REPORT DIGEST

 

 

 

DEPARTMENT

OF HUMAN SERVICES

 

 

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

 

 

 

Release Date:

April 2, 2009

 

 

 

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

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 the Full Report are also available on

the worldwide web at

www.auditor.illinois.gov

 

 

 

SYNOPSIS

 

 

      This digest covers our audit of the Department of Human Services (Department) financial statements for the year ended June 30, 2008.  The auditors expressed an unqualified opinion on the Department’s financial statements.  A two year compliance attestation examination and a one year financial audit will be performed for the period(s) ending June 30, 2009.

 

     The auditors identified 6 findings involving the internal control over financial reporting that they considered to be significant deficiencies.  The significant deficiencies are described in the Schedule of Findings on pages 51 – 63 of the report, as findings 08-1 through 08-6.  Following is a summary of three of the findings included in this digest.

 

-           The Department records liabilities payable from future appropriations in its financial statements based on estimates supported by methodologies and historical analyses provided by program personnel.  After reviewing subsequent payments related to these liabilities, we noted discrepancies resulting in over and understated liabilities at June 30, 2008.

 

-          The Department did not maintain a centralized oversight function over commodities, resulting in inadequate controls.  Inventory control includes responsibilities at individual facilities, multiple warehouses, and Central Office locations.

 

-          One of the Department facilities, Howe Developmental Center, continued to remain decertified during fiscal year 2008 due to failure to comply with requirements to be certified as an eligible Medicare or Medicaid service provider. The Tinley Park Mental Health Center which was decertified on February 23, 2007, has applied for recertification and has moved from a decertified status to conditional accreditation but as of January 15, 2009 still awaits a final site visit or survey and approval.  

 

 

 

 

{Selected financial information is summarized on the next page.}

 

 

 

 

 

DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT

For The Year Ended June 30, 2008

 

FINANCIAL INFORMATION – Governmental Funds (in thousands)

 

FY 2008

 

FY 2007

REVENUES

      Program revenues: charges for service.............................

      Program revenues: operating grants ................................

      General revenue: taxes, interest and other.........................

            Total revenue...........................................................

EXPENDITURES

      Health and social services...............................................

      Debt service – principle...................................................

      Debt services – interest...................................................

      Capital outlays................................................................

            Total expenditures.....................................................

OTHER SOURCES (USES)

      Appropriation from State resources..................................

      Transfers in....................................................................

      Transfers out..................................................................

      Receipts collected & transmitted to State Treasurer..........

      Lapsed appropriations.....................................................

Other.............................................................................

            Total other sources (uses).........................................      

FUND BALANCE  

      Increase in fund balance..................................................

      Fund balance July 1.........................................................

      Decrease for Changes in Inventory..................................

             Fund balance June 30...............................................

 

$     58,569 

3,300,302

       9,598

$3,368,469

 

$6,762,335

417

60

       1,239

         

$6,764,051

 

$4,210,300

118,438

(87,482)

(645,920)

(54,543)

         (86,188)

$3,454,605

 

$     59,023

59,349 

       (941)

$   117,431

 

$     43,203 

3,176,499

     12,075 

$3,231,777

 

$6,387,346

329

88

       2,064             

$6,389,827

 

$4,070,090

69,174

(78,737)

(657,386)

(121,962) 

  (71,498) 

$3,209,681 

 

$     51,631 

8,065 

 (347

$     59,349

SELECTED ACCOUNT BALANCES – JUNE 30, Governmental Funds (in thousands)

 

 2008

 

 2007

ASSETS

      Cash and cash equivalents & investments.........................

      Due from other governments – federal & local.................

      Loans, taxes and other receivables, net.............................

      Due from other Department and State funds.....................

      Inventories.....................................................................

      Unexpended appropriations..............................................

      Other assets...................................................................

           Total assets...............................................................

LIABILITIES

      Accounts payable & accrued liabilities.............................

      Deferred Revenue..........................................................

      Due to other funds – State, federal, local & department.....

      Unavailable revenue........................................................

           Total liabilities............................................................

FUND BALANCE

      Fund balance, reserved & unreserved..............................

           Total liabilities and fund balance..................................

 

$189,544

190,180

40,615

7,093

9,129

235,674

         86

$672,321

 

$356,594

64,216

   77,610

  56,470

$554,890

 

$117,431 

$672,321

 

$111,582

200,603

38,111

5,437

10,070

241,638

        183

$607,624

 

$355,239

45,001

 74,885

  73,150

$548,275

 

$  59,349

$607,624

SECRETARY

 

 

During Audit Period:  Carol L. Adams, Ph.D.

Currently:  Carol L. Adams, Ph.D.

 

 


 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Discrepancies were noted in estimating liabilities

 

 

 

 

 


Net overstatement of liabilities of approximately $900,000 identified

 

 

 

 

 

 


Understatement of  liabilities of approximately $1,200,000 identified

 

 

 

 

 

 

 

 

 

 

 

 


Department relied on information provided to record liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Department accepted the recommendation

 

 

 

 

 

 

 

Centralized oversight not maintained

 

 

 

 

 

Weaknesses with inventory counting noted at 7 locations

 

Weaknesses in segregation of duties during counting noted at 3 facilities

 

Failure to provide documentation of who made counts and when


Errors noted in systems used to reconcile inventory for reporting purposes

 

 

 

 

 

 

 

 

 

 


Department indicated they have established a centralized oversight for commodities

 

 

 

 

 

 

 


Department accepted the recommendation

 

 

 

 

 

 

 

 


Lost revenue from decertification of Howe estimated to be $30,000,000 annually

 

 

 

 

 

 

 

Department has proposed closing Howe

 

 

 

 

 

 

 


Tinley Park has conditional accreditation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Department accepted the recommendation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

     The Department of Human Services (Department) is a part of the executive branch of the State of Illinois (State).  The Department is organized to assist Illinois residents to achieve self-sufficiency, independence and health to the maximum extent possible by providing integrated family oriented services, promoting prevention and establishing measurable outcomes in partnership with communities.

 

     The financial statements of the Department are intended to present the financial position and changes in financial position of only that portion of the governmental activities, the major fund, and the aggregate remaining fund information of the State that is attributable to the transactions of the Department. 

 

FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

 

 

LIABILITIES PAYABLE FROM FUTURE APPROPRIATIONS ARE MISSTATED

      

     The Department records liabilities payable from future appropriations in its financial statements based on estimates supported by methodologies and historical analyses provided by program personnel.  After reviewing subsequent payments related to these liabilities, we noted discrepancies resulting in over and understated liabilities at June 30, 2008.

 

     A $4.5 million liability was estimated by increasing the prior year amount by 3% for a cost of living increase.  This entire liability was erroneously recorded in the DHS Special Purposes Trust Fund (Fund 0408).  In prior years, this liability was split between the General Revenue Fund (Fund 0001) and Fund 0408.  The allocation used in fiscal year 2008 was not consistent with prior years.  As a result, the future year liability recorded in Fund 0408 was overstated by approximately $4.1 million and the future year liability recorded in Fund 0001 was understated by approximately $3.2 million.  The net effect was an overstatement of approximately $900,000.

 

The General Revenue Fund also recorded an estimate for the future year liability for prior year Medicaid bills of $4.0 million.  Actual payments made through December 2008 were $5.2 million, resulting in an understated liability