REPORT DIGEST

DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

THIS DIGEST COVERS THE DEPARTMENT OF HUMAN
SERVICES’ FINANCIAL AUDIT AS OF AND FOR THE
YEAR ENDED JUNE 30, 2019.  THE DEPARTMENT’S
COMPLIANCE EXAMINATION COVERING THE TWO YEARS
ENDED JUNE 30, 2019 WILL BE ISSUED AT A LATER
DATE.

Release Date:  April 28, 2020

FINDINGS THIS AUDIT:  12

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  2 -- 9 -- 11
Category 2:  1 -- 0 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  3 -- 9 -- 12

FINDINGS LAST AUDIT: 11

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

SYNOPSIS

• (19-01) The Department does not have an
adequate understanding of the internal
controls in place over all data recorded in
its financial statements and does not
sufficiently review transactions initiated by
other State agencies and recorded in the
Department’s financial statements.

• (19-05) The Departments (DHS and HFS) lacked
controls over eligibility determinations,
redeterminations and Mid-Point Reporting
requirements for Federal programs where such
determination/requirement is documented using
the Integrated Eligibility System.
• (19-07) The Departments (DHS and HFS) did
not maintain adequate internal control to
ensure applications for benefits and
redeterminations of eligibility for benefits
were completed timely.
• (19-11) The Departments (DHS and HFS) failed
to design and implement adequate internal
controls over the operation of the State of
Illinois’ Illinois Medicaid Program Advanced
Cloud Technology system (IMPACT).

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

MEDICAL ASSISTANCE PROGRAM FINANCIAL
INFORMATION

The Department of Human Services (Department)
does not have an adequate understanding of the
internal controls in place over all data
recorded in its financial statements and the
Department does not sufficiently review
transactions initiated by other State agencies
and recorded in the Department’s financial
statements.

During our testing of the financial statements
we noted the following:

• The Department could not provide
documentation of the preparation or the
Department's review of expenditure
reconciliations for Federal Medical Assistance
Program (MAP) funds (Funds 0120, 0142, 0365,
0502, 0718) between amounts reported in the
Department's Consolidated Accounting and
Reporting System (CARS) and amounts reported
in the Grant/Contract Analysis Forms (Form
SCO-563s) provided to the Comptroller's Office
(IOC) which support the receivable calculation
for financial reporting.  The amount per the
Form SCO-563s (totaling about $408 million for
total reimbursable costs "TRC" for CFDA
93.778) is a computed amount (a formula),
essentially the amount needed to achieve the
reported receivable balance provided by the
Department of Healthcare and Family Services
(HFS), a separate State agency.  The
Department does not retain a reconciliation
between what is reported on the Form SCO-563s
(claimable expenditures) and within CARS (all
expenditures) for each fund.  Additionally,
there is no documentation maintained by the
Department to support the calculation and
methodology used by HFS in preparing the
federal receivable amount.

•During testing of expenditures and
liabilities, we determined that the Department
is not monitoring or reviewing the payments
submitted by HFS, or the liabilities
calculated by HFS, on behalf of the Department
and reported in the Department's financial
statements.  When HFS submits a request for
payment to the IOC, a summary file is also
sent to the Department which goes through an
interface and is recorded into CARS.  An
employee in the Department's Fiscal Services
Bureau reconciles the payments between CARS
and the IOC before accepting them into CARS.
However, the Department has not obtained and
documented a detailed understanding of how its
transactions are processed within HFS, the
controls in place over those transactions,
monitoring performed by HFS, exceptions noted
by HFS through its monitoring activities, and
how exceptions and control deficiencies are
addressed by HFS and communicated to the
Department.  We selected and tested multiple
expenditures and liabilities initially
processed by HFS.  Currently, the Department
receives summarized information from HFS and
records the transactions into CARS and the
GAAP packages without performing sufficient
procedures to determine the accuracy of the
information. (Finding 1, pages 78-79)

We recommended the Department assume more
responsibility for the transactions and
balances reported in its financial statements
that are initiated/estimated by other State
agencies, including the following: working
with management of HFS to gain a better
understanding of the internal control system
established over Department transactions,
enter into an interagency agreement with HFS
that details the responsibilities of each
agency and how this will be monitored, and
reconcile CARS to expenditure amounts provided
by HFS in connection with year-end reporting
of Federal MAP receivables.  We also
recommended expenditure and accrual amounts
provided by HFS in connection with year-end
reporting of Federal MAP receivables should be
reconciled to CARS or agreed to reports and
source data compiled by HFS.

The Department accepted the recommendation and
stated it will prepare documentation, at a
high level, of HFS’ internal controls over
Department transactions and institute annual
monitoring and will implement a process to
verify data provided by HFS is reconciled to
source data.

INADEQUATE CONTROLS OVER ELIGIBILITY
DETERMINATIONS, REDETERMINATIONS AND MID-POINT
REPORTING REQUIREMENTS

The Department of Healthcare and Family
Services (HFS) and the Department of Human
Services (DHS) (collectively, the
“Departments”) lacked controls over
eligibility determinations, redeterminations
and Mid-Point Reporting requirements for
Federal programs where such determination/
requirement is documented using the Integrated
Eligibility System.

The Departments’ Integrated Eligibility System
(IES) is the automated system used by the
Departments which intakes, processes (with the
assistance of caseworkers), and approves
recipient applications, redetermination,
Midpoint Reports and, maintenance items, in
order to determine eligibility and make
payments for the State’s human service
programs.

In order to conclude if the determination of
eligibility was proper during the audit
period, we selected a sample of 60 cases (29
new applications and 31 redeterminations) and
tested whether the cases were properly
certified (approved or denied) based on non-
financial, financial and timeliness criteria.
For SNAP cases we also tested whether the Mid-
Point Report (MPR) was timely certified, where
applicable. Our testing considered all the
documentation contained within the case file,
including the scanned documentation supporting
caseworker overrides required prior to
certification. In 13 of the 60 cases tested
(21.7%) we noted 15 exceptions where either
the case was not certified timely and/or the
case file did not contain documentation
supporting eligibility upon certification.

In order to understand the functions performed
by the caseworkers more fully, we conducted
on-site observations at three of the
Department of Human Services’ local offices.
We noted the following types of issues the
caseworkers encountered in their utilization
of IES while working with recipients:

• IES timed out and sent the caseworker back
to the login screen while entering recipients’
information. Consequently, the caseworker had
to reenter information.
• IES indicated a recipients’ information
contained errors; however, the caseworker’s
review of the information noted no errors.
• IES had technical errors while interfacing
the other applications to conduct verification
of the recipients’ information.
• IES had errors in determining the benefits
for recipients.
• IES had issues determining recipients’
eligibility.
• IES was unable to produce correspondence to
recipients.

Further, we noted insufficient communication
between the Departments’ internal operating
units which administer IES and related systems
and the Departments’ financial reporting
units, along with a lack of communication
between the Departments and the auditors.  We
discovered that in September 2019, HFS’ Bureau
of Eligibility Integrity identified system
defects which resulted in temporary
eligibility status recipients, or
presumptively eligible recipients, maintaining
their eligibility status in error after the
Departments had deemed them ineligible.
However, this condition was not reported to
HFS’ financial reporting unit to determine the
impact of this defect on the Departments’
financial statements, and it was not made
known to the auditors.  In fact, it was not
until February 2020, during testing for the
Statewide Single Audit performed by other
auditors, that exceptions in the other
auditors’ testing and further inquiries
related thereto led to HFS’ disclosure of the
existence of these system defects.  At our
request, HFS performed an analysis of the
impact of this defect on the Departments’
financial statements and determined HFS paid
benefits of $4.7 million in error for
recipients who had been determined ineligible
and received $217 thousand in federal
financial participation (FFP) from those
disbursements, pertaining to fiscal year 2019.

The lack of a formal process to communicate
matters such as those identified above
represents a significant weakness in internal
control over the Departments’ financial
reporting. It is essential that financial-
related consequences of system defects be
communicated with appropriate fiscal personnel
to determine the potential impact on the
financial statements. Further, full and timely
disclosure of potential or known problems to
the auditors is essential to avoiding delays
in the audits, including audits of the
Departments’ financial statements, the
Statewide Single Audit, and the Statewide
Comprehensive Annual Financial Report.
(Finding 5, pages 87-91) This finding has been
repeated since 2015.

We recommended management of the Departments
provide adequate training and supervision of
caseworkers, 	implement additional controls
to ensure appropriate documentation of
eligibility is obtained at the time of
certification and retained in IES, complete
certifications of applications and
redeterminations timely, establish formal
lines of communication between operating unit
personnel and financial reporting personnel,
and correct IES application errors.

DHS accepted the recommendation and stated it
will continue to adjust and improve mandated
IES training as needed.  DHS also agreed to
work with all staff, including Regional
Administration and Policy experts in order to
identify any potential additional controls
that would assist in ensuring appropriate
documentation of eligibility is obtained and
retained in IES.

UNTIMELY PROCESSING OF APPLICATIONS FOR
BENEFITS AND REDETERMINATIONS OF ELIGIBILITY
FOR BENEFITS

The Department of Healthcare and Family
Services (HFS) and the Department of Human
Services (DHS) (collectively, the
“Departments”) did not maintain adequate
internal control to ensure applications for
benefits and redeterminations of eligibility
for benefits were completed timely.

As part of our audit procedures, we tested the
Departments’ compliance with the federal time
requirements for approving or denying
applications, conducting redeterminations, and
working any changes communicated by recipients
for the SNAP, TANF, and Medical programs.

• For initial applications – The Departments
had a backlog of 107,242 Medical applications,
19,957 SNAP applications, and 6,476 TANF
applications, for which the determination of
eligibility to receive benefits was not
complete as of June 30, 2019. Additionally,
there were 1,279 applications in which the
applicant did not specify the program;
therefore, we were unable to determine the
timeliness of the application.

• For redeterminations - The Departments had
incurred a backlog of at least 170,720 medical
redeterminations, and 980 SNAP and TANF
redeterminations as of June 30, 2019. In
addition to the known redetermination backlog,
because of a defect within IES, the date
information was received was not documented
and we were unable to determine the timeliness
of the redeterminations for 68,612 Medical
recipients and 2,146 SNAP and TANF recipients.

• For change documentation (a/k/a maintenance)
- The Departments had a backlog of 51,903
cases for which information had been received
by the Departments but not reviewed as of June
30, 2019.  Because the information had not
been reviewed, the Departments did not know
which program(s) might be impacted.  As such,
we were unable to determine the timeliness of
processing the information.  (Finding 7, page
95-97) This finding has been repeated since
2017.

We recommended the Departments work together
to implement controls to comply with the
requirement that applications are reviewed and
approved or denied within 45 or 30 days, as
applicable, and the Departments should
establish appropriate controls to both monitor
the progress of eligibility redeterminations
and ensure those redeterminations occur timely
along with any change documentation received.

DHS accepted the recommendation and stated the
Department agrees to work with HFS to
implement controls to comply with the
requirement that applications are reviewed and
approved or denied timely. DHS also stated the
Department will continue the practice of
assigning and training additional personnel so
that initial applications are worked and
redeterminations and maintenance of
eligibility are performed within the
timeframes required.  DHS also stated the
Department recently implemented Statewide
Processing Centers (SPCs) in order to handle
work from larger offices with heavy caseloads,
and effectively redistribute tasks to areas of
the field that have the capacity to handle
additional assignments which has resulted in
more timely performance of task completion
within IES; a substantial increase in SNAP
application timeliness; a reduction in the
backlog of medical applications; lower wait
times for customers who enter the FCRC; and
improved customer service in the timely and
accurate distribution of benefits.

INSUFFICIENT REVIEW AND DOCUMENTATION OF
PROVIDER ENROLLMENT DETERMINATIONS AND FAILURE
TO EXECUTE INTERAGENCY AGREEMENTS

The Department of Healthcare and Family
Services (HFS), and the Department of Human
Services (DHS) (collectively, the
“Departments”) failed to design and implement
adequate internal controls over the operation
of the State of Illinois’ Illinois Medicaid
Program Advanced Cloud Technology system
(IMPACT). Specifically, we noted the
Departments did not sufficiently review and
document approval for provider enrollments and
had not entered into interagency agreements
(IA) defining each agency’s roles and
responsibilities.

HFS’ and DHS’ Roles
As set by the State of Illinois’ State Plan
under Title XIX of the Social Security Act
(State Plan) (Section 1.1), the State’s
designated agency responsible for
administering and supervising the
administration of the Medicaid Program is HFS.
However, Section 1.1 of the State Plan allows
for HFS to delegate specific functions to
other State agencies to assist with the
administration of the Medicaid Program,
pursuant to a written IA defining each
agency’s roles and responsibilities.  As such,
DHS administers several human service programs
under the Medicaid Program, including
developmental disabilities support services,
rehabilitation services, and substance abuse
(prevention and recovery) services.

Auditor Testing and Results
Interagency Agreements
We noted the Departments did not have
interagency agreements defining the specific
roles and responsibilities.

Quality/Supervisory Reviews Not Conducted
We noted the Departments do not have a process
for supervisors to perform, at least on a
sample basis, quality reviews of the
activities performed by staff to obtain
independent evidence that staff members are
acting within the scope of their authority and
that transactions and events comport with
management’s expectations.

Detail Sample Testing
Based on the population provided by HFS,
during Fiscal Year 2019, 26,529 provider
applications were approved.  In order to
determine if the providers’ applications were
approved in accordance with federal and State
laws/rules/regulations, a sample of 40
approved applications were selected for
testing. Our testing of the 40 provider files
noted:

• 38 approved provider applications included
requests for the applicable Department to
backdate their enrollment beginning dates.  Of
those 38 approved applications, 28 (74%)
provider files did not contain documentation
of the Department's reason for allowing an
exception and thereby backdating the
provider's enrollment.  As a result, we could
not determine if the backdating of enrollment,
and the subsequent payments was proper. Also,
4 of the 38 (11%) provider files were
backdated in excess of HFS' policy, ranging
from 19 to 413 days past the 180 day limit.

• 8 (20%) provider files did not contain
documentation the applicable Department
reviewed the provider's required professional
license or board certification to confirm the
licenses/certifications were valid at the time
the application was approved.

• 3 (8%) provider files did not have
documentation the applicable Department
confirmed the provider's national board
certification end date.  In fact the
certifications were recorded with open ended
expiration dates within IMPACT.

• 1 (3%) provider file noted a felony charge
during the screening process.  However, there
was no documentation the application was sent
to the Office of Inspector General (OIG) for
detailed review and approval.

DHS Testing
During our testing, we determined DHS did not
utilize IMPACT as the book of record or rely
on it to verify their providers met certain
Medicaid requirements prior to approving them
to provide services.   In fact, DHS was
performing procedures to determine if the
providers met certain Medicaid eligibility
requirements outside of IMPACT.  Upon
completion of those procedures, DHS entered
the information into IMPACT and approved the
provider in order to grant the approval for
payment.  However, DHS did not regularly
follow-up on discrepancies identified upon
IMPACT completing verification of information,
background checks, and professional licensing.
Additionally, on a monthly basis IMPACT checks
provider profiles against several databases to
determine if the provider licenses are valid
and current, and identifies suspected criminal
activity.  However, we determined DHS was not
regularly following up on noted issues.

Although DHS performed various procedures in
determining if providers met the Medicaid
eligibility requirements, we noted there was
no consistent process for reviewing issues
identified and reporting to HFS to ensure only
eligible providers were paid with federal and/
or State funds.  (Finding 11, page 106-110)

We recommend management of the Departments
improve controls to ensure each Departments’
staff and supervisors are properly obtaining,
reviewing, and retaining documentation in
IMPACT to support Medicaid provider
enrollment, and execute detailed interagency
agreements defining the roles and
responsibilities of each agency regarding the
Medicaid program. Furthermore, we recommended
DHS utilize IMPACT as their book of record for
provider enrollment.  DHS should also develop
controls to review any noted issues and notify
HFS of any issues affecting eligibility.

DHS accepted the recommendation and stated the
Department will provide written documentation
in IMPACT of the documentation and databases
that were used to manually verify eligibility.
The Department also stated HFS, as the lead
Medicaid Agency, is coordinating with each
state agency to define the roles and
responsibilities regarding the Medicaid
program and DHS will continue to cooperate and
comply with the guidance provided by HFS
during the interim while the Interagency
Agreement is being developed.  In addition,
DHS stated the Department will continue to
collaborate with HFS to execute an interagency
agreement that sufficiently addresses the
necessary procedures to enforce monitoring and
accountability provisions over IMPACT as
required by the Code of Federal Regulations so
the providers offering services is carried out
in an efficient and compliant manner.
Furthermore, DHS agrees that IMPACT is the
book of record for determining Medicaid
eligibility and the Department will cooperate
with HFS to develop adequate controls to
ensure applications are reviewed and a process
is established for notifying HFS of any issues
affecting eligibility.  Lastly, DHS noted the
process of notifying HFS of issues affecting
eligibility and the roles and responsibilities
for determining a provider’s eligibility will
be addressed in the Interagency Agreement.

OTHER FINDINGS

The remaining findings pertain to the lack of
adequate controls over the review of internal
controls over service providers, weaknesses in
preparation of year-end Department financial
statements, failure to deposit federal funds
according to statute, lack of security
controls over the IES, insufficient internal
controls over changes to the IES and recipient
data, inadequate disaster recovery over the
IES, the lack of a detailed agreement with the
Department of Innovation & Technology, and
inadequate general information technology
controls over 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 of Human Services as of and
for the year ended June 30, 2019 are fairly
stated in all material respects.

This financial audit was performed by RSM US
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

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