REPORT DIGEST

DEPARTMENT OF HEALTHCARE AND FAMILY
SERVICES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2024

Release Date:  February 10, 2026

FINDINGS THIS AUDIT: 8

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  4 -- 4 -- 8
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  4 -- 4 -- 8

FINDINGS LAST AUDIT: 7

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

•	(24-05) 	The Department of
Healthcare and Family Services (HFS) and
the Department of Human            Services
(DHS) (collectively, the “Departments”)
failed to perform revalidations required
for ongoing provider enrollment.
•	(24-06) The Department’s year-end
financial reporting in accordance with
generally accepted accounting principles
(GAAP) contained inaccuracies and omitted
amounts affecting balances.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FAILURE TO PERFORM PROVIDER REVALIDATIONS

The Department of Healthcare and Family
Services (HFS) and the Department of Human
Services (DHS) (collectively, the
“Departments”) failed to perform
revalidations required for ongoing provider
enrollment.

Management of the Departments have a shared
responsibility for various human service
programs in the State and for internal
controls over the manual and automated
processes relating to eligibility for these
programs.  The Illinois Medicaid Program
Advanced Cloud Technology (IMPACT) system
is a multi-agency effort to implement a
web-based system to give providers more
convenient and consistent user experience
and to ensure beneficiaries receive timely
and high-quality Medicaid services.  IMPACT
is an automated system used by the
Departments to accommodate provider
enrollment approvals and all Medicaid claim
payments to such providers.

The Departments are required to revalidate
previously enrolled providers every five
years.  Due to the COVID-19 Public Health
Emergency (PHE), the Centers of Medicare
and Medicaid Services (Federal CMS) granted
a waiver allowing the Departments to delay
the revalidation process until after the
conclusion of the PHE, or May 11, 2023.
Guidance issued by Federal CMS provided
additional time after the conclusion of the
PHE to begin the revalidation process.  As
such, fiscal year 2024 was the first year
the revalidation process was required to be
completed.

We obtained from HFS a population of all
providers, including the date the provider
was enrolled/approved, original
revalidation date (without consideration of
the PHE), and if the provider is currently
active or inactive.  Based on our testing
and discussion with HFS management, we
determined 47,478 of 393,856 (12%) active
providers should have been revalidated
during fiscal year 2024.  The Departments
did not perform the revalidation process
for any of these providers (100%).

We recommended the Departments strengthen
internal controls to ensure providers are
properly revalidated in accordance with the
Code.

HFS accepted the recommendation and stated
they will improve internal controls to
ensure providers are revalidated as
required.

DHS accepted the recommendation and stated
they will continue to work with HFS to
ensure revalidations are processed.

FINANCIAL STATEMENT PREPARATION WEAKNESSES

The Department of Healthcare and Family
Services’ (Department) year-end financial
reporting in accordance with generally
accepted accounting principles (GAAP)
contained inaccuracies and omitted amounts
affecting balances.

Some of the more significant issues noted
were as follows:

During our audit of the Department’s
financial statements, we brought the
following footnote error to the
Department’s attention.  The Department
subsequently corrected this error.

• Footnote 2(q), Net Position: The
Department had a restricted balance of
$1.048 million on the Statement of Net
Assets which was not included in the
footnote disclosure.

Subsequent to year end, the Department
identified an information technology (IT)
system error that impacted invoices for
drug claims identified as Medicare Part D
for the Medicare Medicaid Alignment
Initiative (MMAI).  These claims, submitted
by Managed Care Organizations (MCOs) during
fiscal years 2020 through 2024, were not
excluded from data ultimately transmitted
to facilitate drug rebate invoicing.
Inclusion of these claims resulted in the
Department invoicing pharmaceutical
manufacturers for rebate payments for
Medicare Part D drugs that were ineligible
for such rebates.  For financial statement
reporting purposes, drug rebates are
reported as a reduction in expenditures.
Therefore, expenditures were understated by
$1.073 billion.  Due to the effect of
correcting the error for fiscal years 2020
through 2023, the beginning fund balance/
net position required a restatement as of
June 30, 2023.  Additional adjustments were
necessary for the fiscal year 2024
balances.

Additionally, the Department identified
revisions necessary to capital assets
related to subscription-based information
technology agreements (SBITA) and
intangible asset classifications.  Due to
the effect of correcting the
classifications, the Department’s financial
statements required a restatement as of
June 30, 2023 in multiple accounts with an
overall impact to beginning net position of
$57.7 million.

Due to the capital asset revisions noted
above, additional adjustments were
necessary for fiscal year 2024.

Furthermore, auditors noted the
Department’s financial statements were
compiled from various sources, including
those within the Department and other third
parties.  The Department lacked effective
communication between its program and
fiscal areas and external sources,
resulting in the untimely identification of
information pertinent to the financial
statements.  As a result of ineffective
communication, the preparation of the final
financial statements was delayed and
resulted in further adjustments as
additional information became available.
Additional analysis was performed to
identify financial statement revisions.
The errors noted were identified after
revised detailed information was provided,
resulting in multiple versions of the draft
financial statements.   The final revision
was provided on July 23, 2025; however, the
Department did not confirm this was the
final revision until September 4, 2025.

We recommended the Department evaluate its
methodologies in determining estimates for
information not readily available at the
time the financial statements are prepared
and strengthen its internal controls to
ensure its financial reporting is timely
completed and in accordance with GAAP.

HFS accepted the recommendation and stated
HFS fiscal staff will assist staff from the
Office of the Comptroller, as requested,
throughout development of the Annual
Comprehensive Financial Report and Notes.
The Department also stated they will also
add staff focused on GAAP financial
reporting and modify its GAAP processes to
increase fiscal office review of
information provided by various program
area staff for financial reporting.

OTHER FINDINGS

The remaining findings pertain to
inadequate general information technology
controls over IES, inadequate disaster
recovery controls over IES, inadequate
controls over eligibility determinations
and redeterminations, IES backlog
untimeliness, lack of disaster recovery
planning, and inadequate general
information technology controls.  We will
review the Department’s progress towards
the implementation of our recommendations
in our next engagement.

AUDITOR’S OPINIONS

The auditors stated the financial
statements of the Department of Healthcare
and Family Services as of and for the year
ended June 30, 2024 are fairly stated in
all material respects.

This financial audit was performed by
Sikich CPA LLC.

COURTNEY DZIERWA
Division Director

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

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