REPORT DIGEST DEPARTMENT OF CHILDREN AND FAMILY SERVICES FINANCIAL AND COMPLIANCE AUDIT For the Year Ended: Summary of Findings: Total this audit 17 Release Date: State of Illinois WILLIAM G. HOLLAND AUDITOR GENERAL To obtain a copy of the Report contact: (217)782-6046 or TDD (217) 524-4646 This Report Digest is also available on |
SYNOPSIS
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DEPARTMENT OF CHILDREN AND FAMILY SERVICES
FINANCIAL AND COMPLIANCE AUDIT
For The Year Ended June 30, 2000
EXPENDITURE STATISTICS | FY 2000 |
FY 1999 |
$1,358,691,603 |
$1,346,856,817 |
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OPERATIONS TOTAL % of Total Expenditures |
$274,729,018 20% |
$262,415,540 20% |
Personal Services |
$176,551,809 |
$169,989,246 |
Other Payroll Costs (FICA, Retirement) |
$37,102,724 |
$35,383,355 |
Contractual Services |
$38,618,369 |
$34,630,250 |
All Other Operations Items |
$22,456,116 |
$22,412,689 |
LUMP SUM AND OTHER PURPOSES TOTAL |
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AWARDS AND GRANTS TOTAL % of Total Expenditures |
$1,036,419,390 76% |
$1,039,179,994 77% |
$39,968,730 |
$34,025,242 |
SELECTED ACTIVITY MEASURES (unaudited) | FY 2000 |
FY 1999 |
306,818 |
304,945 |
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Regular foster care Specialized foster care Relative care Residential placements Independent living |
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6,281 |
7,275 |
AGENCY DIRECTOR |
During Audit Period: Mr. Jess McDonald |
Auditors' Opinion Qualified
Physical inventory and property records not reliable
Information on leases and installment purchases not adequate
Emergency purchase vouchers are like "signed blank checks" and must be controlled
Questionable expenditures made for children's personal and physical maintenance
Questionable purchases
Lack of documentation
Unauthorized purchaser
Untimely approval
Conflicts with Department policy
No evidence of charge-backs to caregivers
Child case files incomplete and not timely prepared
Lack of written procedures to re-examine foster family homes
Unauthorized overtime totaling $10,049 paid to two employees
Insufficient monitoring of contractors providing services to children
Contractor's Executive Director received questionable payments
Contractor had incomplete personnel files
Contractor's property records had weaknesses
Contractor paid rent to a related party
Contractor paid for non-client entertainment
Contractor lacked documentation to support gas purchases Inspector General, created in 1993, lacks operational rules required by law
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FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS QUALIFIED OPINION Our audit of the financial statements of the Department of Children and Family Services for the year ended June 30, 2000 resulted in a qualified opinion. The Department did not maintain adequate control over its property and equipment, and did not maintain adequate records of leases and installment purchases. As a result of these weaknesses, certain amounts reported in the financial statements and accompanying notes are management's estimates and were not audited. These amounts could be materially misstated as follows: Property and Equipment Although the Department attempted a physical inventory of fixed assets for fiscal year 2000, it contained numerous errors and could not be relied upon. Our prior audit reported that annual inventories of fixed assets were not performed for fiscal years 1999 or 1998. The Department attempted to maintain a property control log and an Additions and Deletions Register for fiscal year 2000. However, equipment vouchers could not be traced to the inventory listing from CMS or any Department property control log. The prior audit reported these records were not maintained for fiscal year 1999. The Department's financial statements reported approximately $40 million in property, plant and equipment at June 30, 2000, $11 million in property additions and $5 million in property deletions for fiscal year 2000. (Finding 1, pages 14-15) Leases and Installment Purchases Information concerning new leases and multi-year installment purchases and the related acquired equipment was not accumulated or reported properly. Original contracts were not properly processed within the Department making it impossible for the Department or the State Comptroller to timely record, report and classify the transactions. Due to the lack of sufficient evidence as to the existence or amounts of such transactions, the General Long-Term Debt Account Group (other than vested vacation and sick pay), the General Fixed Assets Account Group and the related notes were not audited. (Finding 2, pages 16-17) Department officials agreed with these findings and stated they have implemented new procedures and assigned specific responsibilities to staff to resolve the weaknesses noted. CONTROLS OVER EMERGENCY PURCHASE VOUCHERS The Department did not have adequate control over emergency purchase vouchers called "932 Forms". These forms are issued to enable foster parents to purchase emergency items for their foster children, such as clothing and furniture. The forms may be taken to certain retail department stores, and used similar to a "signed blank check" within an authorized limit. The "932 Forms" are supposed to report the identification number of the foster child being provided for. We noted that in certain circumstances, the "932 Forms" were charged to a "dummy child identification number." In addition, the stores were not being required to obtain identification from the bearer of the forms upon use and the forms did not have an authorized limit pre-printed on the face of the form. Finally, the issuance of these forms was not adequately tracked by the caseworker who issued them; rather an attempt was made to track them after they had been processed. Failure to maintain good controls over the use of these forms could result in purchases of unsanctioned items. (Finding 5, page 20) Department officials agreed with our recommendation to improve controls over emergency purchase vouchers. They stated they implemented a revised "932 Form" as of July 1, 2000 and also enhanced controls over the use, approval and processing of the form. INADEQUATE OVERSIGHT OVER CHILD CARE EXPENDITURES The Department did not have adequate oversight for expenditures made for children's personal and physical maintenance. This has resulted in several problems ranging from a lack of adequate documentation for expenditures to questionable expenditures due to case status and service code discrepancies. During Fiscal Year 2000, the Department expended $6.4 million from an appropriation for personal and physical maintenance for children. Department officials stated the majority of the initial and replacement clothing for children are paid from this appropriation. Additionally, expenditures include camp and educational fees, cultural enrichment, travel, graduation expenses, and tutoring. These payments are in addition to regular monthly payments to caregivers for the child's room, board, clothing and allowance. We selected 100 vouchers paid from the children's personal and physical maintenance appropriation to test for appropriateness and adequacy of support. Lack of oversight contributed to exceptions in 49 of the 100 vouchers tested and resulted in questioned expenditures of $43,695. Some cases had multiple exceptions. The exceptions are summarized as follows:
Oversight for these expenditures is detailed in Department Procedures/Rules promulgated by the Department and two types of purchase authorizations. The procedure details the eligible goods/services that can be purchased. The authorization details what was purchased and contains sections for the seller and purchaser to certify that the goods/services were delivered. We found a lack of review at both regional and Springfield central offices. Also, inconsistent processing methods contributed to questionable expenditures. (Finding 6, pages 21-26) We recommended Department management implement consistent review procedures at regional offices that process expenditures for the personal and physical maintenance of children so that taxpayer funds are adequately protected. Further, the Department should, as stated in procedure, ensure that reasons for replacement clothing are noted on authorizations, or revise current procedures to match current Departmental operations. Finally, the Department should seek recovery of expenditures from the caregiver, if appropriate, when it is found that the child has an inadequate wardrobe. Department officials responded they will strive to achieve a higher level of compliance with their own procedures regarding use of proper forms, multiple sign offs on forms, and additional supporting documentation. CHILD WELFARE AND FOSTER CARE FILES The Department's Child Welfare and Foster Care files lacked required documentation. During our review of the Child Welfare Case Files, we noted that 4 out of 40 initial case plans were not prepared timely, ranging from 1 month to 3 months over the 30 day requirement. During our review of 40 Foster Care Files, we noted the files were missing 14 initial case plans, 4 initial court orders, and 15 re-determinations by the Eligibility Determination Unit. An initial service plan must be developed within 30 days of placement to meet Department Procedure 305.50 and State law (325 ILCS 5/8.2, Abused and Neglected Child Reporting Act). The failure to follow Department procedures and State law or maintain documentation of such is not in the best interest of the children being served. (Finding 10, pages 32-33) Department officials agreed with our recommendation regarding the timely preparation and retention of initial case plans and stated they would continue to stress the importance of this requirement to all caseworkers. RE-EXAMINATIONS OF FOSTER FAMILY HOMES The Department did not have written procedures to ensure that a foster family home that is the subject of an indicated report is scheduled for re-examination at least annually. The Childcare Act of 1969 (225 ILCS 10/4.3) requires that the Department establish a schedule for re-examination of the foster family home mentioned in an indicated report under the Abused and Neglected Child Reporting Act, at least once a year. The Department stated it had not yet dedicated the time necessary to develop written policies and procedures in this area. The risk of non-compliance with this State law is increased by the absence of written policies and procedures. (Finding 11, page 34) Department officials agreed with our recommendation and stated they will revise current policies and procedures to include this mandated requirement. UNAUTHORIZED OVERTIME COSTS Inadequate management controls in a local office resulted in the Department incurring $10,049 for unauthorized overtime costs for two employees. Department policy requires that overtime must be approved before compensation will be authorized. One employee incurred 397 non-supervisory approved hours of overtime during fiscal year 2000 at a cost of $8,853. All of the questionable overtime was incurred without a supervisor approving the required Overtime or Compensatory Time Request Form. The employee in question was also the back-up timekeeper. According to Department officials, the timekeeping computer system does not deny a timekeeper access to his or her own entries. In the absence of adequate management controls, such a system creates an opportunity for abuse. In its investigation into this matter, the Department identified a second employee in the local office who incurred 31 hours of unapproved overtime, at a cost of $1,196. Department officials stated that the breakdown in controls occurred because supervisory management in the field office was not in place and properly functioning. (Finding 14, pages 37-38) We recommended the Department examine the adequacy of management controls over the earning of overtime hours and entry into the Department timekeeping system. The Department should also pursue disciplinary action against employees who have been found to have violated Department policies regarding the accruing of overtime hours. Department officials agreed and stated they will continue to pursue disciplinary action. They also stated they will take steps against any employee in the future who violates policies. MONITORING OF SUBRECIPIENT PROVIDERS The Department does not perform sufficient monitoring of its contractors providing services to children. During FY 00, the Department was appropriated $738 million for foster homes and specialized foster care and prevention, and for institution and group home care and prevention. The Department contracts with approximately 600 providers around the State to furnish these services to children. The Department's Office of Internal Audits is responsible for monitoring purchase of service providers to ensure that State and federal pass-through money is expended in compliance with State and federal requirements (89 Ill. Adm. Code 434.9). Department personnel indicated that the audit responsibility, as well as desk reviews of provider audit reports, has been transferred to a fiscal monitoring unit located in Cook County. We selected three providers that had contracts with the Department for FY 00 to perform onsite audit procedures in the areas of expenditures, payroll/personnel, and inventory. The operations of these providers were largely funded by the State, with monies from the Department constituting 92 to 96 percent of all monies received during FY 99 by each entity. State receipts to each entity during FY 99 ranged from $1 million to $9.8 million. Our audit work largely focused on FY 99 because it was the most current year for which completed records/audits were available from the providers. We selected 220 transactions/expenditures by the three providers totaling $282,084 for testing. We questioned $113,768 or 40 percent of the dollars tested. Significant results of our testing are summarized below.
The above circumstances indicate the Department's current monitoring activities are not reasonably designed to detect instances of non-compliance with laws and regulations by purchase of service providers. Further, the Department's Inspector General position was created by statute in 1993 but has not yet adopted rules governing its operations as required by law. (Finding 17, pages 44-50) We recommended the Department devote sufficient resources to perform increased monitoring of providers' activities for the protection of State and federal funds. The Department should take reasonable steps to ensure that its providers comply with applicable laws and regulations pertaining to their use of State or federal funds passed through the Department. Those monitoring activities should include reviews to determine provider expenditures are fully supported by documentation, personnel are properly licensed, pay rates are documented, assets purchased with State or federal funds are controlled, and related party transactions are documented as required by Department rules. Additionally, we recommended that the Inspector General adopt rules as required by statute as necessary to carry out that office's functions, purposes and duties. With regard to the specific problems identified by our review of selected providers, the Department should immediately follow-up as necessary to determine whether any misuse of State or federal pass-through monies has occurred and, if so, whether such activities should be referred for further investigation by an appropriate investigatory agency, such as the Attorney General or State Police. Department officials agreed with the auditor's conclusion and accepted the recommendations, stating, among other things, that it intends to complete the rulemaking process for the Inspector General, follow up on specific items questioned in the finding, and review its procedures for overseeing its contractors. OTHER FINDINGS The remaining findings are being addressed by the Department. We will review progress toward the implementation of our recommendations in our next audit. Mr. Jonathan Gaciala, Chief Auditor of the Department, provided the agencys responses. AUDITORS OPINION Our auditors expressed a qualified opinion on the Departments June 30, 2000 financial statements because the Department did not maintain adequate control over its property and equipment, or its leases and installment purchases.
____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KMA:pp SPECIAL ASSISTANT AUDITORS Our special assistant auditors on this audit were Friedman Eisenstein Raemer and Schwartz, LLP. |