REPORT DIGEST

STATE OF ILLINOIS STATEWIDE SINGLE AUDIT REPORT

SINGLE  AUDIT
For the Year Ended: June 30, 2013


Release Date:   April 15, 2014

Summary of Findings:
Total this audit: 74
Total last audit:  91
Repeated from last audit: 59

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
www.auditor.illinois.gov

SYNOPSIS

• The State expended approximately $23.5 billion
from federal awards in FY13.
• A total of 33 programs or program clusters
were classified and audited as major programs at
thirteen (13) State agencies.  These programs
constituted approximately 92.5% of all federal
spending, or about $21.8 billion.
• Overall, 45 State agencies expended federal
financial assistance in FY13.  Eleven (11) State
agencies accounted for about 98.5% of federal
dollars spent.

Statewide Finding – Financial Reporting

• The State of Illinois does not have an
adequate process in place to permit the timely
completion of a complete and accurate schedule
of federal awards.  As a result, the State has a
material weakness on all federal programs for
financial reporting.

Significant Agency Findings Classified as a
Scope Limitation Resulting in an Auditor
Qualification

• The auditors were unable to obtain sufficient
documentation supporting the compliance of the
State of Illinois for the program reporting
compliance requirements for the Employment
Service Cluster.

Significant Agency Findings Classified as a
Material Weakness Resulting in an Auditor
Qualification

• The Department of Human Services (DHS) has
material weaknesses for:
• failing to perform eligibility
redeterminations within the timeframes
prescribed by regulation for the Temporary
Assistance for Needy Families (TANF), Children’s
Health Insurance Program (CHIP), and Medicaid
Cluster programs.
• inadequately maintaining and controlling
beneficiary case file documents of the TANF,
CHIP and Medicaid Cluster programs.
• failing to locate case file documentation
supporting eligibility determinations for
beneficiaries of the TANF, CHIP and Medicaid
Cluster programs.
• making an improper payment to a beneficiary of
the TANF Cluster program.

• The Department of Public Health has a material
weakness for:
• inadequately monitoring providers under the
Immunization Cluster program.

• The Department of Employment Security has
material weaknesses for:
• inadequate procedures to follow up on invalid
social security numbers for Unemployment
Insurance (UI) program claimants.
• eligibility determinations not being issued
for individuals applying for Unemployment
Insurance benefits in accordance with timeframes
required by the State Plan.

• The Department of Commerce and Economic
Opportunity has material weaknesses for:
• inaccurately reporting Federal Expenditures
under the CDBG – State-Administered Small Cities
Program (CDBG) Cluster program.
• inadequate monitoring of the consultant
responsible for the administration of the
Community Development Block Grant (CDBG)
disaster recovery grants.

• The Department of Transportation has material
weaknesses for:
• not obtaining certified payrolls prior to
making grant payments to contractors for the
Highway Planning and Construction Cluster
(Highway Planning) and Surface Transportation
Discretionary Grants for Capital Investment
(TIGER) programs.
• preparing inaccurate financial reports for the
TIGER program.
• not performing procedures to determine whether
a vendor receiving funding under the High Speed
Rail Corridors and Intercity Passenger Rail
Services – Capital Assistance Grants (High Speed
Rail) program complied with the Davis Bacon Act
or the Illinois Procurement Code.

Findings Involving Multiple Agencies

• The Department of Children and Family Services
(DCFS), Illinois State Board of Education
(ISBE), and the Department of Transportation
(DOT) have a material weakness due to inadequate
and/or lack of on-site monitoring of
subrecipients of federal awards.

Findings Regarding American Recovery and
Reinvestment Act (ARRA) and the Federal Funding
Accountability and Transparency Act (FFATA)

• The Department of Transportation (DOT) failed
to communicate ARRA information and requirements
to subrecipients of the TIGER program.

• The Department of Human Services (DHS),
Healthcare and Family Services (DHFS), Children
and Family Services (DCFS), State Board of
Education (ISBE) and Emergency Management Agency
(IEMA) had inadequate processes to report
subaward information required by the Federal
Funding Accountability and Transparency Act
(FFATA).

Note:  Summary definitions (in order of
significance) of key terms used in the findings.

Material weakness (financial):  A material
weakness is a deficiency, or combination of
deficiencies, in internal control over financial
reporting, such that there is a reasonable
possibility that a material misstatement of the
entity’s schedule of expenditures of federal
awards will not be prevented, or detected and
corrected on a timely basis.
Material weakness (compliance):  A material
weakness in internal control over compliance is
a deficiency, or combination of deficiencies, in
internal control over compliance, such that
there is a reasonable possibility that material
noncompliance with a type of compliance
requirement of a federal program will not be
prevented, or detected and corrected, on a
timely basis.

Significant Deficiency (compliance):  A
significant deficiency in internal control over
compliance is a deficiency, or combination of
deficiencies, in internal control over
compliance with a type of compliance requirement
of a federal program that is less severe than a
material weakness in internal control over
compliance yet important enough to merit
attention by those charged with governance.

Control Deficiency:  A deficiency in internal
control over compliance exists when the design
or operation of a control over compliance does
not allow management or employees, in the normal
course of performing their assigned functions,
to prevent, or detect and correct, noncompliance
with a type of compliance requirement of a
federal program on a timely basis.

INTRODUCTION

The Illinois Office of the Auditor General
conducted a Statewide Single Audit of the FY13
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.

The Statewide Single Audit includes State
agencies that are a part of the primary
government and expend federal awards.  In total,
45 State agencies expended federal financial
assistance in FY13.  A separate supplemental
report has been compiled 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.  The component units
continue to have separate OMB Circular A-133
audits when required.

The Schedule of Expenditures of Federal Awards
(SEFA) reflects total expenditures of
approximately $23.5 billion for the year ended
June 30, 2013.  Overall, the State participated
in 420 different federal programs, however, 10
of these programs or program clusters accounted
for approximately 83.1% of the total federal
award expenditures.  (See Exhibit I in the full
report)

The funding for the 420 programs was provided by
23 different federal agencies.  Exhibit II shows
that five federal agencies provided Illinois
with the vast majority of federal funding in
FY13. (See Exhibit II in the full report)

 A total of 33 federal programs or program
 clusters were identified as major programs in
 FY13.  A major program was defined in
 accordance with Circular A-133 as any program
 with federal awards expended that meets certain
 criteria when applying the risk-based approach.
 Exhibit III provides a brief summary of the
 number of programs classified as “major” and
 “non-major” and related federal award
 expenditures. (See Exhibit III in the full
 report)

Eleven State agencies accounted for
approximately 98.5% of all federal dollars spent
during FY13 as depicted in Exhibit IV. (See
Exhibit IV in the full report)

AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON
EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER
COMPLIANCE

The auditors’ report contained qualifications on
compliance as summarized below.  The complete
text of the Auditors’ Report may be found on
pages 25-29 of the audit.

Internal Control Over Financial Reporting

We noted a matter involving internal control
over financial reporting for the Schedule of
Expenditures of Federal Awards (Schedule) that
was considered to be a material weakness.  A
material weakness is a deficiency, or
combination of deficiencies, in internal control
over financial reporting, such that there is a
reasonable possibility that a material
misstatement of the entity’s Schedule of Federal
Awards will not be prevented, or detected and
corrected on a timely basis.  The auditors noted
that during the past eleven years there have
been various errors identified and reported on
the audits of State agencies and the Office of
the State Comptroller (IOC) in its annual data
gathering on the SCO forms that are used to
present the Schedule.  Thus, the auditors
recommended the Office of the Governor and the
Illinois Office of the Comptroller work together
with the State agencies to establish a
corrective action plan to address the quality of
the accounting information provided to and
maintained by the IOC as it relates to year-end
preparation of the Schedule.

Internal Control Over Compliance

We noted certain matters involving internal
control over compliance that were considered to
be significant deficiencies.  A control
deficiency in an entity’s internal control over
compliance exists when the design or operation
of a control over compliance does not allow
management or employees, in the normal course of
performing their assigned functions, to prevent,
or detect and correct, noncompliance with a type
of compliance requirement of a federal program
on a timely basis.  A significant deficiency in
internal control over compliance is a
deficiency, or combination of deficiencies, in
internal control over compliance with a type of
compliance requirement of a federal program that
is less severe than a material weakness in
internal control over compliance, yet important
enough to merit attention by those charged with
governance.  Overall, 20 of the 74 findings
reported in the single audit were classified as
compliance significant deficiencies.

Material weaknesses were also disclosed in our
report.  A material weakness in internal control
over compliance is a deficiency, or combination
of deficiencies, in internal control over
compliance, such that there is a reasonable
possibility that material noncompliance with a
type of compliance requirement of a federal
program will not be prevented, or detected and
corrected, on a timely basis.  Overall, 54 of
the 74 findings reported in the single audit
were classified as a material weakness.

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 VI summarizes the total number of
findings, number of repeated findings and the
percentage of repeated findings for the past ten
years.

THE FINANCIAL REPORTING PROCESS FOR THE SCHEDULE
OF EXPENDITURES OF FEDERAL AWARDS (SEFA) IS
INADEQUATE TO PERMIT TIMELY AND ACCURATE
REPORTING

The State of Illinois’ current financial
reporting process does not allow the State to
prepare a complete and accurate Schedule of
Expenditures of Federal Awards in a timely
manner.

Accurate financial reporting problems continue
to exist even though the auditors have: 1)
continuously reported numerous findings on the
internal controls (material weaknesses and
significant deficiencies), 2) commented on the
inadequacy of the financial reporting process of
the State, and 3) regularly proposed adjustments
to financial statements year after year. These
findings have been directed primarily towards
major State agencies under the organizational
structure of the Office of the Governor and
towards the Office of the State Comptroller
(IOC).

The IOC has made significant changes to the
system used to compile financial information,
however, the State has not solved all the
problems to effectively remediate these
financial reporting weaknesses.  The process is
overly dependent on the post-audit program being
a part of the internal control over financial
reporting even though the Illinois Office of the
Auditor General has repeatedly informed State
agency officials that the post-audit function is
not and should not be an internal control
mechanism for any operational activity related
to financial reporting.

The State of Illinois has a highly decentralized
financial reporting process. The system requires
State agencies to prepare financial reporting
packages designed by the IOC.   These financial
reporting packages are completed by accounting
personnel within each State agency who have
varying levels of knowledge, experience, and
understanding  of IOC accounting policies and
procedures.  Agency personnel involved with this
process are not under the organizational control
or jurisdiction of the IOC. Further, these
agency personnel may lack the qualifications,
time, support, and training necessary to timely
and accurately report year end accounting
information to the Comptroller.

Although these financial reporting packages are
subject to review by the IOC’s financial
reporting staff during the CAFR preparation
process, the current process lacks sufficient
internal controls at State agencies which has
resulted in adjustments relative to the SEFA
over the past several years.  In addition,
internal control deficiencies have been
identified and reported relative to the SEFA
financial reporting process in each of the past
eleven years as a result of errors identified
during the external audits performed on State
agencies.  These problems significantly impact
the preparation and completion of the SEFA and
the identification of major programs.

Errors identified in the SEFA reporting process
in the current year include corrections and
unreconciled amounts identified in agency level
findings for the Illinois Department of Human
Services (Finding Code 2013-006), the Illinois
Department of Employment Security (Finding Code
2013-044), the Illinois Department of Commerce
and Economic Opportunity (Finding Code
2013-050), and the Illinois Department of
Transportation (Finding Code 2013-053).
Additionally, other correcting entries were
required in order to accurately state the
financial information provide by various other
State agencies. Major programs at the Illinois
Department on Aging, Illinois State Board of
Education, and Illinois Department of Commerce
and Economic Opportunity were not identified
until several months after year end.

Failure to establish effective internal controls
at all agencies regarding financial reporting
for the preparation of the SEFA may prevent the
State from completing an audit in accordance
with timelines set forth in OMB Circular A-133
and may result in the suspension of federal
funding.  (Finding 1, pages 34-36)  This finding
was first reported in the Statewide Single Audit
in 2002.

We recommended the Office of the Governor and
the IOC work together with the State agencies to
establish a corrective action plan to address
the quality of accounting information provided
to and maintained by the IOC as it relates to
year end preparation of the SEFA.

The Office of the Governor agreed with the
recommendation and stated they, along with the
Governor’s Office of Management and Budget are
and will continue to work cooperatively with the
Office of the Comptroller to address these
challenges with effective solutions.   In
addition, the Governor’s Office will continue
working with the agencies to improve the State’s
performance both in the short term and the long
term.   (For previous agency response, see
Digest Footnote #1)

The State Comptroller’s Office accepted the
recommendation and stated the audit of the 2013
SEFA was completed approximately two months
earlier than the audit of the 2012 SEFA.
Additionally, they stated they will continue to
assist the Governor’s Office in their efforts to
increase the quality of departmental financial
reporting by providing technical assistance to
State agencies and by working with them to
develop a statewide financial accounting system.
(For previous agency response, see Digest
Footnote #1)

INADEQUATE SUPPORTING DOCUMENTATION FOR
PERFORMANCE REPORTS

The Department of Employment Security (IDES) was
unable to provide sufficient documentation to
support information reported in the ETA 9002D
and the VETS 200C performance reports.

The ETA 9902D and VETS 200C performance reports
are used to report services, activities, and
outcomes of service for all job seekers and
veterans.  These reports are required to be
submitted quarterly, and are used to assess a
State’s success in meeting its performance
goals.  The reports include data from the
Illinois Job Link (IJL) system, the Unemployment
Services Wage Information System (WIS), and the
Wage Record Interchange System (WRIS).  IDES
uses a report writer, the DART reporting system,
to accumulate the data from the IJL, WIS, and
WRIS systems into the format required for the
reports.  This data is then submitted
electronically through the USDOL’s Employment
and Training Administration’s web-based
reporting system.  We are required by the OMB
Circular A-133 Compliance Supplement to test key
line items in these reports; however, complete
information supporting the accumulation of
average earnings data in these key line items by
the DART reporting system was not available for
testing.

Failure to provide sufficient supporting
documentation for the performance reports
required for the Employment Services Cluster
program inhibits the ability to perform an audit
of the program in accordance with OMB A-133 in
that it inhibits the auditors’ ability to select
a sample of data reported to validate the
accuracy.  (Finding 45, pages 139-140)

As a result of IDES’ inability to provide
sufficient documentation, the auditors reported
a scope limitation for the Employment Services
Cluster.

We recommended IDES establish policies and
procedures ensure documentation to support key
line items can be provided from the DART system
for the ETA 9002D and the VETS 200C performance
reports.

IDES officials accepted the finding and stated
the database from which these reports are
partially compiled is managed by the federal
government and they have no control over the
information retained in the system.  IDES
officials also stated they have begun saving the
data request file to keep a snapshot of the data
at the time it is requested so it will be
available for the auditors.

FAILURE TO PERFORM ELIGIBILITY REDETERMINATIONS
WITHIN PRESCRIBED TIMEFRAMES

The Department of Human Services (DHS) did not
perform eligibility redeterminations for
individuals receiving benefits under the
Temporary Assistance for Needy Families (TANF)
Cluster, Children’s Health Insurance Program
(CHIP), and Medicaid Cluster programs in
accordance with timeframes required by the
respective State Plans.

During our testwork of required eligibility
criteria, we noted the State was delinquent
(overdue) in performing the eligibility
redeterminations of individuals for the three
programs during June 2013 as follows:

TANF:  5,017 of 49,603 cases (10.11%)
CHIP: 62,210 of 755,727 cases (8.23%)
Medicaid: 138,047 of 506,292 cases (27.27%)

Failure to properly perform eligibility
redetermination procedures in accordance with
the State Plans may result in federal funds
being awarded to ineligible beneficiaries, which
are unallowable costs.  (Finding 2, pages 42-45)
This finding was first reported in the Statewide
Single Audit in 2003.

As a result of DHS’ failure to perform timely
redeterminations of recipient eligibility, the
auditors qualified their opinion on the TANF,
CHIP and Medicaid programs.

We recommended DHS review its current process
for performing eligibility redeterminations and
consider changes necessary to ensure all
redeterminations are performed within the
timeframes prescribed within the State Plans for
each affected program.

DHS officials agreed with the recommendation and
stated they will continue to work with the
Department of Healthcare and Family Services to
review current processes for performing
eligibility redeterminations and consider
changes necessary to ensure all redeterminations
are performed within the prescribed timeframes.
(For previous agency response, see Digest
Footnote #2)

FAILURE TO PROPERLY MAINTAIN AND CONTROL CASE
FILE RECORDS

The Department of Human Services (DHS) does not
have appropriate controls over case file records
maintained at its local offices for
beneficiaries of the Supplemental Nutrition
Assistance Program (SNAP) Cluster, Temporary
Assistance for Needy Families (TANF) Cluster,
Children’s Health Insurance Program (CHIP), and
the Medicaid Cluster programs.

During our testwork at five separate local
offices, we noted the procedures in place to
maintain and control beneficiary case file
records do not provide adequate safeguards
against the potential for loss of such records.
Specifically, in the five local offices, case
files were generally disorganized and case files
were stacked on or around file cabinets.  We
also noted case files were generally available
to all DHS personnel and that formal procedures
have not been developed for checking case files
in and out of the file rooms or for tracking
their locations.  The amount of questioned costs
that may be assessed the State due to lost or
misplaced beneficiary files could not be
determined for these four major programs whose
total beneficiary spending exceeds $8.2 billion
in the aggregate.

Failure to properly maintain and control
beneficiary case file records may result in the
loss of source documentation necessary to
establish beneficiary eligibility and in
unallowable costs being charged to the federal
programs.  (Finding 3, pages 46-48)  This
finding was first reported in the Statewide
Single Audit in 2007.

As a result of DHS’ failure to properly maintain
and control case file records of beneficiaries,
the auditors qualified their opinion on the
TANF, CHIP and Medicaid Cluster programs.

We recommended DHS review its current process
for maintaining and controlling beneficiary case
records and consider the changes necessary to
ensure case file documentation is maintained in
accordance with federal regulations and the
State Plans for each affected program.

DHS officials agreed with the recommendation
stating they continue to place a high priority
on proper case file maintenance given their
current fiscal, staffing and space constraints.
DHS officials also stated they are now utilizing
an electronic document management system that is
capturing a portion of the information that was
previously printed and stored in a paper case
file which is assisting in the reduction of the
overwhelming size and amount of paper files in
the offices.    (For previous agency response,
see Digest Footnote #3)

MISSING DOCUMENTATION IN BENEFICIARY ELIGIBILITY
FILES

The Department of Human Services (DHS) could not
locate case file documentation supporting
eligibility determinations for beneficiaries of
the Temporary Assistance for Needy Families
(TANF) Cluster, Children’s Health Insurance
Program (CHIP) and the Medicaid Cluster
programs.

During our testwork of 50 TANF, 65 CHIP and 125
Medicaid beneficiary payments for compliance
with eligibility requirements and the
allowability of the relevant benefits provided
we noted the following exceptions:

• In 16 TANF case files, DHS could not locate
the redetermination application completed and
signed by the beneficiary.
• In 8 TANF case files, DHS could not locate the
Responsibility Service Plan completed and signed
by the beneficiary.
• In 3 TANF case files, DHS could not provide
evidence of eligibility, asset or income
verification, identity, or assignment of rights
to the State.
• In 4 TANF Penalty for Refusal to Work special
test cases, DHS could not provide evidence that
DHS verified the beneficiary’s participation in
program work activities.
• In one TANF Penalty for Refusal to Work
special test case, DHS could not provide
evidence that DHS notified the beneficiary of
sanctions prior to reduction of payments.
• In 6 TANF Adult Custodial Parent of Child
under Six When Child Care Not Available special
test cases, DHS could not provide evidence that
DHS notified the beneficiary of reconciliation
appointment notices before payment sanctions
were levied.
• In 4 CHIP and 14 Medicaid case files, DHS
could not locate the redetermination application
completed and signed by the beneficiary.
• In 14 CHIP and 3 Medicaid case files, DHS
could not locate adequate documentation
evidencing income and asset verification
procedures were performed.
• In 1 CHIP and 2 Medicaid case files, DHS could
not locate adequate documentation of residence
verification of the beneficiary.
• In 3 Medicaid case files, DHS could not
provide adequate documentation that the
beneficiary assigned their right to collect
medical benefit payments to the State of
Illinois.
• In 10 Medicaid case files, DHS could provide
adequate documentation for asset verification to
determine whether the beneficiary was eligible
for program benefits.

Failure to maintain client applications for
benefits and/or source documentation for
redetermination/income verification procedures
may result in inadequate documentation of a
recipient’s eligibility and in federal funds
being awarded to ineligible beneficiaries, which
are unallowable costs.  (Finding 4, pages 49-51)
This finding was first reported in the Statewide
Single Audit in 2001.

As a result of DHS’ failure to locate case file
documentation supporting eligibility
determinations for beneficiaries, the auditors
qualified their report on the TANF, CHIP and
Medicaid Cluster programs.

We recommended DHS review its current process
for maintaining documentation supporting
eligibility determinations and consider changes
necessary to ensure all eligibility
determination documentation is properly
maintained.

DHS officials agreed with the recommendation and
stated the Department will continue to ensure
staff understands the importance of proper and
accurate filing processes.   In addition, DHS
officials stated they are increasing the use of
electronic document management systems that
capture some of the information that has been
traditionally printed and maintained in paper
case files.  (For previous agency response, see
Digest Footnote #4)

IMPROPER TANF BENEFICIARY PAYMENT

The Department of Human Services (DHS) made an
improper payment to a beneficiary of the
Temporary Assistance for Needy Families (TANF)
Cluster program.

During our testwork of TANF Cluster program
beneficiary payments, we selected 50 eligibility
files to review for compliance with eligibility
requirements and to determine that the
appropriate benefits were paid.  We noted one
beneficiary payment was improperly calculated by
excluding the beneficiary’s disability income.
As a result of the calculation error, this
beneficiary’s monthly payment was overstated by
$429 and payments made to the beneficiary under
the TANF Cluster included an overpayment of
$4,598 for the year ended June 30, 2013.  The
overpayment identified in our sample had not
been calculated, recouped, or returned to the
USDHHS as of the time of our testing (December
2013).

Failure to properly calculate benefit payments
may result in unallowable costs being charged to
the TANF Cluster.  (Finding 5, pages 52-53)

As a result of DHS making an improper payment,
the auditors qualified their opinion on the TANF
Cluster.

We recommended DHS review its current process
for maintaining documentation supporting
eligibility determinations and consider changes
necessary to ensure all eligibility
determinations and payments are properly made.

DHS officials agreed with the recommendation
stating the policy and procedure related to
exempt disability income was misapplied to a
TANF case reviewed as part of the finding and
that the case has been referred to the Bureau of
Collections who is actively collecting on the
debt.

INADEQUATE MONITORING OF IMMUNIZATION PROVIDERS

The Department of Public Health (DPH) is not
adequately monitoring providers under the
Immunization Grants program.  DPH receives the
majority of its federal Immunization Grants
program funding in the form of vaccines which
are distributed to medical providers throughout
the State.

During our testwork of 65 providers, we noted
corrective action plans were not obtained for
six providers who had findings identified in on-
site monitoring reviews performed by DPH.
Additionally, we noted no follow up procedures
were performed to obtain the missing corrective
action plans.

Failure to adequately monitor providers of the
Immunization Grants program could result in
vaccines being used for unallowable purposes and
providers not properly administering the program
in accordance with laws, regulations, and the
grant agreement.  (Finding 31, pages 110-111)

As a result of DPH’s failure to adequately
monitor providers, the auditors qualified their
report for the Immunization Cluster program.

We recommended DPH review its monitoring
procedures for providers of Immunization Grants
Program and implement changes necessary to
ensure corrective action plans are obtained and
evaluated for all deficiencies identified in
provider reviews.

DPH officials concurred with the finding and
recommendation and stated they have taken steps
in meeting requirements concerning site visits
for providers in Illinois including a formal 2-
day training of all compliance staff in January
2014.

INADEQUATE PROCEDURES FOR FOLLOW-UP OF INVALID
SOCIAL SECURITY NUMBERS

The Illinois Department of Employment Security
(IDES) does not have adequate procedures to
follow up on invalid social security numbers for
claimants of the Unemployment Insurance (UI)
program.

To be eligible to receive UI benefits, claimants
must be in the labor force, unemployment must be
caused by lack of suitable work, and the
claimant must be legally authorized to work.  As
part of determining whether claimants are
legally authorized to work, IDES is required to
verify the claimant has a valid social security
number.  With the implementation of the Illinois
Benefit Information System (IBIS), IDES planned
to automate its process for verifying social
security numbers by performing a system cross-
match between IBIS and the U.S. Social Security
Administration; however, the interface between
IBIS and the Social Security Administration was
not fully implemented until December 2012.

Failure to verify claimant social security
numbers could result in the payment of UI
benefits to ineligible claimants, which are
unallowable costs.  (Finding 46, pages 141-142)
This finding was first reported in the Statewide
Single Audit in 2009.

As a result of IDES not having adequate
procedures to verify social security numbers,
the auditors qualified their report for the
Unemployment Insurance program.

We recommended IDES follow established
procedures to ensure the automated stop is
generated for all invalid social security
numbers to prevent payment of benefits to
ineligible claimants.

IDES officials agreed with our recommendation
and stated they went live with real-time social
security number validation via the Social
Security Administration in December 2012 and
that the exception noted in this finding
occurred prior to December 2012.   (For previous
agency response, see Digest Footnote #5)

FAILURE TO ISSUE ELIGIBILITY DETERMINATIONS
WITHIN PRESCRIBED TIMEFRAMES

The Illinois Department of Employment Security
(IDES) is not issuing eligibility determinations
for individuals applying for Unemployment
Insurance (UI) benefits in accordance with
timeframes required by the State Plan.

During our test work we conducted unannounced
site visits to five local offices and requested
the most recent pending issues detail report as
of the date of our visit.  We noted a
significant backlog in the resolution status of
claims in the adjudication process.
Specifically, we noted a total of 825 out of
4,144 claims at the five local offices that were
outstanding for greater than 21 days of the
detection date.

Failure to issue eligibility determinations
within prescribed timeframes could result in the
untimely and/or improper payment of unemployment
benefits.  (Finding 48, pages 145-146)

As a result of IDES not having adequate
procedures to issue eligibility determinations
within prescribed timeframes, the auditors
qualified their report for the Unemployment
Insurance program.

We recommended IDES implement procedures to
ensure all eligibility determinations are made
within the prescribed timeframes.

IDES officials agreed with our recommendation
and stated that a combination of federal funding
for unemployment insurance dropping by roughly
25% and pension and health care costs increasing
significantly compelled them to reduce its staff
by nearly 1/3 resulting in timeliness measures
suffering.

INACCURATE REPORTING OF FEDERAL EXPENDITURES

The Department of Commerce and Economic
Opportunity (DCEO) did not accurately report
federal expenditures under the CDBG – State-
Administered Small Cities Program (CDBG)
Cluster, the Workforce Investment Act (WIA)
Cluster, and the Low-Income Home Energy
Assistance Program (LIHEAP) programs.

DCEO inaccurately reported federal expenditures
which were used to prepare the schedule of
expenditures of federal awards (SEFA) to the
Illinois Office of the Comptroller.
Specifically we noted unreconciled differences
for the year ended totaling $329,000, $2,873,000
and $30,000 for the CDBG Cluster, WIA Cluster
and LIHEAP programs respectively.  We also noted
a correction of $23 million was necessary to
eliminate expenditures reported by DCEO that
were not subject to A-133.

Additionally, DCEO provided local municipalities
(subrecipients) funding to operate revolving
loan funds under the CDBG Cluster in the 1980s
which were not initially reported on the SEFA or
in the related footnotes.   DCEO is responsible
for on-going monitoring of the CDBG revolving
loan funds operated by its subrecipients and any
remaining funds revert back to DCEO should the
subrecipient cease participation in the CDBG
revolving loan program.  During our audit
procedures, DCEO personnel identified loan
balances of $59,843,000 were outstanding
according to subrecipient records; however, DCEO
was unable to determine the amounts originally
provided to subrecipients.  Accordingly, we were
unable to verify if the loan balances ultimately
reported in the footnotes to the SEFA were
complete and accurate as of June 30, 2013.  We
also noted DCEO had not implemented procedures
to monitor the CDBG revolving loan fund balances
as of June 30, 2013.

Failure to accurately report federal
expenditures prohibits the completion of an
audit in accordance with OMB Circular A-133
which may result in the suspension of federal
funding.  In addition, failure to monitor
revolving loan funds operated by subrecipient
organizations results in non-compliance with
program requirements.  (Finding 50, pages
150-151)

As a result of DCEO not accurately reporting
federal expenditures, the auditors qualified
their report for the CDBG – State-Administered
Small Cities Program Cluster.

We recommended DCEO establish procedures to
accurately report federal expenditures used to
prepare the SEFA to the IOC and implement
procedures to monitor revolving loan funds
operated by subrecipients of the CDBG Cluster
program.

DCEO officials accepted the recommendation and
stated they will implement reporting procedures
to ensure the IOC has the necessary information
to include a footnote to the SEFA to identify
the loan balances for the CDBG revolving loan
funds held by subrecipients.
INADEQUATE MONITORING OF CDBG CONSULTANT

The Department of Commerce and Economic
Opportunity (DCEO) did not adequately monitor
the consultant responsible for the
administration of the Community Development
Block Grant (CDBG) disaster recovery grants.

DCEO contracted with a consultant to administer
the CDBG disaster recovery grants. The
consultant’s  grant administration
responsibilities as outlined in the contract
include but are not limited to:  (1) designing
and planning a program management model, (2)
developing and/or revising application
guidelines for grant awards, (3) conducting
program outreach and marketing, (4) reviewing
program applications and grant recommendations,
including verifying program eligibility for all
applicants, (5) counseling grant applicants, (6)
facilitating the buyouts of homes and businesses
in eligible communities, (7) performing
environmental clearances on all grant awards,
(8) providing quarterly reporting submissions to
USHUD, and (9) monitoring grant activities not
administered by the consultant to ensure
compliance with all federal, state laws,
regulations, and other requirements for the
program.

DCEO performs on-going monitoring of the
consultant administering the CDBG disaster
recovery grants by: (1) reviewing consultant
payment invoices and comparing against
established contract budgets and allowable
costs, and (2) reviewing required monthly
program progress reports during monthly meetings
with consultants.

During our testwork, we noted the USHUD Office
of Community Planning and Development had
previously conducted (August 2012) a monitoring
review of the CDBG disaster recovery grants at
DCEO which indicated that DCEO had no policies
or procedures in place to monitor consultants
responsible for administering the CDBG disaster
recovery grants.  DCEO submitted a corrective
action plan to USHUD in December 2012 describing
the monitoring plan DCEO planned to implement;
however, we noted DCEO had not yet performed any
on-site monitoring of the consultant as of June
30, 2013.

Failure to perform monitoring activities could
result in vendors not properly administering the
federal programs in accordance with laws,
regulations and the grant agreement and federal
funds being expended for unallowable purposes.
(Finding 51, pages 152-153)

As a result of DCEO not adequately monitoring
the consultant, the auditors qualified their
report for the CDBG – State-Administered Small
Cities Program Cluster.

We recommended DCEO implement procedures to
monitor the consultant responsible for
administering the CDBG disaster recovery grants.

DCEO officials accepted the recommendation and
stated they completed the on-site monitoring
review of the disaster recovery program
consultant in July 2013.  DCEO used the
procedures and the monitoring review checklist
provided to USHUD in December 2012.

FAILURE TO OBTAIN CERTIFIED PAYROLLS PRIOR TO
MAKING HIGHWAY PLANNING AND TIGER CONTRACTOR
PAYMENTS

The Illinois Department of Transportation (IDOT)
did not obtain certified payrolls prior to
making payments to contractors for the Highway
Planning and Construction Cluster (Highway
Planning) and Surface Transportation
Discretionary Grants for Capital Investment
(TIGER) programs.

During our testwork of 48 Highway Planning
contractor payments for regular construction
projects totaling approximately $32,163,000, 17
Highway Planning contractor payments for
advanced construction projects totaling
approximately $6,412,000, and 3 TIGER contractor
payments for regular construction projects
totaling approximately $2,424,000, we noted the
following:

• Certified payrolls for 2 Highway Planning
contractor payments on advanced construction
projects totaling approximately $315,100 were
received subsequent to the payments made to the
contractors ranging from 2 to 235 days.
• Certified payrolls for 28 Highway Planning
contractor payments on regular construction
projects totaling approximately $17,693,000 and
3 TIGER contractor payments on regular
construction projects totaling approximately
$2,424,000 were not dated and as a result we
were unable to determine whether they were
received prior to making payments to the
contractors.
• Certified payrolls for 23 Highway Planning
contractor payments on regular construction
projects totaling approximately $14,601,000 were
not signed by either the Resident Engineer,
documentation staff, or EEO personnel and as a
result we were unable to determine whether the
certified payroll was approved prior to making
payments to the contractor.

Failure to obtain certified payrolls prior to
making payments to the contractors could result
in contractors not paying the prevailing wage
rate to employees.  (Finding 54, pages 158-159)

As a result of IDOT not obtaining certified
payrolls prior to payment, the auditors
qualified their report for the Highway Planning
and TIGER programs.

We recommended IDOT establish procedures to
ensure weekly payroll certifications are
received prior to making payments to the
contractors.

IDOT officials agreed with the recommendation
and stated direction was provided at the Annual
Winter Project Implementation meeting held in
January 2014.

INACCURATE TIGER FINANCIAL REPORTS

IDOT did not prepare accurate financial reports
for the Surface Transportation Discretionary
Grants for Capital Investment (TIGER) program.

IDOT is required to prepare financial status
(SF-425) and ARRA 1512 reports on a quarterly
basis for the TIGER program.  During our
testwork of two SF-425 reports and fourteen ARRA
1512 reports, we noted IDOT did not prepare the
reports based upon its financial records.
Additionally, IDOT could not demonstrate how the
information reported agreed or reconciled to its
financial records.

Failure to accurately prepare financial reports
prevents the USDOT from effectively monitoring
the TIGER program.  (Finding 64, pages 179-180)

As a result of IDOT not preparing accurate
financial reports, the auditors qualified their
report for the TIGER program.

We recommended IDOT review the process and
procedures in place to prepare financial reports
required for the TIGER program and implement the
additional procedures necessary to ensure the
reports agree or reconcile to its financial
records.

IDOT officials agreed with the recommendation
and stated they will review the process and
procedures in place to prepare the financial
reports, and develop and implement additional
quality assurance/quality control measures
within that process to ensure consistently
accurate financial and project information is
being reported quarterly as required.

FAILURE TO MONITOR ACTIVITIES OF A HIGH SPEED
RAIL VENDOR

IDOT did not perform procedures to determine
whether a vendor receiving funding under the
High Speed Rail Corridors and Intercity
Passenger Rail Service – Capital Assistance
Grants (High Speed Rail) program complied with
the Davis Bacon Act or the Illinois Procurement
Code.

IDOT received a grant for approximately $1.1
billion to construct and install the
infrastructure necessary to operate high speed
passenger rail service between Illinois and
Missouri.  The agreement between USDOT and IDOT
specified a for-profit organization would assist
IDOT in completing the construction and
installation of the high speed rails.
Specifically, the for-profit organization
(vendor) is responsible for: (1) designing and
engineering the rails, (2) purchasing any
materials required to construct and install the
rails, (3) selecting and contracting with
vendors to assist in constructing and installing
the rails, and (4) purchasing real estate along
the project route and paying relocation
assistance, as necessary.

During our testwork, we noted IDOT has
implemented certain procedures to monitor its
vendor, which include reviewing supporting
documentation relative to time and material
charges incurred by the for-profit organization
or vendor and its subcontractors, inspecting
materials used in the construction of the rails,
and performing site visits to monitor the
progress of on-going construction and
installation activities.  However, IDOT has not
established procedures to monitor whether the
vendor and its subcontractors have complied with
the Davis Bacon Act prevailing wage rate
requirements or procured services in accordance
with the Illinois Procurement Code in carrying
out their assigned duties.

Failure to determine if vendors have complied
with the Davis Bacon Act and the Illinois
Procurement Code may result in noncompliance
with applicable regulations and in federal funds
being expended for unallowable purposes.
(Finding 65, pages 181-182)

As a result of IDOT not monitoring the
activities of a High Speed Rail vendor, the
auditors qualified their report for the High
Speed Rail program.

We recommended IDOT implement procedures to
verify the High Speed Rail program vendor has
complied with the Davis Bacon Act and the
Illinois Procurement Code.

IDOT officials agreed with the recommendation
and stated the Department implemented monitoring
procedures for the Davis Bacon Act requirements
during fiscal year 2013 and written procedures
were finalized in June 2013.  Department
officials also stated they have been monitoring
the Illinois Procurement Code requirements since
inception of the agreement with the vendor in
question; however, they acknowledged the need to
revise their procedures to include those
processes and ensure proper documentation is
retained to support that monitoring requirements
are being met.

ISSUE INVOLVING MULTIPLE STATE AGENCIES

INADEQUATE ON-SITE MONITORING OF SUBRECIPIENTS

We noted weaknesses in on-site monitoring of
subrecipients for the following agencies:

• Children and Family Services (DCFS): Foster
Care - Title IV-E, 2013-023; and Adoption
Assistance, pages 91-94.

• IL State Board of Education (ISBE): Title I,
Part A Cluster, 2013-037; and
Special Education Cluster, Twenty-First Century
Community Learning Centers, Improving Teacher
Quality State Grants, and School Improvement
Grants Cluster, pages 123-125.

• Transportation (DOT), Surface Transportation –
Discretionary Grants for Capital Investment,
2013-063 and
pages 177-178.

These agencies pass-through federal funding to
subrecipients for the purpose(s) established by
federal regulations.  As pass-through entities,
these agencies monitor subrecipients primarily
by reviewing grant applications, receiving
periodic financial and programmatic reports,
reviewing invoices, establishing policies and
procedures, providing training and guidance,
performing informal evaluations (on-site
reviews) and receiving OMB Circular A-133 audit
reports.

According to federal regulations, a pass-through
entity is required to monitor the activities of
subrecipients as necessary to ensure that
federal awards are used for authorized purposes
in compliance with laws and regulations.  Also,
effective internal controls should include
ensuring documentation of on-site review
procedures adequately supports procedures
performed and the results obtained.  These
findings were first reported in the Statewide
Single Audit for DCFS (2000), ISBE (2012), and
DOT (2012), respectively.

As a result of these agencies’ failure to
adequately monitor subrecipients, the auditors
qualified their report for 8 programs listed in
the above table.

We recommended the agencies: (1) properly report
federal awards passed through to subrecpients
and implement on-site monitoring procedures to
review compliance requirements, (2) establish
measurable selection criteria and revise its
risk assessment criteria to incorporate other
risk factors and reconsider the weighting
assigned to each criterion to ensure the
aggregate amount of funding is not the sole
criteria driving the selection, and (3)
implement procedures to monitor each compliance
requirement administered by its for-profit
subrecipients of the TIGER program.

ISBE and IDOT officials agreed with our findings
and recommendations.  DCFS officials agreed that
federal awards should be properly reported and
monitored but they are currently reviewing the
responses received from the federal government.
(For previous DCFS response, see Digest Footnote
#6)

ISSUES INVOLVING AMERICAN RECOVERY AND
REINVESTMENT ACT (ARRA) AND FEDERAL FUNDING
ACCOUNTABILITY AND TRANSPARENCY ACT (FFATA)

FAILURE TO COMMUNICATE ARRA INFORMATION AND
REQUIREMENTS TO TIGER SUBRECIPIENTS

The Department of Transportation (DOT) did not
communicate American Recovery and Reinvestment
Act (ARRA) information and requirements to
subrecipients of the Surface Transportation
Discretionary Grants for Capital Investment
(TIGER) program.

We noted DOT did not communicate the requirement
to separately report ARRA program expenditures
on the schedule of expenditures of federal
awards and the data collection form to one
subrecipient.  We also noted, this agreement did
not include Buy American Act certifications
required for ARRA awards.

Failure to communicate required ARRA information
and obtain Buy American certifications could
result in subrecipients not properly
administering the federal programs in accordance
with federal regulations and unallowable costs.
(Finding 61, pages 173-174)  This finding was
first reported in the Statewide Single Audit in
2010.

We recommended IDOT implement procedures to
ensure ARRA information and requirements are
properly communicated to its subrecipients and
obtain required Buy American certifications.

DOT officials agreed with our recommendation and
stated the Department   revised the subrecipient
agreements to properly communicate the required
ARRA information and obtain Buy American
certifications for all new subrecipients.  In
addition, the Department will provide
notification to current subrecipients of the
required ARRA information.   (For previous DOT
response, see Digest Footnote #7)

INADEQUATE PROCESS TO REPORT SUBAWARD
INFORMATION REQUIRED BY FEDERAL FUNDING
ACCOUNTABILITY AND TRANSPARENCY ACT

We noted weaknesses in reporting subaward
information as required by FFATA for the
following agencies:

(Please see full report digest for list of
agencies.)

We noted DHS, HFS, and DCFS did not report all
information required by FFATA and ISBE and IEMA
did not have an adequate process to ensure all
subaward information was properly reported.

FFATA requires the State to report certain
identifying information related to awards made
to subrecipients in amounts greater than or
equal to $25,000 under federal grants awarded on
or after October 10, 2010.

We recommended the agencies establish procedures
to identify all subawards subject to FFATA
reporting requirements and report required
subaward information in accordance with FFATA.

DHS, HFS, DCFS, ISBE and IEMA officials accepted
our findings and recommendations.

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, 2014.

AUDITORS’ OPINION

The auditors state the Schedule of Expenditures
of Federal Awards for the State of Illinois as
of and for the year ended June 30, 2013 is
presented fairly in all material respects.

WILLIAM G. HOLLAND
Auditor General

WHG:JSC

SPECIAL ASSISTANT AUDITORS
KPMG LLP was our special assistant auditor for
this audit.

DIGEST FOOTNOTES
Previous response by the Office of the Governor
and the Office of the State Comptroller
#1	Inadequate Process for Compiling the
Schedule of Expenditures of Federal Awards
2012: (Office of the Governor) The Governor’s
Office agrees with this finding.  The Governor’s
Office, the Governor’s Office of Management and
Budget (GOMB) and the Office of the Comptroller
are addressing these challenges and have been
working to solve some of these problems.

The Governor’s Office negotiated with the
General Assembly and other stakeholders and won
passage of SB 3794 in order to create a
statutory framework to begin to address the
basic issues with the State’s financial
reporting capabilities.  The legislation has
several components.  First it creates a
Financial Reporting Standards Board composed of
appointees of the Governor and the Comptroller.
The Board is required to facilitate timely
completion of financial reporting through
additional training, assistance and
communication among the parties involved.
Second, the Board is mandated to participate in
the development of a new financial accounting
system for the State.  We anticipate it will
provide leadership and a forum for project
management and collaboration going forward.
Third, the bill modified the State’s personnel
code to allow accelerated and targeted hiring of
highly skilled employees to perform financial
reporting, accounting, and project management
activities for the annual financial reporting
cycle.  These include personnel to help improve
the speed of the current process as well as
other professionals who will help to design and
implement an overhaul of the technology and
establish a unified statewide system.  Governor
Quinn approved the bill on August 23, 2012 at
which point the bill became law and is now
codified as Public Act #97-1055.

The Governor’s Office is working with agencies
to utilize the new authority that they have to
hire staff pursuant to Public Act #97-1055.  In
addition, the Governor’s Office and GOMB
continue to work with the Department of Central
Management Services to develop job descriptions
to allow agencies to hire employees skilled in
financial statement and single audit preparation
for positions that remain subject to the
Personnel Code.

GOMB and the Governor’s Office have been
primarily responsible for developing a plan for
a statewide financial accounting system.  This
statewide financial accounting system would also
include a grants management module to enable
preparation of the Statement of Expenditures of
Financial Awards.  The State Chief Information
Officer, a team of Governor’s Office and GOMB
representatives has reviewed the information
available from work by prior consultants.
Currently a request for proposals (RFP) is being
developed to secure a consultant.  This
consultant will develop the necessary statewide
accounting requirements and develop an RFP for
software and implementation services to address
the state’s need.  In addition, due to a
September 2012 debt issuance of 10-year notes
aimed at technology modernization, the State has
allotted some capital money for this project.
These resources will be a significant help in
getting the project underway.

The Governor’s Office will continue working with
the agencies to improve the State’s performance
both in the short term and the long term.

2012:	(Office of the State Comptroller) The
Office accepts the recommendation.  The IOC will
continue to work the Governor’s Office in their
efforts to increase the quality of departmental
financial information.  The IOC will continue to
provide training and technical assistance to
State agencies and make improvements to the
financial reporting system and procedures.

Previous responses by the Department of Human
Services

#2 – Failure to Perform Eligibility
Redeterminations within Prescribed Timeframes
2012:	The Department agrees with the
recommendation.  IDHS will continue to work with
the Department of Healthcare and Family Services
to review current processes for performing
eligibility redeterminations and consider
changes necessary to ensure all redeterminations
are performed within the prescribed timeframes.

#3 – Failure to Properly Maintain and Control
Case File Records
2012:	The Department agrees with the
recommendation.  Given our current fiscal,
staffing, and space constraints, the Department
continues to place a high priority on proper
case file maintenance.  The Department is now
utilizing a document management system that is
capturing a portion of the information that was
previously printed and stored in the paper case
file, and now stored electronically.   This is
assisting in the reduction of the overwhelming
size and amount of paper files in the offices.

#4 – Missing Documentation in Beneficiary
Eligibility Files
2012:	The Department partially agrees with the
recommendation. We will continue to ensure that
staff understands the importance of proper and
accurate filing processes. A growing caseload
coupled with the inability to hire additional
staff presents the potential for paper filing
errors and backlog. The Department is currently
utilizing a document management system that
captures a portion of the information that is
currently printed and placed in a paper file.

Specifically, we agree with nine of the ten dot
pints in the finding.  The ninth dot point
refers to a case in which the State improperly
made medical assistance payments.  The medical
payments made by the Illinois Department of
Healthcare and Family Services on behalf of the
client on the case in question were appropriate
and allowable.  The IDHS Client Assessment Unit
(CAU) issued a decision on September 14, 2011
which necessitated the denial of the case, which
was appropriately receiving temporary medical
benefits at the time.  On September 19, 2011,
IDHS denied the case based on the CAU decision.
The DHS processing schedules dictate the
effective date of an action, based on the date
the action is taken.  On September 19, 2011 an
action taken on the case in question would have
an effective month of November 2011.  DHS
policy, in WAG 17-03-03 states, “……the last date
of temporary medical benefits is the last day of
the month before the current processing month.”
Therefore the last date of temporary medical
benefits for the case in question – October 31,
2011 – was correct, and no improper payment was
made.

In an auditor’s comment, as discussed in the
finding above, DCFS determined amounts
previously reported as subrecipient expenditures
were vendor payments.  As a result, DCFS did not
identify the amounts passed through to these
entities as subrecipient expenditures on the
Sate’s schedule of federal awards or in award
communications.  D CFS notes in their response
that they have continued to perform a review of
OMB Circular A-133 reports and perform
programmatic procedures; however, since these
organizations are not considered subrecipients
they are not required to have audits performed
in accordance with OMB Circular A-133 and we
were unable to obtain a population of
expenditures for testwork.  Finally, consistent
with the prior year, DCFS did not perform fiscal
monitoring procedures.

As noted in DCFS’ response, a federal resolution
letter was received on April , 2013 which stated
that the entities in question are considered
subrecipients.  The resolution letter also
included guidance to DCFS which appears to
conflict with subrecipient monitoring
requirements included in OMB Circular A-133 and
OMB Circular A-133 Compliance Supplement.
Accordingly, all parties are in the process of
seeking clarification.  As of the date of our
report, clarification has not been obtained.

Previous responses by the Department of
Employment Security

#5 – Inadequate Procedures for Follow-up of
Invalid Social Security Numbers
2012:	We agree.  IDES went live with real-time
social security number validation via the Social
Security Administration in December 2012.  As
part of this process, when a claimant’s social
security number does not match their name, an
issue is posted in IBIS, which stops any
payments from being established for a new UI
claimant.

Previous responses by the Department of Children
and Family Services

#6 – Inadequate Monitoring of Subrecipients
2012: The Department agrees that federal awards
should be properly reported and monitored.
While the Department disagreed with the finding
in FY2011 and the draft FY2012 finding, it is
currently reviewing the response received from
the federal agency and discussing the intention
and conditions contained in the letter regarding
the classification as vendors and assurances
requested. The response received permits the
Department to classify its providers as vendors
and requests the Department to continue its
current practices to monitor provider
performance.

The Department continues to send notices to all
providers considered to be program sub-
recipients (the only subrecipients the
Department had contracts with in SFY 2012 were
Family Preservation Service; Extended Family
Service; and Adoption Preservation Service; none
currently in Foster Care or Adoption programs)
and notices are sent to all providers (including
Foster Care and Adoption programs) for which an
audit report is required (providers/agencies
that receive over $150,000 during the State’s
fiscal year).

The Department’s policy is that on-site fiscal
and administrative reviews should and do include
procedures that consider all compliance
requirements direct and material to the programs
funded by the Department and to ensure
compliance with contract program plan
requirements established for the services
approved and being obtained for children.

The Department continues to conduct on-site
monitoring of the substitute care providers who
receive payments under the Foster Care, Adoption
Assistance, and TANF programs and has never
discontinued monitoring.  Additionally,
following receipt of information from the
Department’s OIG and the Governor’s Office of
Executive Inspector General regarding a former
Director and one of the former providers
contracted by DCFS, the Department conducted an
audit of one specific provider.  That audit
identified issues that were the basis for
changes to monitoring procedures and regular
provider reporting practices.  The Department
has further assessed the issues identified and
instituted additional steps to improve its
fiscal monitoring of providers.  Corrective
action has been taken to close all gaps in
internal control that allowed this instance of
fraud to incur including:

• Implementation of Grant Recoveries Act
requirements
• Quarterly Monitoring of program expenditures
compared to budget
• Quarterly Monitoring of program metrics
• Quarterly Monitor of Provider key Financial
indicators
• Continuous Monitoring of Program monitors site
visits.

In an auditors’ comment we stated DCFS
determined amounts previously reported as
subrecipient expenditures were vendor payments.
As a result, DCFS did not identify the amounts
passed through to these entities as subrecipient
expenditures on the State’s schedule of federal
awards or in award communications.  DCFS notes
in their response that they will continue to
perform a review of OMB Circular A-133 reports
and perform programmatic procedures; however,
since these organizations are not considered
subrecipients they are not required to have
audits performed in accordance with OMB Circular
A-133 and we were unable to obtain a population
of expenditures for testwork.  Finally,
consistent with the prior year, DCFS did not
perform fiscal monitoring procedures.

Previous responses by the Department of
Transportation

#7 – Inadequate On-Site Monitoring of
Subrecipients
2012:	The Department agrees with the
recommendation.  In December 2011, the
Department implemented corrective action
required to properly communicate ARRA
information to subrecipients.  For the Highway
Planning and Construction Program, all instance
of non-compliance were prior to this
implementation date.  For the High Speed Rail
program, the Department will properly notify all
subrecipients as required if the program has
subrecipients in the future.  For the Surface
Transportation Discretionary Grants for Capital
Investment, the corrective action implemented in
December 2011 will correct the deficiencies for
this program now that the subrecipients have
been properly identified.