REPORT DIGEST DEPARTMENT OF PUBLIC HEALTH COMPLIANCE EXAMINATION For the Two Years Ended: June 30, 2011 Release Date: May 9, 2012 Summary of Findings: Total this audit: 17 Total last audit: 22 Repeated from last audit: 11 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 Full Report are also available on the worldwide web at www.auditor.illinois.gov SYNOPSIS • The Department did not adequately administer its awards and grants programs. The Department expended over $73 million for awards and grants. • The Department did not have adequate support for the allocation of legal services expenses pursuant to interagency agreements with the Office of the Governor and the Department of Central Management Services. • The Department did not correctly report financial information on the Grant/Contract Analysis form resulting in an overstatement of expenditures and receipts by $344,000. • The Department had inadequate controls over computer inventory. The Department was unable to determine whether missing computers contained confidential information. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE ADMINISTRATION OF AWARDS AND GRANTS PROGRAMS The Department did not adequately administer its awards and grants programs. The Department expended over $73 million (11%) of its total expenditures for awards and grants. We tested sixteen grant programs from nine offices and noted the following weaknesses: • The Department did not have written procedures established to guide its administration of the awards and grants programs tested. • Eighteen of 143 (13%) grants tested were missing required documentation, including reporting requirements, audits, and a budget. • For 20 of 143 (14%) grants tested, files contained improper documentation. (Finding 1, pages 13-15) This finding was first reported in 2007. We recommended the Department develop a comprehensive grant administration program that includes the development and implementation of written procedures over the awarding and monitoring of all of the Department’s grant awards; reviewing the programmatic and financial reports of grant recipients; scheduling, conducting, and documenting grantee site visits; and timely collecting refunds due the Department. Department officials concurred with the finding and recommendation and stated they are drafting rules to formalize the grants review process and finalizing written grants procedures. Further, officials stated an electronic grant management system will be purchased.( For Previous Agency response, See Digest Footnote #1) LACK OF DOCUMENTATION FOR INTERAGENCY AGREEMENTS The Department did not have adequate support detailing the methodology for the allocation to be paid for legal services to the State. The Department entered into interagency agreements with the Office of the Governor and the Department of Central Management Services for an allocable share of legal fees occurred. There was no supporting documentation detailing the methodology used for determining the percent allocation which was to be paid by the Department. (Finding 2, pages 16-17) This finding was first reported in 2007. We recommended the Department require and maintain sufficient documentation to ensure that all billed contracted services have been provided to the Department and that the expenditures are reasonable and necessary for services received by the Department. Department officials concurred with the finding and recommendation and stated they will continue to work with the Governor’s Office to obtain sufficient documentation for legal service allocations.( For Previous Agency response, see Digest Footnote #2) NEED TO IMPROVE FINANCIAL REPORTING The Department did not correctly report financial information for immunization grants on the Grant/Contract Analysis (SCO-563) form to the Illinois Office of the Comptroller. The Department inaccurately reported a non-cash award on one SCO-563 form, overstating receipts and expenditures by $344,000. (Finding 3, pages 18-19) This finding was first reported in 2003. We recommended the Department comply with the Statewide Accounting Management System requirements to ensure accurate financial information is submitted to the Illinois Office of the Comptroller. Further, the Department should review and revise as necessary its current system used to gather and document the financial information that will be reported. Department officials concurred with the finding and recommendation and stated the misstatement was subsequently corrected and filed with the Illinois Office of the Comptroller. (For Previous Agency response, see Digest Footnote #3) INADEQUATE CONTROLS OVER COMPUTER INVENTORY The Department was not able to locate 75 computers during fiscal years 2010 and 2011, some of which may have contained confidential information. In its fiscal year 2010 and 2011 Physical Inventory Reports, the Department reported missing computer inventory totaling $95,874, which included 32 desktop and 43 laptop computers. In addition, the Department did not perform a detailed assessment and therefore was unable to determine whether the missing computers contained confidential information. Further, the Department had not protected all of its computers with encryption software, thus increasing the risk that confidential or personal information could be exposed. Department officials stated computer users were required to store Department data on network servers rather than on local computer hard drives. (Finding 8, pages 27-28) We recommended the Department: • Immediately perform a detailed inventory of computer equipment. • Perform a detailed assessment to determine if any of the missing computers contained confidential information. • Review current practices to determine if enhancements can be implemented to prevent the theft or loss of computers. We also recommended the Department establish procedures to immediately assess if a computer may have contained confidential information whenever it is reported lost or stolen. Department officials concurred with the finding and recommendation and stated corrective action will be taken. Officials stated a review of computer equipment inventory is underway and if any missing computers contained confidential information, IT Security will be informed. OTHER FINDINGS The remaining findings are reportedly being given attention by the Department. We will review the Department’s progress toward the implementation of our recommendations during our next examination. ACCOUNTANTS’ REPORT We conducted a compliance examination of the Department as required by the Illinois State Auditing Act. The Accountant’s Report noted the Department did not comply in all material respects with the requirements regarding laws and regulations, including the State uniform accounting system, in its financial and fiscal operations. WILLIAM G. HOLLAND Auditor General WGH:lkw:rt SPECIAL ASSISTANT AUDITORS Sikich LLP was our special assistant auditor for this engagement. DIGEST FOOTNOTES #1 Inadequate administration of awards and grants programs - Previous Department Response. The Department concurs in the finding and recommendation. Upon review of the grant exceptions cited, the area where the greatest improvement must be made deals with the timeliness of quarterly, semi-annual and/or final reports required of our grantees. In addition, the Department offices where grants were executed did not always follow-up as necessary or document its efforts to receive such reports. The Directive (08-01) regarding Grant Monitoring Compliance that was issued by the Director on May 1, 2008 was done so to provide written requirements and instructions for grant monitoring across the Department. Unfortunately, as the finding states, that effort did not significantly reduce the weakness noted. Two actions steps will be taken. First, the implementation of the Directive will be stressed at upcoming Senior Staff meetings and also with the fiscal offices of each of the applicable offices that administer grants. Secondly the Department is part of a grants management committee comprised of several State agencies charged with the task of addressing issues on general oversight and management of grants. #2 Lack of documentation for Interagency agreements - Previous Department Response. The Department concurs in the finding and recommendation. Going forward, the Department will seek to obtain additional supporting documentation from the Governor’s Office for any legal allocations in order to be consistent with the State Accounting Management System. Historically, it is our understanding that payment responsibility was assigned to particular State agencies based principally on the agencies’ involvement in the subject matter of the litigation. #3 GAAP Reporting - Previous Department Response The Department concurs in the finding and recommendation. The Department maintains documentation of all transactions associated with immunization doses distributed by the third party distributor contracted directly by the US Centers for Disease Control and Prevention. The Department will utilize the immunization distribution reports submitted to IDPH and the CDC by the third party distributor for the purpose of documenting the financial information that is reported to the Office of the State Comptroller in the GAAP Reporting Package Forms.