Our audit of the financial statements of the Department of Children and Family Services for the year ended June 30, 2002 resulted in a qualified opinion. The Department did not provide adequate documentation for its property and equipment values. Although the Department performed a physical inventory for fiscal year 2002, the values assigned to its property and equipment cannot be relied upon because vendor invoices were not available to support the values. The Department maintained a property control log and an Additions and Deductions Register for fiscal years 2002 and 2001. However, vouchers and supporting documentation did not exist for the items added to the records as a result of the physical inventory.

The Department's financial statements contain approximately $3.3 million (net of depreciation) in property and equipment at June 30, 2002, with $780,000 in property additions and $490,000 in property deletions for fiscal years 2002 and 2001 combined. Due to the inability to support the values of the property and equipment amounts recorded on the financial statements, these amounts could not be audited, and the opinion on the financial statements was qualified. (Finding 1, pages 14-15) This finding was first reported in 1994.

We recommended the Department conduct a thorough investigation to locate the original documentation supporting the historical cost of fixed assets. If original documentation cannot be obtained, the Department should consider an outside independent appraisal.

Department officials concurred and stated they will continue efforts to address the concerns raised in the finding. They stated they are still researching economical methods to determine historical costs for items acquired prior to fiscal year 2000. (For previous agency responses, see Digest Footnote #1.)

The Department's Child Welfare and Foster Care files lacked required documentation. During our review of 60 Child Welfare case files, we noted: 11 initial case plans were not maintained in the file and 4 initial case plans were not prepared within 30 days; 5 permanency hearings were not maintained in the file; 22 administrative case reviews were not prepared timely; and 2 permanency hearing reports to the court were not approved and 5 were not prepared timely. During our review of 20 Foster Care files, we noted: 4 initial service plans were not completed within 30 days; 1 complete service plan with necessary evaluations was not in the file; and 1 file was missing and could not be located. Department procedures and State law (705 ILCS 405/2-10.1, Juvenile Court Act of 1987) prescribe deadlines and documentation requirements for file maintenance. 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 2, pages 16-17) This finding was first reported in 1998.

Department officials agreed with our recommendation regarding the timely preparation and retention of documentation in child welfare files. They stated they intend to automate much of the required documentation included in a child/family case file. (For previous agency responses, see Digest Footnote #2.)

Reports of child abuse and neglect were not always determined within 60 days as required by the Abused and Neglected Child Reporting Act. The Act states the Department shall determine, within 60 days, whether a report is "unfounded" or "indicated" and provides that the Department may extend the period up to an additional 30 days for good cause. Department statistics indicate the following noncompliance:

Failure to make a determination of a report within 60 days is a violation of the Act, could delay the implementation of a service plan, and could result in further endangerment of the child. (Finding 3, pages 18-19) This finding was first reported in 1998.

We recommended the Department determine reports of child abuse or neglect within 60 days as mandated by State law.

Department officials agreed and stated they will continue in their efforts to achieve 100% compliance in the future. (For previous agency responses, see Digest Footnote #3.)

The Department did not initiate an investigation of some child abuse and neglect cases within 24 hours of receipt of the reports as required by the Abused and Neglected Child Reporting Act. Department statistics indicate the following noncompliance:

Failure to respond to a report of abuse of neglect within 24 hours is a violation of the Act and could result in further endangerment of the child. (Finding 4, pages 20-21) This finding was first reported in 1998.

We recommended the Department initiate investigations of all child abuse and neglect reports within 24 hours of receiving the report as mandated by State law.

Department officials agreed and responded they will continue efforts to try to achieve 100% compliance in the future. (For previous agency responses, see Digest Footnote #4.)

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 years 2001 and 2002, the Department expended $9.7 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 45 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 30 of the 45 vouchers tested and resulted in questioned expenditures of $10,314. Some cases had multiple exceptions. The exceptions are summarized as follows:

Oversight for these expenditures is detailed in Department Procedures/Rules and two types of purchase authorizations. The procedures detail the eligible goods/services that can be purchased. The authorizations detail what was purchased and contain 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 5, pages 22-24)

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.

Department officials responded they will be reviewing internal policies concerning payments for items/services that are needed beyond regular maintenance payments. They said they will revise policies as necessary and train staff as needed. They are investigating the noted exceptions to determine if any illegal purchases were made, and if any are found, they will be reported to the DCFS Office of the Inspector General.

The Department does not have a policy on reserving uncollectible amounts due from current and former service providers. The Department has a policy for advance funding private agencies, group homes and institutions at the beginning of the service month. The Department refers to these monies as "Current Funding" to service providers. Current Funding amounts are calculated estimates of the monthly service billings the Department expects to get from the service provider. When the provider sends in billing statements for the month, the Current Funding balance is reduced and the appropriate expenditure adjusted on the Department's books. The total amount advanced at any month end is approximately $7 million to a total of 300 service providers. The providers are required to reimburse the Department for any monies advanced that are not expended in a timely fashion. After the end of a fiscal year, the Department requires reimbursement from overpaid providers by mid-October of the new fiscal year, approximately 100 days after the end of the Department's fiscal year. Those organizations that do not reimburse by mid-October will have their funding cut for the subsequent period.

We noted twenty-eight of the providers advanced funds through Current Funding will never reimburse the Department because they are no longer in business or they have amounts in dispute. We noted over $2 million of the amount of advanced funds relates to contracts for fiscal year 1999 and prior. Some of the providers have been turned over to the Comptroller's Offset System, however money for maintenance of child support may not be used to offset these receivables. Our analysis indicates that nearly the entire $2 million of advanced funds relating to contracts for fiscal year 1999 and prior should be reserved as uncollectible as required by generally accepted accounting procedures. (Finding 6, pages 25-26)

Department officials agreed with our recommendation to conduct an analysis of the balances in question and pursue establishing a reserve account for those balances determined to be uncollectible.

The Department did not submit certain generally accepted accounting principles (GAAP) reports to the Office of the State Comptroller in a timely fashion. Specifically, the Department did not submit the forms Interim A (GASB 34 Capital Asset Reconciliation), Interim B (GASB 34 Other Beginning Balances & Reconciliation of Receivables) and GAAP packages to the State Comptroller's Office on a timely basis. As required by the State Comptroller's Office, Forms Interim A and Interim B were due on September 21, 2001. The GAAP packages were due August 31, 2002. The Department filed the GAAP Interim Form A on May 1, 2002 and revised the form on May 2, 2002. The Department did not file the GAAP Interim Form B by the due date (the Comptroller was unable to provide the date in which the Department filed the Interim Form B). The GAAP packages were submitted by the Department as late as October 8, 2002. Late submission of the GAAP packages and Interim Forms A and B results in the State Comptroller's Office not having information needed to compile financial data on a statewide basis. (Finding 10, page 32)

Department officials stated they will complete future submissions of GAAP and other required financial information for the Comptroller's Office in a timely manner.

The Department had not established adequate controls for securing its computer resources. The Department had approximately $6.9 million of computer equipment located in facilities throughout the State and relied on computer systems to meet its mission of providing "services to children and families to protect and advocate on behalf of children and youth who are, or who are at risk of, being abused, neglected or removed from their families." The Department collected, maintained, and stored a significant amount of confidential information.

During our review, we noted the following weaknesses:

During our review, we also determined that physical security was not consistently enforced or monitored, and lax security controls were allowed in various locations (non-data center locations).

Physical security is essential to the confidentiality, integrity, and availability of information resources. A lack of security policies, user awareness and lax security parameters increases the risk of unauthorized access to computerized information. (Finding 11, pages 33-35)

We recommended the Department implement more stringent security parameters on its computer systems. The Department should develop a security awareness program and ensure physical security controls are enforced and monitored at each location.

Department officials responded that the auditors had not established or proven that the Department's relevant controls are inadequate or seriously deficient.

In an Auditor Comment we reemphasized that the Department processes and maintains confidential information on its computer systems and we believe that the security and integrity of this information is essential.

The Department does not perform sufficient monitoring of its contractors providing services to children. While the Department has taken some actions, other areas still need to be addressed.

During the previous audit, we selected three providers that had contracts with the Department and performed onsite audit procedures in the areas of expenditures, payroll/personnel, and inventory. The results of this testing indicated that the Department's monitoring activities were not reasonably designed to detect instances of non-compliance with laws and regulations by purchase of service providers. We recommended that the Department:

The Department agreed with our conclusions and accepted the recommendation.

To follow-up on our recommendation, the Department did perform audits of the three providers during 2001-2002. At two of the providers, the Department recovered a combined total of approximately $58,000 in questioned expenditures. At the third provider, the Department identified expenditures of over $373,000 in disallowed costs. Additional investigation by the Department of this provider has been ongoing. According to Department officials, once this investigation has been completed, the Department will take the necessary steps to involve the Attorney General's Office.

The Department has not reviewed the resources allocated to contractor oversight functions. The Office of Field Audits conducts onsite fiscal audits of provider agencies. The Department reported that there are five field auditors assigned to this office. In addition to field audits, this staff is responsible for desk reviews of provider annual audit reports. Documentation submitted by the Department shows that, during FY 01, only 8 field audits were completed - 3 of which were follow-up to the three we tested during the last audit. During FY 02, documentation shows that only 2 field audits were completed. The Department contracts with approximately 600 providers around the State to provide foster home and specialized foster care for children.

In response to the previous finding, the Department stated it would "consider" implementing additional requirements on provider reporting. The Department has not implemented additional requirements on provider reporting, nor were any documents provided during this audit illustrating any ideas for additional self-reporting requirements for providers. The Department has changed its administrative rules to increase the threshold for submitting an independent audit from $50,000 to $150,000.

The Department did promulgate rules for the Inspector General's Office that were adopted in November 2001.

Given the size of the field audit staff and number of providers conducting business for the Department, additional self-reporting requirements could provide additional fiscal monitoring. (Finding 12, pages 36-37)

We recommended the Department continue its investigation into provider activities and, if necessary, refer its findings to the Attorney General. Further, the Department should make a determination of the appropriate staffing level for the field audit function at provider organizations. Lastly, the Department should develop more rigorous self-reporting requirements for providers.

Department officials concurred and stated they are working on completing the investigation into the indicated provider's activities. With regard to the recommendation concerning staffing levels, they will be evaluating the staffing levels throughout the Department and working towards filling vacancies as resources allow.

The remaining findings are less significant and are reportedly being given attention by the Department. We will review progress toward the implementation of our recommendations during the next audit.

Ms. Tina Neely, Acting Director of Internal Audit, provided the Department’s responses.

Our auditors expressed a qualified opinion on the Department’s June 30, 2002 financial statements because the Department did not provide adequate documentation for its property and equipment values.

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WILLIAM G. HOLLAND, Auditor General

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Our special assistant auditors on this audit were McGladrey & Pullen, LLP.