters accounted for 79% of the federal award expenditures.
  • A total of 41 federal programs were classified and audited as major programs. These programs constituted approximately 93% of all federal spending or about $10.5 billion.
  • Overall, 37 State agencies expended federal financial assistance in FY 00. 9 State agencies accounted for about 97% of federal dollars spent.

Significant Findings

  • The Department of Children and Family Services has an Audit Scope Limitation1 on Adoption Assistance and Foster Care Programs because claims and adjustments were not properly accounted for.
  • The Department of Children and Family Services has a material reportable condition2 on Foster Care Program because of inadequacies in monitoring and communicating subrecipient activities.
  • The Department of Public Aid has material reportable conditions2 on the Child Support Program due to inadequacies in the implementation of the State Disbursement Unit and errors in the Key Information Delivery System's data.
  • The Department of Public Aid has a material reportable condition2 in the Temporary Assistance for Needy Families Program for failing to report information to the Department of Human Services.
  • The State Board of Education has material reportable conditions2 on Special Education Cluster Programs due to unlocated subrecipient files and failure to complete on-site reviews of subrecipients within a 6-year period.
  • The Environmental Protection Agency has a material reportable condition2 on the Capitalization Grants due to inaccurate reports being filed, and not reconciling the filed reports with internal supporting schedules.

Notes: Summary definitions of key terms used in the findings.

1Scope Limitation: A condition occurring in the audit where the auditor was unable to obtain sufficient evidential matter. This condition resulted in an inability to audit the Program as required by federal regulations.

2Reportable Condition: A significant deficiency in internal controls discovered by the auditor in the course of the audit.

{Expenditures and Activity Measures are summarized on the next page.}

STATE OF ILLINOIS
STATEWIDE SINGLE AUDIT
For the Year Ended June 30, 2000 (in thousands)

FINANCIAL ACTIVITIES

FY 2000

EXPENDITURES BY PROGRAM

Amount

Percent

Major Programs
Medicaid Cluster
Unemployment Insurance
Food Stamp Cluster
Highway Planning and Construction
Temporary Assistance for Needy Families
Title I Grants to Local Educational Agencies
Foster Care - Title IV-E
Child Care Cluster
Child Nutrition Cluster
Special Supplemental Nutrition Program for Women, Infants & Children
Special Education Cluster
Social Services Block Grant
Federal Family Education Loans
Job Training Partnership Act Cluster
Child Support Enforcement
Rehabilitation Services - Vocational Rehabilitation Grants to States
Airport Improvement Program
Low-Income Home Energy Assistance Program
Child and Adult Care Food Program
Capitalization Grants for State Revolving Funds
Adoption Assistance
Block Grants for Prevention and Treatment of Substance Abuse
Social Security - Disability Insurance
Class Size Reduction
Employment Services Cluster
Community Development Block Grants/State's Program
Vocational Education - Basic Grants to States
Aging Cluster
Capitalization Grants for Drinking Water State Revolving Funds
Total Major Programs
Non-Major Programs (Less than $30 Million)
TOTAL EXPENDITURES


$4,283,763
1,280,122
849,744
834,715
424,169
331,362
281,080
263,060
236,095
208,385
202,174
157,281
153,275
121,411
99,722
98,840
75,461
75,313
69,476
67,133
65,636
61,032
57,517
49,791
46,404
42,960
39,459
36,855
31,044
10,543,279
756,761
$11,300,040


37.9%
11.3%
7.5%
7.4%
3.8%
2.9%
2.5%
2.3%
2.1%
1.8%
1.8%
1.4%
1.4%
1.1%
0.9%
0.9%
0.7%
0.7%
0.6%
0.6%
0.6%
0.5%
0.5%
0.4%
0.4%
0.4%
0.3%
0.3%
0.3%
93.3%
6.7%
100.0%

Federal Agencies Providing Funding:

Total

Major Program
Expenditures

U.S. Department of Health and Human Services
U.S. Department of Labor
U.S. Department of Agriculture
U.S. Department of Education
U.S. Department of Transportation
U.S. Environment Protection Agency
Social Security Administration
U.S. Department of Housing and Urban Development
All other federal agencies

$5,970,881
1,516,827
1,416,087
1,037,480
943,151
127,576
57,814
47,349
182,875
$11,300,040

$5,747,911
1,447,937
1,363,700
874,901
910,176
98,177
57,517
42,960
0
$10,543,279

STATISTICAL INFORMATION

FY 2000

Total Number of Federal Programs in the Schedule of Expenditures of Federal Awards
Number of Federal Programs Audited as "Major Programs"
Total Number of State Agencies Spending Federal Funds
Number of State Agencies Having "Major Programs" Audited for Single Audit Requirements

292
41
37
10

INTRODUCTION

The Illinois Office of the Auditor General converted to a Statewide Single Audit approach to conduct the FY 00 audit of 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. In prior years, audits of federal grant programs were conducted on a department by department basis.

The Statewide Single Audit includes all State agencies that are a part of the primary government and expend federal awards. In total, 37 State agencies expended federal financial assistance in FY 00. A separate supplemental report has been prepared 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. Consequently, the supplemental report does not include information on component units. The component units continue to have separate OMB Circular A-133 audits.

The Schedule of Expenditures of Federal Awards (SEFA) reflects total expenditures of $11.3 billion for the year ended June 30, 2000. Overall, the State participated in 292 different federal programs, however, 10 of these programs or program clusters accounted for approximately 79% of the total federal award expenditures. (See Exhibit I)

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The funding for the 292 programs were provided by 20 different federal agencies. Exhibit II shows that five federal agencies provided Illinois with the vast majority of federal funding in FY 00.

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A total of 41 federal programs were identified as major programs in FY 00. A major program was defined as any program with federal awards expended that exceeded $30 million. Exhibit III provides a brief summary of the number of programs classified as "major" and "non-major" and related federal award expenditures.

 

EXHIBIT III
Classification of Federal Programs
"Major vs. Non-Major"
and Related Federal Award Expenditures
for the year ended June 30, 2000

Audit Coverage

No.

Expenditures (in millions)

%

Major Programs

41

$10,543.3

93.3%

Non-Major Programs

251

756.7

6.7%

Total

292

$11,300.0

100.0%


Nine State agencies accounted for approximately 97.5% of all federal dollars spent during FY 00 as depicted in Exhibit IV.

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AUDITORS' REPORT
ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO
EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE

The auditors' report contained a scope limitation and qualifications on compliance as summarized below. The complete text of Auditors' Report may be found on pages 19-22 of the audit.

Scope Limitation

The auditors were unable to obtain sufficient documentation supporting the compliance with allowability and period of availability requirements for the Adoption Assistance and Foster Care Programs administered by the Illinois Department of Children and Family Services (DCFS). The DCFS grant accounting system does not adequately identify the period in which claims were made. This resulted in the inability to audit the Program as required by OMB Circular A-133.

 

State Administering Agency Federal Program Compliance Requirement Finding Number

Page Numbers

IL Department of Children and Family Services Adoption Assistance Allowability and period of availability

00-15

57-58

IL Department of Children and Family Services Foster Care Allowability and period of availability

00-15

57-58

Qualifications

The auditors qualified their report on major programs for the following noncompliance findings:

State Administering Agency Federal Program Compliance Requirement Finding Number

Page Numbers

IL Department of Public Aid Child Support Enforcement Special tests and provisions

00-1

28-30

IL Department of Public Aid Child Support Enforcement Special tests and provisions

00-2

31-32

IL Department of Public Aid Temporary Assistance for Needy Families Special tests and provisions

00-8

43-44

IL Department of Children and Family Services Foster Care Subrecipient monitoring

00-17

61-62

IL Department of Children and Family Services Foster Care Subrecipient monitoring

00-18

63-64

IL State Board of Education Special Education Cluster Subrecipient monitoring

00-21

68-69

IL Environmental Protection Agency Capitalization Grants for State Revolving Funds Reporting

00-30

87-89

IL Environmental Protection Agency Capitalization Grants for Drinking Water State Revolving Funds Reporting

00-30

87-89

 

As identified on the preceding page and described in the report's schedule of findings and questioned costs, the State did not comply with certain compliance requirements that are applicable to certain of its major federal programs.

Internal Control Over Compliance

We noted certain matters involving internal control over compliance that were considered to be reportable conditions. Reportable conditions involve matters coming to the auditors' attention relating to significant deficiencies in the design or operation of internal control over compliance that, in the auditors' judgement, could adversely affect the State's ability to administer a major federal program in accordance with the applicable requirements. Overall, 23 of the 36 findings reported in the single audit were classified as reportable conditions.

Material weaknesses were also disclosed in our report. In general, a material weakness is a condition in which the design or operation of internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Overall, 7 of the 36 findings reported in the single audit were classified as both a material weakness and reportable condition.

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 V
Summary Schedule of Findings By Agency

State Agency

Number of Findings

Number of Repeat Findings

Report Page References to Findings

Public Aid
Human Services
Children & Family Services
State Board of Education
Student Assistance Commission
Transportation
Environmental Protection Agency
Natural Resources
Criminal Justice Information Authority
Emergency Management Agency
Corrections
Totals

8
6
6
4
3
2
1
1
1
2
2
36

1
0
4
1
2
0
0
1
1
2
2
14

28-44
45-56
57-67
68-77
78-82
83-86
87-89
90-91
92-93
94-98
99-102

 

 

 

 

Auditor Scope Limitation Pertaining to Allowability and Period of Availability

 

 

 

 

Claimed Expenditures Not Identifiable in Accounting Records

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auditor Qualification Pertaining to Subrecipient Monitoring

 

 

 

 

 

 

 

 

 

 

 

Auditor Qualification Pertaining to Special Tests and Provisions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Errors in Accounts Receivables Balances

 

 

 

 

 

 

Auditor Qualification Pertaining to Special Tests and Provisions

 

 

 

 

 

 

Non-cooperative Individuals Not Being Reported for TANF Sanctions

 

 

 

 

 

 

 

 

 

 

 

 

 

Auditor Qualification Pertaining to Special Tests and Provisions

 

 

 

 

 

 

 

Deficiencies in Documentation of Subrecipient Monitoring Activities

 

 

 

 

 

 

Auditor Qualification Pertaining to Subrecipient Monitoring

 

 

 

 

 

 

 

 

 

 

 

 

Auditor Qualification Pertaining to Reporting

 

 

 

 

CLAIMS AND ADJUSTMENTS FOR FEDERAL REIMBURSEMENT NOT PROPERLY ACCOUNTED FOR

The auditors were unable to obtain sufficient documentation from the Department of Children and Family Services (DCFS) supporting compliance regarding allowability and period of availability for the Adoption Assistance and Foster Care programs. This condition resulted in an audit scope limitation. Total FY 00 federal program expenditures from the Adoption Assistance and Foster Care programs were $65,636,000 and $281,080,000, respectively. Questioned costs could not be determined.

The grant accounting system maintained by DCFS was not able to adequately match the expenditure to the period in which federal claims were being made. Similarly, adjustments were often recorded to reduce amounts previously claimed for beneficiaries who were later determined to be ineligible. As a result, DCFS could not provide a list of expenditures (adjustments) that related to claims filed in FY 00 but incurred in FY 99 (and prior).

The "period of availability of federal funds" is limited to within 2 years after the calendar quarter in which the State made the expenditures. (Finding 00-15, pages 57-58)

We recommended DCFS either: (1) develop a program which will identify the adjustments recorded in a quarter by comparing detail with the previous quarter; or (2) revise its grant accounting system to record the date in which an expenditure is claimed for federal reimbursement.

DCFS officials agreed with the finding, and stated they are making enhancements to their automated financial systems along with changes to their retention practices for quarterly claiming documentation files.

INSUFFICIENT FEDERAL FUNDING INFORMATION AND INADEQUATE AND UNTIMELY MONITORING OF SUBRECIPIENTS IN THE FOSTER CARE PROGRAM

The Department of Children and Family Services (DCFS) does not adequately monitor or have an adequate system in place to report federal funding to Foster Care subrecipients.

DCFS only communicates federal award information to subrecipients upon request by a subrecipient. OMB Circular A-133 requires that each subrecipient of a federal program be notified of the federal program's Catalog of Federal Domestic Assistance title and number, award amount, award name and number, and award year.

Also, in 25 subrecipients sampled out of a total of 113 subrecipients (totaling $108,757,000 of $281,080,000 in federal expenditures, respectively), we noted certain items of noncompliance. Some of the conditions noted in our sample results showed DCFS did not always: (1) receive subrecipient audit reports timely; (2) perform timely desk reviews and take appropriate action when necessary; and (3) reconcile A-133 reports to financial information in subrecipient files. Further, we noted DCFS is on a two-year lag in performing on-site monitoring activities and reviewing the allowability of the costs and activities of subrecipients. (Findings 00-17 and 00-18, pages 61-64)

As a result of the conditions noted for the compliance requirement pertaining to subrecipient monitoring, the auditors qualified their report on major programs for the Foster Care Program.

We recommended DCFS implement procedures to ensure: (1) OMB Circular A-133 reports are received within the 180 days as required; (2) desk reviews are performed timely, including review of reports, follow-up on subrecipient findings and implementation of corrective action plans, receipt and review of applicable management letters, and documentation of such review; (3) the reconciliation of the OMB Circular A-133 reports to financial information in subrecipient files; (4) an evaluation of the current staffing of the monitoring department to ensure resources are adequate; and (5) required federal funding information to the subrecipient is provided on a timely basis.

DCFS officials agreed with all the findings and recommendations with the exception of one. That exception relates to the feasibility of completing the oversight cycle timely (within a one-year time period) instead of the current two-year cycle.

FAILURE TO ADEQUATELY ESTABLISH AND MONITOR STATE DISBURSEMENT UNIT

The Department of Public Aid (DPA) did not adequately establish and monitor the State Disbursement Unit (SDU) for child support payments. This condition resulted in an auditor qualification on the Child Support Enforcement Program for the compliance requirement pertaining to special tests and provisions.

The SDU creation was mandated by the Federal Personal Responsibility and Work Opportunity Act of 1996. During our audit and discussions with management, several operational problems were noted from the SDU's inception. Problems identified included backlogs of checks received from employers for distribution to custodial parents due to the inability to match checks to child support orders and checks being sent to the wrong address. (Finding 00-01, pages 28-30)

We recommended DPA closely monitor the transition process to a new vendor and establish formal procedures to review the SDU activities on a recurring basis. Also, we recommended that DPA require an annual audit of the SDU. This audit, at a minimum, should include a report on the significant controls placed in operation and tests of the SDU's operating effectiveness.

DPA officials stated that the current framework is now working well with minimal disruptions and the agency will attempt to improve and stabilize the existing system. Upon stabilization, DPA anticipates a smooth and trouble free transition to a new vendor can occur. DPA agreed with the implementation of formal procedures to review SDU activities, yearly audits of the SDU's transactions, and significant controls and tests to measure operating efficiency.

INACCURATE DATA IN KEY INFORMATION DELIVERY SYSTEM

The Department of Public Aid (DPA) is not maintaining accurate data in the Key Information Delivery System (KIDS) which has resulted in numerous errors in child support accounts receivable balances. A review of the KIDS was performed in FY 00 by IDPA to determine the extent to which prior years' problems had either been resolved or still existed and what corrective actions were needed. IDPA staff concluded that from a sample of 81 child support cases: (1) errors similar to those in the past two audits, FY 98 and FY 99 still existed; (2) all 81 cases contained one or more errors; (3) 20 of the 81 (25%) cases contained errors related to accounts receivable balances; and (4) corrective action will require system changes to KIDS, retraining of supervisors and field staff, along with closer supervision of field staff. (Finding 00-02, pages 31-32)

This condition resulted in an auditor qualification on the Child Support Enforcement Program for the compliance requirement pertaining to special tests and provisions. In FY 00 total federal program expenditures for Child Support Enforcement were $99,722,000.

We recommended DPA continue its efforts in identifying and correcting all data integrity problems in KIDS and other noted deficiencies.

DPA officials stated they are continuing their efforts to identify and correct all data integrity problems and other noted deficiencies.

NON-ENFORCEMENT OF SANCTIONS OVER TANF RECIPIENTS

The Department of Public (DPA) is responsible for administering the Child Support Enforcement Program. The objectives of this program are to enforce support obligations owed by non-custodial parents, to locate absent parents, establish paternity, and obtain child and spousal support. In situations where a parent is non-cooperative in establishing paternity and is also receiving Temporary Assistance for Needy Families (TANF) benefits, DPA is required to refer the case to the Department of Human Services (DHS) for sanctions (reduction or elimination) of the TANF benefits.

We sampled 25 cases that should have been referred to DHS from DPA due to a notice of non-cooperation to the parent in establishing paternity. We reviewed the case files to ensure that the case was referred to DHS and DHS took the proper course of action to either sanction or solicit cooperation from the TANF recipient with respect to paternity establishment. Of the 25 cases reviewed, we found that DPA did not refer six cases to DHS which resulted in DHS not being able to take the proper action to either reduce or deny TANF benefits.

Per Federal Code, when the State finds an individual is not cooperating with the State in establishing paternity, etc., the State TANF agency (DHS) must (1) deduct an amount equal to not less than 25% from the TANF assistance, and (2) may deny the family any TANF assistance. (Finding 00-08, pages 43-44)

This condition resulted in an auditor qualification on the TANF program for the compliance requirement pertaining to special tests and provisions. In FY 00 total federal program expenditures for TANF were $424,169,000. Questioned costs cannot be determined.

We recommend DPA implement control procedures to ensure that all TANF recipients who are non-cooperative in establishing paternity are referred to DHS for proper sanctions.

DPA officials agreed with the finding and indicate they now notify DHS via an electronic transaction the same night the DPA staff enter a disposition of non-cooperation.

INADEQUATE ON-SITE MONITORING OF SUBRECIPIENTS RECEIVING FEDERAL AWARDS

The Illinois State Board of Education (ISBE) is not adequately performing on-site reviews of subrecipients receiving federal awards.

The ISBE policy is to perform on-site reviews and inspections of subrecipients every 4 to 6 years. ISBE documents subrecipient monitoring activities and stores the documents in each individual subrecipient file. During testwork, 2 of 50 subrecipient files selected could not be located. Due to these files not being located and available, there is no evidence the requirements contained in the Compliance Supplement were being performed. Secondly, we noted no on-site reviews were done within the last six years on 10 of 25 subrecipients tested. (Finding 00-21, pages 68-69)

This condition resulted in an auditor qualification on the Special Education Cluster programs for the compliance requirement pertaining to subrecipient monitoring.

We recommended ISBE review its subrecipient files on a regular basis to ensure all supporting documentation is properly included in the file. We also recommended that ISBE consider revising its on-site monitoring policy for federal programs to use a risk-based approach for selecting subrecipients for on-site visits.

ISBE officials agreed with our finding and stated they have been considering a risk-based assessment process. Also, other monitoring processes will likely continue to be performed by various units within the agency.

INACCURATE CASH TRANSACTIONS AND FEDERAL STATUS REPORTS FILED

The Environmental Protection Agency (EPA) did not properly report expenditures in the quarterly Federal Cash Transaction Report and the annual Financial Status Reports for the Capitalization Grants for State Revolving Funds and the Capitalization Grants for Drinking Water State Revolving Funds programs. The amounts reported were not in agreement with supporting schedules or system data used to generate the reports. (Finding 00-30, pages 87-89)

This condition resulted in an auditor qualification on capitalization grant programs for the compliance requirement pertaining to reporting.

We recommended EPA prepare the reports using the cash basis expenditure balance at the end of the period. We also recommended the employee preparing the reports print out the applicable supporting schedules used in report preparation and copy the relevant pages of the cash management, payroll and other systems that support the amounts on the supporting schedules. Lastly, we recommended an independent review of the report and supporting schedules by a knowledgeable individual be completed prior to report(s) submission.

EPA officials accepted our recommendations and responded they have implemented procedures to ensure that expenditures for both programs will be accurately reported on the quarterly and annual reports. In addition, the EPA has filed amended reports for the period July, 1999 to June, 2000.

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, 2001.

AUDITORS' OPINION

The auditors have stated the Schedule of Expenditures of Federal Awards for the State of Illinois as of and for the year ended June 30, 2000 is presented fairly in all material respects.

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:SES:pp

SPECIAL ASSISTANT AUDITORS

KPMG LLP were our special assistant auditors for this audit.