REPORT DIGEST

STATE OF ILLINOIS - STATEWIDE SINGLE AUDIT

SINGLE AUDIT
FOR THE YEAR ENDED JUNE 30, 2015

Release Date:  April 28, 2016

FINDINGS THIS AUDIT:  75

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  23 -- 49 -- 72
Category 2:  0 -- 2 -- 2
Category 3:  0 -- 0 -- 0
TOTAL:  23 -- 51 – 75

Disclaimer:   1-- 0 – 1

GRAND TOTAL:  24 -- 51 – 75

FINDINGS LAST AUDIT: 69

Category 1:	Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State
laws and regulations (material
noncompliance).
Category 2:	Findings that are
significant deficiencies in internal
control and noncompliance with State laws
and regulations.
Category 3:	Findings that have no
internal control issues but are in
noncompliance with State laws and
regulations.
Disclaimer:  A condition in the audit
where the auditor was unable to form an
opinion on compliance with the
requirements of a major program.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, 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 $29.5
billion from federal awards in FY15.

• A total of 31 programs or program
clusters were classified and audited as
major programs at fourteen (14) State
agencies. These programs constituted
approximately 95.4% of all federal
spending, or about $28.2 billion. In
addition, 41 State agencies expended
federal financial assistance in FY15.
Eleven (11) State agencies accounted for
about 98.7% of federal dollars spent.
Statewide Finding – Financial Reporting

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

Auditor Disclaimer Opinion

• As described in the audit, we were
unable to express, and we did not express,
an opinion on the compliance of the State
of Illinois with the requirements
applicable to its Foster Care Program.
Consequently, a disclaimer of opinion was
issued.

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

The Department of Human Services has
material weaknesses for:
• failing to establish adequate controls
over the Integrated Eligibility System of
the Supplemental Nutrition Assistance
Program Cluster (SNAP), 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.
• failing to perform eligibility
redeterminations within the timeframes
prescribed by regulation for the TANF,
CHIP, and Medicaid Cluster programs.
• making improper payments to
beneficiaries of the TANF program.
• failing to maintain the required
aggregate State expenditures for the
maintenance of effort requirements and not
providing adequate supporting
documentation for the Block Grants for
Prevention and Treatment of Substance
Abuse (SAPT) program.

•The Department of Healthcare and Family
Services has material weaknesses for:
• failing to establish adequate controls
over the Integrated Eligibility System of
the SNAP, TANF, CHIP and Medicaid Cluster
programs.
• failing to locate case file
documentation supporting eligibility
determinations for beneficiaries of the
CHIP and Medicaid Cluster programs.

The Department of Children and Family
Services has a material weakness for:
• making recurring payments of adoption
assistance benefits that were not properly
supported by adoption assistance
agreements for the Adoption Assistance
program.

The Department of Insurance has material
weaknesses for:
• failing to maintain supporting
documentation to substantiate payroll
costs claimed for federal reimbursement
under the State Planning and Establishment
Grants for the Affordable Care Act (ACA)’s
Exchanges (ACA Exchanges) program.
• failing to prepare accurate financial
reports for the ACA Exchanges program.

The Illinois State Board of Education has
material weaknesses for:
• not performing adequate on-site
subrecipient monitoring procedures in
accordance with established monitoring
plan for the Title I Grants to Local
Educational Agencies (Title I), Special
Education Cluster (IDEA)(Special
Education), Twenty-First Century Community
Learning Centers (21st Century), and
Improving Teacher Quality State Grants
programs.
• not performing on-site fiscal reviews of
subrecipients receiving federal award
under the Career and Technical Education –
Basic Grants to States (CTE) program.
• not having an adequate process for
communicating and following up on
monitoring findings for subrecipients of
the School Improvement Grants Cluster
(SIG) program.

The Department of Employment Security has
material weaknesses for:
• failing to implement Federal
requirements to improve program integrity
and reduce overpayments of the
Unemployment Insurance program.
• failing to maintain supporting
documentation to substantiate payroll
costs claimed for federal reimbursement
under the Employment Services Cluster and
Unemployment Insurance programs.

The Department of Transportation has a
material weakness for:
• failing to retain documentation for
construction projects in the Highway
Planning and Construction Cluster in
accordance with federal regulations.

Findings Regarding American Recovery and
Reinvestment Act (ARRA)

The Department of Human Services failed to
communicate ARRA information and
requirements to subrecipients of the TANF
program.

INTRODUCTION

The Illinois Office of the Auditor General
conducted a Statewide Single Audit of the
FY15 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, 41 State agencies expended federal
financial assistance in FY15. 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 $29.5 billion for the
year ended June 30, 2015. Overall, the
State participated in 361 different
federal programs, however, 13 of these
programs or program clusters accounted for
approximately 90.0% of the total federal
award expenditures. (See Exhibit I in the
PDF version of this digest.)

The funding for the 361 programs was
provided by 22 different federal agencies.
Exhibit II shows that five federal
agencies provided Illinois with the vast
majority of federal funding in FY15. (See
Exhibit II in the PDF version of this
digest.)

A total of 31 federal programs or program
clusters were identified as major programs
in FY15. 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 PDF version of this
digest.)

Eleven State agencies accounted for
approximately 98.7% of all federal dollars
spent during FY15 as depicted in Exhibit
IV. (See Exhibit IV in the PDF version of
this digest.)

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 a
disclaimer and qualifications on
compliance as summarized below. The
complete text of the Auditors’ Report may
be found on pages 26-31 of the audit.

Disclaimer

The auditors disclaimed an opinion on the
Foster Care program as a result of an
inability to evaluate and perform
sufficient audit procedures to satisfy
themselves that the Department of Children
and Family Services complied with the
provisions of laws and regulations related
to the Foster Care – Title IV-E Program.
The auditors were unable to express, and
did not express, an opinion on the
Department of Children and Family
Services’ compliance with the requirements
applicable to its Foster Care program.

Qualifications (Noncompliance)

The auditors qualified their report on
major programs for the following
noncompliance findings: (Please see chart
in PDF version of this digest.)

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 will
not be prevented, or detected and
corrected on a timely basis. The auditors
noted that during the past thirteen 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, 2
of the 75 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, 72 of the 75
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. (Please see Exhibit V in the PDF
version of this digest.)

Exhibit VI summarizes the total number of
findings, number of repeated findings and
the percentage of repeated findings for
the past ten years. (Please see Exhibit VI
in the PDF version of this digest.)

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 even
though the Illinois Office of the Auditor
General has repeatedly informed State
agency officials that the post-audit
function is not a substitute for
appropriate internal controls at State
agencies.

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.

Although these financial reporting
packages are subject to review by the
IOC’s financial reporting staff during the
Comprehensive Annual Financial Report
preparation process and the Financial
Reporting Standards Board has adopted
minimum qualifications for all new GAAP
Coordinators who oversee the preparation
of financial reporting forms, the current
process still lacks sufficient internal
controls at State agencies. As a result,
adjustments relative to the SEFA continue
to occur.

Errors identified in the SEFA reporting
process in the current year included: (1)
corrections to amounts reported; (2)
adjustments to report loan balances; and
(3) unreconciled amounts. These items have
been reported in agency level findings for
the Illinois Department of Human Services
(Finding Code 2015-008), the Illinois
Department of Healthcare and Family
Services (Finding Code 2015-024), the
Illinois Department of Insurance (Finding
Code 2015-036), the Illinois State Board
of Education (Finding Code 2015-049), the
Illinois Community College Board (Finding
Code 2015-051), the Illinois Student
Assistance Commission (Finding Code
2015-052), the Illinois Department of
Employment Security (Finding Code
2015-064), the Illinois Department of
Commerce and Economic Opportunity (Finding
Code 2015-066), and the Illinois
Department of Transportation (Finding Code
2015-073). Additionally, other correcting
entries were required in order to
accurately state the financial information
provided by various other State agencies.
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 by OMB Circular A-133
and may result in the suspension of
federal funding. (Finding 1, pages 36-38)
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 concurred with
the recommendation and stated they will
continue to work with the Office of the
State Comptroller to address the core
issues and establish sufficient internal
control processes in State agencies
regarding the quality of the accounting
information provided to and maintained by
the IOC as it relates to year-end
preparation of the SEFA. (For previous
agency response, see Digest Footnote #1.)

The State Comptroller’s Office accepted
the recommendation and stated that while
the 2014 SEFA audit was submitted prior to
the March 31st deadline, the Office agrees
that the existing financial reporting
systems need to be replaced with a new
statewide accounting and grants management
system that is designed to provide the
information needed to complete the SEFA
report and to improve the quality of the
accounting information provided to the
IOC. In addition, the IOC stated the
Office is engaged in a project with the
Governor’s Office and other stakeholders
and outside consultants to design, program
and implement a new statewide financial
accounting and grants management system to
better meet the State’s financial tracking
and reporting needs. (For previous agency
response, see Digest Footnote #1.)

POSSIBLE UNALLOWABLE COSTS CHARGED TO THE
FOSTER CARE PROGRAM

The Department of Children and Family
Services (DCFS) identified adequate
documentation may not have been obtained
and maintained in beneficiary case files
supporting eligibility determinations made
related to the Foster Care – Title IV-E
(Foster Care) maintenance payments claimed
for Federal reimbursement. (Finding 27,
pages 108-109)

As a result of the auditor’s inability to
evaluate DCFS’ compliance with the
provisions of laws and regulations related
to the eligibility of Foster Care
beneficiaries and the related allowability
of payments made on behalf of those
beneficiaries, the auditors issued a
disclaimer of opinion.

We recommended DCFS continue to review its
procedures for payment of Foster Care
benefits and implement changes necessary
to ensure benefits are only paid on behalf
of eligible individuals.

DCFS officials stated they are continuing
their review of procedures for payments of
Foster Care benefits initiated in 2016 to
resolve this matter and expect to complete
implementation by September 2016.

FAILURE TO ESTABLISH ADEQUATE CONTROLS
OVER THE INTEGRATED ELIGIBILITY SYSTEM

The Department of Human Services (DHS) and
the Department of Healthcare and Family
Services (HFS) did not have appropriate
controls over the Integrated Eligibility
System (IES) used for certain eligibility
determinations performed for the
Supplemental Nutrition Assistance Program
(SNAP) Cluster, Temporary Assistance for
Needy Families (TANF) Cluster, Children’s
Health Insurance Program (CHIP), and
Medicaid Cluster programs.

DHS administers the SNAP Cluster, the TANF
Cluster, and certain Medicaid Cluster
waiver programs and HFS administers the
CHIP and Medicaid Cluster programs. The
Affordable Care Act of 2010 required the
State to consolidate and modernize its
eligibility determination functions into a
single system which is known as the
Integrated Eligibility System (IES).
Effective October 1, 2013, the State
implemented IES and began performing and
documenting eligibility determinations for
certain beneficiaries of its Medicaid
Cluster program and later expanded the use
of IES to certain eligibility
determinations for beneficiaries of the
SNAP Cluster, TANF Cluster, and CHIP
programs. IES was developed through a
partnership between IDHS and DHFS with
each agency providing system requirements
specific to their respective federal
programs.

During our testwork, we noted several
deficiencies in the controls over the
implementation of IES. Specifically, we
noted DHS and HFS had not adequately
completed and documented system testing
performed prior to going live with IES. We
were also unable to perform adequate
procedures to satisfy ourselves that
general information technology controls
over the IES system were operating
effectively. Lastly, we noted several
instances of noncompliance during our
review of system data obtained from IES.
Accordingly, we were not able to rely on
IES with respect to our testing of the
eligibility and related allowability
compliance requirements for beneficiary
payments made under the TANF Cluster,
CHIP, and Medicaid Cluster programs.

As a result of DHS’ and HFS’ failure to
have appropriate controls over the
Integrated Eligibility System the auditors
qualified their opinion on the SNAP, TANF,
CHIP and Medicaid Cluster programs.

Failure to establish adequate controls
over systems used to determine the
eligibility of program beneficiaries
inhibits the ability of the State to
properly determine eligibility in
accordance with program requirements and
may result in ineligible beneficiaries
receiving federal benefits which are
unallowable costs. (Findings 2 and 19,
pages 44-46 and 90-93, respectively)

We recommended DHS and HFS evaluate the
known IES system issues, implement
monitoring procedures to identify
potential noncompliance relative to its
federal programs resulting from these
items, and consider the changes necessary
with respect to internal controls over
eligibility determinations to ensure only
eligible beneficiaries receive assistance
under its federal programs. We also
recommended DHS and HFS implement adequate
general information technology control
procedures for the IES system.

DHS and HFS officials accepted the
recommendation and stated they have taken
steps since June 2015 to establish
improved controls over general information
technology control procedures.

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
Medicaid Cluster programs.

During our testwork, we noted the
procedures in place to maintain and
control manual beneficiary case file
records do not provide adequate safeguards
against the potential for loss of such
records. Specifically, in our review of
case files at five separate local offices,
we noted manual case files were generally
available to all DHS personnel and that
formal procedures have not been developed
for checking hard-copy case files in and
out of the file rooms or for tracking
their locations. We also noted a number of
case files were provided several weeks
past the original date due to the fact
that case files had been transferred
between local offices and were not easily
located by DHS. We also noted three CHIP
case files for which DHS could not locate
any case file documentation supporting the
eligibility determinations performed on or
prior to the service date sampled. Lastly,
we noted 2 missing CHIP eligibility case
files.

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 47-49) 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 accepted the recommendation
and 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 #2.)

MISSING DOCUMENTATION IN BENEFICIARY
ELIGIBILITY FILES

The Department of Human Services (DHS) and
the Department of Healthcare and Family
Services (HFS) 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 numerous
exceptions. We noted DHS could either not
locate items needed for testing, could not
provide adequate support of items tested
or could not provide evidence that various
items had been performed or completed. We
also noted HFS could not locate case file
documentation and did not complete
redetermination procedures within required
timeframes.

Failure to maintain client applications
for benefits and/or source documentation
for redetermination/income verification
procedures performed may result in
inadequate documentation of a recipient’s
eligibility and in federal funds being
awarded to ineligible beneficiaries, which
are unallowable costs. (Findings 4 and 20,
pages 50-53 and 94-95, respectively) This
finding was first reported in the
Statewide Single Audit in 2001 for DHS.

As a result of DHS’ and HFS’ 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 and HFS review their
current processes 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
continues 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 #3.)

HFS officials accepted the recommendation
and stated they are working with DHS to
incorporate all initial eligibility and
redeterminations of eligibility into the
new Integrated Eligibility System which
will significantly improve record
retention.

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 2015 as follows:

TANF:  3,805 of 44,443 cases -- 8.56%
CHIP:  141,519 of 1,336,064 cases --
10.59%
Medicaid:  38,545 of 476,054 cases --
8.10%

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 5, pages 54-56) 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 #4.)

IMPROPER TANF CLUSTER BENEFICIARY PAYMENT

The Department of Human Services (DHS)
made improper payments to beneficiaries of
the Temporary Assistance for Needy
Families (TANF) Cluster program.

During our testwork of 50 TANF Cluster
program beneficiary payments, we noted
seven beneficiaries received payments for
the addition of a family member to the
family unit that were improperly
calculated. As a result of the calculation
errors, the monthly payments for four
beneficiaries (with payments of $2,057)
were overstated in total by $508 and the
monthly payments for three beneficiaries
(with payments of $1,331) were understated
in total by $207. Total payments made to
these beneficiaries under the TANF Cluster
were $16,856 for the year ended June 30,
2015. As of the date of our testing
(December 19, 2015), the payment errors
identified in our sample had not been
corrected by IDHS.

Failure to properly calculate benefit
payments may result in unallowable costs
being charged to the TANF Cluster.
(Finding 6, pages 57-58)

As a result of DHS making improper
payments to beneficiaries, the auditors
qualified their opinion on the TANF
Cluster program.

We recommended DHS review its current
process for calculating beneficiary
payments and consider changes necessary to
ensure payments are properly calculated
and paid.

DHS officials accepted the recommendation
and stated the implementation of Phase 2
of the Integrated Eligibility System will
reduce or eliminate the need for manual
calculations of initial prorated
entitlements.

FAILURE TO MEET AND PROVIDE ADEQUATE
DOCUMENTATION FOR THE SAPT MOE REQUIREMENT

The Department of Human Services (DHS) did
not maintain the required aggregate State
expenditures for the maintenance of effort
(MOE) requirements and was unable to
provide adequate supporting documentation
to substantiate DHS met the MOE
requirements for the Block Grants for
Prevention and Treatment of Substance
Abuse (SAPT) program.

During the current fiscal year, we noted
DHS was short $4,395,006 of the aggregate
expenditures needed to meet the SAPT MOE
requirement. Additionally, during our
testwork over 25 expenditures used by the
State to meet the SAPT MOE requirements
(totaling $19,733,117), we noted DHS could
not provide detailed supporting
documentation for 17 expenditures sampled
(totaling $8,672,505). Accordingly, these
expenditures are not allowable for
purposes of meeting the maintenance of
effort. Upon further review, we noted an
additional $108,486,392 for which detailed
supporting documentation was not readily
available.

Failure to maintain required State
expenditure levels for MOE and maintain
adequate supporting documentation to
support expenditures used to meet the MOE
requirement results in unallowable costs
and noncompliance with program
requirements. (Finding 9, pages 65-66)

As a result of DHS not meeting its
maintenance of effort expenditures, the
auditors qualified their opinion on the
Block Grants for Prevention and Treatment
of Substance Abuse program.

We recommended DHS review its process for
monitoring compliance with the SAPT MOE
and for maintaining documentation for
expenditures used to meet its SAPT MOE
requirement.

DHS officials accepted the recommendation
and staff will continue to work to obtain
the necessary reports.

FAILURE TO PROPERLY DOCUMENT OR EXECUTE
ADOPTION ASSISTANCE AGREEMENTS

The Department of Children and Family
Services (DCFS) made recurring payments of
adoption assistance benefits that were not
properly supported by adoption assistance
agreements.

During our testwork of adoption assistance
beneficiary payments, we reviewed 50 case
files and related benefit payments
(totaling $59,107) for compliance with
eligibility requirements and allowability
of related benefits. We noted two subsidy
payments were not supported by adequate
documentation resulting in payments made
that differed from the adoption assistance
agreements. As of the date of our testing,
DCFS has not evaluated whether additional
errors exist or quantified the impact of
this error on the population.

Failure to maintain case file
documentation, including documentation
support changes in the amount of the
subsidy paid, may result in payments to
ineligible beneficiaries, which are
unallowable costs. (Finding 28, pages
110-111)

As a result of DCFS not maintaining case
file documentation supporting payments
made, the auditors qualified their opinion
on the Adoption Assistance program.

We recommended DCFS implement procedures
to ensure adoption assistance subsidy
payments are consistent with the approved
subsidy payment amount in the adoption
assistance agreement and to obtain and
include proper supporting documentation
for subsidy payment changes in the
adoption assistance case files.

DCFS officials agreed with the
recommendation and stated in 2014 the
Department consolidated adoption functions
into one unit which will ensure the
approval and monitoring of all subsidy
agreements and that all supporting
documentation is located in the subsidy
file.

INADEQUATE SUPPORTING DOCUMENTATION FOR
PAYROLL COSTS

The Department of Insurance (DOI) did not
retain adequate supporting documentation
to substantiate payroll costs, totaling
$2,488,093 claimed for federal
reimbursement under the State Planning and
Establishment Grants for the Affordable
Care Act (ACA)’s Exchanges (ACA Exchanges)
program.

During our testing of five payroll
expenditures, totaling $20,319, charged to
the ACA Exchanges program we noted DOI was
unable to provide adequate supporting
documentation for the sampled
expenditures. Upon further investigation,
we noted IDOI does not obtain
certifications from employees who work
solely on the ACA Exchanges program to
verify they spent 100% of their time on
the federal program. We also noted the
timesheets on file for hourly employees
did not contain information detailing the
activity or federal program to which the
time pertained.

In addition, we noted DOI did not have
standard forms (CMS-2 forms or equivalent
documentation) on file to document annual
salary amounts for the payroll
expenditures sampled.

Inadequate documentation of payroll costs
may result in the federal funds being
expended for unallowable purposes.
(Finding 37, pages 128-129)

As a result of inadequate supporting
documentation, the auditors qualified
their opinion on the ACA Exchanges
program.

We recommended DOI implement procedures to
properly document payroll costs in
accordance with the applicable program
guidance.

DOI officials concurred with the finding
and stated they will review the federal
guidelines and develop a process to
document staff certifications of time
spent on the ACA Exchanges Program.

INACCURATE ACA EXCHANGES FINANCIAL REPORTS

The Department of Insurance (DOI) did not
prepare accurate financial reports for the
State Planning and Establishment Grants
for the Affordable Care Act (ACA)’s
Exchanges (ACA Exchanges) program.

During our testwork of two quarterly
SF-425 reports and three monthly Budget
reports, we noted several errors in the
preparation of the reports. Specifically,
amounts reported did not agree to
supporting documentation or only reported
current period (quarterly or monthly)
activity where cumulative information was
required.

Additionally, in considering the reporting
process for all required financial
reports, we noted adequate internal
controls have not been established to
ensure reports prepared by DOI personnel
are accurate. Specifically, we noted DOI
does not perform analytical or other
procedures during the report preparation
process or supervisory reviews to ensure
amounts reported are reasonable in
relation to previously reported
information or expectations relative to
current program activities.

Failure to accurately prepare and review
financial reports prevents the USDHHS from
effectively monitoring the ACA Exchanges
program. (Finding 39, pages 132-133)

As a result of inaccurately preparing
financial reports, the auditors qualified
their opinion on the ACA Exchanges
program.

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

DOI officials concurred with the finding
and stated the Get Covered Illinois (GCI)
finance division was primarily composed of
only one employee who was not properly
trained in federal reporting, and
therefore, incorrectly reported the
receipts and disbursements on required
federal reporting. In addition, DOI
officials stated GCI has since reviewed
the requirements of the various federal
reports and established a consistent and
correct method to report the receipts and
disbursements.

FAILURE TO FOLLOW ON-SITE MONITORING PLAN
FOR SUBRECIPIENTS

The Illinois State Board of Education
(ISBE) did not perform adequate on-site
subrecipient monitoring procedures in
accordance with its established monitoring
plan for the Title I Grants to Local
Educational Agencies (Title I), Special
Education Cluster (IDEA) (Special
Education), Twenty-First Century Community
Learning Centers (21st Century), and
Improving Teacher Quality State Grants
(Title II) programs.

During our review of the subrecipients
selected for review, we noted one
subrecipient common across all Education
programs which represented the single
largest subrecipient for each program. As
we reviewed the monitoring procedures
performed for this subrecipient, we noted
the procedures performed were limited to
on-site reviews of nine schools and
analytical expenditure reviews at
additional schools for the purpose of
determining whether further on-site
reviews were deemed necessary, within the
school district which has in excess of 600
schools. We also noted no on-site
monitoring procedures were performed for
the 21st Century program at this
subrecipient. Given the significance of
this individual subrecipient, we do not
believe the on-site monitoring procedures
performed by ISBE during the year ended
June 30, 2015 were adequate. We also noted
ISBE did not follow timeframes established
in its on-site monitoring plan for
communicating findings and closing out
monitoring files.

Failure to properly monitor subrecipients
and communicate monitoring results may
result in undetected noncompliance and
subrecipients not properly administering
Federal programs in accordance with laws,
regulations, and grant agreements.
(Finding 41, pages 136-138)

As a result of inadequate monitoring of
subrecipients, the auditors qualified
their opinions on the Title I, Special
Education, 21st Century and Title II
grants.

We recommended ISBE review its monitoring
procedures relative to individually
significant subrecipients and implement
additional procedures as necessary to
ensure proper monitoring procedures are
performed for all programs. Additionally,
we recommended ISBE review its procedures
for communicating monitoring results and
closing out audit files and implement
additional procedures to ensure timely
completion of these activities.

ISBE officials agreed with the finding and
stated they will modify the risk scoring
process to ensure individually significant
subrecipients are adequately monitored and
will improve project management related to
the monitoring function.

FAILURE TO CONDUCT ON-SITE MONITORING
VISITS OF CTE PROGRAM SUBRECIPIENTS

The Illinois State Board of Education
(ISBE) did not perform on-site fiscal
reviews of subrecipients receiving federal
awards under the Career and Technical
Education – Basic Grants to States (CTE)
program.

ISBE passed through approximately
$21,382,000 to subrecipients of the CTE
program during the year ended June 30,
2015. The majority of funding was passed
through to vocational schools to implement
educational programs for technical
careers. As a pass-through entity, ISBE
monitors subrecipients of the CTE program
by receiving and reviewing periodic
expenditure reports. However, ISBE does
not perform on-site reviews of CTE
subrecipients.

Failure to adequately monitor
subrecipients may result in subrecipients
not properly administering the federal
programs in accordance with laws,
regulations, and the grant agreement.
(Finding 42, pages 139-140)

As a result of inadequate monitoring of
subrecipients, the auditors qualified
their opinion on the CTE program.

We recommended ISBE develop and implement
formal monitoring procedures to perform
on-site reviews to ensure subrecipients
are administering its CTE program in
accordance with the applicable laws and
regulations.

ISBE officials agreed with the finding and
stated they have developed and implemented
formal monitoring procedures for
performing on-site review of CTE
subrecipients.

INADEQUATE PROCEDURES FOR MONITORING SIG
SUBRECIPIENTS

The Illinois State Board of Education
(ISBE) did not have an adequate process in
place for communicating and following up
on monitoring findings for subrecipients
of the School Improvement Grants Cluster
(SIG) program.

During our review of eight monitoring
files and checklists prepared for on-site
reviews conducted for four SIG
subrecipients (with expenditures of
$26,983,000 during the year ended June 30,
2015), we noted the following:

• ISBE identified several instances of
noncompliance with program requirements
which were not formally communicated to
any of the subrecipients tested within 30
days of the exit conference, as required
in ISBE’s SIG Monitoring Manual.
Monitoring reports were provided to
subrecipients tested ranging from 49 to 86
days after the monitoring visits
concluded.

• ISBE did not conduct exit conferences
within 2 weeks of the completion of the
on-site review as required in the SIG
monitoring manual for 2 subrecipients
tested. Delays in completing exit
conferences for these subrecipients were 7
and 22 days after completion of on-site
reviews.

ISBE passed through approximately
$39,730,000 of federal funding to
subrecipients of the SIG program during
the year ended June 30, 2015.

Failure to communicate the results of on-
site monitoring reviews to subrecipients
in a timely manner could result in federal
funds being expended for unallowable
purposes and subrecipients not properly
administering the federal programs in
accordance with laws, regulations, and the
grant agreement. (Finding 44, pages
143-144) This finding was first reported
in the Statewide Single Audit in 2012.

As a result of inadequate monitoring of
subrecipients, the auditors qualified
their opinion on the SIG program.

We recommended ISBE review its current
policies and procedures for monitoring SIG
subrecipients and implement additional
procedures to ensure the results of on-
site reviews are communicated in a timely
manner.

ISBE officials agreed with the finding and
stated they will modify the monitoring
cycle timeline to allow for additional
time to respond to grantees and will
continue to work with Human Resources to
hire personnel. (For previous agency
response, see Digest Footnote #5.)

FAILURE TO IMPLEMENT UNEMPLOYMENT
INSURANCE (UI) PROGRAM INTEGRITY AND
OVERPAYMENT REDUCTION REQUIREMENTS

The Illinois Department of Employment
Security (IDES) did not implement Federal
requirements to improve program integrity
and reduce overpayments.

The State is required to establish written
procedures for: (1) identifying
overpayments, (2) classifying overpayments
into categories based on the reason the
overpayment occurred (i.e. employer error,
non-response from employers, beneficiary
fraud, etc.), and (3) establishing
appropriate methods for following up on
each category of overpayment. In
establishing these procedures, the State
is required to enter into three agreements
prior to commencing recoveries. The first
agreement permits the State to offset
State UI from Federal UI overpayments
(Cross Program Offset and Recovery
Agreement). The second agreement permits
the State to recover overpayments from
benefits being administered by another
State (Interstate Reciprocal Overpayment
Recovery Agreement). The third agreement
permits the State to utilize the Treasury
Offset Program to recover overpayments
that remain uncollected one year after the
debt was determined to be due.
Additionally, the State is (1) required to
impose a monetary penalty (not less than
15 percent) on claimants whose fraudulent
acts resulted in overpayments, and (2)
prohibited from providing relief from
charges to employer’s UI account when
overpayments are the result of the
employer’s failure to respond timely or
adequately to a request for information.

As of the date of our testwork (December
20, 2015), we noted that while IDES has
developed the written procedures relative
to overpayments and entered into the
required agreements described in the
previous paragraph, the written procedures
did not address the requirement to impose
a monetary penalty on fraud overpayments.
Additionally, we noted the policies do not
address the prohibition of providing
employers relief resulting from an
employer failing to provide timely or
adequate information.

Failure to implement Federal requirements
could result in noncompliance with laws,
regulations and the grant agreement.
(Finding 56, pages 168-169)

As a result of not implementing federal
requirements, the auditors qualified their
opinion on the Unemployment Insurance
program.

We recommended IDES develop and implement
procedures to improve UI program integrity
and reduce overpayments that incorporate
the required monetary penalty on fraud
overpayments and prohibit providing relief
to employers who fail to provide timely
and adequate responses to information
requests.

IDES officials agreed and stated they are
currently planning to integrate their
current overpayment system into their
benefit payment system and they will also
begin planning the implementation of the
prohibition on non-charging due to
employer fault per UIPL 02-12.

INADEQUATE SUPPORTING DOCUMENTATION FOR
PAYROLL COSTS

Adequate supporting documentation does not
exist to substantiate payroll costs
claimed for federal reimbursement under
the Employment Services Cluster (ES
Cluster) and Unemployment Insurance (UI)
programs.

During our testing of 50 (25 for each
program) direct payroll expenditures
charged to the ES Cluster and UI programs,
we noted effort reports (time sheets) were
not consistent with the hours reported in
the timekeeping system and used to
allocate payroll expenditures to these
programs, could not be located for
testing, and did not contain evidence of
supervisory review.

Inadequate documentation of payroll costs
may result in the federal funds being
expended for unallowable purposes.
(Finding 61, pages 178-180)

As a result of inadequate supporting
documentation, the auditors qualified
their opinions on the Employment Services
Cluster and Unemployment Insurance
programs.

We recommended IDES review its current
procedures and consider any changes
necessary to properly document payroll
costs in accordance with the applicable
program guidance.

IDES officials accepted our finding and
stated cost center managers are held
responsible for payroll accuracy and file
retention.

FAILURE TO RETAIN DOCUMENTATION IN
ACCORDANCE WITH FEDERAL REGULATIONS

The Illinois Department of Transportation
(IDOT) did not retain documentation for
construction projects in the Highway
Planning and Construction Cluster (Highway
Planning) program in accordance with
federal regulations.

Contractors must receive advance approval
from IDOT to bid on construction projects.
As a condition of obtaining IDOT’s advance
approval, contractors are required to
submit an affidavit of availability, which
identifies the total value of work
previously awarded but not yet complete by
the contractor, the contractor’s
commitment of equipment and personnel on
payroll for the planned project, any
proposed work on which the contractor is
the low bidder which has not yet been
awarded, all subcontractors used by the
contractor on its projects, and the value
of work sublet by the contractor. This
affidavit is used by IDOT to determine
whether the contractor has available
capacity to complete the project.

During our testwork of 48 contractor
payments for regular construction projects
totaling approximately $29,659,000 and 17
contractor payments for advanced
construction projects totaling $7,271,000
we noted the affidavit of availability
could not be located for one contractor
with sampled payment of $137,182. We noted
this project was originally bid prior to
fiscal year 2009 and the affidavit was
purged in accordance with IDOT’s record
retention policy. As federal regulations
require records to be retained for a
period of three years after final payment
and all other pending matters are closed,
this affidavit of availability should have
been retained by IDOT.

Failure to retain documentation in
accordance with Federal regulations may
result in unallowable costs being charged
to the federal program and prevents
Federal agencies from properly monitoring
the State’s compliance with program
requirements. (Finding 68, pages 194-195)

As a result of IDOT not retaining
documentation in accordance with federal
regulations, the auditors qualified their
opinion for the Highway Planning program.

We recommended IDOT review its current
retention policies and procedures and
implement the changes necessary to ensure
documentation is retained in accordance
with Federal regulations.

IDOT officials agreed with the
recommendation and stated their record
retention schedule for retaining these
records was revised and approved in
February 2016.

ISSUES INVOLVING AMERICAN RECOVERY AND
REINVESTMENT ACT (ARRA)

FAILURE TO COMMUNICATE ARRA INFORMATION
AND REQUIREMENTS TO SUBRECIPIENTS

The Department of Human Services (DHS) did
not communicate American Recovery and
Reinvestment Act (ARRA) information and
requirements to subrecipients of the
Temporary Assistance for Needy Families
(TANF) program.

During our testwork over one ARRA
disbursement of $1,168,792 to a
subrecipient of the TANF Cluster program,
we noted the subrecipient agreement did
not identify the Federal award number,
CFDA number, the amount of ARRA funds, or
the requirement to separately report ARRA
program expenditures on the Schedule of
Expenditures of Federal Awards (SEFA) and
the data collection form. DHS could not
provide evidence that communication of
these requirements was made subsequent to
the grant award. DHS passed through ARRA
funds of approximately $5,374,000 to one
subrecipient of the TANF Cluster program.

Failure to communicate required ARRA
information could result in subrecipients
not properly administering the federal
programs in accordance with federal
regulations. (Finding 13, pages 76-77)

We recommended DHS implement procedures to
ensure ARRA information and requirements
are properly communicated in writing to
its subrecipients.

DHS officials agreed with the
recommendation and stated they will ensure
that all IDHS providers who receive ARRA
funds in the future will be adequately
notified of the funding during the award
notification process or during any
amendments that are processed.

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, 2016.

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, 2015 is presented fairly in
all material respects.

FRANK J. MAUTINO
Auditor General

FJM: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

2014: (Office of the Governor) The Office
of the Governor agrees with the
recommendation. The Office of the Governor
will continue to work with the Office of
the State Comptroller to address the core
issues regarding the quality of the
accounting information provided to and
maintained by the IOC as it relates to
year-end preparation of the SEFA.

2014: (Office of the State Comptroller)
The Office accepts the recommendation. The
2014 and 2013 SEFA audits were completed
approximately 2 months earlier than the
audit of the 2012 SEFA. The old and
antiquated patchwork of existing payment
processing and financial reporting systems
need to be replaced with a new statewide
accounting and grants management system
that is designed to provide the
information needed to complete the SEFA
report and to improve the quality of the
accounting information provided to the
IOC. The Office will work with the
Governor’s Office and the Financial
Reporting Standards Board to meet this
objective.

Previous responses by the Department of
Human Services

#2 Failure to Properly Maintain and
Control Case File Records

2014: The Department accepts the
recommendation. Despite our current
fiscal, staffing, and space constraints,
the Department continues to place a high
priority on proper case file maintenance.
Many of our FCRCs were storing an
abundance of case files that exceeded
storage capabilities within given file
cabinets. Case files then had to be stored
in hallways and passage ways, calling into
question the safety of some of the
buildings. In order to relieve some of the
space limitations, offsite storage
facilities were obtained and are being
used. The Department is now utilizing a
document management system than 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
reductions of the overwhelming size and
amount of paper files in the offices.

#3 Missing Documentation in Beneficiary
Eligibility Files

2014: The Department agrees with the
recommendation. We will continue to ensure
staff understands the importance of proper
and accurate filing processes. The
Department is 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.

#4 Failure to Perform Eligibility
Redeterminations within Prescribed
Timeframes

2014: The Department agrees with the
recommendation. IDHS will continue to work
with the Department of Healthcare and
Family Services (HFS) to review current
processes for performing eligibility
redeterminations and consider changes
necessary to ensure all redeterminations
are performed within the prescribed
timeframes.

Although HFS and DHS continued its
contract with an outside vendor, Maximus,
in order to perform electronic eligibility
factor verifications, the function of
Maximus was modified during the audit
period. Beginning 2/1/14, a new Illinois
Medicaid Redetermination Program process
has begun. Maximus has developed a new
redetermination system called Max-IL to
record and store redetermination
information for medical-only cases.

DHFS and IDHS have set up 4 specialized
central redetermination units across the
state to handle most medical only
redeterminations. Staff in these units
specialize in working in the new Max-IL
system, developed by Maximus that records
and stores redetermination information,
forms, and verifications. The latter half
of the audit period was met with a
learning curve and staff becoming
acclimated to the newly developed system
and its functionality.

Additionally, although IDHS was able to
hire some additional staff during the
audit period, those hires were new staff
having no previous IDHS program knowledge
or experience. As a result, production was
not initially at an optimum level given
the needed staff development in addition
to the barriers associated with new staff,
processes, procedures, and software.

Also, this audit period represents the
first full year after the Administrative
Renewal process ended. As a result, the
thousands of cases that qualified for
renewal using the Administrative Renewal
process had to be absorbed by casework
staff, which added to the current backlog
of overdue cases.

For Family Health Plans with no
Supplemental Nutrition Assistance Program
(SNAP) or cash, Maximus now handles the
mailing of the pre-populated
redetermination form. Maximus also
facilitates the uploading of
redetermination forms sent and returned,
data-match results, and verifications
provided by the client to Content Manager,
ensuring easy retrieval for historical and
audit purposes.

Using electronic data-matching, the MAX-IL
system will make recommendations on the
case’s on-going eligibility. State
casework staff will be responsible for
making the final eligibility decision, and
for performing the necessary re-
determination reporting actions in the new
Integrated Eligibility System and/or the
legacy Automated Management system.

Previous responses by the Illinois State
Board of Education

#5 Inadequate Procedures for Monitoring of
SIG Subrecipients

2014: The Agency agrees with this finding.
The new System of Support and District
Intervention Division administration has
established a School Improvement Grant
1003(g) monitoring manual which outlines
policies and procedures for monitoring,
reporting, and staff follow-up on
corrective actions that are currently
being implemented in fiscal year 2015.