REPORT DIGEST

STATE OF ILLINOIS STATEWIDE SINGLE
AUDIT REPORT

SINGLE AUDIT
FOR THE YEAR ENDED JUNE 30, 2016

Release Date: March 30, 2017

FINDINGS THIS AUDIT: 73

CATEGORY: NEW -- REPEAT -- TOTAL
Category 1: 23 -- 48 -- 71
Category 2: 1 -- 1 -- 2
Category 3: 0 -- 0 -- 0
TOTAL: 24 -- 49 -- 73

FINDINGS LAST AUDIT: 75

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

• The State expended approximately
$28.8 billion from federal awards in
FY16.

• A total of 28 programs or program
clusters were classified and audited as
major programs at eleven (11) State
agencies. These programs constituted
approximately 94.5% of all federal
spending, or about $27.2 billion. In
addition, 43 State agencies expended
federal financial assistance in FY16.
Eleven (11) State agencies accounted
for about 97.1% of federal dollars
spent.

Statewide Finding – Financial Reporting

• The State of Illinois does not have
an adequate process in place to permit
the timely and accurate completion of
the Schedule of Expenditures of Federal
Awards. As a result, the State has a
material weakness on all federal
programs for financial reporting.

Significant Agency Findings Classified
as a Material Weakness Resulting in an
Auditor Qualification

 • The Department of Human Services has
 material weaknesses for:
 • failing to establish adequate
 controls over the Integrated
 Eligibility System of the Supplemental
 Nutrition Assistance Program (SNAP)
 Cluster, Temporary Assistance for
 Needy Families (TANF) Cluster,
 Children’s Health Insurance Program
 (CHIP) and Medicaid Cluster programs.
 • inadequately maintaining and
 controlling beneficiary case file
 documents of the TANF, CHIP and
 Medicaid Cluster programs.
 • failing to locate case file
 documentation supporting eligibility
 determinations for beneficiaries of
 the TANF, CHIP and Medicaid Cluster
 programs.
 • failing to perform eligibility
 redeterminations within the timeframes
 prescribed by regulation for the TANF,
 CHIP, and Medicaid Cluster programs.
 • making improper payments to
 beneficiaries of the TANF program.
 • failing to maintain the required
 aggregate State expenditures for the
 maintenance of effort requirements and
 not providing adequate supporting
 documentation for the Block Grants for
 Prevention and Treatment of Substance
 Abuse (SAPT) program.

 • The Department of Healthcare and
 Family Services has material
 weaknesses for:
 • failing to establish adequate
 controls over the Integrated
 Eligibility System of the SNAP, TANF,
 CHIP and Medicaid Cluster programs.
 • failing to locate case file
 documentation supporting eligibility
 determinations for beneficiaries of
 the CHIP and Medicaid Cluster
 programs.

 • The Department of Children and
 Family Services has material
 weaknesses for:
 • having inadequate process for
 supporting adjustments to the Title
 IV-E claiming report for the Foster
 Care program.
 • not maintaining complete provide
 licensing files, including
 documentation of required background
 checks for foster care service
 providers for the Foster Care program.
 • making recurring payments of
 adoption assistance benefits that were
 not properly supported by adoption
 assistance agreements for the Adoption
 Assistance program.

 • The Department on Aging has material
 weaknesses for:
 • Inaccurately certifying its
 maintenance of effort (MOE)
 expenditures under the Aging Cluster
 program.
 • failing to perform a risk assessment
 of subrecipients of the Aging Cluster
 and not performing any on-site
 programmatic reviews or fiscal reviews
 as required.

 • The Illinois State Board of
 Education has a material weakness for:
 • not performing adequate on-site
 subrecipient monitoring procedures in
 accordance with established monitoring
 plan for the Title I Grants to Local
 Educational Agencies (Title I),
 Special Education Cluster (IDEA)
 (Special Education), Twenty-First
 Century Community Learning Centers
 (21st Century), and Improving Teacher
 Quality State Grants programs.

 • The Illinois Community College Board
 has a material weakness for:
 • failing to perform a risk assessment
 of subrecipients of the Career and
 Technical Education (CTE) program and
 not performing any on-site fiscal
 reviews of CTE Subrecipients as
 required.

 • The Department of Employment
 Security has a material weaknesses
 for:
 • failing to implement Federal
 requirements to improve program
 integrity and reduce overpayments of
 the Unemployment Insurance program.

Findings Regarding American Recovery
and Reinvestment Act (ARRA)
 • The Department of Human Services
 failed to communicate ARRA information
 and requirements to subrecipients of
 the TANF program.

INTRODUCTION

The Illinois Office of the Auditor
General conducted a Statewide Single
Audit of the FY16 federal grant
programs. The audit was conducted in
accordance with the Uniform Guidance
(Title 2 U.S. Code of Federal
Regulation Part 200, Uniform
Administration Requirements, Cost
Principles, and Audit Requirements for
Federal Awards).

The Statewide Single Audit includes
State agencies that are a part of the
primary government and expend federal
awards. In total, 43 State agencies
expended federal financial assistance
in FY16. A separate supplemental report
has been compiled by the Illinois
Office of the Auditor General. This
report provides summary information on
federal spending by State agency. The
Statewide Single Audit does not include
those agencies that are defined as
component units such as the State
universities and finance authorities.
The component units continue to have
separate single audits when required.

The Schedule of Expenditures of Federal
Awards (SEFA) reflects total
expenditures of approximately $28.8
billion for the year ended June 30,
2016. Overall, the State participated
in 366 different federal programs,
however, 10 of these programs or
program clusters accounted for
approximately 88.0% of the total
federal award expenditures. (Please see
Exhibit I in the PDF version of this
digest.)

The funding for the 366 programs was
provided by 23 different federal
agencies. Exhibit II shows that five
federal agencies provided Illinois with
the vast majority of federal funding in
FY16. (Please see Exhibit II in the PDF
version of this digest.)

A total of 28 federal programs or
program clusters were identified as
major programs in FY16. A major program
was defined in accordance with the
Uniform Guidance as any program with
federal awards expended that meets
certain criteria when applying the
risk-based approach. Exhibit III
provides a brief summary of the number
of programs classified as “major” and
“non-major” and related federal award
expenditures. (Please see Exhibit III
in the PDF version of this digest.)

Eleven State agencies accounted for
approximately 98.8% of all federal
dollars spent during FY16 as depicted
in Exhibit IV. (Please see Exhibit IV
in the PDF version of this digest.)

AUDITORS’ REPORT ON COMPLIANCE WITH
REQUIREMENTS THAT COULD HAVE A DIRECT
AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND INTERNAL CONTROL OVER
COMPLIANCE

The auditors’ report contained
qualifications on compliance as
summarized below. The complete text of
the Auditors’ Report may be found on
pages 23-27 of the audit.

Qualifications (Noncompliance)

The auditors qualified their report on
major programs for the following
noncompliance findings: (Please see
chart in the PDF version of this
digest.)

Internal Control Over Financial
Reporting

We noted a matter involving internal
control over financial reporting for
the Schedule of Expenditures of Federal
Awards (Schedule) that was considered
to be a material weakness. A material
weakness is a deficiency, or
combination of deficiencies, in
internal control over financial
reporting, such that there is a
reasonable possibility that a material
misstatement of the entity’s Schedule
will not be prevented, or detected and
corrected on a timely basis. The
auditors noted that during the past
fourteen years there have been various
errors identified and reported on the
audits of State agencies and the Office
of the State Comptroller (IOC) in its
annual data gathering on the SCO forms
that are used to present the Schedule.
Thus, the auditors recommended the
Office of the Governor and the Illinois
Office of the Comptroller work together
with the State agencies to establish a
corrective action plan to address the
quality of the accounting information
provided to and maintained by the IOC
as it relates to year-end preparation
of the Schedule.

Internal Control Over Compliance

We noted certain matters involving
internal control over compliance that
were considered to be significant
deficiencies. A control deficiency in
an entity’s internal control over
compliance exists when the design or
operation of a control over compliance
does not allow management or employees,
in the normal course of performing
their assigned functions, to prevent,
or detect and correct, noncompliance
with a type of compliance requirement
of a federal program on a timely basis.
A significant deficiency in internal
control over compliance is a
deficiency, or combination of
deficiencies, in internal control over
compliance with a type of compliance
requirement of a federal program that
is less severe than a material weakness
in internal control over compliance,
yet important enough to merit attention
by those charged with governance.
Overall, 2 of the 73 findings reported
in the single audit were classified as
compliance significant deficiencies.

Material weaknesses were also disclosed
in our report. A material weakness in
internal control over compliance is a
deficiency, or combination of
deficiencies, in internal control over
compliance, such that there is a
reasonable possibility that material
noncompliance with a type of compliance
requirement of a federal program will
not be prevented, or detected and
corrected, on a timely basis. Overall,
70 of the 73 findings reported in the
single audit were classified as a
material weakness.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

Exhibit V summarizes the number of
report findings by State agency,
identifies the number of repeat
findings, and references the findings
to specific pages in the report.
(Please see Exhibit V in the PDF
version of this digest.)

Exhibit VI summarizes the total number
of findings, number of repeated
findings and the percentage of repeated
findings for the past ten years.
(Please see Exhibit VI in the PDF
version of this digest.)

THE FINANCIAL REPORTING PROCESS FOR THE
SCHEDULE OF EXPENDITURES OF FEDERAL
AWARDS (SEFA) IS INADEQUATE TO PERMIT
TIMELY AND ACCURATE REPORTING

The State of Illinois’ current
financial reporting process does not
allow the State to prepare a complete
and accurate Schedule of Expenditures
of Federal Awards in a timely manner.

Accurate financial reporting problems
continue to exist even though the
auditors have: 1) continuously reported
numerous findings on the internal
controls (material weaknesses and
significant deficiencies), 2) commented
on the inadequacy of the financial
reporting process of the State, and 3)
regularly proposed adjustments to
financial statements year after year.
These findings have been directed
primarily towards major State agencies
under the organizational structure of
the Office of the Governor and towards
the Office of the State Comptroller
(IOC).

The IOC has made significant changes to
the system used to compile financial
information; however, the State has not
solved all the problems to effectively
remediate these financial reporting
weaknesses. The process is overly
dependent on the post-audit program
even though the Illinois Office of the
Auditor General has repeatedly informed
State agency officials that the post-
audit function is not a substitute for
appropriate internal controls at State
agencies.

The State of Illinois has a highly
decentralized financial reporting
process. The system requires State
agencies to prepare financial reporting
packages designed by the IOC.  These
financial reporting packages are
completed by accounting personnel
within each State agency who have
varying levels of knowledge,
experience, and understanding of IOC
accounting policies and procedures.
Agency personnel involved with this
process are not under the
organizational control or jurisdiction
of the IOC.

Although these financial reporting
packages are subject to review by the
IOC’s financial reporting staff during
the Comprehensive Annual Financial
Report preparation process and there
are minimum qualifications for all new
GAAP Coordinators who oversee the
preparation of financial reporting
forms, the current process still lacks
sufficient internal controls at State
agencies. As a result, adjustments
relative to the SEFA continue to occur.

Errors identified in the SEFA reporting
process in the current year included:
(1) corrections to amounts reported or
provided during the audit; (2)
adjustments to accurately report loan
balances; and (3) unreconciled amounts.
These items have been reported in
agency level findings for the Illinois
Department of Human Services (Finding
Code 2016-010), the Illinois Department
of Public Health (Finding Code
2016-040), the Illinois Department on
Aging (Finding Code 2016-047), the
Illinois State Board of Education
(Finding Code 2016-053), the Illinois
Community College Board (Finding Code
2016-057), the Illinois Department of
Employment Security (Finding Code
2016-069), the Illinois Department of
Commerce and Economic Opportunity
(Finding Code 2016-070), and the
Illinois Department of Transportation
(Finding Code 2016-072). Additionally,
other correcting entries were required
in order to accurately state the
financial information provided by
various other State agencies.

Failure to establish effective internal
controls at all agencies regarding
financial reporting for the preparation
of the SEFA may prevent the State from
completing an audit in accordance with
timelines set forth by the Uniform
Guidance and may result in the
suspension of federal funding. (Finding
1, pages 32-34) This finding was first
reported in the Statewide Single Audit
in 2002.

We recommended the Office of the
Governor and the IOC work together with
the State agencies to establish a
corrective action plan to address the
quality of accounting information
provided to and maintained by the IOC
as it relates to year-end preparation
of the SEFA.

The Office of the Governor concurred
with the recommendation and stated the
operational Enterprise Resource
Planning (ERP) will improve the State’s
control environment and processes to
enable the State and agencies to
prepare a complete and accurate
Schedule of Federal Awards in a timely
manner. (For previous agency response,
see Digest Footnote #1.)

The State Comptroller’s Office accepted
the recommendation and stated that
while it is expected the 2016 SEFA
audit will be submitted prior to the
March 31st deadline, the Office agrees
that the existing financial reporting
systems need to be upgraded with a
cost-effective statewide grants
management system that is designed to
provide the information needed to
complete the SEFA report and to improve
the quality of the accounting
information provided to the IOC. (For
previous agency response, see Digest
Footnote #1.)

FAILURE TO ESTABLISH ADEQUATE CONTROLS
OVER THE INTEGRATED ELIGIBILITY SYSTEM

The Department of Human Services (DHS)
and the Department of Healthcare and
Family Services (HFS) did not have
appropriate controls over the
Integrated Eligibility System (IES)
used for certain eligibility
determinations performed for the
Supplemental Nutrition Assistance
Program (SNAP) Cluster, Temporary
Assistance for Needy Families (TANF)
Cluster, Children’s Health Insurance
Program (CHIP), and Medicaid Cluster
programs.

DHS administers the SNAP Cluster, the
TANF Cluster, and certain Medicaid
Cluster waiver programs and HFS
administers the CHIP and Medicaid
Cluster programs. The Affordable Care
Act of 2010 required the State to
consolidate and modernize its
eligibility determination functions
into a single system which is known as
the Integrated Eligibility System
(IES). Effective October 1, 2013, the
State implemented IES and began
performing and documenting eligibility
determinations for certain
beneficiaries of its Medicaid Cluster
program and later expanded the use of
IES to certain eligibility
determinations for beneficiaries of the
SNAP Cluster, TANF Cluster, and CHIP
programs. IES was developed through a
partnership between IDHS and DHFS with
each agency providing system
requirements specific to their
respective federal programs.

During our testwork, we were unable to
perform adequate procedures to satisfy
ourselves that certain general
information technology controls over
the IES system were operating
effectively.  Specifically, we noted
IDHS and DHFS could provide all
information necessary to test system
access security controls and several
system changes did not follow the
established change management polices
of either IDHS of DHFS. Accordingly, we
were not able to rely on IES with
respect to our testing of the
eligibility and related allowability
compliance requirements for beneficiary
payments made under the TANF Cluster,
CHIP, and Medicaid Cluster programs. We
were also not able to rely on IES with
respect to the special test and
provision – ADP System for SNAP related
to the SNAP Cluster program.

As a result of DHS’ and HFS’ failure to
have appropriate controls over the
Integrated Eligibility System the
auditors qualified their opinion on the
SNAP, TANF, CHIP and Medicaid Cluster
programs.

Failure to establish adequate controls
over systems used to determine the
eligibility of program beneficiaries
inhibits the ability of the State to
properly determine eligibility in
accordance with program requirements
and may result in ineligible
beneficiaries receiving federal
benefits which are unallowable costs.
(Findings 2 and 20, pages 40-42 and
92-94, respectively)

We recommended IDHS and DHFS implement
adequate general information technology
control procedures for the IES system.
We also recommended IDHS and DHFS
evaluate the known IES system issues,
implement monitoring procedures to
identify potential noncompliance
relative to its federal programs
resulting from these items, and
consider the changes necessary with
respect to internal controls over
eligibility determinations to ensure
only eligible beneficiaries receive
assistance under its federal programs.

DHS and HFS officials accepted the
recommendation and stated they have
taken steps since June 2015 to
establish improved controls over
general information technology control
procedures.

FAILURE TO PROPERLY MAINTAIN AND
CONTROL CASE FILE RECORDS

The Department of Human Services (DHS)
does not have appropriate controls over
case file records maintained at its
local offices for beneficiaries of the
Supplemental Nutrition Assistance
Program (SNAP) Cluster, Temporary
Assistance for Needy Families (TANF)
Cluster, Children’s Health Insurance
Program (CHIP), and Medicaid Cluster
programs.

During our testwork, we noted the
procedures in place to maintain and
control manual beneficiary case file
records do not provide adequate
safeguards against the potential for
loss of such records. Specifically, in
our review of case files at five
separate local offices, we noted manual
case files were generally available to
all DHS personnel and that formal
procedures have not been developed for
checking hard-copy case files in and
out of the file rooms or for tracking
their locations. We also noted a number
of case files were provided several
weeks past the original date due to the
fact that case files had been
transferred between local offices and
were not easily located by DHS. We also
noted three CHIP and eight Medicaid
case files for which DHS could not
locate any case file documentation
supporting the eligibility
determinations performed on or prior to
the service date sampled.

Failure to properly maintain and
control beneficiary case file records
may result in the loss of source
documentation necessary to establish
beneficiary eligibility and in
unallowable costs being charged to the
federal programs. (Finding 3, pages
43-45) This finding was first reported
in the Statewide Single Audit in 2007.

As a result of DHS’ failure to properly
maintain and control case file records
of beneficiaries, the auditors
qualified their opinion on the TANF,
CHIP and Medicaid Cluster programs.

We recommended DHS review its current
process for maintaining and controlling
beneficiary case records and consider
the changes necessary to ensure case
file documentation is maintained in
accordance with federal regulations and
the State Plans for each affected
program.

DHS officials accepted the
recommendation and stated they are now
utilizing an electronic document
management system that is capturing a
portion of the information that was
previously printed and stored in a
paper case file which is assisting in
the reduction of the overwhelming size
and amount of paper files in the
offices. (For previous agency response,
see Digest Footnote #2.)

MISSING DOCUMENTATION IN BENEFICIARY
ELIGIBILITY FILES

The Department of Human Services (DHS)
and the Department of Healthcare and
Family Services (HFS) could not locate
case file documentation supporting
eligibility determinations for
beneficiaries of the Temporary
Assistance for Needy Families (TANF)
Cluster, Children’s Health Insurance
Program (CHIP) and the Medicaid Cluster
programs.

During our testwork of 50 TANF, 65 CHIP
and 125 Medicaid beneficiary payments
for compliance with eligibility
requirements and the allowability of
the relevant benefits provided we noted
numerous exceptions. We noted DHS could
either not locate items needed for
testing, could not provide adequate
support of items tested or could not
provide evidence that various items had
been performed or completed.  We also
noted HFS could not locate
documentation supporting the completion
of the initial eligibility
determination or subsequent
redetermination procedures.

Failure to maintain client applications
for benefits and/or source
documentation for redetermination/
income verification procedures
performed may result in inadequate
documentation of a recipient’s
eligibility and in federal funds being
awarded to ineligible beneficiaries,
which are unallowable costs. (Findings
4 and 21, pages 46-49 and 95-97,
respectively) This finding was first
reported in the Statewide Single Audit
in 2001 for DHS.

As a result of DHS’ and HFS’ failure to
locate case file documentation
supporting eligibility determinations
for beneficiaries, the auditors
qualified their opinion on the TANF,
CHIP and Medicaid Cluster programs.

We recommended DHS and HFS review their
current processes for maintaining
documentation supporting eligibility
determinations and consider changes
necessary to ensure all eligibility
determination documentation is properly
maintained.

DHS officials agreed with the
recommendation and stated the
Department continues to ensure staff
understands the importance of proper
and accurate filing processes.  In
addition, DHS officials stated they are
continuing the use of electronic
document management systems that
capture some of the information that
has been traditionally printed and
maintained in paper case files. (For
previous agency response, see Digest
Footnote #3.)

HFS officials accepted the
recommendation and stated they are
working with DHS to incorporate all
initial eligibility and
redeterminations of eligibility into
the new Integrated Eligibility System
which will significantly improve record
retention.
FAILURE TO PERFORM ELIGIBILITY
REDETERMINATIONS WITHIN PRESCRIBED
TIMEFRAMES

The Department of Human Services (DHS)
did not perform eligibility
redeterminations for individuals
receiving benefits under the Temporary
Assistance for Needy Families (TANF)
Cluster, Children’s Health Insurance
Program (CHIP), and Medicaid Cluster
programs in accordance with timeframes
required by the respective State Plans.

During our testwork of required
eligibility criteria, we noted the
State was delinquent (overdue) in
performing the eligibility
redeterminations of individuals for the
three programs during June 2016 as
follows:

TANF:  3,655 of 32,849 cases -- 11.11%
CHIP:  133,612 of 1,343,607 cases --
9.94%
Medicaid:  59,654 of 470,952 cases --
12.67%

Failure to properly perform eligibility
redetermination procedures in
accordance with the State Plans may
result in federal funds being awarded
to ineligible beneficiaries, which are
unallowable costs. (Finding 5, pages
50-53) This finding was first reported
in the Statewide Single Audit in 2003.

As a result of DHS’ failure to perform
timely redeterminations of recipient
eligibility, the auditors qualified
their opinion on the TANF, CHIP and
Medicaid programs.

We recommended DHS review its current
process for performing eligibility
redeterminations and consider changes
necessary to ensure all
redeterminations are performed within
the timeframes prescribed within the
State Plans for each affected program.

DHS officials agreed with the
recommendation and stated they will
continue to work with the Department of
Healthcare and Family Services to
review current processes for performing
eligibility redeterminations and
consider changes necessary to ensure
all redeterminations are performed
within the prescribed timeframes. (For
previous agency response, see Digest
Footnote #4.)

IMPROPER TANF CLUSTER BENEFICIARY
PAYMENT

The Department of Human Services (DHS)
made improper payments to beneficiaries
of the Temporary Assistance for Needy
Families (TANF) Cluster program.

During our testwork of 50 TANF Cluster
program beneficiary payments, we noted
eleven beneficiaries received payments
that were improperly calculated.  As a
result of the calculation errors, the
monthly payments for six beneficiaries
(with payments of $2,480) were
overstated in total by $1,252 and the
monthly payments for five beneficiaries
(with payments of $3,066) were
understated in total by $113. Total
payments made to these beneficiaries
under the TANF Cluster were $27,856 for
the year ended June 30, 2016. As of the
date of our testing (January 20, 2017),
the payment errors identified in our
sample had not been corrected by IDHS.

Failure to properly calculate benefit
payments may result in unallowable
costs being charged to the TANF
Cluster. (Finding 6, pages 54-55)  This
finding was first reported in the
Statewide Single Audit in 2012.

As a result of DHS making improper
payments to beneficiaries, the auditors
qualified their opinion on the TANF
Cluster program.

We recommended DHS review its current
process for calculating beneficiary
payments and consider changes necessary
to ensure payments are properly
calculated and paid.

DHS officials accepted the
recommendation and stated the
implementation of Phase 2 of the
Integrated Eligibility System will
reduce or eliminate the need for manual
calculations of initial prorated
entitlements. (For previous agency
response, see Digest Footnote #5.)

FAILURE TO MEET AND PROVIDE ADEQUATE
DOCUMENTATION FOR THE SAPT MOE
REQUIREMENT

The Department of Human Services (DHS)
did not maintain the required aggregate
State expenditures for the maintenance
of effort (MOE) requirements and was
unable to provide adequate supporting
documentation to substantiate DHS met
the MOE requirements for the Block
Grants for Prevention and Treatment of
Substance Abuse (SAPT) program.

During the current fiscal year, we
noted DHS was short $58,207,406 of the
aggregate expenditures needed to meet
the SAPT MOE requirement.
Additionally, during our testwork over
25 expenditures used by the State to
meet the SAPT MOE requirements
(totaling $5,074,083), we noted DHS
could not provide detailed supporting
documentation for 16 expenditures
sampled (totaling $2,664,147).
Accordingly, these expenditures are not
allowable for purposes of meeting the
maintenance of effort. Upon further
review, we noted an additional
$41,307,973 for which detailed
supporting documentation was not
readily available.

Failure to maintain required State
expenditure levels for MOE and maintain
adequate supporting documentation to
support expenditures used to meet the
MOE requirement results in unallowable
costs and noncompliance with program
requirements. (Finding 8, pages 59-61)

As a result of DHS not meeting its
maintenance of effort expenditures, the
auditors qualified their opinion on the
Block Grants for Prevention and
Treatment of Substance Abuse program.

We recommended DHS review its process
for monitoring compliance with the SAPT
MOE and for maintaining documentation
for expenditures used to meet its SAPT
MOE requirement.

DHS officials accepted the
recommendation.

INADEQUATE PROCESS FOR SUPPORTING
ADJUSTMENTS TO THE TITLE IV-E CLAIMING
REPORT

The Department of Children and Family
Services (DCFS) does not have an
adequate process for supporting
adjustments to the Title IV-E claiming
report for the Foster Care and Adoption
Assistance programs.

During our testwork over 25 adjustments
to the Foster Care and Adoption
Assistance programs reported on
quarterly claiming reports, we
experienced significant delays in
receiving detailed documentation
supporting the adjustments sampled.
DCFS personnel informed us the original
files supporting the adjustments had
not been maintained and had to be
recreated over a period of several
weeks for our testing.

We also noted one decreasing adjustment
(totaling $45,148) was improperly
reported, one decreasing adjustment
(totaling $65,080) was improper and two
increasing adjustments (totaling
$30,132) were not supported by
eligibility determinations. As of the
date of our testing, DCFS had not
evaluated whether additional errors
exist or quantified the impact of these
errors on the population. We also
noted, DCFS has not implemented
adequate supervisory reviews or other
monitoring controls to determine if the
adjustments being made are complete,
accurate, and properly supported.

Failure to properly determine when
adjustments are necessary and failure
to maintain proper supporting
documentation for expenditures
(adjustments) claimed for the Foster
Care and Adoption Assistance programs
may result in payments to ineligible
beneficiaries, which are unallowable
costs. (Finding 27, pages 110-112)

As a result of DCFS not having an
adequate process for supporting
adjustments to the Title IV-E claiming
report, the auditor’s qualified their
opinion on the Foster Care and Adoption
Assistance programs.

We recommended DCFS review its current
process for identifying and documenting
adjustments and implement procedures to
ensure the adjustments claimed for the
Foster Care and Adoption Assistance
programs are properly determined and
supported. DCFS should also consider
implementing additional monitoring
controls to ensure the adjustments
reported are complete, accurate, and
properly supported.

DCFS officials agreed with our
recommendation and stated improvements
in design of our system will ensure
detailed transaction information will
be maintained on a permanent basis to
ensure adjustments are better
supported, will make changes to the
manual process of reviewing requests to
ensure they are properly categorized
and will continue to review its
procedures to ensure claiming on all
judicial determinations is appropriate
and that documentation of eligibility
files are complete.

FAILURE TO MAINTAIN ADEQUATE PROVIDER
LICENSING FILES

The Department of Children and Family
Services (DCFS) did not maintain
complete provider licensing files,
including documentation of required
background checks for foster care
services programs.

During our testwork of 65 Foster Care
maintenance assistance payments
(totaling $134,980), we reviewed the
associated provider licensing files for
compliance with licensing requirements
and for the allowability of related
benefits paid. We noted one foster care
beneficiary payment sampled (totaling
$295) with an unlicensed relative
service provider whereby DCFS could not
locate documentation evidencing the
provider had undergone the proper
criminal background checks and child
abuse and neglect registry check.  We
also noted 33 foster care beneficiary
payments sampled (totaling $119,218)
with child-care institution service
providers, whereby the licensing files
did not contain documentation that
verified the safety considerations with
respect to staff of the institution had
been addressed. Lastly, as of the date
of our testing, DCFS has not evaluated
whether additional errors exist or
quantified the impact of these errors
on the population.

Failure to maintain complete provider
licensing files for foster family homes
and child-care institutions, including
documentation that required criminal
records checks and child abuse and
neglect registry checks have been
performed for all prospective foster
parents, child-care institution
applicants, employees, volunteers, or
non-licensed service providers, could
result in payments being made to
ineligible service providers, which are
unallowable costs. (Finding 28, pages
113-115)

As a result of DCFS not maintaining
complete information, the auditors
qualified their opinion on the Foster
Care program.

We recommended DCFS implement
procedures to ensure the provider
licensing files are complete, including
documentation that all required
background checks have been performed
and documentation that verifies safety
considerations with respect to the
staff of child-care institutions has
been properly addressed. Additionally,
we recommended DCFS evaluate its
process for ensuring providers are
properly licensed and meet program
requirements prior to placing Foster
Care beneficiaries in their care and
claiming payments to these providers
for federal reimbursement.

DCFS officials agreed with our
recommendation and stated based on
similar recommendations from the Title
IV-E Foster Care Eligibility Review
conducted in June, 2016, the Department
has made significant changes to their
processes.

FAILURE TO PROPERLY DOCUMENT AND
EXECUTE ADOPTION ASSISTANCE AGREEMENTS

The Department of Children and Family
Services (DCFS) made recurring payments
of adoption assistance benefits that
were not properly supported by adoption
assistance agreements.

During our testwork of adoption
assistance beneficiary payments, we
reviewed 50 case files and related
benefit payments (totaling $33,092) for
compliance with eligibility
requirements and allowability of
related benefits. We noted two
beneficiary assistance subsidy payments
were not supported by adequate
documentation resulting in payments
made that differed from the adoption
assistance agreements. As of the date
of our testing, DCFS has not evaluated
whether additional errors exist or
quantified the impact of this error on
the population.

Failure to maintain case file
documentation, including documentation
to support changes in the amount of the
subsidy paid, may result in payments to
ineligible beneficiaries, which are
unallowable costs. (Finding 29, pages
116-118)

As a result of DCFS not maintaining
case file documentation supporting
payments made, the auditors qualified
their opinion on the Adoption
Assistance program.

We recommended DCFS implement
procedures to ensure adoption
assistance subsidy payments are
consistent with the approved subsidy
payment amount in the adoption
assistance agreement and to obtain and
include proper supporting documentation
for subsidy payment changes in the
adoption assistance case files.
Additionally, we recommended DCFS
evaluate its process for ensuring
subsidy payments are consistent with
executed agreements or changes are
adequately documented prior to paying
adoption subsidies and claiming
payments for federal reimbursement.

DCFS officials agreed with the
recommendation and stated the
Department has implemented a quality
assurance review completed by the data
entry supervisor to assure that the
amount entered for payment matches the
approved amounts listed in the approve
subsidy agreement.

INACCURATE CERTIFICATION OF MAINTENANCE
OF EFFORT (MOE) EXPENDITURES

The Department on Aging (DOA) did not
accurately certify its maintenance of
effort (MOE) expenditures under the
Aging Cluster program to USDHHS.

During our testwork of the MOE
requirement, we noted DOA passed
through a total of $20,380,075 to Area
Agencies on Aging (subrecipients) for
both services and administration under
the Title III program but only reported
and certified that $5,305,727 was spent
for MOE expenditures. The amount
reported for MOE expenditures was equal
to the amount certified to USDHHS as
the average expenditures for the past
three years. Upon further discussion
with IDOA management, we noted the MOE
expenditures reported for the past four
federal fiscal years have been
determined in a similar manner. As a
result, the average expenditures in the
three year period have been consistent
and does not properly reflect the
actual expenditures incurred for the
respective periods which would have
resulted in a higher MOE requirement.

Failure to accurately certify and
report the level of maintenance of
effort expenditures prevents the USDHHS
from effectively monitoring and
evaluating the performance of the Title
III Program, and could result in USDHHS
improperly allocating future funding.
(Finding 43, pages 150-152)

As a result of not accurately
certifying its maintenance of effort
(MOE) expenditures, the auditors
qualified their opinion on the Aging
Cluster.

We recommended IDOA review the process
and procedures in place to prepare the
certification of the maintenance of
effort and its financial reports
required for the Aging Cluster program
and implement procedures necessary to
ensure that actual expenditures
incurred during the period are reported
and certified. We also recommended IDOA
implement procedure to financial
reports are subject to documented
supervisory reviews prior submission.

DOI officials disagree with the portion
of the finding referring to MOE not
accurately being certified.

In an auditor’s comment, we stated the
DOA could not provide authoritative
guidance supporting its position that
the State is only required to report
and certify an amount equal to the
average expenditures for the past three
years.

FAILURE TO PERFORM REQUIRED RISK
ASSESSMENT AND ADEQUATELY MONITOR
SUBRECIPIENTS OF THE AGING CLUSTER
PROGRAM

The Department on Aging (DOA) did not
perform a risk assessment of
subrecipients of the Aging Cluster
program as required by the Uniform
Guidance. Additionally, IDOA did not
perform any on-site programmatic
reviews during the fiscal year for
Aging Cluster subrecipients and further
did not perform fiscal on-site reviews
as required by its established
monitoring procedures.

Beginning for all new federal awards
(as well as any amendments to existing
awards as identified by the federal
agency) with effective dates on or
after December 26, 2014, IDOA was
required to perform a risk assessment
to establish appropriate monitoring
procedures based upon the risks
inherent at each subrecipient. During
our audit procedures, we noted IDOA had
not amended its existing approach to
monitoring its subrecipients. We noted
deficiencies whereby DOS did not
perform programmatic on-site reviews
for any of the program’s 13
subrecipients, fiscal on-site reviews
were not performed for 2 of 6
subrecipients sampled, and corrective
action plans were not obtained for 2 of
6 subrecipients sampled and as of the
date of our testing (February 16, 2017)
DOA had not followed up with the
subrecipient to obtain the corrective
action plans.

Failure to implement required risk
assessments and to adequately monitor
subrecipients results in noncompliance
and may result in subrecipients not
properly administering the federal
programs in accordance with laws,
regulations, and the terms and
conditions of the award. (Finding 44,
pages 153-155)

As a result of not performing risk
assessments of subrecipients, the
auditors qualified their opinion on the
Aging Cluster program.

We recommend DOA: (1) implement the
risk assessment procedures required by
the Uniform Guidance; (2) review its
current policies and procedures for
monitoring Aging Cluster program
subrecipients and implement changes
necessary to implement any changes
required by the Uniform Guidance; and
(3) implement procedures to ensure on-
site reviews are appropriately
performed and completed as planned.

DOA officials agreed with our
recommendation and stated the
Department is working to make sure they
are in compliance with all requirements
of the Uniform Guidance.

FAILURE TO FOLLOW ON-SITE MONITORING
PLAN FOR SUBRECIPIENTS

The Illinois State Board of Education
(ISBE) did not perform adequate on-site
subrecipient monitoring procedures in
accordance with its established
monitoring plan for the Title I Grants
to Local Educational Agencies (Title
I), Special Education Cluster (IDEA)
(Special Education), Twenty-First
Century Community Learning Centers
(21st Century), and Supporting
Effective Instruction State Grant
(formerly Improving Teacher Quality
State Grants) (Title II) programs.

During our review of the subrecipients
selected for review, we noted one
subrecipient common across all
Education programs which represented
the single largest subrecipient for
each program. As we reviewed the
monitoring procedures performed for
this subrecipient, we noted the
procedures performed were limited to
on-site reviews of nine schools and
analytical expenditure reviews at
additional schools for the purpose of
determining whether further on-site
reviews were deemed necessary, within
the school district which has in excess
of 600 schools. We also noted no on-
site monitoring procedures were
performed for the 21st Century program
at this subrecipient.  Given the
significance of this individual
subrecipient, we do not believe the on-
site monitoring procedures performed by
ISBE during the year ended June 30,
2016 were adequate. We also noted ISBE
did not follow timeframes established
in its on-site monitoring plan for
communicating findings and closing out
monitoring files.

Failure to properly monitor
subrecipients and communicate
monitoring results may result in
undetected noncompliance and
subrecipients not properly
administering Federal programs in
accordance with laws, regulations, and
grant agreements. (Finding 48, pages
162-164)

As a result of inadequate monitoring of
subrecipients, the auditors qualified
their opinions on the Title I, Special
Education, 21st Century and Title II
grants.

We recommended ISBE review its
monitoring procedures relative to
individually significant subrecipients
and implement additional procedures as
necessary to ensure proper monitoring
procedures are performed for all
programs. Additionally, we recommended
ISBE review its procedures for
communicating monitoring results and
closing out audit files and implement
additional procedures to ensure timely
completion of these activities.

ISBE officials agreed with the finding
and stated they have modified the risk
scoring process to ensure individually
significant subrecipients are
adequately monitored and they have also
worked to establish procedures related
to communicating monitoring results and
closing out audit files to ensure
timely completion of these activities.

FAILURE TO PERFORM REQUIRED RISK
ASSESSMENT AND ADEQUATELY MONITOR
SUBRECIPIENTS OF THE CTE PROGRAM

The Illinois Community College Board
(ICCB) did not perform a risk
assessment of subrecipients of the
Career and Technical Education (CTE)
program as required by the Uniform
Guidance. Additionally, ICCB did not
perform any on-site fiscal reviews of
CTE subrecipients as required by its
established monitoring procedures.

Beginning for all new federal awards
(as well as any amendments to existing
awards as identified by the federal
agency) with effective dates on or
after December 26, 2014, ICCB was
required to perform a risk assessment
to establish appropriate monitoring
procedures based upon the risks
inherent at each subrecipient.  During
our audit procedures, we noted ICCB had
not amended its existing approach to
monitoring its subrecipients. We also
noted ICCB did not perform any on-site
fiscal reviews of CTE subrecipients as
identified and planned within ICCB’s
monitoring policies and procedures.

Failure to implement required risk
assessments and to adequately monitor
subrecipients results in noncompliance
and may result in subrecipients not
properly administering the federal
programs in accordance with laws,
regulations, and the terms and
conditions of the award. (Finding 55,
pages 143-144)

As a result of inadequate monitoring of
subrecipients, the auditors qualified
their opinion on the CTE program.

We recommend ICCB implement the risk
assessment procedures required by the
Uniform Guidance, review its current
policies and procedures for monitoring
CTE program subrecipients and implement
changes necessary to implement any
changes required by the Uniform
Guidance and implement procedures to
ensure on-site reviews are
appropriately performed and completed
as planned.

ICCB officials agreed with the
recommendation and stated the Board has
implemented risk assessment procedures
as required by the Uniform Guidance in
FY17. In addition, ICCB stated the
Board will perform on-site fiscal
monitoring for all grantees designated
as high-risk each fiscal year.

FAILURE TO IMPLEMENT UNEMPLOYMENT
INSURANCE (UI) PROGRAM INTEGRITY AND
OVERPAYMENT REDUCTION REQUIREMENTS

The Illinois Department of Employment
Security (IDES) did not implement
Federal requirements to improve program
integrity and reduce overpayments.

The State is required to establish
written procedures for: (1) identifying
overpayments, (2) classifying
overpayments into categories based on
the reason the overpayment occurred
(i.e. employer error, non-response from
employers, beneficiary fraud, etc.),
and (3) establishing appropriate
methods for following up on each
category of overpayment. In
establishing these procedures, the
State is required to enter into three
agreements prior to commencing
recoveries. The first agreement permits
the State to offset State UI from
Federal UI overpayments (Cross Program
Offset and Recovery Agreement). The
second agreement permits the State to
recover overpayments from benefits
being administered by another State
(Interstate Reciprocal Overpayment
Recovery Agreement). The third
agreement permits the State to utilize
the Treasury Offset Program to recover
overpayments that remain uncollected
one year after the debt was determined
to be due. Additionally, the State is
(1) required to impose a monetary
penalty (not less than 15 percent) on
claimants whose fraudulent acts
resulted in overpayments, and (2)
prohibited from providing relief from
charges to employer’s UI account when
overpayments are the result of the
employer’s failure to respond timely or
adequately to a request for
information.

During our testwork, we noted that
while IDES has developed the written
procedures relative to overpayments and
entered into the required agreements
described in the previous paragraph,
the written procedures did not address
the requirement to impose a monetary
penalty on fraud overpayments.
Additionally, we noted the policies do
not address the prohibition of
providing employers relief resulting
from an employer failing to provide
timely or adequate information.

Failure to implement Federal
requirements could result in
noncompliance with laws, regulations
and the grant agreement. (Finding 61,
pages 193-194)

As a result of not implementing federal
requirements, the auditors qualified
their opinion on the Unemployment
Insurance program.

We recommended IDES develop and
implement procedures to improve UI
program integrity and reduce
overpayments that incorporate the
required monetary penalty on fraud
overpayments and prohibit providing
relief to employers who fail to provide
timely and adequate responses to
information requests.

IDES officials accepted our
recommendation and stated they are
currently integrating their current
overpayment tracking system into their
benefit payment system scheduled for
completion by December 2017.

ISSUES INVOLVING AMERICAN RECOVERY AND
REINVESTMENT ACT (ARRA)

FAILURE TO COMMUNICATE ARRA INFORMATION
AND REQUIREMENTS TO SUBRECIPIENTS

The Department of Human Services (DHS)
did not communicate American Recovery
and Reinvestment Act (ARRA) information
and requirements to subrecipients of
the Temporary Assistance for Needy
Families (TANF) program.

During our testwork over one ARRA
disbursement of $1,492,345 to a
subrecipient of the TANF Cluster
program, we noted the subrecipient
agreement did not identify the Federal
award number, CFDA number, the amount
of ARRA funds, or the requirement to
separately report ARRA program
expenditures on the Schedule of
Expenditures of Federal Awards (SEFA)
and the data collection form. During
the audit period, DHS sent a letter to
the subrecipient identifying that the
award was funded by ARRA and
communicating the CFDA number; however,
DHS could not provide evidence that
they had communicated any of the other
requirements.  DHS passed through ARRA
funds of approximately $8,215,859 to
one subrecipient of the TANF Cluster
program.

Failure to communicate required ARRA
information could result in
subrecipients not properly
administering the federal programs in
accordance with federal regulations.
(Finding 14, pages 78-79)

We recommended DHS implement procedures
to ensure ARRA information and
requirements are properly communicated
in writing to its subrecipients.

DHS officials agreed with the
recommendation and stated they will
review and implement procedures to
ensure that all award information and
requirements is properly communicated
in writing to its subrecipients.

OTHER FINDINGS

The remaining findings pertain to other
compliance and internal control
matters. We will follow up on the
status of corrective action on all
findings in our next Statewide Single
Audit for the year ended June 30, 2017.

AUDITORS’ OPINION

The auditors state the Schedule of
Expenditures of Federal Awards for the
State of Illinois as of and for the
year ended June 30, 2016 is presented
fairly in all material respects.

This single audit was conducted by the
firm of KPMG LLP.

BRUCE L. BULLARD
Division Director

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

FRANK J. MAUTINO
Auditor General

FJM:JC

DIGEST FOOTNOTES

Previous response by the Office of the
Governor and the Office of the State
Comptroller

#1 -- Inadequate Process for Compiling
the Schedule of Expenditures of Federal
Awards

2015: (Office of the Governor) The
Office of the Governor concurs with the
auditor’s finding and recommendation.
The Office of the Governor will
continue to work with the Office of the
State Comptroller to address the core
issues and establish sufficient
internal control processes in State
agencies regarding the quality of the
accounting information provided to and
maintained by the IOC as it relates to
year-end preparation of the SEFA. Both
offices have begun a multi-year
implementation of an Enterprise
Resource Planning (ERP) system to
develop an integrated enterprise-wide
application system for financials,
which is an aspect of the Governor’s
Executive Order that created the
Illinois Department of Innovation and
Technology to transform Illinois’ IT
systems to be more responsive to state
employees and taxpayers. An operational
ERP system will improve the State’s
control environment and processes to
allow the State and agencies to prepare
a complete and accurate Schedule of
Expenditures of Federal Awards in a
timely manner.

2015:	(Office of the State
Comptroller) The Office accepts the
recommendation. While the 2014 SEFA
audit was submitted prior to the March
31st deadline, the Office agrees that
the existing financial reporting
systems need to be replaced with a new
statewide accounting and grants
management system that is designed to
provide the information needed to
complete the SEFA report and to improve
the quality of the accounting
information provided to the IOC. The
Office is engaged in a project with the
Governor’s Office and other
stakeholders and outside consultants to
design, program and implement a new
statewide financial accounting and
grants management system to better meet
the State’s financial tracking and
reporting needs.

Previous responses by the Department of
Human Services

#2 -- Failure to Properly Maintain and
Control Case File Records

2015:	The Department accepts the
recommendation. Following are some of
the steps taken since June 2015 to
establish improved controls over
general information technology control
procedures:

 • Implemented observation sessions to
 validate results of System Test stage
 before moving into User Acceptance
 Test stage.
 • Extended timeline for Phase 2 to
 increase User Acceptance Test stage
 from 12 to 43 weeks.
 • Created detailed requirements
 traceability matrix to enable thorough
 due diligence of defects and
 workarounds.
 • Refocusing on quality by requiring
 vendor quality reviews and joint
 quality review meetings with vendor.
 • Redefining project deliverables
 jointly with vendor to focus on
 quality and acceptable defect levels
 for deployment.
 • Revamping change management,
 decision management and documentation
 of deliverable approvals.

The Department has implemented a
sophisticated system for documenting,
tracking and prioritizing correction of
all identified defects. Because of the
size and complexity of the benefit
programs IES controls, the Department
will review IES on an ongoing basis to
assure accuracy of all eligibility
determinations. The Department will
continue to work with the IES vendor to
develop plans to resolve all currently
identified control weaknesses,
vulnerabilities and other deficiencies
noted during this audit.

#3 -- Missing Documentation in
Beneficiary Eligibility Files

2015:	The Department agrees with the
recommendation. The Department
continues to ensure staff understands
the importance of proper and accurate
filing processes. The Department is
increasing the use of electronic
document management systems that
capture some of the information that
has been traditionally printed and
maintained in paper case files.

#4 -- Failure to Perform Eligibility
Redeterminations within Prescribed
Timeframes

2015:	The Department agrees with the
recommendation. IDHS will continue to
work with the Department of Healthcare
and Family Services (HFS) to review
current processes for performing
eligibility redeterminations and
consider changes necessary to ensure
all redeterminations are performed
within the prescribed timeframes.

IDHS and DHFS have set up four
specialized central redetermination
units across the state to handle most
medical only redeterminations. Staff in
these units specialize in working in a
new electronic storage system,
developed by a vendor that records and
stores redetermination information,
forms, and verifications.

#5 -- Improper TANF Cluster Beneficiary
Payments

2015:  We accept the recommendation.
The implementation of Phase 2 of the
Integrated Eligibility System will
reduce or eliminate the need for manual
calculations of initial prorated
entitlements.