Section 434.7 Certified Audits, Cost Reports and Desk Reviews

Section 434

Section 434.7  Certified

Audits, Cost Reports and Desk Reviews

a)         The Department's requirements for providers include the annual

filing of a cost report in accordance with 89 Ill. Adm. Code 356 (Rate Setting)

and an audit report in accordance with 89 Ill. Adm. Code 357 (Purchase of

Service) and 360 (Grants-in-Aid).

b)         The certified audit reports are reviewed by the Office of Financial

Review and the cost reports are reviewed by the Rate Setting Unit and, when

appropriate, a report on the certified audit or cost reports will be issued to

Department officials who are responsible for the contracts. The general

objectives of the desk review and report shall determine whether:

1)         financial and service unit information is appropriately

presented and is consistent with the generally accepted accounting principles;

2)         costs incurred in operating the contracted service are not

less than the revenues received directly for the program;

3)         related party transactions are appropriately recorded and

disclosed;

4)         significant accounting practices and other information that

require disclosure (as described by generally accepted accounting principles)

are disclosed appropriately; and

5)         funds were used in accordance with Department policy and

whether the entity has received monies in excess of actual reimbursable costs.

c)         The Office of Financial Review is responsible for answering

all questions regarding the preparation of a certified audit.  If the

Department has not received the certified audit by the deadline of 180 calendar

days after the completion of the entity's fiscal year, the Department will

notify the entity of the delinquency and send a copy of the notice to the

Department's Contracts and Grants unit and regional administrative staff.

d)         All certified audit reports are logged in upon receipt by the

Office of Financial Review and a check-in list is prepared for each audit

received

of 180 calendar

days after the completion of the entity's fiscal year, the Department will

notify the entity of the delinquency and send a copy of the notice to the

Department's Contracts and Grants unit and regional administrative staff.

d)         All certified audit reports are logged in upon receipt by the

Office of Financial Review and a check-in list is prepared for each audit

received. If the audit does not contain adequate information, the Office of Financial

Review will send a letter to the entity to request additional information.  If

the certified audit does not meet the standards set out in 89 Ill. Adm. Code

357.120 (Purchase of Service Fiscal Reports and Records), the entity will be

given 10 business days to submit omitted items or 30 business days to submit a

new certified audit.

e)         The Office of Financial Review will prepare a desk review

report that will highlight any deficiencies that are found in the audit and

will contain specific recommendations for procedural changes in the preparation

of certified audits. The completed desk review report will be sent directly to

the entity, with a copy to appropriate Department regional staff.

f)         Department regional staff are responsible for reviewing the

recommendations contained in the desk review report and providing assistance as

necessary to the entity in follow-up on the recommendations made.  The desk

review report may contain recommendations for contract or budget revisions that

must be acted upon by the regional staff.

g)         The desk review report may contain recommendations that

require an additional response from the entity before the certified audit is

accepted.  The entity's response and concurrence with the recommendations of

the desk review report will close the desk review process

ew report may contain recommendations for contract or budget revisions that

must be acted upon by the regional staff.

g)         The desk review report may contain recommendations that

require an additional response from the entity before the certified audit is

accepted.  The entity's response and concurrence with the recommendations of

the desk review report will close the desk review process.

h)         Effective with cost reports received for contract periods

ending after July 1, 2023, excess revenue calculations shall be based on the

information reported in the cost report or other suitable financial report

accepted by the Department.  The certified independent audit report may be used

to develop excess revenue calculations if sufficient detail exists within the

report to support the excess revenue calculations, and an accurate cost report

or other suitable financial report is not available.

1)         Programs Subject to Excess Revenue Determination:

The Department

shall determine individual program excess revenues attributable to Department

funding for contracted provider agency 24-hour substitute care programs.

Examples of provider agency programs include, but are not limited to:

A)        childcare

institutions;

B)        shelter

care;

C)        group

homes;

D)        independent

living;

E)        community

integrated living arrangements;

F)         agency

foster care; and

G)        other programs or contracted agencies, as determined by the

Director or the Director's designee.

2)         Excess Revenue Calculation

A)        The Department determines excess revenue for every individual program

reported separately on the cost report. Excess revenue is the amount of Child

Welfare Contributing Agency (contributing agency) fees and governmental grant

funding that exceeds total costs.

B)        Total cost is the amount of total reimbursable cost on the cost

report.

C)        Total costs do not include:

i)          disallowable

costs as listed in 89 Ill. Adm

for every individual program

reported separately on the cost report. Excess revenue is the amount of Child

Welfare Contributing Agency (contributing agency) fees and governmental grant

funding that exceeds total costs.

B)        Total cost is the amount of total reimbursable cost on the cost

report.

C)        Total costs do not include:

i)          disallowable

costs as listed in 89 Ill. Adm. Code 356.60

(Disallowable Cost and Reduced Reimbursement); or

ii)         administrative costs that exceed 20% of all other allowable

costs.

D)        For excess revenue determinations, profit is considered as an

allowable cost to the extent permitted in 89 Ill. Adm. Code 356 (Rate Setting).

E)         Excess revenue attributable to Department funding is the

amount of program excess revenues times Departmental revenue divided by all

program Child Welfare Contributing Agency (contributing agency) fees and

government non-restricted grants.

3)         Excess Revenue Amounts that May Be Retained

A)        In each fiscal year, provider agencies may retain an amount of

program excess revenues attributable to substitute care programs reimbursed through

payments made according to standard reimbursement levels or through individual

historical cost-based program rates calculated consistent with the process and

standards defined in 89 Ill. Adm. Code 356, provided that:

i)         for programs with a licensed capacity, the total utilization

is between 85% and 95% of the licensed or approved program capacity;

ii)        for all programs receiving an enhancement, the provider agency

demonstrates that the intended funding of the enhancement has been met without

supplanting other contracted services or costs; and

iii)       the provider agency demonstrates that program staffing level

meets the minimum requirements defined in the contract program plan and

licensing standards where applicable

capacity;

ii)        for all programs receiving an enhancement, the provider agency

demonstrates that the intended funding of the enhancement has been met without

supplanting other contracted services or costs; and

iii)       the provider agency demonstrates that program staffing level

meets the minimum requirements defined in the contract program plan and

licensing standards where applicable.

B)        The

amount retained may not exceed the DCFS portion of 7% of the program reimbursable

costs less the DCFS portion of excess administrative costs.  Programs

reimbursed through rates containing an enhancement add-on (89 Ill. Adm. Code

356.80) are not eligible to retain excess revenue amounts in the year in which

the enhancement was awarded.

C)        All DCFS identified program excess revenue amounts retained by

the provider agency must be invested in direct service (non-administrative)

activities in programs funded by the Department.  Provider agencies unable to

demonstrate that retained program excess revenue amounts have been invested

consistent with the provisions of this subsection (h)(3) will be subject to

forfeiture of the retained funds.

4)         Amounts Returned to the Department

Amounts to be returned to the Department must be received within 60 days

after the date the excess revenue amount has been finalized by the Department and

notification is mailed to the provider agency's director or the director's

designee or after a payment plan has been approved.

5)         Program Excess Revenue Offsets

Program excess

revenue may not be offset against other program deficits occurring in the year

reviewed, or any other year, without the approval of the Director or the Director's

designee.