REPORT DIGEST

DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  June 30, 2021

FINDINGS THIS AUDIT:  13

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  3 -- 9 -- 12
Category 2:  1 -- 0 -- 1
Category 3:  0 -- 0 -- 0
TOTAL:  4 -- 9 -- 13

FINDINGS LAST AUDIT: 12

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

• (20-01) The Department does not have an
adequate understanding of the suitability
of the design of internal control or the
operating effectiveness of internal
control in place over all data recorded
in its financial statements for
transactions initiated by other State
agencies and recorded in the Department’s
financial statements.

• (20-05) The Departments (DHS and HFS)
lacked controls over eligibility
determinations and redeterminations for
Federal programs where such determination
is documented using the Integrated
Eligibility System (IES).

• (20-06) The Departments (DHS and HFS)
did not maintain adequate internal
control to ensure change documentation
and applications for benefits and
redeterminations of eligibility for
benefits were reviewed and/or completed
timely.
• (20-11) The Department failed to
execute an interagency agreement (IA)
with the Department of Healthcare and
Family Services (HFS) establishing
adequate internal controls over the
operation of the State of Illinois’
Illinois Medicaid Program Advanced Cloud
Technology system (IMPACT), and failed to
sufficiently review and document
eligibility requirements either prior to
the approval of eligibility and/or during
the required monthly screenings for
enrolled providers.

• (20-13) The Department 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

MEDICAL ASSISTANCE PROGRAM FINANCIAL
INFORMATION

The Department of Human Services
(Department) does not have an adequate
understanding of the suitability of the
design of internal control or the
operating effectiveness of internal
control in place over all data recorded
in its financial statements for
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, 0211, 0365, 0502, 0509, and
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
Office of Comptroller (IOC) which support
the receivable calculation for financial
reporting.  The amount per the Form
SCO-563s (totaling approximately $377.4
million for total reimbursable costs
"TRC" for CFDAs 93.767 and 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.  Although the Department
has documented their understanding of how
transactions for DHS programs are
processed within HFS, the Department was
not able to provide auditors with
documentation of their monitoring
performed over the amounts reported in
the Department’s financial statements.
Additionally, we noted Department
management is placing reliance on the
internal control over the applicable HFS
system application based on information
obtained during HFS’ State Compliance
Examination for the two years ended June
30, 2017, which is outdated for
transactions processed during FY2020.
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:  entering into an interagency
agreement (IA) with HFS that details the
responsibilities of each agency with
regards to initiating, processing and
recording transactions, and how the
sufficiency of internal control over
Department transactions will be monitored
(i.e. annual internal audit, SOC 1 Type 2
audit, or other), and, once an IA is
executed, on a regular basis, the
Department should determine if the
control system and related monitoring
agreed to through the IA, is sufficient
to prevent and detect significant
financial statement errors. The
sufficiency of internal control should be
monitored each time there is a major
change to MAP/CHIP programs or IT systems
used for those programs.  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 review
current internal controls on Federal
Medical Assistance Program transactions
and balances reported in its financial
statements that are initiated and
estimated by other State agencies and
seek improvements.

INADEQUATE CONTROLS OVER ELIGIBILITY
DETERMINATIONS AND REDETERMINATIONS

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

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, Mid-Point
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, we selected a
sample of 60 cases (30 new applications
and 30 redeterminations) and tested
whether the cases were properly certified
(approved or denied) based on non-
financial, financial and timeliness
criteria. 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. (Finding
5, pages 90-93)

We recommended the Departments work
together to 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 and correct
IES application errors.

DHS accepted the recommendation and
stated it will review current guidelines
and quality checks for maintaining
accurate and thorough case records as
well as training resources on proper
entry of income.  DHS also stated
statewide processing management will be
utilized to review and assign outstanding
requests coming due to certification.

UNTIMELY PROCESSING OF APPLICATIONS FOR
BENEFITS, REDETERMINATIONS OF ELIGIBILITY
FOR BENEFITS AND ELIGIBILITY CHANGE
DOCUMENATION

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 change
documentation and applications for
benefits and redeterminations of
eligibility for benefits were reviewed
and/or 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 change documentation (a/k/a
maintenance) – When a recipient
encounters a change in their situation,
which may have an impact on eligibility,
the recipient is to notify the
Departments of such change.  As of June
30, 2020, the Departments had a backlog
of 70,466 cases in which information had
been received; however, not reviewed.
Because the information had not been
reviewed, the Departments did not know
the program(s) which might be impacted.
As such, we were unable to determine the
timeliness of processing the information.

• For initial applications – At June 30,
2020, the Departments had a backlog of
20,511 medical applications, 4,208 SNAP
applications, and 2,223 TANF
applications, for which the determination
of eligibility to receive benefits was
not completed timely. Additionally, there
were 8,989 applications in which the
applicant did not specify the program;
therefore, we were unable to determine
the timeliness of the application.

• For redeterminations - As of June 30,
2020, DHS had not timely redetermined the
eligibility of 881 SNAP and/or TANF
recipients to continue receiving benefits
upon receipt of redetermination
information from the recipient.  In
addition, DHS had received
redetermination information from 1,145
SNAP and/or TANF recipients; however, due
to a defect within IES, the date the
information was received was not
documented.  Because the received date
was missing, we were unable to determine
the timeliness of these redeterminations.
(Finding 6, page 94-96)

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 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 statewide processing management
will be utilized to review and assign
outstanding requests coming due to
certification.

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

The Department of Human Services (DHS)
failed to execute an interagency
agreement (IA) with the Department of
Healthcare and Family Services (HFS)
establishing adequate internal controls
over the operation of the State of
Illinois’ Illinois Medicaid Program
Advanced Cloud Technology system
(IMPACT), and failed to sufficiently
review and document eligibility
requirements either prior to the approval
of eligibility and/or during the required
monthly screenings for enrolled
providers.

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

The auditors noted DHS did not enter into
or have an existing IA with HFS defining
each agencies’ roles and responsibilities
as they related to IMPACT during fiscal
year 2020.

Detail Sample Testing of DHS Providers

During testing, the auditors determined
DHS did not utilize IMPACT as the
official book of record or rely on it to
verify its providers met certain Medicaid
requirements prior to approving them to
provide services to Medicaid recipients.

Further, in order to determine if DHS
provider applications were approved in
accordance with DHS program specific
federal and State laws/rules/regulations,
the auditors requested DHS to provide
them with a population of its approved
providers, identified in IMPACT as DHS
providers as of June 30, 2020. From the
population provided by DHS, the auditors
selected a sample of 60 approved
applications for detailed testing.
During the detailed testing of the 60
provider files, the auditors noted two
(3%) providers did not have an executed
Waiver Program Provider Agreement. The
two providers were part of the Department
of Rehabilitation Services (DRS) Home
Services Program (HSP).

Further, on a monthly basis, IMPACT
conducts monthly screenings of provider
profiles against several databases to
determine if the provider licenses are
valid and current, and identifies
suspected criminal activity. During the
detailed testing of the 60 provider
files, the auditors determined DHS
personnel did not consistently follow up
on discrepancies identified in IMPACT
during the monthly screenings. (Finding
11, page 106-108)

We recommended DHS management work with
HFS to ensure all provider applications
are properly reviewed, approved, and the
documentation is maintained documented
within IMPACT. In addition, we
recommended DHS work with HFS to execute
a detailed interagency agreement which
documents specific roles and
responsibilities as they relate to
IMPACT. Lastly, we recommended DHS
implement internal controls to ensure
notifications regarding issues with its
programs’ providers are being received
from HFS and addressed expeditiously.

DHS accepted the recommendation and
stated it will work with HFS to ensure
provider applications and documentation
are thoroughly reviewed at the initial
enrollment and at revalidations.  DHS
also stated an interagency agreement was
drafted on April 1, 2020 and is in the
process of being finalized and DHS will
implement dedicated inboxes to ensure
that provider issues received from HFS
are expeditiously addressed.

LACK OF CENSUS DATA RECONCILIATIONS

The Department 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, we noted 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. (Finding 13, pages
112-113)

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 the
recommendation and stated it will work
with CMS and SERS to develop an ongoing
reconciliation process.  In addition, the
Department stated it will generate
discrepancy reports to be analyzed by
Department Payroll Staff and a plan to
correct such discrepancies will be
developed by partnering with SERS and CMS
staff.

OTHER FINDINGS

The remaining findings pertain to the
lack of adequate controls over service
providers, revenue not being recorded in
the correct fund, errors in computing the
allowance of doubtful accounts,
insufficient internal controls over
changes to IES and recipient data,
inadequate access review procedures for
IES, inadequate disaster recovery
controls over the IES, insufficient
detailed agreement with the Department of
Innovation & Technology, inadequate
interagency agreement over IES, 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, 2020 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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