08 FINANCIAL AUDIT REPORT
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08 FINANCIAL AUDIT REPORT

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STATE OF ILLINOIS DEPARTMENT OF HUMAN SERVICES FINANCIAL AUDIT For the Year Ended June 30, 2008 Performed as Special Assistant Auditors for the Auditor General, State of Illinois STATE OF ILLINOIS DEPARTMENT OF HUMAN SERVICES FINANCIAL AUDIT For the Year Ended June 30, 2008 TABLE OF CONTENTS Page AGENCY OFFICIALS ................................................................................................. 1 FINANCIAL STATEMENT REPORT Summary ................................................................................................................. 3 Independent Auditors’ Report ................................................................................. 5 Basic Financial Statements Statement of Net Assets and Governmental Funds Balance Sheet ...................... 7 Reconciliation of Governmental Funds Balance Sheet to Statement of Net Assets .................................................................................... 8 Statement of Activities and Governmental Revenues, Expenditures, and Changes in Fund Balances ................................................................................ 9 Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to Statement of Activities ....................................................................................................... 10 Statement ...

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STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT

For the Year Ended June 30, 2008

Performed as Special Assistant Auditors for the
Auditor General, State of Illinois

STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT

For the Year Ended June 30, 2008


TABLE OF CONTENTS

Page

AGENCY OFFICIALS ................................................................................................. 1

FINANCIAL STATEMENT REPORT

Summary ................................................................................................................. 3

Independent Auditors’ Report ................................................................................. 5

Basic Financial Statements

Statement of Net Assets and Governmental Funds Balance Sheet ...................... 7

Reconciliation of Governmental Funds Balance Sheet to
Statement of Net Assets .................................................................................... 8

Statement of Activities and Governmental Revenues, Expenditures, and
Changes in Fund Balances ................................................................................ 9

Reconciliation of Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to Statement
of Activities ....................................................................................................... 10

Statement of Fiduciary Net Assets ....................................................................... 11

Statement of Changes in Fiduciary Net Assets .................................................... 12

Notes to Financial Statements .............................................................................. 13

STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

FINANCIAL AUDIT

For the Year Ended June 30, 2008


TABLE OF CONTENTS - Continued

Supplementary Information

Combining Schedule of Accounts – General Fund .............................................. 33

Combining Schedule of Revenues, Expenditures and Changes
in Fund Balance – General Fund ...................................................................... 34

Combining Balance Sheet – Non-major Governmental Funds ............................ 35

Combining Statement of Revenues, Expenditures and Changes
in Fund Balance – Non-major Governmental Funds ........................................ 41

Combining Statement of Fiduciary Net Assets – Agency Funds ........................ 47

Combent of Changes in Assets and Liabilities – Agency Funds ..... 48

Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards ............................................ 49

Schedule of Findings..................................................................................................... 51

Prior Finding not Repeated ........................................................................................... 64




STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

AGENCY OFFICIALS


Secretary Carol L. Adams, Ph.D.

Assistant Secretary (Operations) Catalina Soto (Effective 3/16/07 through 7/9/08)
Jerome Butler (Effective 11/12/08)

Assistant Secretary (Programs) Grace Hou

Budget Director Robert Brock

Business Services Director Steven Richie (Through 8/8/07)
Hero Tameling (Acting, Effective 8/8/07 to
8/19/08)
Ron Brian (Acting, Effective 8/20/08)

Chief of Staff Teyonda Wertz

Chief Financial Officer Robert Stanek

Chief Operational Officer Jerome Butler (Through 10/5/08)
Andrew Fox (Effective 10/14/08)

Contract Administration Manager Sally Hardwick Adams

State Purchasing Officer Curtis Thompson

Fiscal Services Director Solomon Oriaikhi

Human Resources Director Elizabeth Sarmiento

Management Information Services Chief Robert Daniel (Through 11/20/08)
Jeremy Margaron (Acting, Effective 11/20/08)

Office of Community Relations Director Tracey Scruggs Yearwood (Through
10/26/07)
Aurelio Huertas Fabrizio (Acting, Effective
10/29/07)

Chief Legislative Liaison Randy Wells

Compliance Workforce Safety Audrey McCrimon (Through 12/31/07)
Martha Younger-White (Effective 7/16/08)

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STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

AGENCY OFFICIALS - Continued


Hispanic/Latino Affairs Director Mireya Hurtado (Through 7/16/07)
Agueda Corona (Effective 7/16/07)

General Counsel Mary-Lisa Sullivan (Acting)

Inspector General Bill Davis

Office of Strategic Planning and Performance Ronald Carter (Through 1/30/07)
Management Director Gregory Diephouse (Effective 9/1/07)

Office of Alcoholism and Substance Theodora Binion-Taylor
Abuse Director

Office of Rehabilitation Services Rob Kilbury
Associate Director

Office of Community Health and Steven Guerra (Through 5/31/06)
Prevention Director Ivonne Sambolin-Jones (Effective 7/30/07)

Office of Developmental Disabilities Lilia Teninty
Director

Office of Mental Health Director Lorrie Rickman-Jones, Ph.D.

Office of Clinical, Administrative and Jim Hobbs
Program Support Manager

Office of Human Capital Development Marva Arnold
Director

Grant Administration Director Sharon Zahorodnyj

Office of Security and Emergency Hero Tameling (Effective 8/20/08)
Preparedness Director

Agency main offices are located at:

100 South Grand Avenue, East 501 South Clinton Street
Springfield, Illinois 62762 Chicago, Illinois 60607
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STATE OF ILLINOIS
DEPARTMENT OF HUMAN SERVICES

FINANCIAL STATEMENT REPORT

SUMMARY


The audit of the accompanying basic financial statements of the State of Illinois, Department of
Human Services (Department) was performed by Sikich LLP as special assistants for the Auditor
General.

Based on their audit, the auditors expressed an unqualified opinion on the Department’s basic
financial statements.

SUMMARY OF FINDINGS

The auditors identified matters involving the Department’s internal control over financial
reporting that they considered to be significant deficiencies. The significant deficiencies are
described in the accompanying Schedule of Findings on pages 51-63 of this report, as findings
08-1 through 08-6, summarized as follows:

08-1 Consolidated services payments made without sufficient supporting documentation

08-2 Liabilities payable from future appropriations are misstated

08-3 Inadequate controls over commodities

08-4 Commodity inventory system outdated and insufficient for user needs

08-5 Inadequate controls over capital asset financial reporting

08-6 Failure to comply with Medicare and Medicaid certification requirements

PRIOR FINDING NOT REPEATED

A. Unrecorded and unreported locally held bank accounts

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EXIT CONFERENCE

The findings and recommendations appearing in this report were discussed with Department
personnel at an exit conference on March 12, 2009. Attending were:

Department of Human Services

Robert Stanek Chief Financial Officer
Albert Okwuegbunam Chief, Bureau of Audit Liaison
Jame Nardulli DHS Audit Liaison
Brian Crofton Acting Bureau Chief, Bureau of General
Accounting
Solomon Oriaikhi Fiscal Services, Director
Dan Blair Bureau Chief, Fiscal Support Services
Tim Milbrandt Manager, Budget and Contracts Section,
Division of Management Information Services
Greg Primm Bureau Chief, Bureau of Federal Reporting
Ivonne Sambolin-Jones Office of Community Health and
Prevention, Director (via Chicago – TV)
Derrick Crane Business Administrator, Office of Clinical,
Administrative and Program Support

Office of the Auditor General

Paul Usherwood Audit Manager
Joe Gudgel IS Audit Manager

Sikich LLP – Special Assistant Auditors

Nick Appelbaum Partner
Andy Lascody


The responses to the recommendations were provided by Solomon Oriaikhi in a letter dated
March 12, 2009.

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INDEPENDENT AUDITORS’ REPORT


Honorable William G. Holland
Auditor General
State of Illinois

As Special Assistant Auditors for the Auditor General, we have audited the accompanying
financial statements of the governmental activities, the major fund, and the aggregate remaining
fund information of the State of Illinois, Department of Human Services (the Department), as of
and for the year ended June 30, 2008, which collectively comprise the Department’s basic
financial statements as listed in the table of contents. These financial statements are the
responsibility of the Department’s management. Our responsibility is to express opinions on
these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.

As discussed in Note 2, the financial statements of the Department are intended to present the
financial position and changes in financial position of only that portion of the governmental
activities, the major fund, and the aggregate remaining fund information of the State that is
attributable to the transactions of the Department. They do not purport to, and do not, present
fairly the financial position of the State of Illinois as of June 30, 2008, and the changes in its
financial position for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the major fund, and the aggregate
remaining fund information of the Department, as of June 30, 2008, and the respective changes
in financial position thereof for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued a report dated
March 16, 2009 on our consideration of the Department’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts
and grant agreements and other matters. The purpose of that report is to describe the scope of
our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards and should be considered in assessing the results of our audit.

The Department has not presented a management’s discussion and analysis and budgetary
comparison information for any of its funds that accounting principles generally accepted in the
United States of America has determined is necessary to supplement, although not required to be
part of, the basic financial statements.

Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Department’s basic financial statements. The combining General
Fund, nonmajor governmental fund and Agency fund financial statements and schedules listed in
the table of contents as supplementary information are presented for purposes of additional
analysis and are not a required part of the basic financial statements. The combining General ental fund and Agency fund financial statements and schedules have
been subjected to the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.

This report is intended solely for the information and use of the Auditor General, the General
Assembly, the Legislative Audit Commission, the Governor, the Comptroller, and Department
management, and is not intended to be and should not be used by anyone other than these
specified parties.


Springfield, Illinois
March 16, 2009




6
7
State of Illinois
Department of Human Services
Statement of Net Assets and Governmental Funds Balance Sheet
June 30, 2008 (Expressed in Thousands)
Total Governmental
General Fund Other Non-major Funds Funds Adjustments Statement of Net Assets
ASSETS
Unexpended appropriations $ 231,862 $ 3,812 $ 235,674 $ - $ 235,674
Cash equity with State Treasurer 87,112 96,270 183,382 - 183,382
Cash and cash equivalents 217 3,334
3,551 - 3,551
Investments - 2,611 2,611 - 2,611
Due from other government - federal 134,035 52,511 186,546 - 186,546
Due from other government - local 3,300 334 3,634 - 3,634
Taxes receivable, net 179 179 - 179
Other receivables, net 23,983 15,980
39,963 - 39,963
Loans and notes receivable, net - 473 473 - 473
Due from other Department funds 33 2,550 2,583 (2,583) -
Due from other State funds 2,371 2,068 4,439 - 4,439
Due from State of Illinois component units 71 71 - 71
Inventories 9,129 - 9,129 - 9,129
Prepaid expenses - - 1,442 1,442
Other assets 86 86 - 86
Capital assets not being depreciated - - 3,248 3,248
Capital assets being depreciated, net - - 257,486 257,486
Total assets $ 492,042 $ 180,279 $ 672,321 259,593 931,914
LIABILITIES
Accounts payable and accrued liabilities $ 281,429 $ 75,165 $ 356,594 - 356,594
Due to other government - federal 3,728 411 4,139 - 4,139
Due to other government - local 22,221 6,659
28,880 - 28,880
Due to other Department fiduciary funds 5 - 5 - 5
Due to other State fiduciary funds 5,201 805 6,006 - 6,006
Due to other Department funds 1,676 907 2,583 (2,583) -
Due to other State funds 18,656 5,782 24,438 - 24,438
Due to State of Illinois component units 5,197 6,362 11,559 - 11,559
Unavailable revenue 46,617 9,853 56,470 (56,470) -
Deferred revenue 28,295 35,921 64,216 - 64,216
Long-term obligations:
Due within one year - - - 3,234 3,234
Due subsequent to one year - 72,502 72,502
Total liabilities 413,025 141,865 554,890 16,683 571,573
FUND BALANCES/NET ASSETS
Reserved for:
Encumbrances 2,641 258
2,899 (2,899) -
Long-term portion of loans and notes receivable - 442 442 (442) -
Inventories 9,129 - 9,129 (9,129) -
Other 1,091 1,091 (1,091) -
Unreserved:
General funds 67,247
67,247 (67,247) -
Special revenue funds - 36,509 36,509 (36,509) -
Permanent funds 114 114 (114) -
Invested in capital assets, net of related debt - - 260,145 260,145
Restricted net assets:
Restricted for health and social service programs - - 367 367
Funds held as permanent investments:
Nonexpendable purposes - - - 1,091 1,091
Expendable purposes - 114 114
Unrestricted net assets - 98,624 98,624
79,017 38,414 117,431
Total fund balances/net assets $ 242,910 $ 360,341
Total liabilities and fund balances $ 492,042 $ 180,279 $ 672,321
The accompanying notes to the financial statements are an integral part of this statement.