REPORT DIGEST DEPARTMENT OF CHILDREN AND FAMILY SERVICES FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2020 Release Date: June 30, 2021 FINDINGS THIS AUDIT: 5 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 3 -- 2 -- 5 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 3 -- 2 -- 5 FINDINGS LAST AUDIT: 3 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. 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 INTRODUCTION This digest covers the Department of Children and Family Services’ Financial Audit as of and for the year ended June 30, 2020. The Department of Children and Family Services’ Compliance Examination covering the two years ended June 30, 2020 will be released under a separate cover at a later date. SYNOPSIS • (20-01) The Department year-end financial reporting in accordance with generally accepted accounting principles (GAAP) submitted to the Illinois Office of Comptroller contained a material error. • (20-03) The Department did not develop or retain adequate supporting documentation for its personnel transactions and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits (OPEB) plans was complete and accurate. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS FINANCIAL STATEMENT PREPARATION The Department of Children and Family Services (Department) year-end financial reporting in accordance with generally accepted accounting principles (GAAP) submitted to the Illinois Office of Comptroller (Comptroller) contained a material error. A material error was identified during the audit of the Department’s draft financial statements. The effect of this misstatement in the Department’s governmental funds financial statements was an overstatement of revenue and an understatement of beginning fund balance in the amount of $24.005 million. The Department posted an audit adjustment to correct this error in its financial statements as of and for the year ended June 30, 2020. (Finding 1, page 58) We recommended the Department implement internal control procedures to ensure GAAP Reporting Packages are prepared in an accurate manner. The Department agreed with our recommendation and stated they have implemented corrective action. In addition, the Department stated they have filled a vacant CPA position and will continue to employ a contractor with expertise in completion and review of governmental financial statements. INADEQUATE INTERNAL CONTROLS OVER CENSUS DATA The Department of Children and Family Services (Department) did not develop or retain adequate supporting documentation for its personnel transactions and did not have a reconciliation process to provide assurance census data submitted to its pension and other postemployment benefits (OPEB) plans was complete and accurate. During testing, some of the more significant issues we noted included the following: • The Department had not performed an initial complete reconciliation of its census data recorded by the State Employees’ Retirement System of Illinois (SERS) and the Department of Central Management Services (CMS) to its internal records to establish a base year of complete and accurate census data. • Two of 80 (3%) employees tested did not have documentation supporting the employee’s total compensation as determined under the Illinois Pension Code (40 ILCS 5/14-133(a)), as adjustments were posted for bilingual pay and longevity pay which the Department could not substantiate from its own records. We considered the impact of the portion of these employees’ total compensation that was unsupported and determined these amounts did not materially impact the Department’s financial statements. (Finding 3, pages 61-62) We recommended the Department implement controls to ensure total compensation paid to each employee is fully documented and supported within the Department’s records. Further, we recommended the Department work with SERS and CMS to develop an annual reconciliation process of its active members’ census data from its underlying records to a report from each plan of census data submitted to the plan’s actuary. The Department agreed with our recommendation and stated they will review their procedures regarding maintenance of employee pay records and make any changes necessary to ensure compensation figures are fully supported. The Department also stated they will work with the Office of Comptroller, SERS and CMS to develop a process to reconcile pension and OPEB census data as recommended. OTHER FINDINGS The remaining findings pertain to controls over cash, general information technology controls over IMPACT, and provider enrollment determinations and failure to execute interagency agreements relating to IMPACT. We will review the Department’s progress towards the implementation of our recommendations in our next financial audit. AUDITOR’S OPINION The auditors stated the financial statements of the Department as of and for the year ended June 30, 2020, are fairly stated in all material respects. This financial audit was conducted by CliftonLarsonAllen LLP. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:SJS