Illinois Auditor General, Program Audit of the Business Interruption Grant Program (May 24, 2023)
Summary
The State of Illinois Office of the Auditor General’s Program Audit of the Business Interruption Grant Program, dated May 24, 2023, under Auditor General Frank J. Mautino. The audit was conducted pursuant to Legislative Audit Commission Resolution Number 159, adopted September 1, 2021. The report highlights state that the BIG program was developed to provide $585 million in economic relief for small businesses hit hardest by COVID-19, and that the Department of Commerce and Economic Opportunity (DCEO) could not provide documentation to show how or why it selected organizations to administer Round 1. The key findings also state that 196 ineligible applicants received $3.42 million in Round 1, and the audit report contains 15 recommendations directed to DCEO.
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State of Illinois
Office of the Auditor General
Program Audit of the
Business Interruption Grant
Program
May 24, 2023
Frank J. Mautino
Auditor General
You can obtain reports by contacting:
Office of the Auditor General
Iles Park Plaza
740 E. Ash
Springfield, IL 62703
217-782-6046 or TTY: 1-888-261-2887
OR
This Audit Report and a Report Digest are also available on the worldwide web at
http://www.auditor.illinois.gov
To the Legislative Audit Commission, the Speaker
and Minority Leader of the House of Representatives,
the President and Minority Leader of the Senate, the
members of the General Assembly, and the
Governor:
This is our report of the performance audit of the Business Interruption Grant program.
The audit was conducted pursuant to Legislative Audit Commission Resolution Number
159. This audit was conducted in accordance with generally accepted government
auditing standards and the audit standards promulgated by the Office of the Auditor
General at 74 Ill. Adm. Code 420.310.
The audit report is transmitted in conformance with Sections 3-14 and 3-15 of the Illinois
State Auditing Act.
FRANK J. MAUTINO
Auditor General
Springfield, Illinois
May 2023
May 24, 2023
OFFICE OF THE Performance Audit
AUDITOR GENERAL Report Highlights
Frank J. Mautino Auditor General www.auditor.illinois.gov
Program Audit of the
Business Interruption Grant Program
Key Findings:
Background:
• DCEO could not provide documentation to show how or why it selected
Legislative Audit Commission organizations to administer Round 1 of the BIG program. One of the grant
Resolution 159, adopted September 1, administrators, as well as a DCEO official, appears to have not complied
2021, directed the Auditor General to with conflict of interest policies at DCEO. The BIG grant administrators
conduct a performance audit of the were to distribute $580 million in funds. An additional $5 million was to
Business Interruption Grant (BIG) be administered by DOA.
program. The BIG program was
developed to provide $585 million in • DCEO initiated the small business component of the BIG program
economic relief for small businesses without having emergency administrative rules in place for the
hit hardest by COVID-19. administration of the program. Rules had not been implemented before the
completion of Round 1 of the small business component of BIG.
The Department of Commerce and Additionally, even after the lack of timeliness for Round 1, DCEO was
Economic Opportunity (DCEO) had unable to amend the rules for Round 2 of the small business component of
responsibility for the development and BIG timely. DCEO filed amended rules 12 days after the Round 2
implementation of the BIG program. application process had started, a process that utilized a preference for
DCEO entered into agreements with certain types of businesses to receive preferential treatment in the selection
the Departments of Human Services process.
(DHS) and Agriculture (DOA) to
assist with other components of BIG. • DCEO allowed, without verification, BIG small business grant applicants
to self-certify that they complied with all laws as well as reporting other
pandemic funding. We found that not all applicants’ certifications were
accurate. Nonetheless, DCEO and its grant administrators awarded funding to these applicants.
• The BIG program was designated by the General Assembly to provide assistance for businesses that had losses due to
COVID-19. DCEO utilized an eligibility category for the small business component of BIG that was not specified in
the Public Act passed by the General Assembly. DCEO paid over $11 million to 630 applicants that applied under
this eligibility designation.
• DCEO awarded small business applicants in Round 1 of the BIG program funding when the businesses were not
eligible based on information submitted in the application. Our analysis found 196 ineligible applicants received
$3.42 million. Additionally, the application system developed by a DCEO grant administrator that was supposed to
not allow ineligible applicants to submit finalized applications failed to work as advertised.
• DCEO oversight of the award selection process for the small business component of BIG was insufficient. Our
testing of the selection process found significant deficiencies in both rounds.
In Round 1, we were only able to concur with 8 percent of the BIG awards from our sample. We determined
that 16 percent of the BIG awards, totaling $430,000, in our sample were ineligible for reasons such as revenues
outside the criteria or restaurants providing outdoor dining. We also questioned 76 percent of the BIG awards,
totaling $1,980,000, in our sample due to lack of required documentation being submitted by the applicant.
In Round 2, we were only able to concur with 41 percent of the BIG awards from our sample. We determined
that 29 percent of the BIG awards in our sample had one or more questioned elements. Additionally, we
determined that 30 percent of the awards made by DCEO in our Round 2 sampling were ineligible. Finally,
Iles Park Plaza – 740 E. Ash Street ♦ Springfield, IL 62703 ♦ 217.782.6046 | 888.261.2887 TTY
questionable expenses from our selection-testing sample totaled $1,335,708 – 28 percent of all funds awarded
from the Round 2 sample.
• DCEO utilized an award determination process which failed to follow the directive of State statute relative to
funding for COVID-19 losses. By rounding loss amounts up to the next $5,000, DCEO reduced the funding levels
while some applicants went without funding. In our selection testing work, we found 47 percent of the awards
overpaid the documented losses by a total of $171,000. Our sample of 150 award winner cases was just over 2
percent of the total awards in Round 2 of the small business component of BIG.
• DCEO and its grant administrators for the small business component of BIG awarded funding in excess of program
policy. Eleven business owners received funding for businesses in excess of the three for which each owner was
eligible. Total overpayment of funds totaled $220,000. DCEO is responsible for overseeing grant programs,
including ones in which program administrators are utilized.
• DCEO failed to execute grant agreements with grant administrators for the small business component of the BIG
program prior to the grant administrators working on the BIG program. Further, DCEO required funding
applicants to submit multiple pieces of confidential information to these grant administrators that were operating
without an executed grant with the State of Illinois. Finally, DCEO was unaware of the actual individuals that
would view this confidential information, even though some of these individuals were temporary staff hired by the
grant administrators.
• DCEO failed to maintain notifications to applicants of the BIG program. Additionally, DCEO paid an outside
vendor for a mass mailing system that did not maintain a retrieval function instead of utilizing a State system at the
Department of Innovation and Technology, which could have been less costly and had the ability to retrieve the
notifications.
• DCEO failed to monitor that the payment of small business component funding was provided within program
guidelines. During our testing we found that in 49 percent (67 of 136) of the cases, the grant administrator failed
to provide funding within 14 days of DCEO approval.
• DCEO had monitoring weaknesses relative to the uses of funding provided as part of the small business component
of the BIG program. DCEO failed to conduct routine monitoring of the funds provided under BIG and at times did
not have documentation to conduct monitoring. The lack of documentation made it impossible for DCEO to know
if the same claimed losses were utilized by an applicant to obtain funding under different programs.
• DCEO and its grant administrators failed to follow BIG program requirements relative to deducting previous awards
from future BIG funding for the small business component of the program. This inaction resulted in the
overpayment of $4.29 million in BIG funds.
• DCEO failed to monitor all terms of the grant agreements with grant administrators. The lack of monitoring resulted
in one grant administrator not providing tax information on $4.4 million in BIG funds to 305 sub-recipients.
• DCEO did not claw back funds for noncompliance. DCEO became aware of instances of violations but did not
initially have a system in place to manage businesses found to be in violation of law, regulations, and executive
orders. DCEO relied on the attestations of the recipient that they would comply or were already complying with
the mitigation efforts.
• Testing for the child care component and the livestock management component did not find any significant or
pervasive issues. We concurred with all of the grant awards and grant denials in our sample.
Key Recommendations:
The audit report contains 15 recommendations directed to DCEO:
• DCEO should develop and maintain documentation on why and how it has selected grant administrators when DCEO
delegates the responsibility for that administration to outside parties.
• DCEO should develop administrative rules for new grant programs prior to the initiation of the program.
• When DCEO allows grant applicants to self-certify information on the grant application, DCEO should develop
controls to check those certifications for accuracy.
• DCEO should design grant application selection criteria that are aligned with directives in State statute.
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• DCEO should make sure that eligibility criteria are followed when conducting a grant program and not allow
ineligible applicants to receive funding.
• DCEO should, when utilizing grant administrators to make funding selections, conduct more extensive oversight by
ensuring administrators understand the evaluation criteria and by reviewing a significant amount of application
documentation to determine if awards were correctly made.
• DCEO should comply with requirements in State statute relative to award of funding for specific purposes.
• DCEO should take the steps necessary to ensure that grant awardees do not receive funds in excess of program policy.
• DCEO should, when utilizing outside grant administrators, ensure that grant agreements are executed prior to
allowing the entities to work on the grant program. Additionally, when the grant administrators are able to view
confidential information as part of the program, DCEO should develop procedures to monitor that the confidential
documents are securely maintained.
• DCEO should maintain a history of notifications to applicants of grant programs it is responsible for when it decides
to utilize a third party for those notifications.
• DCEO should, when allowing grant administrators to pay out grant funds, develop controls to ensure that payments
are timely made by those grant administrators.
• DCEO should: conduct the monitoring that it develops for grant program criteria; follow contractual criteria it
develops and obtain the documentation to support grant awards when a third party administrator is utilized to select
grant recipients; comply with administrative rules and obtain documentation to demonstrate how grant funds are
utilized; and conduct monitoring efforts to ensure that multiple sources of funding are not utilized for the same
expenses.
• DCEO should take steps to ensure that grant administrators appropriately apply program requirements to applications
including, when applicable, the deduction of previous awards. Additionally, DCEO should not approve awards until
adequate review has been conducted.
• DCEO should take the steps necessary to ensure that the terms of grant agreements, including sending 1099 forms
when applicable, are complied with by grant administrators.
• DCEO should have a system in place to manage notices of grant program violators and should enforce the program
requirements it creates.
This performance audit was conducted by the staff of the Office of the Auditor General.
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Report Digest
On September 1, 2021, the Legislative Audit Commission (LAC) adopted
Resolution 159 directing the Auditor General to conduct a program audit of the
Business Interruption Grant (BIG) program. The Resolution contained several
issues to examine. Our assessment of these issues is shown in Digest Exhibit 1.
(page 1)
Digest Exhibit 1
ASSESSMENT OF AUDIT DETERMINATIONS
Audit Determinations Auditor Assessment
An examination of the application process, the • Auditors found the DCEO oversight of the
documentation submitted, and the selection of award selection process for the small business
grants by the Department of Commerce and component of BIG was insufficient. (pages 14-
Economic Opportunity (DCEO), the Department of 38)
Human Services (DHS), and the Department of
Agriculture (DOA) for the BIG program.
An examination of the monitoring oversight by • Auditors found DCEO had significant
DCEO, DHS, and DOA for grant recipients deficiencies in the monitoring of the small
including whether all eligibility requirements were business component of the BIG program.
satisfied and expenses submitted were allowable. (pages 39-55)
An examination of how DCEO allocated funding in • Auditors found that DCEO allocated funding
the BIG program to disproportionately impacted based on the requirements in State statute for
areas and whether the allocation was at least 30 the BIG program. (pages 56-57)
percent of total funding.
An examination of DCEO compliance with • Auditors found that DCEO developed a listing
prioritizing severely impacted businesses and of Disproportionately Impacted Areas (DIAs) for
industries. the BIG program. The listing, as stated in
statute, was based on the COVID-19 levels and
areas that had certain poverty levels. (pages
58-59)
An examination of the role of the Community • Auditors found DCEO only minimally utilized a
Navigators, if any, in the selection of grant few firms to provide technical outreach and
recipients in the BIG program. assistance. Community Navigators were not
utilized until the BIG successor program, Back
to Business, was initiated. (pages 60-63)
An examination of the actions taken by DCEO, • Auditors found DCEO did not have a formal
DHS, and DOA when a BIG participant was not in process to claw back funds that were paid to
compliance with any step in the application process BIG recipients that were in violation of the
or made a material misrepresentation in reporting terms of the BIG program. (pages 64-68)
on the use of funds provided as part of the BIG
program.
Source: OAG assessment of the audit determinations contained in LAC Resolution 159.
Background
Public Act 101-636, effective June 10, 2020, amended the DCEO Law of the
Civil Administrative Code by adding section 605-1050. This addition created
the BIG program to be administered by DCEO. According to statute, the
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
purpose of the BIG program was to provide financial support to businesses that
have experienced interruption of business or other adverse conditions
attributable to the COVID-19 public health emergency [20 ILCS 605/605-
1050].
The BIG program was designed to fund
three types of grants: small business, child BIG Program Grant Funding
Levels
care, and livestock management. See the
adjacent text box for the initial grant Small Business - $290 million
funding levels for each type of grant. Child Care - $290 million
(page 2) Livestock Management - $5 million
Outsourcing the Small Business Component of
the BIG Program
DCEO outsourced the BIG program to a number of grant administrators and
community partners. These administrators were to receive applications for
funding, evaluate the applications, recommend awards, and make payments to
the sub-recipients. DCEO documentation indicated that it partnered with six grant
administrators for the small business component and another (Illinois Network of
Child Care Resource and Referral Agencies) for the child care component of the
BIG program. The small business grant administrators were:
• Accion,
• Women’s Business Development Center (WBDC),
• Chicago Urban League (CUL),
• SomerCor,
• Chicago Community Loan Fund (CCLF), and
• Chicago Neighborhood Initiatives (CNI). (page 2)
Lack of Documentation to Support Selection of Grant Administrators
DCEO could not provide documentation to show how or why it selected
organizations to administer the BIG program in Round 1. One of the grant
administrators, as well as a DCEO official, appears to have not complied with
conflict of interest policies at DCEO. The BIG grant administrators were to
distribute $580 million in funds. An additional $5 million was to be
administered by DOA.
During the entrance conference for the audit, DCEO officials reported that the use
of grant administrators by DCEO for a grant program was an entirely new
process due to the pandemic.
The decision to utilize grant administrators, as reported by DCEO, was made by a
former Assistant Director and a former Chief of Staff. These individuals also
selected the administrators. During our initial research for the audit, we found
that the former Assistant Director developed a political campaign to run for 47th
ward alderman in the City of Chicago. The lead for the main grant administrator
from Accion made a $5,000 campaign contribution to the former Assistant
Director on September 30, 2018. We questioned DCEO as to whether this was
any sort of violation of conflict of interest policies for DCEO in the DCEO
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Employee Policy Manual. DCEO agreed with us that the issue should have been
reported to the DCEO Director as well as the DCEO Ethics Officer. However, the
DCEO Ethics Officer could find no documentation on any such disclosure and
the Director at the time is no longer with DCEO. DCEO also agreed with us that
the Accion official should have reported this conflict of interest in the grant
application, but did not. Digest Exhibit 2 provides a timeline for the contracting
with grant administrators and the different selection periods for BIG. (pages 3-5,
76-77)
Digest Exhibit 2
TIMELINE OF EVENTS FOR THE BIG PROGRAM
Source: OAG developed from BIG program information.
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Funding for the BIG Program
The federal government provided direct aid to the State of Illinois for COVID-19
responses. One piece of legislation that guided funding for BIG was the
Coronavirus Aid, Relief and Economic Security (CARES) Act (enacted March
27, 2020).
Federal funds were deposited in the Coronavirus Relief Fund (CRF), a fund
created by the CARES Act. Public Act 101-637 included appropriations to
support State government’s costs of response, provide assistance to households
and small businesses impacted by COVID-19, and provide pandemic related
stability payments to healthcare providers. Digest Exhibit 3 provides a flow of
the funding from the federal government through the BIG program. (pages 5-8)
Department of Commerce and Economic Opportunity
DCEO entered into an intergovernmental agreement (IGA) with DHS on July 8,
2020, relative to the child care portion of the BIG program. The IGA stipulated
that DHS would provide subject matter expertise to assist DCEO in
development and implementation of the Child Care Restoration Grant (CCRG)
program. DCEO was to provide funding to qualified businesses through a third-
party qualified partner. That third party ended up being the Illinois Network of
Child Care Resource and Referral Agencies (INCCRRA).
For the livestock part of the BIG program, DCEO developed the relationship
differently than it did with DHS. DCEO entered into a grant agreement with
DOA, on October 15, 2020, to provide sub-awards to eligible recipients. DOA,
unlike DHS in the child care portion of BIG, was to evaluate the applications and
make award recommendations to DCEO for payment. The total amount to be
awarded under this grant to DOA was $5,008,816, even though DOA did not
utilize all the funds. DCEO took the approximately $1.6 million in unused
livestock funds and added to the small business component of BIG and awarded
grants in 2021. This was after DCEO reported all funds had been awarded in
December 2020. (pages 8-9)
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Digest Exhibit 3
FLOW OF CARES ACT FUNDING FOR THE BIG PROGRAM
Source: OAG developed from BIG program information.
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Failure to Develop Timely Administrative Rules for the BIG Program
DCEO initiated the small business component of the BIG program without
having emergency administrative rules in place for the administration of the
program. Rules had not been implemented before the completion of Round 1 of
the small business component of BIG. Additionally, even after the lack of
timeliness for Round 1, DCEO was unable to amend the rules for Round 2 of the
small business component of BIG timely. DCEO filed amended rules 12 days
after the Round 2 application process had started, a process that utilized a
preference for certain types of businesses to receive preferential treatment in the
selection process.
DCEO documentation touted the BIG program as a $580 million economic relief
program for small businesses hit hardest by COVID-19.
Round 2 of the small business component made changes in the types of
businesses that would receive BIG awards. This round focused on acutely
distressed industries. DCEO proposed rules defining these new industries such as
bus operating companies, amusement parks, event venues, indoor recreation,
music venues, movie theaters, and performing arts venues. While DCEO did
define the new industries, it did so nearly two weeks after the initiation of
Round 2. (pages 9-13)
BIG Application Process
Our examination of the application process for the BIG program found a number
of significant deficiencies.
Self-Certifications
DCEO allowed, without verification, BIG small business grant applicants to self-
certify that they complied with all laws as well as reporting other pandemic
funding. We found that not all applicants’ certifications were accurate.
Nonetheless, DCEO and its grant administrators awarded funding to these
applicants.
Verifying the self-certifications may have avoided the following:
• During our Round 1 application award selection testing we found 2 percent (2
of 126) of the applicants failed to accurately report Paycheck Protection
Program (PPP) awards on the application.
• During our Round 2 application award selection testing we found 29 percent
(36 of 125) of the applicants failed to accurately report PPP or other
CARES Act funding on the application. (pages 14-17)
Use of Non-Approved Selection Criteria
The BIG program was designated by the General Assembly to provide assistance
for businesses that had losses due to COVID-19. DCEO utilized an eligibility
category for the small business component of BIG that was not specified in the
Public Act passed by the General Assembly. DCEO paid over $11 million to
630 applicants that applied under this eligibility designation. (pages 17-20)
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Applications Outside Eligibility Criteria
DCEO awarded small business applicants in Round 1 of the BIG program funding
when the businesses were not eligible based on information submitted in the
application. Our analysis found 196 ineligible applicants received $3.42
million. Additionally, the application system developed by a DCEO grant
administrator that was supposed to not allow ineligible applicants to submit
finalized applications failed to work as advertised.
During our review of the universe of Round 1 awards we found a number of
applicants that were not eligible for BIG funds yet not only did the
application system allow the applicant to complete the application process,
DCEO and its grant administrators approved and funded the ineligible
applicants. Digest Exhibit 4 presents the results of our review for the ineligible
awards. Specifically:
• 41 applicants reported having revenues during 2019 that were outside the
range for eligibility, yet were awarded $570,000;
• 154 applicants reported having on-site outdoor food or beverage services in
violation of program guidelines, yet were awarded $2.83 million.
• 1 applicant applied in the “Other” category yet did not list a zip code that
was in a designated severely disproportionately impacted area, but was
awarded $20,000. (pages 20-23)
Digest Exhibit 4
BIG PROGRAM – INELIGIBLE APPLICANTS PROCESSED AND AWARDED
Small Business Component Round 1
Number of Ineligible BIG Funds Paid to
Criteria Violated
Awards Ineligible Applicants
Revenue Threshold in 2019
Barbershops or Salon 25 $250,000
Other Category 16 $320,000
Provided On-Site Outdoor Dining 154 $2,830,000
Type of Business – Other category needs to
1 $20,000
be in a designated zip code
Totals 196 $3,420,000
Source: OAG developed from DCEO BIG award information.
Award Selection Testing Results for Small Business Component
DCEO oversight of the award selection process for the small business component
of BIG was insufficient. Our testing of the selection process found significant
deficiencies in both rounds. In Round 1, we were only able to concur with 8
percent of the BIG awards from our sample. We determined that 16 percent of
the BIG awards, totaling $430,000, in our sample were ineligible for reasons such
as revenues outside the criteria or restaurants providing outdoor dining. We also
questioned 76 percent of the BIG awards, totaling $1,980,000, in our sample due
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
to lack of required documentation being submitted by the applicant. In 9 of 150
applications, we found that the applicant was actually eligible for the BIG award
yet the grant administrator denied the application. In Round 2, we were only able
to concur with 41 percent of the BIG awards from our sample. We determined
that 29 percent of the BIG awards in our sample had one or more questioned
elements. Additionally, we determined that 30 percent of the awards made by
DCEO in our Round 2 sampling were ineligible. Finally, questionable
expenses from our selection testing sample totaled $1,335,708 – 28 percent of all
funds awarded from the Round 2 sample.
Digest Exhibit 5 summarizes testing results for Rounds 1 and 2 for the small
business component of BIG. (pages 24-31)
Digest Exhibit 5
AWARD SELECTION TESTING RESULTS FOR SMALL BUSINESS COMPONENT
Round 1 and Round 2 Awards
Round 1 Round 2
Met all
requirements
8%
One or more
Ineligible1 questioned Met all
16% elements4 requirements
29% 41%
Lack of required
documentation2
Ineligible3
76%
30%
Notes:
1 Ineligible for reasons such as revenues outside the criteria or restaurants providing outdoor dining.
2 Lack of required documentation such as failure to submit tax returns, submitting the incorrect business license or
tax form, or submitting unsigned/undated tax returns.
3 Ineligible for reasons such as an unallowable business, businesses that had revenue gains year over year, and
businesses that did not submit all required documentation.
4 One or more questioned elements such as failure to report other CARES Act funding and the award amount was
incorrect based on supporting documentation.
Source: OAG analysis of sample of 150 Round 1 awards and 150 Round 2 awards.
Overpayment of COVID Losses by BIG Program
DCEO utilized an award determination process that failed to follow the directive
of State statute relative to funding for COVID-19 losses. By rounding loss
amounts up to the next $5,000, DCEO reduced the funding levels while some
applicants went without funding. In our selection testing work, we found 47
percent of the awards overpaid the documented losses by a total of $171,000.
Illinois Office of the Auditor General
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REPORT DIGEST – BUSINESS INTERRUPTION GRANT PROGRAM
Our sample of 150 award winner cases was just over 2 percent of the total
awards in Round 2 of the small business component of BIG.
We randomly sampled 150 award winners from Round 2 of the small business
component and found that 47 percent (71 of 150) received BIG award from
DCEO and its grant administrators in excess of the losses provided from
documentation submitted by applicants as part of the application process.
These overpayments were due to the process of rounding losses up to the next
$5,000 instituted by DCEO and its grant administrator. The overpayment
amounted to $170,798 for the 71 awards, an average of $2,406.
See Digest Exhibit 6 for some examples of BIG payments that were over the
documented losses of the applicant. (pages 31-34)
Digest Exhibit 6
BIG PROGRAM – PAYMENT EXAMPLES OVER COVID LOSSES
Small Business Component Round 2
COVID Losses Based
on Documentation Excess Amount Paid
Case Number Submitted BIG Payment Amount Over COVID Losses
OAG Case 65 $647.71 $5,000.00 $4,352.29
OAG Case 83 $97.44 $5,000.00 $4,902.56
OAG Case 96 $20,726.26 $25,000.00 $4,273.74
OAG Case 113 $10,771.52 $15,000.00 $4,228.48
OAG Case 121 $572.14 $5,000.00 $4,427.86
Source: OAG developed from DCEO BIG program information.
Exception to Policy on the Number of Awards
DCEO and its grant administrators for the small business component of BIG
awarded funding in excess of program policy. Eleven business owners
received funding for businesses in excess of the three for which each owner was
eligible. Total overpayment of funds totaled $220,000. DCEO is responsible
for overseeing grant programs, including ones in which program administrators
are utilized.
If DCEO and its grant administrators had conducted the selection process
according to BIG program policy, there would have been more funds available
for other applicants that went without funding. Instead, 11 business owners
received more than the maximum number of BIG awards.
Business owners that applied for BIG did nothing incorrect when applying for
funding for more than three of their businesses. The owners could not have
known whether any of the businesses would have been awarded BIG funding.
(pages 34-36)
Illinois Office of the Auditor General
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Child Care Component and Livestock Management Component Testing
Testing for the child care component and the livestock management component
did not find any significant or pervasive issues. We concurred with all of the
grant awards and grant denials in our sample. (pages 36-38)
Monitoring the BIG Program
DCEO had significant deficiencies in the monitoring of the small business
component of the BIG program.
Grant Administrators Working Without Executed Agreements
DCEO failed to execute grant agreements with grant administrators for the
small business component of the BIG program prior to the grant administrators
working on the BIG program. Further, DCEO required funding applicants to
submit multiple pieces of confidential information to these grant administrators
that were operating without an executed grant with the State of Illinois. Finally,
DCEO was unaware of the actual individuals that would view this confidential
information, even though some of these individuals were temporary staff hired by
the grant administrators.
Digest Exhibit 7 provides the execution dates for the grant administrator
agreements for the small business component with the initial payment dates and
initial payment amounts to the grant administrators. During Round 1, the six
administrators, on average, worked on the BIG selection program for 44 days
since the beginning of the application process prior to DCEO executing a
contractual agreement with the administrator.
Digest Exhibit 7
GRANT ADMINISTRATOR GRANT EXECUTION DATES
Small Business Component Rounds 1 and 2
# Days
Grant from Date of Amount of
Application Execution Application 1st Grant 1st Grant
Administrator Start Date Date Start Date Payment Payment
Accion 06/26/20 08/10/20 45 08/18/20 $12,125,000
Women’s Business Development Center 06/26/20 08/06/20 41 08/18/20 $11,125,000
Chicago Urban League 06/26/20 08/12/20 47 08/18/20 $8,375,000
SomerCor 06/26/20 08/10/20 45 08/17/20 $8,125,000
Chicago Community Loan Fund 06/26/20 08/10/20 45 08/18/20 $11,625,000
Chicago Neighborhood Initiatives 06/26/20 08/06/20 41 08/17/20 $10,125,000
Accion – Round 2 09/17/20 10/13/20 26 10/16/20 $50,238,633
Source: OAG developed from grant documentation.
During Round 1 for the small business component of BIG, grant administrators
were able to inspect information submitted by the applicants. Many of these
pieces of information were either sensitive (such as veteran’s status, race,
ethnicity, gender, and home and email address) or confidential by law (such as
FEIN, SSN, tax returns, and bank account information).
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However, DCEO was unaware of who had access to this confidential information.
On June 9, 2022, we were told, “DCEO did not request the identities of the
individuals evaluating applications under the BIG program. The grant
administrator(s) was responsible for their staff and contractors as indicated by
their grant agreement.” Two grant administrators told us they hired temporary
contractors to complete work on BIG. (pages 39-42)
Lack of Documentation to Support Applicant Notifications
DCEO failed to maintain notifications to applicants of the BIG program.
Additionally, DCEO paid an outside vendor for a mass mailing system that did
not maintain a retrieval function instead of utilizing a State system at the
Department of Innovation and Technology, which could have been less costly and
had the ability to retrieve the notifications.
DCEO did not conduct timely monitoring of the process to utilize an outside
vendor for notifications for the small business component of BIG. In February
2021, DCEO had to inform:
• Five applicants that, “Due to a data error, you were previously sent a
notification intended for a different award recipient that was mistakenly
attached to your business and e-mail address. Note that the award amount
below is different than in the previous notification you received.”
• Seven applicants that, “It has come to our attention that you received a
Business Interruption Grant but never received an official notification
documenting the details of that grant.” (pages 42-46)
Timely Payment of BIG Awards
DCEO failed to monitor that the payment of small business component funding
was provided within program guidelines. During our testing we found that in 49
percent (67 of 136) of the cases, the grant administrator failed to provide
funding within 14 days of DCEO approval. (pages 46-48)
Failure to Enforce Funding Monitoring
DCEO had monitoring weaknesses relative to the uses of funding provided as
part of the small business component of the BIG program. DCEO failed to
conduct routine monitoring of the funds provided under BIG and at times did not
have documentation to conduct monitoring. The lack of documentation made it
impossible for DCEO to know if the same claimed losses were utilized by an
applicant to obtain funding under different programs.
Based on documentation obtained from DCEO during the audit, over two rounds,
DCEO made 9,295 awards totaling $286,087,758 from the small business
component of the BIG program. The six grant administrators that evaluated and
paid small business award winners reported conducting no monitoring of the
funds disbursed. During the audit, we found that DCEO did not have any idea
what the funds were expended on by the award winners and relied on the award
winners to expend the funds in compliance with the program.
We saw a number of correspondence related to how funds could be expended:
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• In responding to an official from a member of the Illinois House on January 7,
2021, a DCEO official stated, “You can spend it on a wide range of typical
business expenses, and don’t need to worry about tying those expenses to
COVID response. It can be applied to expenses March through December
2020.”
• On January 29, 2021, a Round 2 award winner inquired to DCEO whether
BIG funds were taxable and whether it needed to provide any proof of
expenditures comparable to PPP (Paycheck Protection Program). A DCEO
official reported, “Yes it is taxable…No they don’t need to have specific
documented expenses like PPP.” (pages 48-52)
Failure to Deduct Previous Awards
DCEO and its grant administrators failed to follow BIG program requirements
relative to deducting previous awards from future BIG funding for the small
business component of the program. The result of the inaction resulted in the
overpayment of $4.29 million in BIG funds.
During the audit, we received a universe of awards for the small business
component of BIG for both Rounds 1 and 2 of the program. We compared the
Round 1 and Round 2 winners against each other to determine which applicants
had received awards in both rounds of the BIG program.
Our analysis found:
• 96 instances where the applicant in Round 2 should not have received an
award due to the amount of BIG funding received during Round 1 – the 96
applicants should not have received $1,079,933;
• 169 instances where the applicant in Round 2 should have had awards
adjusted based on the amount of funding received during Round 1 – the 169
applicants were overpaid $3,210,000. (pages 52-53)
Tax Reporting Issue
DCEO failed to monitor all terms of the grant agreements with grant
administrators. The lack of monitoring resulted in one grant administrator not
providing tax information on $4.4 million in BIG funds to 305 sub-recipients.
DCEO confirmed that funds provided from the BIG program were taxable and
that grant administrators were to send 1099 forms to sub-recipients of BIG funds
for tax purposes. (pages 54-55)
Compliance with Funding Allocations
DCEO allocated funding based on the requirements in State statute for the BIG
program. Our analysis of BIG payment documentation showed 39 percent of the
funding went to businesses located in DIAs of the State of Illinois. (pages 56-57)
Priority for Severely Impacted Industries
LAC Resolution 159 asked us to examine DCEO’s compliance with prioritizing
severely impacted businesses and industries. DIA’s were generally not used
during the selection process for BIG program. DCEO used the economic impact
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language found in the Public Act related to BIG Program and implemented it
through inclusion of a severe DIA eligibility criteria in Round 1, which focused
on property damage in areas with civil unrest. However, the use of these severe
DIA eligibility criteria was different than how DIA was defined and excluded a
number of zip codes that would have been otherwise eligible. (pages 58-59)
Community Navigators
LAC Resolution 159 asked us to conduct an examination of the role of the
Community Navigators, if any, in the selection of grant recipients in the BIG
program. According to DCEO’s website, the Small Business Community
Navigators program is a support program for small businesses in the State of
Illinois, which is a hub and spoke model that brings together community
organizations from across the State of Illinois. The Community Navigator
awardees, or hubs, will provide support and training services to the spokes in their
program, and the spokes will offer grassroots engagement with small businesses
to assist with access to grants, marketing outreach, and technical assistance.
For the BIG program, which ended on June 30, 2021, we found that Community
Navigators were generally not utilized. DCEO did conduct a competitive
Notice of Funding Opportunity to contract with Community Navigators for the
successor to BIG, the Back to Business program in FY22.
DCEO utilized four organizations to provide technical assistance and outreach
(TA&O) for the BIG program. According to DCEO, “The scope and breadth of
the hub-and-spoke model used for community navigators in 2021 is much greater
than that used for the TA&O partners [in 2020], but the concept was similar.”
As shown in Digest Exhibit 8, the four partners, which signed grant agreements
with DCEO, received $874,508 for TA&O services. We also note that $191,646
or 22 percent of the funds received for technical assistance and outreach were
unused and returned. (pages 60-63)
Digest Exhibit 8
BIG PROGRAM – TA&O FUNDING
Small Business Component Round 2
Total Amount Total Amount Amount % of Total
Entity Paid Used Returned Returned
Greater Auburn Gresham
$310,000 $259,365 $50,635 16.3%
Development Corporation
The Resurrection Project $227,530 $206,186 $21,344 9.4%
Chicago Urban League $219,645 $99,978 $119,667 54.5%
American Business
$117,333 $117,333 $0 0%
Immigration Coalition
Total $874,508 $682,862 $191,646 21.9%
Source: OAG developed from DCEO BIG program information.
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Return of Funds
LAC Resolution 159 asked us to conduct an examination of the actions taken by
DCEO, DHS, and DOA when a BIG participant was not in compliance with any
step in the application process or made a material misrepresentation in reporting
on the use of funds provided as part of the BIG program.
DCEO did not initially have a formal process to claw back funds that were paid to
BIG recipients that were in violation of the terms of the BIG program. DCEO
reported, “It was developed after awards began to be distributed.”
DCEO did not claw back funds for noncompliance with the Executive Order.
DCEO became aware of instances of violations but did not initially have a system
in place to manage businesses found to be in violation of law, regulations, and
executive orders. DCEO relied on the attestations of the recipient that they
would comply or were already complying with the mitigation efforts.
During the audit, we found that DCEO was aware of businesses having signed the
requirements and certifications document yet were not in compliance with all
laws, regulations, and executive orders. DCEO became aware of notices of BIG
Program violations from news stories, forwarded complaints, and internal agency
reviews. Businesses most often having documented violations were restaurants
failing to follow local mitigations and executive orders. We found that DCEO
was not prepared to handle such notices of violation, did not have complete
information on all violators, and did not always enforce a return of funds when
such violations were confirmed. (pages 64-68)
Audit Recommendations
The audit report contains 15 recommendations directed to DCEO. DCEO
generally agreed with the recommendations. The complete response from DCEO
is included in this report as Appendix F.
This performance audit was conducted by the staff of the Office of the Auditor
General.
___________________________________
JOE BUTCHER
Division Director
This report is transmitted in accordance with Sections 3-14 and 3-15 of the
Illinois State Auditing Act.
___________________________________
FRANK J. MAUTINO
Auditor General
FJM:MAZE
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Contents
Report Highlights
Report Digest v
Glossary and Acronyms
Introduction 1
Background 2
Funding for the BIG Program 5
Department of Commerce and Economic Opportunity 8
BIG Application Process 14
Monitoring the BIG Program 39
Compliance with Funding Allocations 56
Priority for Severely Impacted Businesses 58
Community Navigators 60
Return of Funds 64
Appendix A – Legislative Audit Commission Resolution Number 159 69
Appendix B – Audit Scope and Methodology 72
Appendix C – Timeline of Activities – BIG Program 76
Appendix D – Disproportionately Impacted Area Zip Codes and Cities BIG
Program 78
Appendix E – BIG Applicant Certification Statements – Small Business 80
Appendix F – Agency Responses 89
Recommendations
Recommendation 1 – Lack of Documentation to Support Selection of Grant
Administrators 4
Recommendation 2 – Failure to Develop Timely Administrative Rules for the
BIG Program 13
Recommendation 3 – Self-Certifications 16
Recommendation 4 – Use of Non-Approved Selection Criteria 20
Recommendation 5 – Applications Outside Eligibility Criteria 23
Recommendation 6 – Award Selection Testing Results for Small Business
Component 30
Recommendation 7 – Overpayment of COVID Losses by BIG Program 33
Recommendation 8 – Exception to Policy on the Number of Awards 36
Contents
Recommendation 9 – Grant Administrators Working Without Executed
Agreements 42
Recommendation 10 – Lack of Documentation to Support Applicant
Notifications 46
Recommendation 11 – Timely Payment of BIG Awards 48
Recommendation 12 – Failure to Enforce Funding Monitoring 52
Recommendation 13 – Failure to Deduct Previous Awards 53
Recommendation 14 – Tax Reporting Issue 55
Recommendation 15 – Grant Program Violators 67
Glossary and Acronyms
Agriculture Business Program that covers monetary losses of livestock
Interruption Program producers due to the disruption of the livestock
market caused by the COVID-19 emergency.
Applicant A qualifying business that applies for funding under
the Business Interruption Grant (BIG) program.
Business A for-profit enterprise or non-profit organization
lawfully conducting business in Illinois. This term
does not include any business that is prohibited from
receiving funds under section 5001(b) of the CARES
Act.
CARES Act The federal Coronavirus Aid, Relief, and Economic
Security Act (Public Law 116-136).
Community A hub and spoke model used to support businesses
Navigators trying to access relief program dollars. The hubs
provide support and training services to the spokes in
their program and the spokes offer grassroots
engagement with small businesses to assist with
access to grants, marketing outreach and technical
assistance.
COVID-19 The novel coronavirus disease deemed COVID-19 by
the World Health Organization on February 11, 2020.
CRF The Coronavirus Relief Fund established by the
CARES Act.
DCEO The Illinois Department of Commerce and Economic
Opportunity.
DHS The Illinois Department of Human Services.
Disproportionately Those ZIP Codes most severely affected by the
Impacted Area COVID-19 emergency, to be determined based on
positive COVID-19 case per capita rates, and high
rates in at least one of the following poverty-related
categories relative to other ZIP Codes within their
region:
• Share of population consisting of children age 6 to
17 in households with income less than 125
percent of the federal poverty level;
• Share of population consisting of adults over age
64 in households with income less than 200
percent of the federal poverty level;
• Share of population in household with income less
than 150 percent of the federal poverty level; and
Glossary and Acronyms
• Share of population consisting of children ages 5
and under in households with income less than
185 percent of the federal poverty level.
DCEO, using these criteria, may determine different
eligibility thresholds when allocating funds for the
Allotment Tiers.
DOA The Illinois Department of Agriculture.
Financial Assistance Financial support to an Illinois business in the form of
a grant, expense reimbursement, or subsidy.
Livestock An operation where livestock (swine, beef cattle, dairy
Management Facility cattle, poultry, sheep and meat goats) are primarily
used in the production of food, fiber, or other
products; and have been, are, or will be fed, confined,
maintained, or stabled for a total of 45 days or more in
any 12-month period.
Meat and Poultry A program that covers the costs for operations and
Capacity Program costs associated with facility improvements necessary
to decrease or eliminate COVID-19 related
slowdowns and mitigate capacity reductions.
Necessary An expenditure of funds that is eligible for
Expenditure reimbursement from the CRF and necessary to
respond to the COVID-19 emergency or reimburse
the cost of business interruption.
Qualified Partner A financial institution or nonprofit with which DCEO, or
another State agency pursuant to an
intergovernmental agreement with DCEO, has
entered into an agreement or contract to provide or
incentivize assistance to qualifying businesses.
Severely A disproportionately impacted area that has
Disproportionately experienced heightened adverse economic conditions
Impacted Area since March 13, 2020, which may include high rates
of business closures or losses, unemployment,
poverty rates, or other economic factors.
Swine Depopulation Program that covers the costs and expenses of swine
Program producers associated with the depopulation and
disposal of livestock due to the disruption of the
livestock market caused by the COVID-19
emergency.
AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Introduction
On September 1, 2021, the Legislative Audit Commission (LAC) adopted
Resolution 159 directing the Auditor General to conduct a program audit of the
Business Interruption Grant (BIG) program. The Resolution asked the Auditor
General to conduct:
• an examination of the application process, the documentation submitted, and
the selection of grants by the Department of Commerce and Economic
Opportunity (DCEO), the Department of Human Services (DHS), and the
Department of Agriculture (DOA) for the BIG program;
• an examination of the monitoring oversight by DCEO, DHS, and DOA for
grant recipients including whether all eligibility requirements were satisfied
and expenses submitted were allowable;
• an examination of how DCEO allocated funding in the BIG program to
disproportionately impacted areas and whether the allocation was at least 30
percent of total funding;
• an examination of DCEO compliance with prioritizing severely impacted
businesses and industries;
• an examination of the role of the Community Navigators, if any, in the
selection of grant recipients in the BIG program; and
• an examination of the actions taken by DCEO, DHS, and DOA when a BIG
participant was not in compliance with any step in the application process or
made a material misrepresentation in reporting on the use of funds provided as
part of the BIG program.
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Background
Public Act 101-636, effective June 10, 2020, amended the DCEO Law of the
Civil Administrative Code by adding section 605-1050. This addition created
the BIG program to be administered by DCEO.
According to DCEO documentation, the BIG program was developed by
Governor J.B. Pritzker and the Illinois General Assembly to provide $585 million
in economic relief for small businesses hit hardest by COVID-19. BIG was
advertised by DCEO as the “largest program of its kind in the nation.”
According to statute, the purpose of the BIG program was to provide financial
support to businesses that have experienced interruption of business or other
adverse conditions attributable to the COVID-19 public health emergency
[20 ILCS 605/605-1050]. The provision of support to for-profit and not-for-profit
businesses that have experienced adversity attributable to the COVID-19
epidemic is a necessary response to the public health emergency. Financial
assistance shall be prioritized for communities most in need of assistance, as
determined by numbers or rates of COVID-19 infection and economic
measures identified. BIG was to be implemented in multiple phases of funding.
The BIG program was designed to fund
three types of grants: small business, BIG Program Grant Funding
Levels
child care, and livestock management.
See the adjacent text box for the initial Small Business - $290 million
grant funding levels for each type of Child Care - $290 million
grant. Livestock Management - $5 million
Outsourcing the Small Business and Child
Care Components of the BIG Program
DCEO outsourced the BIG program to a number of grant administrators and
community partners. These administrators were to receive applications for
funding, evaluate the applications, recommend awards, and make payments to
the sub-recipients. DCEO documentation indicated that it partnered with six grant
administrators for the small business component and another (Illinois Network of
Child Care Resource and Referral Agencies) for the child care component of the
BIG program. The small business grant administrators were:
• Accion,
• Women’s Business Development Center (WBDC),
• Chicago Urban League (CUL),
• SomerCor,
• Chicago Community Loan Fund (CCLF), and
• Chicago Neighborhood Initiatives (CNI).
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This outsourcing was provided for in
statute. Public Act 101-636, the FY21 20 ILCS 605/605-1050
Budget Implementation Act, added a new “Support may be provided directly
section [20 ILCS 605/605-1050] to the by the Department to business and
DCEO Law. While the language in the organizations or in cooperation with
new section does not prohibit DCEO a Qualified Partner.”
from administering the BIG program it
does provide DCEO the ability to partner with a Qualified Partner. A Qualified
Partner can mean a financial institution or a nonprofit. See adjacent text box for
the statutory language. DCEO officials told auditors during the entrance
conference that the administrators would maintain all documentation on
applications and grant award selections.
Lack of Documentation to Support Selection of Grant Administrators
DCEO could not provide documentation to show how or why it selected
organizations to administer Round 1 of the BIG program. One of the grant
administrators, as well as a DCEO official, appears to have not complied with
conflict of interest policies at DCEO. The BIG grant administrators were to
distribute $580 million in funds. An additional $5 million was to be
administered by DOA.
During the entrance conference for the audit, DCEO officials reported that the use
of grant administrators by DCEO for a grant program was an entirely new
process due to the pandemic.
DCEO reported that, “there was a consensus among DCEO leadership and
operational staff that the only way to carry out this program was through a grant
administrator or administrators.” However, DCEO did not maintain
documentation to show how the grant administrators were selected for Round
1 of the BIG program nor did DCEO conduct any sort of cost benefit analysis to
determine whether the cost of grant administrators was more or less expensive
than using DCEO staff.
The decision to utilize grant administrators, as reported by DCEO, was made by a
former Assistant Director and a former Chief of Staff. These individuals also
selected the administrators. DCEO also reported that while the Governor’s
Office advised DCEO that the Chicago Urban League ran a similar type of
program, no one from the Governor’s Office was involved in the ultimate
selection of the administrators.
During background research, we contacted all grant administrators and asked if
awarding grants was part of their normal operating activities. Only two (Accion
and Chicago Urban League) reported it had conducted grant activities previously.
The other four small business administrators and the child care grant
administrator indicated they had not conducted grant activities. These
administrators which did not administer grants as part of normal activities
were provided over $325 million by DCEO to conduct grant activities.
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During our initial research for the audit, we found that the former Assistant
Director developed a political campaign to run for 47th ward alderman in the City
of Chicago. The lead for the main grant administrator from Accion made a
$5,000 campaign contribution to the former Assistant Director on September 30,
2018.
We questioned DCEO as to whether this was any sort of violation of conflict of
interest policies for DCEO in the DCEO Employee Policy Manual. DCEO
agreed with us that the issue should have been reported to the DCEO Director as
well as the DCEO Ethics Officer. However, the DCEO Ethics Officer could find
no documentation on any such disclosure and the Director at the time is no
longer with DCEO. DCEO also agreed with us that the Accion official should
have reported this conflict of interest in the grant application, but did not. DCEO
reported that, “Now that DCEO has been made aware of this relationship, the
Agency has initiated an investigation into this matter and will take appropriate
actions to address this situation.”
To the DCEO response above, we would point out that the application Accion
submitted to be a grant administrator for BIG was not signed until July 20, 2020 –
after it had begun working on the BIG program.
The State Records Act details that the head of each agency shall preserve records
containing adequate and proper documentation of the organization, functions,
policies, decisions, procedures and essential transactions of the agency [5 ILCS
160/8].
DCEO was unable to provide a reason that there was no documentation to support
why the grant administrators were selected for Round 1 of the BIG program.
Utilizing outside grant administrators, administrators that largely do not conduct
grant activities, for Round 1 of the BIG program should necessitate an
explanation of why the individual administrators were selected.
Lack of Documentation to Support Selection of Grant Administrators
RECOMMENDATION DCEO should develop and maintain documentation on why and
how it has selected grant administrators when DCEO delegates
NUMBER the responsibility for that administration to outside parties.
1
DCEO Response:
The Department agrees that it would have been preferable to have additional documentation in place
as it pertains to selecting the administrator for BIG Round 1.
During this time period in 2020, emergency flexibilities permitted the Department to select grant
administrators without a competitive Notice of Funding Opportunity (NOFO) process, as noted in OMB
Memo 20-17.
The Department would also like to note that a competitive NOFO process was utilized for selecting the
administrator in BIG Round 2, which resulted in Accion being selected after scoring the highest on
merit-based criteria, consistent with the documentation provided to OAG pertaining to this process.
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Regarding the status of the investigation mentioned on page 4, the Department concluded that the
campaign contribution that took place prior to the former Assistant Director’s employment with the
Department did not create a conflict of interest. Nevertheless, the Department forwarded this issue to
the Office of the Executive Inspector General to determine whether to conduct any additional
investigation.
Auditor Comment #1:
DCEO notified auditors on January 5, 2022, that it was investigating the situation with
the former Assistant Director. Sixteen months later, in the formal responses to the
audit, DCEO informs us of the investigation results. We have seen no documentation
relative to the investigation.
Funding for the BIG Program
The federal government provided direct aid to the State of Illinois for COVID-19
responses. In March and April 2020, four pieces of federal legislation passed to
address the impact of COVID-19:
• Coronavirus Preparedness and Response Supplemental Appropriations Act,
2020 (enacted March 6, 2020);
• Families First Coronavirus Response Act (enacted March 18, 2020);
• Coronavirus Aid, Relief and Economic Security (CARES) Act (enacted
March 27, 2020); and
• Paycheck Protection Program and Health Care Enhancement Act (enacted
April 24, 2020).
Federal funds were deposited in the Coronavirus Relief Fund (CRF), a fund
created by the CARES Act. Public Act 101-637 included appropriations to
support State government’s costs of response, provide assistance to households
and small businesses impacted by COVID-19, and provide pandemic related
stability payments to healthcare providers.
DCEO, among a number of State agencies, received FY21 appropriations for
COVID-19 from the CARES Act. A Governor’s Office of Management and
Budget report from June 2020 detailed the DCEO appropriations. These
appropriations are shown in Exhibit 1.
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Exhibit 1
DCEO CARES ACT APPROPRIATIONS
FY21
Program Appropriation Amount Purpose
Coronavirus Business $376,000,000 For costs incurred to qualifying businesses
Interruption Grant Program due to business interruption or other such
purposes eligible for payment from the
federal Coronavirus Relief Fund. Of this
amount, $60 million is designated for
qualifying businesses that serve
disproportionately impacted areas, based
on positive COVID-19 cases.
Coronavirus Business $260,000,000 For costs incurred to child care and daycare
Interruption Grant Program providers due to business interruption or
for Child Care Providers other such purposes eligible for payment
from the Coronavirus Relief Fund. Of this
amount, $25 million is designated for
qualifying child care and daycare providers
that serve disproportionately impacted
areas, based on positive COVID-19 cases.
Reimbursement Program for $250,000,000 Administration and payment of COVID-19
97 Counties with no Direct related grants and expense reimbursement
Allocation from the to units of local government, including but
Coronavirus Relief Fund not limited to, local certified public health
departments.
Technical Support to $10,000,000 Provides support to community-based, non-
Community-Based, Non- profit organizations located in modest and
Profit Organizations low-income census tracts to provide
technical assistance to diverse,
underserved and minority-owned small
businesses. Must be within the locations
described above and have a strong record
of serving diverse, underserved and
minority-owned businesses.
Source: OAG developed from Governor’s Office of Management and Budget information.
A flowchart showing how the State utilized the CARES Act for BIG is presented
in Exhibit 2. Additionally, a timeline for the BIG program is presented in
Appendix C, which shows when each component was developed, and funds
awarded to receiving providers.
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AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Exhibit 2
FLOW OF CARES ACT FUNDING FOR THE BIG PROGRAM
Source: OAG developed from BIG program information.
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Direct CARES Disbursements to Local Governments
Illinois received a total of $4,913,633,437
in CRF dollars. Direct disbursements Direct CARES Funding Levels
were made by the federal government to Chicago - $470,078,038
cities or counties with populations of Cook County - $428,597,905
500,000 or more. See the adjacent text box
DuPage County - $161,042,598
for Illinois cities or counties with direct
distributions. The balance after direct Kane County - $92,900,218
disbursements, $3,518,945,365, was left for Lake County - $121,539,986
statewide allocation. The six entities in the Will County - $120,529,327
adjacent text box also had grant programs
for small businesses similar to BIG.
We contacted the governments that received direct disbursement of CARES funds
to ascertain whether they utilized any of these funds for grants to small business
that had losses due to COVID-19. All six governments verified that they did
provide grants to small businesses. All six governments provided us with
spreadsheets to show which small businesses were awarded grants. We compared
those spreadsheets with the listing of BIG funding recipients on the DCEO
website and found:
• the City of Chicago, which awarded $17.87 million to 2,164 grantees, had 406
city-funded grantees that matched the BIG recipient listing;
• Cook County, which awarded $17.08 million to 1,708 grantees, had 178
county-funded grantees that matched the BIG recipient listing;
• DuPage County, which awarded $20.59 million to 1,629 grantees, had 134
county-funded grantees that matched the BIG recipient listing;
• Kane County, which awarded $13.02 million to 628 grantees, had 73 county-
funded grantees that matched the BIG recipient listing;
• Lake County, which awarded $16.61 million to 1,198 grantees, had 134
county-funded grantees that matched the BIG recipient listing; and
• Will County, which awarded $20.95 million to 1,447 grantees, had 130
county-funded grantees that matched the BIG recipient listing.
The purpose of the previous information was to show how some businesses were
receiving multiple sources of funding in addition to BIG funding. Some of the
funding above was provided to recipients prior to receiving BIG funds while
other local government funds were provided after the BIG funding was received.
Department of Commerce and Economic Opportunity
One of the major responsibilities of DCEO is to work with businesses, economic
development organizations, local governments, and community organizations to
improve the quality of life for Illinoisans, advance economic development
through economic opportunities for businesses, entrepreneurs and residents, and
improve the State’s competitiveness in the global economy.
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DCEO entered into an intergovernmental agreement (IGA) with DHS on July 8,
2020, relative to the child care portion of the BIG program. The IGA stipulated
that DHS would provide subject matter expertise to assist DCEO in
development and implementation of the Child Care Restoration Grant (CCRG)
program. DCEO was to provide funding to qualified businesses through a third-
party qualified partner. That third party ended up being the Illinois Network of
Child Care Resource and Referral Agencies (INCCRRA).
For the livestock part of the BIG program, DCEO developed the relationship
differently than it did with DHS. DCEO entered into a grant agreement with
DOA, on October 15, 2020, to provide sub-awards to eligible recipients. DOA,
unlike DHS in the child care portion of BIG, was to evaluate the applications and
make award recommendations to DCEO for payment. The total amount to be
awarded under this grant to DOA was $5,008,816, even though DOA did not
utilize all the funds. DCEO took the approximately $1.6 million in unused
livestock funds and added to the small business component of BIG and awarded
grants in 2021. This was after DCEO reported all funds had been awarded in
December 2020.
Failure to Develop Timely Administrative Rules for the BIG Program
DCEO initiated the small business component of the BIG program without
having emergency administrative rules in place for the administration of the
program. Rules had not been implemented before the completion of Round 1 of
the small business component of BIG. Additionally, even after the lack of
timeliness for Round 1, DCEO was unable to amend the rules for Round 2 of the
small business component of BIG timely. DCEO filed amended rules 12 days
after the Round 2 application process had started, a process that utilized a
preference for certain types of businesses to receive preferential treatment in the
selection process.
DCEO documentation touted the BIG program as a $580 million economic relief
program for small businesses hit hardest by COVID-19.
When a statute establishes a grant program, such as BIG, and places it under the
authority of a State agency such as DCEO, that agency then is to propose
administrative rules addressing details such as the application process and
eligibility criteria.
On May 27, 2020, DCEO and Governor’s Office for Management and Budget
officials discussed rulemaking for the Local Coronavirus Urgent Remediation
Emergency (CURE) and BIG programs. A DCEO official questioned, “What if
we planned to file emergency rules on Local CURE, but just a program guideline
doc (for public distribution) for the BIG program?”
On June 1, 2020, nine days prior to the effective date of Public Act 101-636
which created the BIG program, the former DCEO Chief of Staff informed other
DCEO officials that, “The Governor’s Office has asked us to ramp up a quick
round of initial BIG grants focusing on businesses that are still not really in full
operations for Phase 3 but will be poised for greater operations in Phase 4.” The
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subject line of the email was Quick BIG round-gyms, bars and restaurants.
DCEO had no administrative rules at this point in time nor contractual
relationships with any grant administrators to conduct the activities.
During the audit, we asked DCEO who from the Governor’s Office made the
request for “a quick round” of BIG. DCEO reported on June 29, 2022, that the
DCEO staff on the email could not confirm who made the request.
DCEO filed emergency rules for the BIG program on July 21, 2020. DCEO
confirmed that no other rules were filed prior to that date. The rules detailed,
for small businesses:
• Qualified Partners,
• Identifying Disproportionately Impacted Areas,
• Form of Financial Assistance,
• Financial Assistance Application Process,
• Selection Process,
• Eligibility Requirements and Allowable Expenditures,
• Reporting, Cooperation and Record Retention,
• Noncompliance,
• Prioritizing Severely Impacted Businesses and Industries, and
• Applicant Affiliation.
The small business component of BIG was conducted in two rounds. The
application period for Round 1 was the time period June 26, 2020, through July 7,
2020. DCEO did not file administrative rules until two weeks after the end of
Round 1. Over $49 million in awards were made to 2,844 sub-recipients during
Round 1. See Exhibit 3 for the genesis of the administrative rules for the BIG
program.
An August 5, 2020 email from the former DCEO Assistant Director indicated that
the emergency rules for Round 1 were to be discussed at a meeting of the Joint
Committee on Administrative Rules (JCAR) on August 11, 2020. The former
Acting Deputy Director of Legislative Affairs reported, “For BIG, we had a
briefing with [JCAR members]. They didn’t have any flags. With [JCAR
members’] strong participation in the DIA [Disproportionately Impacted Area]
conversation, there’s a low likelihood of any opposition.”
Round 2 of the small business component made changes in the types of
businesses that would receive BIG awards. This round focused on acutely
distressed industries. DCEO proposed rules defining these new industries such as
bus operating companies, amusement parks, event venues, indoor recreation,
music venues, movie theaters, and performing arts venues. While DCEO did
define the new industries, it did so nearly two weeks after the initiation of
Round 2.
During background research, we contacted all grant administrators and asked if
awarding grants was part of their normal operating activities. Only two small
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business grant administrators [Accion and the Chicago Urban League] reported
they had conducted grant activities previously. The other four small business
administrators and the child care administrator indicated they had not
conducted grant activities.
We asked DCEO who made the decision to allow the BIG program to start
without administrative rules in place. DCEO responded, “Although no
documentation is available, the understanding is that (former Assistant Director)
and (former Chief of Staff) were the key DCEO leadership working to get the
program up and running as soon as possible to prevent loss of jobs and business
closures.”
Section 5-45.3 of the Illinois Administrative Procedure Act (IAPA) [5 ILCS
100/5-45.3] allowed DCEO to adopt emergency rules for the BIG program.
Section 5-45(b) states, “Subject to applicable constitutional or statutory
provisions, an emergency rule becomes effective immediately upon filing under
section 5-65 or at a stated date less than 10 days thereafter.” As shown in
Exhibit 3, DCEO filed the emergency rules after Round 1 was completed and
after Round 2 had been initiated.
On January 12, 2022, DCEO reported, “Due to the crisis at hand, there was an
overwhelming urgency to roll out the BIG program as soon as possible. After the
signing of the budget on June 10th, DCEO began working to coordinate program
expectations regarding the structure of the program, the content of the
application, when it would be posted, how applications would be distributed to
other administrators for review, and the process for review. Furthermore, the
BIG program Round 1 application process occurred in tandem with our edits and
final filing of the emergency rules to set up the program as quickly as feasible.
The parameters of Round 1 mirrored the requirements established by the
emergency rules. Applicants were not selected or informed of an award until
after rules were filed.”
In order for the Joint Committee for Administrative Rules to ensure that agency
administrative rules meet the requirements of the IAPA and that the agency is not
exceeding the authority granted by the General Assembly, rules need to be
developed and make its way through the process prior to implementing a grant
program like BIG.
Effective internal controls should include that administrative rules be developed
prior to allowing grant administrators, many of which had no experience in grant
programs, to conduct program activities. DCEO’s response about the “urgency”
of the program does not ensure controls were effective.
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Exhibit 3
BIG PROGRAM - GENESIS OF ADMINISTRATIVE RULES DEVELOPMENT
Date Action Rules Description
Application period initiation date for Not Applicable
June 26, 2020 Round 1 of small business
component of BIG program.
Application period closing date for Not Applicable
July 7, 2020 Round 1 of the small business
component of the BIG program.
Date of filing with Index Department Provides administrative framework
and effective date of emergency required for DCEO to administer the
rules for the small business BIG program and provide technical
July 21, 2020
component of the BIG program. assistance grants to help businesses
in underserved areas apply for
financial assistance.
Application period initiation date for Not Applicable
September 17, 2020 Round 2 of small business
component of BIG program.
Date of filing with Index Department The amendments provide an
and effective date of amendment to expanded administrative framework
September 29, 2020 emergency rules for the small for the next round of disbursements
business component of the BIG under the BIG program.
program.
Date of filing with Index Department The amendments provide DCEO the
and effective date of amendment to ability to administer additional funding
emergency rules for the small rounds to affected businesses if
November 6, 2020 business component of the BIG funding is available and extends the
program. deadline for recipients of financial
assistance to submit final expenditure
reports.
Application period closing date for Not Applicable
December 15, 2020 Round 2 of the small business
component of the BIG program.
Effective date for the filing of final Filing of final rules for BIG program.
December 23, 2020
version of BIG rules.
Source: OAG developed from Secretary of State and BIG program information.
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Failure to Develop Timely Administrative Rules for the BIG Program
RECOMMENDATION DCEO should develop administrative rules for new grant
programs prior to the initiation of the program.
NUMBER
2
DCEO Response:
The Department agrees with the recommendation that it would have been preferable to have formal
Administrative Rules adopted prior to the launch of the program. The Department would also like to
note that program administration did follow the policies that were adopted as part of the program's
Administrative Rules.
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BIG Application Process
In our examination of the BIG selection process, we found that DCEO allowed applicants for
funding to self-certify application responses without DCEO or its grant administrators verifying
the information. Additionally, DCEO utilized an eligibility category for the small business
component of BIG that was not specified in the Public Act passed by the General Assembly.
DCEO also awarded 196 small business applicants in Round 1 of the BIG program funding
when the businesses were not eligible based on information submitted in the application.
DCEO oversight of the award selection process for the small business component of BIG was
insufficient. Our testing of the selection process found significant deficiencies in both rounds.
In Round 1, we were only able to concur with 8 percent (12 of 150) of the BIG awards from
our sample. We determined that 16 percent of the BIG awards, totaling $430,000, in our sample
were ineligible for reasons such as revenues outside the criteria or restaurants providing outdoor
dining. We also questioned 76 percent of the BIG awards, totaling $1,980,000, in our sample
due to lack of required documentation being submitted by the applicant. In 9 of 150
applications, we found that the applicant was actually eligible for the BIG award yet the
grant administrator denied the application. In Round 2, we were only able to concur with
41 percent (61 of 150) of the BIG awards from our sample. We determined that 29 percent of
the BIG awards in our sample had one or more questioned elements. Additionally, we
determined that 30 percent of the awards made by DCEO in our Round 2 sampling were
ineligible. Finally, questionable expenses from our selection-testing sample totaled $1,335,708
– 28 percent of all funds awarded from the Round 2 sample.
DCEO utilized an award determination process, which failed to follow the directive of State
statute relative to funding for COVID-19 losses. By rounding loss amounts up to the next
$5,000, DCEO reduced the funding levels while some applicants went without funding.
Additionally, in 11 instances, DCEO and its grant administrators for the small business
component of BIG awarded funding in excess of program policy, which limited awards to
three per business owner for three separate businesses.
Testing for the child care component and the livestock management component did not find any
significant or pervasive issues. We concurred with all of the grant awards and grant denials in
our sample.
Self-Certifications
DCEO allowed, without verification, BIG small business grant applicants to self-
certify that they complied with all laws as well as reporting other pandemic
funding. We found that not all applicants’ certifications were accurate.
Nonetheless, DCEO and its grant administrators awarded funding to these
applicants.
As part of applying for financial assistance for the small business component of
BIG, applicants were required to complete an application form and sign a
certification that attests to eligibility for the BIG program and conditions
funding on compliance with programmatic requirements.
Appendix E provides the certifications that are broken down into the following
four categories:
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• General Covenants, Representations, and Warranties;
• Program-Specific Covenants, Representations and Warranties;
• Requirements Between Grantee and Subrecipients; and
• Final Attestation that all application information is accurate.
Funds for the BIG program were to cover expenses or losses incurred due to the
COVID-19 public health emergency. During Round 1 of the small business
component of BIG, applicants were to select a “loss” amount from a drop down
menu and attest that the amount was true. According to a grant administrator,
“all reviewers were instructed to accept the applicants’ assertion…the loss claim
was a self-attestation by the applicant.” DCEO also reported to auditors, “In
order to receive a grant, applicants were required to agree to the terms…and to
confirm that they filled out the application truthfully.”
DCEO, in a July 17, 2020 email, specifically directed grant administrators not to
attempt to determine loss amounts through calculations. A DCEO official stated,
“We’ve determined that verification of the revenue minimum and attestation of
business losses are sufficient evidence that a business has had losses at the level
that they attest to in the application. No need to perform any additional
calculations using figures from their bank statements.”
Other grant administrators reported the same process to us.
• CCLF reported, “No monitoring was required. The Business Attestation
placed the liability on the business.”
• CNI reported, “Applicants were required to certify and attest to their proper
usage of funds during the application process.”
On October 7, 2022, DCEO reported, “Qualifying Businesses within BIG were
treated by DCEO as beneficiaries, not contractors performing work or a grantee
which produced a program to meet a mandate of the State. A grant going to a
Qualifying Business was a financial assistance lifeline to partially compensate for
previously incurred losses. There was no requirement that it be used in a
specific way, and therefore no need for the monitoring of its use.” [Emphasis
added.] Auditors’ issue with the DCEO perspective is that neither DCEO nor its
grant administrators verified that losses actually occurred and that the losses were
due to the pandemic.
While DCEO relied on these self-certifications, documentation showed that not
all businesses awarded BIG funds were compliant with the program terms with
respect to mitigation efforts by the Governor, even though they had certified
they were.
Verifying the self-certifications may have avoided the following:
• During our Round 1 application award selection testing we found 2 percent (2
of 126) of the applicants failed to accurately report Paycheck Protection
Program (PPP) awards on the application.
• During our Round 2 application award selection testing we found 29 percent
(36 of 125) of the applicants failed to accurately report PPP or other
CARES Act funding on the application.
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• The Sangamon County Department of Public Health provided auditors with a
listing of businesses it had cited for indoor dining in violation of mitigation
orders from the Governor. Our review found 12 percent (3 of 25) of the
citations were to BIG award winners.
• An official with the Peoria Area Convention and Visitors Bureau, a BIG
awardee, asked DCEO on November 24, 2020, “Will there be just one, final
financial report submitted? When will that be due?” A DCEO official
replied, “This is not your typical grant and does not have typical reporting
requirement…You are a subgrantee who affirmed your agreement to the
certification here when you applied for the funds….As long as you remain in
compliance with this going forward, no reporting is required.”
The Fiscal Control and Internal Auditing Act [30 ILCS 10/3001] requires all State
agencies to “establish and maintain a system, or systems, of internal fiscal and
administrative controls.” These controls should include developing a
mechanism to verify self-certifications, especially when those self-
certifications lead to funding of an award.
DCEO agreements with grant administrators contained references to reporting of
PPP funding in the selection and award of BIG funds:
• Round 1: “Additionally, priority will be given to businesses that have not
received additional financing from the [DCEO] or through the federal CARES
Act for costs or losses due to COVID-19.”
• Round 2: “For all applicants, priority will be given to businesses that…[d]id
not receive PPP or other forms of emergency aid from the CARES Act or the
State.”
DCEO reported that if a business did not disclose that they received other forms
of CARES funds DCEO had minimal means of being able to verify that claim.
Without verifying the self-certifications of applicants, DCEO and its grant
administrators were unable to comply with requirements in grant agreements.
Self-Certifications
RECOMMENDATION When DCEO allows grant applicants to self-certify information
on the grant application, DCEO should develop controls to
NUMBER check those certifications for accuracy.
3
DCEO Response:
The Department agrees with the recommendation that it is important to implement processes, checks
and balances for programs that necessitate the use of self-certification.
It is a standard practice to ask entities to certify that they will follow the law and attest that the
information they have provided is correct, especially for information that is not feasibly verifiable for
thousands of businesses. For example, the Department did not have access to PPP/CARES data to
cross reference while BIG award determinations were being made and therefore, needed to rely on
attestations. However, PPP/CARES was not a determinant of eligibility or funding amount and
therefore, the Department believes the use of self-certification was appropriate.
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To ensure accessibility for the most vulnerable businesses, the Department required information and
documentation that was consistently available to all businesses within a short time period. BIG was
designed first and foremost to quickly help businesses that have been adversely impacted by the
pandemic, all of whom suffered immense hardship.
For future rounds of COVID-19 funding programs through its B2B program, the Department
implemented the following processes to improve its ability to verify attested information:
• Basing award size on tax form information for year-over-year losses occurred. Tax information was
not available for 2020 during the BIG program and therefore, the Department had to use less
preferable proxies to determine need (e.g. bank statements comparing months in different years).
• Implementation of standard, manual review checks against external data sources for verification,
such as receipt of other sources of government relief, status with the Secretary of State’s office,
verification of proper licensing, and additional quality assurance checks.
Auditor Comment #2:
As stated in the audit, in Round 2 of the small business component of BIG, 29 percent
(36 of 125) of the sampled applicants failed to accurately report PPP or other CARES
Act funding on the application. Despite DCEO asserting, “PPP/CARES was not a
determinant of eligibility” for BIG, the reporting, or lack of reporting of PPP/CARES
funding did influence the place in line for review of the applications by the grant
administrator.
Relative to the Back to Business (B2B) program, we cannot comment on the DCEO
assertions, as B2B was not within the scope of this audit.
Use of Non-Approved Selection Criteria
The BIG program was designated by the General Assembly to provide assistance
for businesses that had losses due to COVID-19. DCEO utilized an eligibility
category for the small business component of BIG that was not specified in the
Public Act passed by the General Assembly. DCEO paid over $11 million to
630 applicants that applied under this eligibility designation.
According to the DCEO website, during Round 1 of the small business
component of BIG there were four ways for an applicant to be eligible for a BIG
award:
• Restaurants and bars that were unable to provide on-site outdoor food or
beverage services between May 29, 2020, and June 17, 2020;
• Barbershops and salons;
• Health and fitness centers; and
• Businesses located in specific DIAs that experienced property damage due
to civil unrest.
DCEO reported that there is no mention of civil unrest in State or federal
statutes, rules, or guidance. Despite this assertion, DCEO still utilized an
application process that contained this designation.
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DCEO did, in administrative rules
effective July 21, 2020, define Severely Disproportionately Impacted
severely disproportionately Area
impacted area. See text box for “A disproportionately impacted area that
the definition. The definition has experienced heightened adverse
does not define civil unrest, nor economic conditions since March 13,
was it in place during the 2020, which may include high rates of
business closures or losses,
Round 1 application period for unemployment, poverty rates, or other
BIG which closed on July 7, economic factors.”
2020.
On June 23, 2020, DCEO published on its website a listing of severely
disproportionately impacted areas. DCEO stated, “For a portion of BIG grants,
DCEO will be prioritizing awards to businesses located in ‘Severely Impacted
DIAs,’ which are zip codes that qualify as DIAs that have also experienced
property damage as a result of civil unrest during protest and demonstrations on
or after May 25, 2020.” May 25, 2020, was the day that George Floyd died in
Minneapolis, Minnesota.
DCEO developed a list of zip codes for DIAs in Illinois. The list consisted of 176
zip codes. A subset of the DIA zip codes, representing severely impacted DIAs,
consisted of 48 zip codes. Appendix D identifies each DIA and the city for the
DIA.
During the audit, we examined a number of email correspondence relative to the
BIG program at DCEO. Relative to the funding of “severely impacted”
businesses we found:
• On June 14-15, 2020, DCEO officials discussed the property damage issue.
The former DCEO Chief of Staff reported, “…prioritizing the property
damage DIAs may come at the expense of businesses in other DIAs.” In
response, the former DCEO Assistant Director stated, “I generally don’t think
we should communicate that businesses with damages will get priority though
we should implement on the back end.”
• On June 29, 2020, a DCEO official confirmed for another DCEO official that
in Round 1 only severely impacted DIAs were eligible for BIG.
• On August 10, 2020, the former Assistant Director, responding to a request
from an official from the Governor’s Office stated, “…we are announcing
BIG results this week and some portion of that is going to DIAs that had
property damage back in the first round of looting. We’ll have dollar amounts
and numbers of businesses.”
According to DCEO documentation, in Round 1 DCEO provided 630 BIG
awards totaling $11,310,000 to applicants that applied as an “other”
application, meaning the applicant was located in a DCEO defined severely
impacted DIA.
Funding from this Round 1 eligibility designation could have been utilized in
Round 2 of BIG. Documentation from DCEO showed that 1,368 Round 2
applicants were reviewed, found to be eligible, but not funded because funds
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were exhausted. Additionally, 26,607 applications in Round 2 were never
reviewed.
DCEO also allowed applicants in severely impacted areas to not follow eligibility
guidelines during Round 1. DCEO reported, “As described in the eligibility
guidelines…for BIG Round 1, to be eligible, restaurants or bars ‘[m]ust not have
been open to the public for on-site consumption of food or beverages between
March 21, 2020, and June 17, 2020.’ That said, an entity that did not qualify
based on this criteria may still qualify if they were located in a Severe DIA.”
Based on the above statement if a restaurant had outdoor dining it was not eligible
for BIG. However, if a restaurant in a severe DIA was operating under outdoor
dining it would still be eligible for funding.
In Round 2 of the small business component of BIG the eligibility criteria does
not address the concept of severe DIA. In fact, DCEO reported, “Severe DIAs
were not used in any way in Round 2.”
Public Act 101-636 (Act) created the BIG program. The Act stated that DCEO
“shall administer a program to provide financial assistance to Qualifying
Businesses that have experienced interruption of business or other adverse
conditions attributable to the COVID-19 public health emergency.” [Emphasis
added.] The Act goes on, “Of the funds appropriated, a minimum of 30% shall be
allotted for Qualified Businesses with ZIP codes located in the most
disproportionately impacted areas of Illinois, based on positive COVID-19 cases.
DCEO reported, “Property damage due to civil unrest relates to additional
adverse economic conditions occurring within DIAs. This portion of the grants
provided support to businesses in areas that experienced compounding crises.
Please note that no funding was used for property damage caused by civil unrest
and a business did not need to have experienced damage from civil unrest to be
eligible for funding. The Department’s discretion to determine areas of greatest
need based on local economic conditions is provided by 20 ILCS 605-1050(h),
which is interpreted consistent with the legislative intent behind the program.”
We note that the Act creating the BIG program was passed by both chambers of
the General Assembly on May 24, 2020. The effective date for the legislation
was June 10, 2020.
DCEO reported, “The decision to include businesses located in DIAs where there
was property damage as eligible in Round 1 was made collectively by [the Deputy
Director of Policy Development, Planning & Research], [the former Chief of
Staff], and [the former Assistant Director at DCEO] … in consultation
with[Governor’s Office officials].”
Use of selection criteria by DCEO for applications due to civil unrest for the BIG
program does not align with the purpose of the program in State statute.
Additionally, providing funding for civil unrest areas for the BIG program in
Round 1 left less funding available for the BIG program in Round 2.
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Use of Non-Approved Selection Criteria
RECOMMENDATION DCEO should design grant application selection criteria that are
aligned with directives in State statute.
NUMBER
4
DCEO Response:
DCEO agrees with the recommendation, and the Department did use selection criteria aligned with
state statute. Creating a specific eligibility criterion for businesses located in DIAs that experienced
property damage due to civil unrest falls within DCEO’s authority granted by statute and administrative
rule. 20 ILCS 605-105(h) granted DCEO the authority to “establish procedures that prioritize greatly
impacted industries and businesses” attributable to the COVID-19 public health emergency. The
program Administrative Rules define “Severely Disproportionately Impacted Areas” (DIAs) as those
that “...experienced heightened adverse economic conditions since March 13, 2020.” The civil unrest
that occurred in May 2020 resulted in “heightened adverse economic conditions since March 13, 2020”
for businesses in those areas that experienced civil unrest, through direct damage inflicted on some
businesses and through extended closures.
Auditor Comment #3:
As stated in the finding, DCEO reported that there is no mention of civil unrest in State
or federal statutes, rules, or guidance. The audit also notes that the former DCEO
Chief of Staff reported, “…prioritizing the property damage DIAs may come at the
expense of businesses in other DIAs.” The former DCEO Assistant Director stated, “I
generally don’t think we should communicate that businesses with damages will get
priority though we should implement on the back end.” Finally, the audit notes that the
administrative rules DCEO references in its response were effective July 21, 2020,
which was 14 days after the end of the Round 1 application period for the small
business component.
Applications Outside Eligibility Criteria
DCEO awarded small business applicants in Round 1 of the BIG program funding
when the businesses were not eligible based on information submitted in the
application. Our analysis found 196 ineligible applicants received $3.42
million. Additionally, the application system developed by a DCEO grant
administrator that was supposed to not allow ineligible applicants to submit
finalized applications failed to work as advertised.
DCEO hurried to get a first round of small business awards for BIG initiated. A
correspondence on June 1, 2020, from a DCEO official to other DCEO officials
stated, “The Governor’s Office has asked us to ramp up a quick round of initial
BIG grants focusing on businesses that are still not really in full operations for
Phase 3.” This request from the Governor’s Office was nine days before Public
Act 101-636 was signed, creating the BIG program.
On the same day that DCEO posted the BIG application online, DCEO posted a
document that laid out the eligibility requirements for receiving a BIG award in
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Round 1. Business categories eligible for Round 1 funding, along with the
number of awards in each category, were:
• restaurants and bars that were unable to provide on-site outside food or
beverage services (1,452 awards),
• barbershops and salons (392 awards),
• health and fitness centers (370 awards), and
• ‘Other’ defined as businesses located in specific disproportionate impact areas
that experienced property damage due to civil unrest (630 awards).
To apply for a BIG award in Round 1, the applicant had to choose which of the
four categories above it was applying under based on a drop down menu on the
online application. The applicant then had to submit supporting documentation
applicable to the category.
The DCEO website then listed questions to determine eligibility of the applicants.
The questions included: amount of business revenue in 2019; annual minimum
and maximum revenues based on business category; whether on-site outdoor food
or beverage service was provided; and estimated revenue loss. At the end of these
eligibility questions, the document listed two statements:
“Responses to the questions above will be used to screen applicants for
eligibility.”
“Applicants that are not eligible for this round of funds will not move forward
to complete the application.”
During our review of the universe of Round 1 awards we found a number of
applicants that were not eligible for BIG funds yet not only did the
application system allow the applicant to complete the application process,
DCEO and its grant administrators approved and funded the ineligible
applicants. Exhibit 4 presents the results of our review for the ineligible awards.
Specifically:
• 41 applicants reported having revenues during 2019 that were outside the
range for eligibility; yet were awarded $570,000;
• 154 applicants reported having on-site outdoor food or beverage services in
violation of program guidelines; yet were awarded $2.83 million.
• 1 applicant applied in the “Other” category yet did not list a zip code that
was in a designated severely disproportionately impacted area; yet was
awarded $20,000.
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Exhibit 4
BIG PROGRAM – INELIGIBLE APPLICANTS PROCESSED AND AWARDED
Small Business Component Round 1
Number of Ineligible BIG Funds Paid to
Criteria Violated
Awards Ineligible Applicants
Revenue Threshold in 2019
Barbershops or Salon 25 $250,000
Other Category 16 $320,000
Provided On-Site Outdoor Dining 154 $2,830,000
Type of Business – Other category needs to
1 $20,000
be in a designated zip code
Totals 196 $3,420,000
Source: OAG developed from DCEO BIG award information.
DCEO was aware of the issues we found that are detailed above. Correspondence
reviewed during the audit included:
• On the day Round 1 went live for applications, an Accion official reported at
11:29 a.m., “Applications are coming in fast.” Approximately five hours
later, at 4:42 p.m., DCEO was informed of a system problem. A DCEO
official told BIG team members from Accion and DCEO that, “Got a note
from our frontline team on this Submit button issue: ‘Apparently a business
can hit submit, even if their [sic] ineligible and it says ‘Thank you for
successfully submitting your app’ – and that is causing some confusion.”
• On July 21, 2020, a BIG grant administrator official needed a review
clarification for the applications. The official asked the lead administrator,
Accion, “Can you please clarify the comment about the outdoor seating for
the review process? If the restaurant answered ‘Yes’ to the outdoor dining
question, then are they automatically disqualified?” The correspondence
eventually moved to a DCEO official that responded, “The grant is intended
for businesses that did not provide on site dining outdoors so correct, they
should be DQd.”
On December 16, 2022, in response to our exception listing relative to eligibility
outside of criteria, DCEO stated, “Grant administrators were responsible for
carrying out reviews in line with BIG policy and process. Approved lists were
provided to DCEO for review before final approval for funding.” Auditors note
that DCEO, pursuant to Public Act 101-636, is responsible for the BIG program.
Relative to the noncompliance with program criteria where applications were not
supposed to proceed if the applicant was not eligible, DCEO stated, “While we
consulted with them on developing the application, Accion managed the online
application and the logic underlying the user experience in navigating the
application. We defer questions related to those decisions to them [Accion].”
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On December 1, 2022, Accion explained, “…[Accion] and DCEO decided to
widen the applicant pool during BIG 1 (by allowing more businesses to apply in
full) in order to make it less bureaucratic to later administer a potential BIG 2,
which turned out to be a wise decision since we did in fact execute a second round
of BIG. Because of that decision, we did not have to ask businesses to fill out
another application in order to distribute those BIG funds efficiently.” Auditors
note that DCEO made no mention of this “widen the applicant pool” explanation
and the Round 2 application was different in terms of what documentation
was required.
Providing awards to ineligible applicants calls into question monitoring efforts for
the BIG program. Additionally, paying out program funds to ineligible applicants
lessens the amount of funding available for other eligible applicants. Finally,
when the application used to determine eligibility does not work correctly it
creates skepticism that the grant awards were fairly administered.
Applications Outside Eligibility Criteria
RECOMMENDATION DCEO should make sure that eligibility criteria are followed
when conducting a grant program and not allow ineligible
NUMBER applicants to receive funding.
5
DCEO Response:
DCEO agrees with the recommendation.
This error was due to a misunderstanding of the criteria among one of our partners; the Department
takes responsibility for not having caught the error during the review and approval of awards.
For BIG Round 2 and in subsequent programs providing small business relief, DCEO worked with its
grant administrators to maintain more extensive documentation and consistent processes for review
and met directly with the administrators performing review multiple times a week to ensure a common
understanding on program policy, how it should be operationalized, and to quickly address any issues
or questions that arose.
Additional improvements include a more robust set of internal reviews of awards prior to allowing grant
administrator to release funds, including DCEO staff closely reviewing samples of award
determinations on an ongoing basis.
Auditor Comment #4:
DCEO states the error was a misunderstanding among one of the partners. While that
may be true, the system developed by that partner, which DCEO approved, allowed the
ineligible applications to go forward. DCEO also states that additional improvements
were made in Round 2 and subsequent programs. While we cannot comment on
additional programs, we can comment that we were only able to concur with 41 percent
of the BIG awards in Round 2 from our sample.
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Award Selection Testing Results for Small Business Component
DCEO oversight of the award selection process for the small business component
of BIG was insufficient. Our testing of the selection process found significant
deficiencies in both rounds. In Round 1, we were only able to concur with 8
percent of the BIG awards from our sample. We determined that 16 percent of
the BIG awards, totaling $430,000, in our sample were ineligible for reasons such
as revenues outside the criteria or restaurants providing outdoor dining. We also
questioned 76 percent of the BIG awards, totaling $1,980,000, in our sample due
to lack of required documentation being submitted by the applicant. In Round
2, we were only able to concur with 41 percent of the BIG awards from our
sample. We determined that 29 percent of the BIG awards in our sample had
one or more questioned elements. Additionally, we determined that 30 percent of
the awards made by DCEO in our Round 2 sampling were ineligible. Finally,
questionable expenses from our selection testing sample totaled $1,335,708 – 28
percent of all funds awarded from the Round 2 sample.
LAC Resolution 159 directed us to examine the application process, the
documentation submitted, and the selection of grants by the DCEO, DHS, and
DOA for the BIG program. Our examination of the selection process at DHS and
DOA is included at the end of this section.
To conduct the examination at DCEO of the award selection process for the small
business component of BIG, we randomly selected 150 cases from the universe of
award winners and an additional random sample of 150 cases from the universe of
non-winners in Round 1. Our sample included all six of the grant administrators
utilized by DCEO in Round 1. In Round 2, we again randomly selected 150
winners and non-winners from the only grant administrator utilized by DCEO for
Round 2.
After completing our testing, we sent exceptions to the grant administrators for
review. After considering any additional information submitted and explanation,
we sent the final exceptions to DCEO for review and comment. We considered
any response from DCEO and the final testing results are reported below.
Additionally, Exhibit 5 summarizes testing results for Rounds 1 and 2 for the
small business component of BIG.
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Exhibit 5
AWARD SELECTION TESTING RESULTS FOR SMALL BUSINESS COMPONENT
Round 1 and Round 2 Awards
Round 1 Round 2
Met all
requirements
8%
One or more
Ineligible1 questioned Met all
16% elements4 requirements
29% 41%
Lack of required
documentation2
Ineligible3
76%
30%
Notes:
1 Ineligible for reasons such as revenues outside the criteria or restaurants providing outdoor dining.
2 Lack of required documentation such as failure to submit tax returns, submitting the incorrect business license or
tax form, or submitting unsigned/undated tax returns.
3 Ineligible for reasons such as an unallowable business, businesses that had revenue gains year over year, and
businesses that did not submit all required documentation.
4 One or more questioned elements such as failure to report other CARES Act funding and the award amount was
incorrect based on supporting documentation.
Source: OAG analysis of sample of 150 Round 1 awards and 150 Round 2 awards.
Round 1 – Award Winners
From documentation received from DCEO and its grant administrators, in Round
1 of BIG DCEO made 2,844 awards totaling $49.26 million.
During Round 1, applicants had to submit certain documentation that was used to
analyze whether an applicant should receive BIG funding. That documentation
included: business bank statements for 2020; business tax returns from 2019;
valid identification card such as a driver’s license; and a completed W-9 form.
Additionally, for the four types of businesses funded in Round 1 there were
revenue ranges the businesses had to fall within as well as business
license/eligibility documentation. Exhibit 6 presents these criteria.
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Exhibit 6
BIG PROGRAM – GENERAL SELECTION CRITERIA
Small Business Component Round 1
Type of Business Revenue Range Supporting Documentation
Consumption on Premise License
Restaurant or Bar $80,000 - $3,000,000 Retail Food License
Local Health Department Inspection Certificate
Barbershop or Salon $80,000 - $500,000 IDFPR License
Fitness Center $80,000 - $2,000,000 Current Membership Agreement
Other-Severely Utility Bill
Disproportionately $80,000 - $2,000,000
Impacted Area Insurance Statement
Source: OAG developed from DCEO BIG program information.
Our testing found significant deficiencies in the selection of award winners in
Round 1. These included:
• Tax Return Issues. DCEO required returns to be legible, complete and
signed to be accepted. Our testing identified:
2 of 150 award winners failed to submit required tax returns;
9 of 150 award winners submitted the incorrect tax form; and
91 of 150 award winners provided tax returns that were incomplete as they
were not signed and/or dated.
• Applicable Business License. As shown in Exhibit 6, DCEO required
specific business licenses for award. Our testing identified:
31 of 150 award winners failed to submit the proper business license.
• Valid Identification. DCEO required documentation to identify the valid
business owner for the application. Our testing identified:
4 of 150 award winners failed to submit the proper identification form.
• W-9 Form. DCEO required a completed W-9 form. Our testing identified:
12 of 150 award winners failed to submit the proper W-9 form.
Overall, our sample of 150 award winners received $2.62 million. We were only
able to concur with 8 percent (12 of 150) of the BIG awards, totaling
$210,000, from our sample. We determined that 16 percent (24 of 150) of the
BIG awards, totaling $430,000, in our sample were ineligible for reasons such
as revenues outside the criteria or restaurants providing outdoor dining. We
also questioned 76 percent (114 of 150) of the BIG awards, totaling
$1,980,000, in our sample due to lack of required documentation being
submitted by the applicant.
Round 1 – Non-Award Winners
From documentation received from DCEO and its grant administrators, in Round
1 of BIG, there were 5,244 total applications for funding for the small business
component. DCEO made 2,844 awards, leaving 2,400 applicants that did not
receive an award.
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Our examination of the sample of applicants that did not receive an award
during Round 1 found:
• In 54 of 150 applications, the auditors agree with the denial reason from the
grant administrators.
• In 46 of 150 applications, the file contained missing documentation but the
grant administrators did not follow up with the applicant for the
documentation.
• In 25 of 150 applications, we disagreed with the reason for denial because
follow up with the applicant was needed.
• In 12 of 150 applications, the files had issues but the issues did not impact the
applicant being ineligible.
• In 4 of 150 applications, we agreed with the decision made by the grant
administrator but the application was denied by DCEO later in the process.
• In 9 of 150 applications, we found that the applicant was actually eligible
for the BIG award yet the grant administrator denied the application.
Round 2 – Award Winners
From documentation received from DCEO and its grant administrator, in Round 2
of BIG DCEO made 6,451 awards totaling $236.83 million.
During Round 2, the evaluation process for the small business component
changed. Exhibit 7 presents the applicant categories, industries, and
documentation requirements.
Exhibit 7
BIG PROGRAM – SELECTION CRITERIA
Small Business Component Round 2
Applicant Type Industries Documentation Requirements
2019 Tax Return
July 2019 Bank Statement
Event Venue August 2019 Bank Statement
Music Venue July 2020 Bank Statement
Performing Arts Venue August 2020 Bank Statement
Indoor Recreation Signed W-9
Heavily Impacted
Amusement Park Rent/Mortgage July/August 2020
Movie Theater Utilities July/August 2020
Museum Insurance July/August 2020
Charter/Shuttle Bus Payroll July/August 2020
Business Loan July/August 2020
Business Owner ID
All other industries with the 2019 Tax Return
following prioritized: July 2019 Bank Statement
Independent Owned Retail August 2019 Bank Statement
Non-Heavily Impacted Restaurant/Bar/Tavern July 2020 Bank Statement
Fitness Center August 2020 Bank Statement
Tourism Signed W-9
Support Services for the Arts Business Owner ID
Note: If sole proprietors did not have separate business bank statements, they could attest to $5,000 in losses in
lieu of providing bank statements.
Source: OAG developed from DCEO BIG program information.
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Selection of award winners was based on revenues, expenses, or self-attested
losses. Heavily impacted industries were evaluated based on the expenses the
applicants claimed. Those expenses were totaled, rounded up to the nearest
$5,000, and awarded to the applicants up to a maximum of $150,000. While
DCEO was willing to pay these expenses it was not concerned with how much
revenue the applicant may have made during that same period.
Non-heavily impacted industries were evaluated a different way. Application
reviewers determined the revenue decrease from July and August 2019 to the
same period in 2020. Again, the amounts were rounded up to the nearest $5,000
with a maximum award of $150,000.
Our testing found significant deficiencies in the selection of award winners in
Round 2. These included:
• 97 of 150 award winners failed to submit required tax returns or submitted tax
return that were not complete.
• 20 of 150 award winners had made gains overall from 2019 to 2020 yet
DCEO provided BIG funding.
• 69 of 150 award amounts could not be verified by auditors based on
exceptions.
Overall, our sample of 150 award winners received $4.76 million. We were only
able to concur with 41 percent (61 of 150) of the BIG awards from Round 2
from our sample. We determined that 29 percent (44 of 150) of the BIG
awards in our sample had one or more questioned elements (for example, an
applicant that failed to report other CARES Act funding and the award
amount was incorrect based on supporting documentation). Additionally, we
determined that 30 percent of the awards (45 of 150) made by DCEO in our
Round 2 sampling were ineligible. Reasons for the ineligibility were:
• 4 – unallowable businesses (gaming parlor, child care business, nightclub and
a business with over $20 million in revenue);
• 13 – businesses that had revenue gains year over year;
• 27 – businesses that did not submit all the required documentation; and
• 1 – business that applied under the wrong industry identification.
Finally, questionable expenses from our testing sample totaled $1,335,708 –
28 percent of all funds awarded from the sample.
Round 2 – Non-Award Winners
From documentation received from DCEO and its grant administrator, in Round 2
of BIG, there were 42,654 total applications for funding for the small business
component. DCEO made 6,451 awards, leaving 36,203 applicants that did not
receive an award.
Only 28 non-award winners from our sample of 150 were actually evaluated by
the DCEO grant administrator. The others were not reviewed because the
program exhausted funding. For the 28 cases for which there was documentation,
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we found that 3 were eligible for BIG and should have received $280,000 in
funding.
Testing Exceptions
Relative to Round 1 testing exceptions, DCEO, on December 16, 2022, stated,
“Our review acknowledges the identified exceptions, which appear to be caused
by:
• Human error, oversight, or a failure of quality checks by the administrator –
this may be a possible cause in cases where
◾An applicant was denied for missing documentation even though all
documents appear to have been provided or approved despite missing
documentation/ID,
◾The award was made to an establishment that had gaming, or
◾The zip code didn’t match zip codes in documents or across the application.
• Misunderstanding of program requirements and processes by grant
administrator or individual reviewer – this appears to be a cause in cases
where
◾The award was made to an applicant who did not meet revenue
requirements or denied an applicant who did,
◾awards were provided to a restaurant that had outdoor dining,
◾awards were rejected for an applicant based on duplicate applications, but
they had not received 3 awards, or were approved for an applicant that had
already received 3 awards.
• Regarding the issue of signed/dated tax returns, based on how common this
exception is across all administrators, we conclude that we made the internal
determination with administrators during the review process not to reject an
application on the basis of the tax return not being signed. A likely
explanation for this process decision is that it was made out of an effort to
ensure that the program was accessible to a range of businesses, including
many small businesses without sophisticated accountants/legal staff, in an
emergency situation, who may have submitted their taxes to the IRS in that
form or were technologically incapable of providing the documents to the
administrator in that form. Reviewers looked through tax returns to ensure
completeness and any clear signs of inaccuracy or ineligibility, but did not
verify whether they were signed or dated.”
DCEO told us, “Grant administrators were responsible for carrying out reviews
in line with BIG policy and process. Approved lists were provided to DCEO for
review before final approval for funding.” DCEO is responsible for overseeing
grant programs, including ones in which program administrators are utilized.
Administration would include making sure grant administrators understood and
enforced program requirements in the selection process.
For Round 2 winner testing exceptions, DCEO did not express disagreement with
the exceptions, but did provide some additional context.
For Round 2 non-winner testing exceptions, DCEO reported, “For the
applications with an exception related to the failure to document that a follow-up
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occurred with a particular applicant to request missing or incorrect documents,
we speculate that this was either an individual reviewer failed to take that step
due to oversight or failed to document it.” DCEO added it disagreed with
exceptions by auditors when there was a determination that a “duplicate
application” or “duplicate FEIN” is ineligible; these are situations where the same
business provided multiple applications. Auditors disagree with the DCEO
explanation because file documentation showed on multiple occasions that the
applicants had difficulty in uploading the application and documentation. Accion
apologized for the inconvenience and asked the applicant to resubmit the
application and documentation. This could be a reason for the same vendor TIN
and application being in the system on more than one occasion.
When the award selection process does not follow the criteria for selection there
is an increase in the chances that funds are awarded inappropriately.
Additionally, when those funds are inappropriately awarded there are less funds
available for those applicants that never had their applications reviewed for the
BIG program.
Award Selection Testing Results for Small Business Component
RECOMMENDATION DCEO should, when utilizing grant administrators to make
funding selections, conduct more extensive oversight by
NUMBER ensuring administrators understand the evaluation criteria and
6
by reviewing a significant amount of application documentation
to determine if awards were correctly made.
DCEO Response:
The Department agrees with the recommendation that oversight, due diligence and reviews are
critically important when making grant awards, and it takes responsibility for the program’s
shortcomings. The amount of time in which the Department established the program and delivered
funding to businesses in dire need of support ultimately resulted in an imperfect process.
The Department would like to note that the majority of businesses in the OAG’s case study that are in
question are considered minor administrative errors, such as failing to sign/date a tax return:
Round 1: 91 of 150 (failure to sign/date tax return)
Round 2: 85 of 150 (failure to sign/date tax return)
As stated in the Department’s prior response, it did not reject an application on the basis of a tax return
not being signed or dated. The vast majority of small businesses are generally not accustomed to
applying for state grants. With the added stress of a global pandemic, it was decided that grants should
not be withheld for minor administrative concerns.
The Department also confirms receipt regarding additional inconsistencies identified and will evaluate
the findings.
For future rounds of COVID-19 funding programs through its B2B program, the Department
implemented the following processes to improve overall program administration:
• Basing award size on tax form information for year losses occurred. Tax information was not
available for 2020 during the BIG program and therefore, the Department had to use less
preferable proxies to determine need (e.g. bank statements comparing year over year)
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• Use of a portal maintained by our grant administrator where DCEO has full access to all submitted
application data, uploaded documents, and reviewer actions. The application portal provides a full
scope of information and documentation for oversight of administrator decisions.
• Implementation of standard, manual review checks against external data sources for verification,
such as receipt of other sources of government relief, status with the Secretary of State’s office,
verification of proper licensing, and additional quality assurance checks.
Auditor Comment #5:
The DCEO response chooses to ignore the cases where applicants were ineligible to
receive funding yet the grant administrator and DCEO approved the funding anyway.
Instead, DCEO chooses to highlight a “minor” administrative error relative to tax
returns. We note that it was DCEO criteria that required tax returns to be legible,
complete and signed to be accepted.
Relative to the Back to Business (B2B) program, we cannot comment on the DCEO
assertions, as B2B was not within the scope of this audit.
Overpayment of COVID Losses by BIG Program
DCEO utilized an award determination process which failed to follow the
directive of State statute relative to funding for COVID-19 losses. By rounding
loss amounts up to the next $5,000, DCEO reduced the funding levels while
some applicants went without funding. In our selection testing work, we found 47
percent of the awards overpaid the documented losses by a total of $171,000. Our
sample of 150 award winner cases was just over 2 percent of the total awards in
Round 2 of the small business component of BIG.
During Round 1 of the small business component of BIG, a grant administrator
reported, “the revenue loss column was self-selected by the applicant via a drop
down menu. And [the applicant] attested to it in the applicant self-certification
form that it was true.” The grant administrator added, “In BIG 1…all reviewers
were instructed to accept the applicants’ assertion.”
The same grant administrator reported that for the calculated revenue or expense
calculations in Round 2, for the small business component, the reviewer was to
round the calculation up to the next $5,000.
We randomly sampled 150 award winners from Round 2 of the small business
component and found that 47 percent (71 of 150) received a BIG award from
DCEO and its grant administrators in excess of the losses provided from
documentation submitted by applicants as part of the application process.
These overpayments were due to the process of rounding losses up to the next
$5,000 instituted by DCEO and its grant administrator. The overpayments
amounted to $170,798 for the 71 awards, an average of $2,406.
See Exhibit 8 for some examples of BIG payments that were over the documented
losses of the applicant.
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Exhibit 8
BIG PROGRAM – PAYMENT EXAMPLES OVER COVID LOSSES
Small Business Component Round 2
COVID Losses Based
on Documentation Excess Amount Paid
Case Number Submitted BIG Payment Amount Over COVID Losses
OAG Case 65 $647.71 $5,000.00 $4,352.29
OAG Case 83 $97.44 $5,000.00 $4,902.56
OAG Case 96 $20,726.26 $25,000.00 $4,273.74
OAG Case 113 $10,771.52 $15,000.00 $4,228.48
OAG Case 121 $572.14 $5,000.00 $4,427.86
Source: OAG developed from DCEO BIG program information.
The decision for how to estimate Heavily Impacted Industries and non-Heavily
Impacted Industries grant size was made collaboratively by the former DCEO
Chief of Staff, the former DCEO Assistant Director and the DCEO Deputy
Director of Policy Development, Planning and Research. In addition, the decision
was made in consultation with Accion to confirm that the determined process
would be feasible to administer and accessible to potential applicants.
While our sample was 150 cases, in Round 2 there were 6,451 total awards that
totaled $236,827,758. The range of the Round 2 payments was $1,424 to
$150,000. The lower limit of the range was for a loan forgiveness case where the
awardee was eligible to receive the outstanding amount of the loan. DCEO grant
administrators utilized the rounding process for the entire round of funding,
outside of loan forgiveness cases.
During the audit, we reviewed a number of emails relevant to the BIG program.
One correspondence, from April 26, 2021, between Accion and DCEO officials
discussed how in Round 2 there were a number of applications that were never
funded because the BIG program ran out of funds. A list was provided where,
"The ‘no’ on the attached list is businesses which were determined eligible, but
for which we would not have the funds to award. The 'not eligible’ is businesses
which were low in priority and were never reviewed.”
DCEO verified to auditors, on June 1, 2022, that, “There was a sizable set of
applications that had not yet been reviewed when funds had been fully deployed
to approved higher-priority applications.”
Documentation obtained during the audit showed that 26,607 applications in
Round 2 were never reviewed by the DCEO grant administrator. Additionally,
1,368 applicants were eligible but the BIG program had apparently exhausted
funding.
In Round 2, the BIG program received 42,654 total applications for funding.
Sixty-two percent (26,607 of 42,654) were never reviewed by the DCEO grant
administrator.
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Had DCEO not instructed its grant administrators to round up the award payments
there would have been additional funds available to fund other eligible applicants,
making the best use of the funds.
Public Act 101-636 required DCEO, as part of the BIG program, to provide
financial assistance through grants, expense reimbursements, or subsidies to
qualified businesses or a qualified partner to cover expenses or losses incurred
due to the COVID-19 public health emergency. [Emphasis added.]
DCEO reported, “…the year-over-year decline in receipts in July and August was
a proxy for the relative level of hardship that any applicant was continuing to
experience at the time that the BIG Round 2 application period opened, and
therefore reflected a reasonable approach to assigning grant amounts among
small businesses in need in Illinois. However, it was significantly lower than the
actual financial hardship any business had incurred due to COVID.”
State statute directed that BIG funding be for losses incurred by individuals and
businesses. When DCEO utilized an award process that paid for more than the
documented COVID-19 losses it failed to follow State law. Additionally, these
actions decreased the amount of funding that could have assisted other individuals
and businesses.
Overpayment of COVID Losses by BIG Program
RECOMMENDATION DCEO should comply with requirements in State statute relative
to award of funding for specific purposes.
NUMBER
7
DCEO Response:
The Department agrees with the recommendation that it should comply with requirements in State
statute but respectfully disagrees with OAG’s assertion that the practice of rounding up represented
non-compliance. Based on the language of the statute (20 ILCS 605-105(h)) it was within the purview
of DCEO to design the program in a manner that would efficiently and effectively support businesses
most in need.
Further, DCEO respectfully disagrees with OAG’s assertion that rounding up constituted “excess
amounts” given the unprecedented hardship faced by small businesses in Illinois.
As noted in our response on page 31, “[documents showing losses were] significantly lower than the
actual financial hardship any business had incurred due to COVID].”
The Department had the legal authority to identify a process that provided an award to compensate
businesses for losses and costs incurred due to the COVID-19 pandemic. The documents required
from businesses in Round 2 reflected a snapshot of losses incurred during a 2-month period that
followed multiple prior months of business closures and interruptions. It was within DCEO’s authority to
round up that amount to reflect that required documentation did not include losses from revenue
declines in other months, nor did it include any increased costs associated with the pandemic.
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Auditor Comment #6:
State statute required DCEO, as part of the BIG program, to provide financial
assistance to cover expenses or losses incurred due to the COVID-19 public health
emergency. When an applicant submitted proper documentation for a certain level of
COVID losses, DCEO was justified in providing funding. However, DCEO elected to
implement a process to award additional funding for hypothetical losses not supported
by documentation. As noted in the audit, one applicant demonstrated $97 in losses,
yet DCEO provided $5,000 to this applicant. This does not appear to be within the
spirit of the statute.
Exception to Policy on the Number of Awards
DCEO and its grant administrators for the small business component of BIG
awarded funding in excess of program policy. Eleven business owners
received funding for businesses in excess of the three for which each owner was
eligible. Total overpayment of funds totaled $220,000. DCEO is responsible
for overseeing grant programs, including ones in which program administrators
are utilized.
If DCEO and its grant administrators had conducted the selection process
according to BIG program policy, there would have been more funds available
for other applicants that went without funding. Instead, 11 business owners
received more than the maximum number of BIG awards.
The BIG program policy placed a limit of three awards per business owner for
three separate businesses. During the audit, we analyzed the universe of awards
to see how many awards were given to each business owner.
During Round 1 of the small business component selection process, five business
owners received more than the program policy three awards. Using a
conservative approach prioritizing the maximum three awards, the excess funds
provided over the maximum number of awards totaled $140,000. In Round 2, six
business owners received $80,000 in excess funds. Exhibit 9 provides a listing
of the 11 owners that received more than three awards with the city locations of
the businesses and the BIG funding amount for each award.
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Exhibit 9
BIG PROGRAM – OWNERS RECEIVING OVER MAXIMUM NUMBER OF AWARDS
Small Business Component Rounds 1 and 2
Round # Grant
Case Number Business City Award Amount
Owner # Administrator
CNI BIG0175 Waukegan $20,000
Round 1 Accion BIG0226 Waukegan $10,000
Owner #1 Accion BIG0284 Waukegan $20,000
Accion BIG0283 Zion $20,000
WBDC BIG2940 Morton Grove $20,000
Round 1 CUL BIG0200 Sycamore $20,000
Owner #2 CUL BIG2905 Glen Ellyn $20,000
CUL BIG1239 Westmont $20,000
CUL BIG5973 Hoffman Estates $20,000
CUL BIG5972 Glen Ellyn $20,000
Round 1 CUL BIG5018 Chicago $20,000
Owner #3 CUL BIG5971 Schaumburg $20,000
CUL BIG5038 Highland Park’ $20,000
Somercor BIG5028 Chicago $20,000
WBDC BIG7329 Ottawa $20,000
Round 1 WBDC BIG4083 Rolling Meadows $20,000
Owner #4 WBDC BIG7324 Peru $20,000
CCLF BIG7339 Addison $20,000
CUL BIG0676 Wauconda $20,000
CUL BIG1479 Crest Hill $20,000
Round 1
CUL BIG1488 Buffalo Grove $20,000
Owner #5
CUL BIG1496 Naperville $20,000
CUL BIG0710 Darien $10,000
Accion Chicago $20,000
Accion Chicago $20,000
Round 2
Accion (1)
Chicago $5,000
Owner #1
Accion Chicago $30,000
Accion Chicago $20,000
Accion Ottawa $150,000
Round 2 Accion (1) Chicago $5,000
Owner #2 Accion Chicago $20,000
Accion Des Plaines $90,000
Accion Jacksonville $90,000
Round 2 Accion (1) Staunton $70,000
Owner #3 Accion Litchfield $15,000
Accion Arcola $30,000
Accion Galena $150,000
Round 2 Accion (1) Lisle $20,000
Owner #4 Accion Chicago $35,000
Accion Chicago $20,000
Accion Lombard $75,000
Round 2 Accion (1) Champaign $5,000
Owner #5 Accion Plainfield $10,000
Accion Bloomington $5,000
Accion Harvard $120,000
Round 2 Accion (1) DeKalb $15,000
Owner #6 Accion Morton $10,000
Accion Morton $50,000
Note: (1) During Round 2, the DCEO grant administrator did not utilized the “BIG” unique identifier for the 42,654
applications.
Source: OAG developed from DCEO BIG program information.
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After we asked who was responsible for ensuring that BIG policy was followed,
DCEO reported, “Accion assembled preliminarily approved awardees from each
administrative partner and performed checks across the aggregate list to ensure
business owners weren’t approved for more than 3 awards. Approved lists were
provided to DCEO for review before final approval for funding. In our reviews,
we did not identify any systematic issue related to providing more than three
awards to the same business owner.”
Business owners that applied for BIG did nothing incorrect when applying for
funding for more than three of their businesses. The owners could not have
known whether any of the businesses would have been awarded BIG funding.
While $220,000 does not appear to be significant given the overall funding of the
BIG program, we note that in Round 2 there were 26,607 applications that were
not reviewed due to the BIG program funds being exhausted.
BIG program policy allowed the same business owner to receive up to three
awards maximum for three separate businesses. The maximum was in effect for
each round of the small business component.
For the Round 1 exceptions, DCEO reported, “The cause appears to have been a
grantee process that was insufficient in identifying all duplicates….leading to
funding of additional awards that did not receive Department approval.” For
Round 2 exceptions, DCEO reported, “We cannot identify a potential cause for
the provision of over 3 awards to the owners provided. Since they all have the
same last name…we can only speculate that there was some flaw in the Accion
process for identifying applications from the same owner that was vulnerable to
owners with this last name.”
DCEO, via Public Act 101-636, was given the authority to develop the BIG
program. Allowing some business owners to receive additional BIG awards over
program policy left less funding available for other applicants that needed
funding.
Exception to Policy on the Number of Awards
RECOMMENDATION DCEO should take the steps necessary to ensure that grant
awardees do not receive funds in excess of program policy.
NUMBER
8
DCEO Response:
The Department agrees with the recommendation.
Child Care Component Selection Testing
We requested and received the Child Care Restoration Grant (CCRG) universe of
awards from DHS and applicants not funded from DCEO. The total number of
awards was 7,459 and the total number not funded was 105. We randomly
selected a sample of 100 awards and a sample of 20 applicants not funded for
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testing. INCCRRA administered all rounds of CCRG and the same requirements
applied in all rounds. The results of testing cannot and should not be projected to
the entire population.
The BIG administrative rules outline the CCRG eligibility requirements which
included being a licensed child care provider holding a valid day care license
from the Department of Children and Family Services; providing full day, year
round child care services; open and receiving children at the time of CCRG
application; receiving at least 25 percent of funding through private pay and/or the
DHS Child Care Assistance Program; and certifying reduced operating capacity
as a result of COVID-19 restrictions. We tested the awards to determine if
applicants met the eligibility requirements and provided the required
documentation. In 100 out of 100 cases, we determined that all applicants met
the eligibility requirements and provided the required documentation. We
did not find any significant or pervasive issues as a result of testing the award
sample.
For the sample of 20 applicants not funded, we determined whether we agreed
with INCCRRA’s reason for not funding the applicants. In 20 out of 20 cases,
we agreed with the reasons for not funding which included missing
documentation; withdrawn application; application not submitted by deadline; or
eligibility requirements not met such as an applicant appearing on DCFS’ list of
revoked child care licenses. We did not find any significant or pervasive issues as
a result of testing the not funded sample.
Livestock Management Component Selection Testing
We requested and received the Livestock Management Facility Program (LMFP)
universe of awards and denials from DOA. The total number of awards was 611
and the total number of denials was 152. We judgmentally selected a sample of
15 awards and a sample of 15 denials for testing. The count of LMFP awards and
denials varied greatly across the three programs: Swine Depopulation Program
(SDP), Agriculture Business Interruption Program (ABIP), and Meat and Poultry
Capacity Program (MPCP). As a result, we determined it best to judgmentally
select the samples to ensure adequate review of the programs relative to the
number of overall awards and denials. The results of testing cannot and should
not be projected to the entire population.
For the sample of 15 awards, we tested 2 awards for MPCP and 13 awards for
ABIP. We chose not to test either of the 2 awards for SDP because they
represented such a small percentage of the overall awards. The BIG
administrative rules outlined the eligibility requirements, loss calculations
(ABIP)/expense details for approved projects (MPCP), and the required
documentation for each award. Applicants were specifically required to provide:
a completed application, W-9, certification of applicable losses due to market
disruption or eligible expenses, and complete inventory records documenting total
site inventories and sales information (ABIP only). We tested the awards to
determine if applicants met the eligibility requirements and provided the required
documentation. In 15 out of 15 cases, we determined that all applicants met the
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eligibility requirements and provided the required documentation. We did not
find any significant or pervasive issues as a result of testing the award
sample.
For the sample of 15 denials, we tested 14 denials for ABIP and 1 denial for
MPCP. There were no denials for SDP. We tested the denials to determine
whether we agreed with DOA’s reason for denial and if necessary, whether DOA
followed up with the applicant. In 15 out of 15 cases, we agreed with the reason
for denial which was incomplete or insufficient documentation. In 15 out of 15
cases, DOA had follow-up correspondence with the applicant; however, the issue
could not be resolved and we agreed with the final denial reason. We did not
find any significant or pervasive issues as a result of testing the denial
sample.
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Monitoring the BIG Program
DCEO had significant deficiencies in the monitoring of the small business component of the BIG
program. DCEO failed to execute grant agreements with grant administrators for the small
business component of the BIG program prior to the grant administrators working on the BIG
program. Further, DCEO required funding applicants to submit multiple pieces of
confidential information to these grant administrators that were operating without an executed
grant with the State of Illinois.
While it utilized a notification system to notify applicants of the BIG program, DCEO failed to
maintain those notifications. Additionally, DCEO failed to monitor that the payment of the
small business component funding was provided within the 14-day program guidelines.
DCEO failed to conduct routine monitoring of the funds provided under BIG and at times did
not have documentation to conduct monitoring. The lack of documentation made it impossible
for DCEO to know if the same claimed losses were utilized by an applicant to obtain
funding under different programs.
DCEO and its grant administrators failed to follow BIG program requirements relative to
deducting previous awards from future BIG funding for the small business component of the
program. The result of the inaction resulted in the overpayment of $4.29 million in BIG funds.
DCEO failed to monitor all terms of the grant agreements with grant administrators. The lack of
monitoring resulted in one grant administrator not providing tax information on $4.4 million
in BIG funds to 305 sub-recipients.
LAC Resolution 159 asked us to examine the monitoring oversight by DCEO,
DHS, and DOA for grant recipients including whether all eligibility requirements
were satisfied and expenses submitted were allowable.
Grant Administrators Working Without Executed Agreements
DCEO failed to execute grant agreements with grant administrators for the
small business component of the BIG program prior to the grant administrators
working on the BIG program. Further, DCEO required funding applicants to
submit multiple pieces of confidential information to these grant administrators
that were operating without an executed grant with the State of Illinois. Finally,
DCEO was unaware of the actual individuals that would view this confidential
information, even though some of these individuals were temporary staff hired by
the grant administrators.
For the six grant administrators for the small business component of BIG, DCEO
allowed the organizations to work on the BIG program without executed grant
agreements in place. Exhibit 10 provides the execution dates for the grant
administrator agreements for the small business component with the initial
payment dates and initial payment amounts to the grant administrators. During
Round 1, the six administrators, on average, worked on the BIG selection
program for 44 days since the beginning of the application process prior to
DCEO executing a contractual agreement with the administrator.
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Exhibit 10
GRANT ADMINISTRATOR GRANT EXECUTION DATES
Small Business Component Rounds 1 and 2
# Days
Grant from Date of Amount of
Application Execution Application 1st Grant 1st Grant
Administrator Start Date Date Start Date Payment Payment
Accion 06/26/20 08/10/20 45 08/18/20 $12,125,000
Women’s Business Development Center 06/26/20 08/06/20 41 08/18/20 $11,125,000
Chicago Urban League 06/26/20 08/12/20 47 08/18/20 $8,375,000
SomerCor 06/26/20 08/10/20 45 08/17/20 $8,125,000
Chicago Community Loan Fund 06/26/20 08/10/20 45 08/18/20 $11,625,000
Chicago Neighborhood Initiatives 06/26/20 08/06/20 41 08/17/20 $10,125,000
Accion – Round 2 09/17/20 10/13/20 26 10/16/20 $50,238,633
Source: OAG developed from grant documentation.
DCEO knew it was going to push through grant administrators without executing
grant agreements. In a June 1, 2020 email correspondence, a DCEO official
reported, “I wanted to give you a heads up that we will be asked to put through a
$15M (amount subject to change) grant from the BIG program to Accion in the
coming days.” The Accion grant agreement for the BIG Round 1 small business
component was executed 70 days later, on August 10, 2020.
Likewise, in Round 2, DCEO still could not get an executed grant agreement
with its grant administrator before the grant application period began on
September 17, 2020.
The DCEO position was that the rollout of the BIG program needed to be done
quickly, whether grant agreements were in place or not. DCEO cited a section in
the DCEO Law of the Civil
Administrative Code as evidence that it 20 ILCS 605/605-55
was “urged by statute to work
“Contracts and other acts to
expeditiously in the execution of accomplish Department’s duties.
appropriated programs.” See adjacent To make and enter into contracts,
text box for the language. Allowing including but not limited to making
grant administrators to work without an grants…and generally to do all
executed grant agreement in place or things that, in its judgment, may be
necessary, proper and expedient in
conducting a $585 million program accomplishing its duties."
without administrative rules in place is
not a prudent business practice and
increases the likelihood that program parameters are not followed. Additionally,
allowing grant administrators to work without executed agreements shows a lack
of adequate internal controls at DCEO.
In response to our question of who made the decision to allow grant
administrators to work without an executed agreement DCEO reported,
“Although no documentation is available, the understanding is that the (former
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AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Assistant Director) and (former Chief of Staff) were the key DCEO leadership
working to get [the] program up and running as soon as possible.”
Confidential Information
During Round 1 for the small business component of BIG, grant administrators
were able to inspect information submitted by the applicants. Many of these
pieces of information were either sensitive (such as veteran’s status, race,
ethnicity, gender, and home and email address) or confidential by law (such as
FEIN, SSN, tax returns, and bank account information).
However, DCEO was unaware of who had access to this confidential information.
On June 9, 2022, we were told, “DCEO did not request the identities of the
individuals evaluating applications under the BIG program. The grant
administrator(s) was responsible for their staff and contractors as indicated by
their grant agreement.” Two grant administrators told us they hired temporary
contractors to complete work on BIG.
We asked DCEO if it provided guidance to grant administrators on how to handle
confidential documentation. DCEO directed auditors to Section 26.10 in the grant
agreement. The section required all grant administrators to remain in compliance
with all applicable confidentiality laws.
We note that the section referenced by DCEO was not agreed to prior to the
grant administrators actually viewing the confidential information In fact, the
application period for Round 1 was for the period June 26, 2020, through July 7,
2020, which was conducted prior to any of the agreements being executed by
DCEO.
Grant administrators utilized an application called SmartSheet in both Rounds 1
and 2 for the small business selection process for BIG. SmartSheet is a data
hosting entity outside of the grant administrators. The lead grant administrator
told us that SmartSheet did host confidential information. We point out that the
entity that provided SmartSheet did not have an agreement with DCEO for BIG
with a requirement to remain in compliance with confidentiality laws.
In response to our question of whether there were any breaches to the
documentation relative to confidentiality, DCEO reported, “To the best of our
knowledge there were no data breaches.” Given the amount of confidential
information supplied relative to the BIG program, auditors believe this should be
an area monitored by DCEO.
The Fiscal Control and Internal Auditing Act [30 ILCS 10/3001] requires all State
agencies to “establish and maintain a system, or systems, of internal fiscal and
administrative controls.” These controls should include the development of
executed agreements with grant administrators prior to allowing those
administrators to view confidential information from applicants seeking
funding from the State.
On November 15, 2021, DCEO reported, “Our understanding is that the
Governor’s office and the General Assembly were generally aware that we were
working as fast as possible to stand up this round of funding, [sic] however, we
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do not have documentation that would support they were aware that work began
prior to the agreement execution.”
Allowing an entity to work on a State grant opportunity without an executed
agreement increases the likelihood that program parameters are not followed.
Additionally, when entities have the ability to view confidential information
without being under contract with the State, it increases the possibility that
information is not protected and could become compromised.
Grant Administrators Working Without Executed Agreements
RECOMMENDATION DCEO should, when utilizing outside grant administrators,
ensure that grant agreements are executed prior to allowing the
NUMBER entities to work on the grant program. Additionally, when the
9
grant administrators are able to view confidential information as
part of the program, DCEO should develop procedures to
monitor that the confidential documents are securely
maintained.
DCEO Response:
The Department agrees with the recommendation.
Lack of Documentation to Support Applicant Notifications
DCEO failed to maintain notifications to applicants of the BIG program.
Additionally, DCEO paid an outside vendor for a mass mailing system that did
not maintain a retrieval function instead of utilizing a State system at the
Department of Innovation and Technology (DoIT), which could have been less
costly and had the ability to retrieve the notifications.
The small business component of the BIG program utilized a number of form
letters to communicate with applicants and award winners. These letters were
sent to notify the applicant of an award, denial of an award, or to request
additional information from the applicant. Notifications were sent via a State
email account with the designation of ceo.BIG@illinois.gov.
Applicants that were determined to be awarded BIG funds received a notification
from DCEO via the ceo.BIG@illinois.gov email account. The notification stated,
“Your grant will be deposited into the account provided at the time of application
within the next 14 days.” Notification correspondence was signed by the Director
or Acting Director of DCEO.
We wanted to test compliance by the grant administrators with the 14-day
payment requirement but were unable to obtain satisfactory documentation
from DCEO that would meet our testing needs. While the email address from
DCEO to the applicants appeared to be a State of Illinois account, DCEO utilized
a third party, Constant Contact, to process the bulk messaging.
Relative to notices for the small business component of BIG, on July 13, 2022,
DCEO reported to us, “The records already provided are PDFs showing the form
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AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
e-mails…as well as accompanying spreadsheets containing the full list of contact
information for recipients of each form e-mail.” [Emphasis added.]
While DCEO maintained the spreadsheets provided were the “full list,” we had
numerous problems with the spreadsheets. We discussed these issues with
DCEO. The issues included:
• Missing field entries in the spreadsheets;
• Created and updated fields in the spreadsheets outside the dates of the BIG
program; and
• A number of cases on spreadsheets that did not tie to populations of Round 1
award winners and applications that DCEO had provided during the audit.
DCEO reported 2,400 Round 1 non-winners for BIG, and that every non-
winner for Round 1 was because the applicant was ineligible and disqualified.
However, the disqualified spreadsheet for Round 1 contained only 1,520
notices. Likewise, DCEO told us there were 2,844 award winners in Round 1
yet the two spreadsheets containing Round 1 notifications contained only
2,636 notifications.
After our questioning on May 31, 2022, DCEO found a limited number of notices
that were apparently sent outside Constant Contact.
Applicants to the small business component of BIG also had issues associated
with the notification process and receiving timely payments. Exhibit 11 provides
a sample of those issues.
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Exhibit 11
BIG PROGRAM – NOTIFICATION AND PAYMENT ISSUES
Small Business Component
Date Issue
Main Street Brewing notified of BIG award. On 11/18/20, applicant asked DCEO
why it had not been paid. On 11/19/20, applicant called DCEO reporting still no
10/22/20 payment. DCEO official stated, “If they are talking to Accion about this, there’s
nothing else we can do here. Accion is aware of the issue and they have more
information than we do on what might have caused this and how to get it resolved.”
Knox Avenue Rehearsals notified DCEO it received an email stating it was
11/24/20 awarded $140,000 but that it only received $5,000. Knox also stated it had been
unsuccessful in reaching anyone directly to discuss.
DCEO asked by the office of a member of the General Assembly about applicant
Tellobernal never having received a notification even though the applicant was on
11/30/20
an award list for Round 1. The lack of notification was 149 days after the
application was submitted on 07/04/20.
DCEO asked by the office of a member of the General Assembly about applicant
Ysabels never having received a notification even though the applicant was on an
12/02/20
award list for Round 1. Two DCEO officials both confirmed the lack of an email
notification.
The Crab Pad reported it was listed on the DCEO Round 1 list of awards yet never
12/03/20 received a grant. The applicant applied on 06/29/20 – 157 days prior to asking
DCEO. A DCEO official stated, “Yikes, this is from Round 1.”
A DCEO official reported to an Accion official, “I have now heard of three instances
12/15/20 where it appears that BIG recipients recently received funds a second time in the
2nd round. In each case, they also received duplicate notices of award.”
Plush Cosmetics received a BIG award letter. After funds were not provided in 14
days a Plush official filed a complaint, according to a DCEO official with the
Executive Inspector General. Plush Cosmetics explained, “After 14 days the funds
were not deposited into my account. I contacted Accion several times via email
12/15/20 and by phone. It’s been over a month and they haven’t given me a reasonable
explanation as to why the grant hasn’t been deposited, nor has [sic] the grant
funds been deposited into my account for my business.” An Accion official
reported to DCEO that the funds were paid on 01/20/21. This was outside the 14-
day period.
Javys was notified of a $5,000 award to be paid within 14 days. An Accion official
12/21/20
reported that the funds were paid on 1/25/21. This was outside the 14-day period.
Source: OAG developed from DCEO BIG program correspondence.
DCEO did not conduct timely monitoring of the process to utilize an outside
vendor for notifications for the small business component of BIG. In February
2021, DCEO had to inform:
• Five applicants that, “Due to a data error, you were previously sent a
notification intended for a different award recipient that was mistakenly
attached to your business and e-mail address. Note that the award amount
below is different than in the previous notification you received.”
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• Seven applicants that, “It has come to our attention that you received a
Business Interruption Grant but never received an official notification
documenting the details of that grant.”
We contacted DoIT relative to its ability to send mass email messages. A DoIT
official reported that the agency does have the ‘listserver’ ability to conduct such
work. The official added that it does not charge a State agency for the service.
While DoIT advertises the service, when we asked DCEO about utilizing the
State service, DCEO stated, “No one…who was involved with the BIG program is
aware of the file service you refer to and do not know whether it was considered
as an option at the time when the process for sending notifications was being
determined.”
DCEO provided payment information to Constant Contact for the BIG program
for the time period May through December 2020. DCEO paid a total of $5,460
for the bulk email processing. While the dollar amount may not be great, DCEO
reported, “as far as we are aware…there is no way to retrieve those e-mails”
from Constant Contact.
To confirm that the notifications were not in the State of Illinois email system,
we asked DoIT if there were email correspondence for a sample of cases on the
State servers. On July 29, 2022, a DoIT official confirmed there were no results
from the DoIT search.
The Fiscal Control and Internal Auditing Act [30 ILCS 10/3001] requires all State
agencies to “establish and maintain a system, or systems, of internal fiscal and
administrative controls.” These controls should include utilization of a system
to maintain notices when DCEO issues grant notices.
The Department’s Office of External Relations has an annual pre-paid agreement
with Constant Contact it uses for mass mailing of newsletters, etc. The
Department utilized this to send the BIG notices. No one who was involved with
the BIG program was aware of the file service from DoIT.
Utilizing the DoIT listserv system would save the State funds that DCEO paid to
Constant Contact. Additionally, utilization of the State bulk email system would
ensure that DCEO maintains a historic record of notifications for grant programs.
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AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Lack of Documentation to Support Applicant Notifications
RECOMMENDATION DCEO should maintain a history of notifications to applicants of
grant programs it is responsible for when it decides to utilize a
NUMBER third party for those notifications.
10
DCEO Response:
The Department agrees with the recommendation and acknowledges that the system by which
notifications were made was not adequate. The Department is wholly committed to providing timely
and accurate information to grantees and in future rounds of COVID-19 funding through the B2B
program, it utilized grant administrators with more advanced technological capabilities to provide
notifications.
Auditor Comment #7:
Relative to the Back to Business (B2B) program, we cannot comment on the DCEO
assertions, as B2B was not within the scope of this audit.
Timely Payment of BIG Awards
DCEO failed to monitor that the payment of small business component funding
was provided within program guidelines. During our testing we found that in 49
percent (67 of 136) of the cases, the grant administrator failed to provide
funding within 14 days of DCEO approval.
The small business component of the BIG program utilized a number of form
letters to communicate with applicants and award winners. One of these letters
was a notification to the applicant of receiving the award and informing the
applicant that payment would be made within 14 days. Notifications were sent
via a State email account with the designation of ceo.BIG@illinois.gov.
During Round 2 of our small business selection testing we were able to utilize
grant administrator information on DCEO approval dates and funding dates for
award winners. From our random sample of 150 cases, we were able to determine
that 136 cases had both pieces of information. In 49 percent (67 of 136) of the
cases, the grant administrator failed to provide funding within 14 days of
DCEO approval. For the 67 exceptions:
• Minimum number of days to be paid was 4 days late;
• Maximum number of days to be paid was 147 days late; and
• Average number of days to be paid was 19 days late.
BIG funds were used to make 6,451 award payments during Round 2. Exhibit 12
provides a breakdown of the payments to the grant administrator and the awards
issued by the grant administrator before receiving another payment from DCEO.
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Exhibit 12
BIG PROGRAM – PAYMENTS TO GRANT ADMINISTRATOR
Small Business Component Round 2
# Awards Paid by Total Awards Paid
Amount Paid to Grant
State Warrant Date Grant Administrator Prior to Subsequent
Administrator
with Funds State Warrant
10/16/20 $52,738,633.00 1,128 $41,225,000.00
11/10/20 $46,242,577.96 1,666 $53,243,974.93
12/04/20 $84,896,606.68 1,893 $71,425,867.72
12/16/20 $23,172,191.47 776 $28,191,521.46
12/29/20 $29,570,276.06 947 $41,092,941.77
04/12/21 $1,716,158.00 41 $1,648,452.26
Total $238,336,443.17 6,451 $236,827,758.14
Notes:
10/16/2020 State payment includes $2,500,000 in Round 1 rollover funding already paid to the grant administrator.
12/4/2020 State Payment includes $36,750,000 in residual Round 1 funding paid to grant administrator.
Source: OAG developed from DCEO BIG program payment information.
DCEO, under signature of the Director, provided winners of BIG funding with a
correspondence announcing the award. The correspondence stated, “Your grant
award will be deposited into the account provided at the time of application
within the next 14 days. The deposit will be made by [Grant Administrator]…a
DCEO partner in administering this program.”
On February 15, 2023, DCEO reported, “We asked that Accion provide input on
the likely explanation behind these funding dates that exceeded 14 days, and they
provided the following response: ‘Most of the funding delays were caused by
ACH [automated clearing house] bounces where we needed to source updated
bank info from awardees, sometimes multiple times after multiple failures. There
were also moments where we had to wait to fund because we needed to provide
paperwork to DCEO to prompt additional fund transfers to us that we could in
turn send along to grantees, but that was much rarer than applicant errors.’”
DCEO also stated, “Accion was responsible as the grant administrator to
‘provide financial assistance to various subrecipients’ via ‘subawards,’
according to the Project Description in their [sic] grant agreement.”
We would note that State law directed DCEO to develop the BIG program and
now, after we asked about the delay in payments on January 24, 2023, DCEO had
to check with its grant administrator for a response. This would not constitute
effective monitoring.
The BIG program was developed as a response to losses due to the COVID-19
pandemic. Small businesses were in need of funding. Delaying that funding by
not paying the awards on a timely basis would have had a negative impact on the
small businesses.
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AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Timely Payment of BIG Awards
RECOMMENDATION DCEO should, when allowing grant administrators to pay out
grant funds, develop controls to ensure that payments are
NUMBER timely made by those grant administrators.
11
DCEO Response:
The Department agrees with the recommendation and regrets any instance of untimely payment. The
Department has found these instances often occur when bank account information changes or varies
from its original submission. The Department made significant improvements to this element for its B2B
program, including 1) requesting banking information at the time of award (rather than the time of
application as was done for BIG); and 2) utilizing a secure online platform to automatically verify
banking information. This drastically streamlined the funding process and reduced the number of
instances where incorrect or out-of-date bank information resulted in instances of back-and-forth with
grantees.
Auditor Comment #8:
Relative to the Back to Business (B2B) program, we cannot comment on the DCEO
assertions, as B2B was not within the scope of this audit.
Failure to Enforce Funding Monitoring
DCEO had monitoring weaknesses relative to the uses of funding provided as
part of the small business component of the BIG program. DCEO failed to
conduct routine monitoring of the funds provided under BIG and at times did not
have documentation to conduct monitoring. The lack of documentation made it
impossible for DCEO to know if the same claimed losses were utilized by an
applicant to obtain funding under different programs.
Based on documentation obtained from DCEO during the audit, over two rounds,
DCEO made 9,295 awards totaling $286,087,758 from the small business
component of the BIG program. The six grant administrators that evaluated and
paid small business award winners reported conducting no monitoring of the
funds disbursed. We also asked grant administrators if they verified an
applicant’s ability to conduct business in Illinois through the Secretary of State.
See Exhibit 13 for the results of our questions to grant administrators relative to
monitoring. During the audit, we found that DCEO did not have any idea what
the funds were expended on by the award winners and relied on the award
winners to expend the funds in compliance with the program.
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Exhibit 13
BIG PROGRAM – GRANT ADMINISTRATOR MONITORING OF FUNDS AWARDED
Small Business Component
Administrator Monitoring of Funds Verification of Ability to do Business in Illinois
Our organization was not required to verify the
Accion No applicant was registered with the Illinois Secretary of
State.
Women’s
Business The review teams and team leaders did random checks
No
Development for businesses in the queue with the Secretary of State.
Center
Chicago
Yes. The applicant needed to be registered with the
Community Loan No
Secretary of State.
Fund
Chicago Urban No, businesses just had to be located in the State of
No
League Illinois.
SomerCor No Administrator did not address Secretary of State issue.
Chicago
Grant administrator reported applicants were verified
Neighborhood No
with Secretary of State.
Initiatives
Source: OAG developed from DCEO BIG program correspondence.
We saw a number of correspondence related to how funds could be expended:
• In responding to an official from a member of the Illinois House on January 7,
2021, a DCEO official stated, “You can spend it on a wide range of typical
business expenses, and don’t need to worry about tying those expenses to
COVID response. It can be applied to expenses March through December
2020.”
• On January 29, 2021, a Round 2 award winner inquired to DCEO whether
BIG funds were taxable and whether it needed to provide any proof of
expenditures comparable to PPP (Paycheck Protection Program). A DCEO
official reported, “Yes it is taxable…No they don’t need to have specific
documented expenses like PPP.”
Routine Monitoring
The form letter notifying small business award winners of their selection stated,
"Please note, the Department will conduct routine monitoring to verify grantee
compliance with program requirements. If selected for monitoring, you will be
required to provide a personal statement regarding your hardship and to provide
information to support the business interruption. Businesses selected for
monitoring must cooperate with the Department and provide all requested
information in a timely manner." [Emphasis added.]
On June 22, 2022, we asked DCEO if it had documentation to show how the
routine monitoring detailed in the award notifications were conducted. DCEO
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responded, “No, the specific type of post-program monitoring referred to in this
paragraph – where businesses that were beneficiaries of the program were
required to provide additional information following receipt of an award directly
to DCEO – has not been performed.”
Documentation Requirement
Exhibit B from the grant administrator grant agreement detailed the deliverables
the grant administrators had to provide as part of the BIG program. There were
two deliverables listed. One deliverable was:
1) Immediately upon notification of the subrecipients, the Grantee will
provide the following to DCEO:
a. A comprehensive list of applicants for this program, including the
amounts requested.
b. A complete list of the entities chosen to receive sub-awards, as well as
associated sub-award amounts.
c. Copies of all supporting documentation from the subrecipients
identifying the costs and losses incurred due to the COVID-19
pandemic. [Emphasis added.]
On July 6, 2022, we asked DCEO if it had the documentation to satisfy the
requirement from the deliverables section of the grant administrator agreement.
DCEO responded, “Due to the quantity/amount of files, it was agreed that files
would be kept by grant administrators.” Exhibit B was not amended to relieve
grant administrators of this contractual requirement.
Report on Use of Financial Assistance
Administrative rules (14 Ill. Adm. Code 690.100) detail reporting requirements
for the BIG program. Specifically, section b) states, “On or before March 31,
2021, BIG participants shall submit a report to the Department on the use of
financial assistance, in relation to the project and initial budget, and any
information about the impact of BIG requested by the Department.” We
confirmed with DCEO that applicants awarded BIG funds would be considered
participants.
DCEO reported on October 7, 2022, “Ultimately, all of the grants issued by the
Department were used to reimburse prior incurred losses, not for some future
project. Subrecipients provided either documentation or an attestation of those
prior incurred losses. The grant funds could be used for any operational costs. It
was ultimately not necessary for DCEO to require all subrecipients to submit a
report on the use of the financial assistance as the information was previously
provided in the application.” We note that in Round 1, applicants simply
reported a loss amount from a drop down menu without any supporting
documentation. In Round 2, as previously detailed in this audit, award winners
did not always have losses nor did the documentation submitted relate to losses
being due to COVID-19.
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Other CARES Act Funds and BIG
DCEO published a document titled Guidance for Businesses and Organizations
that Receive Business Interruption Grants (BIG) and Funds from Other CARES
Act Programs. The guidance stated, “You may have applied to multiple CARES
Act programs around the same time without intending to receive duplicate
coverage, but you have now received approval for funding under two or more
programs that, in combination, exceeds your eligible expenses. If this has
happened to your business, please contact the Department for assistance in
resolving this issue.” DCEO also provided the eligible uses of funds for BIG
which are listed in Exhibit 14. BIG funds were limited to costs and losses
incurred due to the COVID-19 pandemic.
Exhibit 14
BIG PROGRAM – ELIGIBLE USES OF FUNDS
Small Business Component
Grant Proceeds Uses
Reimbursing costs and losses such as inventory and equipment (including Personal Protective
Equipment and other supplies to promote health and safety)
Compensation (including salaries, wages, tips, paid leave, and group healthcare benefits) over and
above what was covered by Paycheck Protection Program loan
Rent, mortgage, insurance premiums, and utilities over and above what was covered by Paycheck
Protection Program loan
Payment of principal and interest on business loans
Lease payments
Technology to facilitate e-commerce
Professional services procured
Source: OAG developed from DCEO BIG program correspondence.
On October 7, 2022, DCEO reported that after referring businesses to the
language above, “we do not have any record of a business believing they need to
return their funds.”
The issue may be more complicated than DCEO believed. In our Round 2
application selection testing we randomly sampled 150 award winners and found
that 29 percent of the applicable cases included applicants that did not report
CARES Act funds they had received. The CARES Act payments not reported
were for PPP and Round 1 of BIG. Unreported funds totaled $2,925,932. One
award winner that received a $150,000 BIG Round 2 award failed to report
$337,500 in PPP funding already received.
Failure to conduct routine monitoring violated BIG policy/procedure and limited
the ability of DCEO to know what uses BIG funds went towards. Failure to
enforce deliverables related to documentation for the program limits DCEO’s
ability to monitor the BIG program, especially when it utilized a third party to
administer the BIG program. Relying on the applicant to report all CARES Act
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funding, without monitoring the information, increases the risk that multiple funds
pay for the same loss.
Failure to Enforce Funding Monitoring
RECOMMENDATION DCEO should:
NUMBER • conduct the monitoring that it develops for grant
12
program criteria;
• follow contractual criteria it develops and obtain the
documentation to support grant awards when a third
party administrator is utilized to select grant recipients;
• comply with administrative rules and obtain
documentation to demonstrate how grant funds are
utilized; and
• conduct monitoring efforts to ensure that multiple
sources of funding are not utilized for the same
expenses.
DCEO Response:
The Department agrees with the recommendation.
Failure to Deduct Previous Awards
DCEO and its grant administrators failed to follow BIG program requirements
relative to deducting previous awards from future BIG funding for the small
business component of the program. The result of the inaction resulted in the
overpayment of $4.29 million in BIG funds.
During the audit, we received a universe of awards for the small business
component of BIG for both Rounds 1 and 2 of the program. We compared the
Round 1 and Round 2 winners against each other to determine which applicants
had received awards in both rounds of the BIG program.
Our analysis found:
• 96 instances where the applicant in Round 2 should not have received an
award due to the amount of BIG funding received during Round 1 – the 96
applicants should not have received $1,079,933;
• 169 instances where the applicant in Round 2 should have had awards
adjusted based on the amount of funding received during Round 1 – the 169
applicants were overpaid $3,210,000.
The BIG program ran out of funds to consider all applicants for the small business
component. We requested information on the number of Round 2 applications
that were not reviewed by the grant administrator. A total of 26,607 applications
were not reviewed due to the exhaustion of funding.
The BIG program Certifications and Requirements (for both Rounds 1 and 2)
contained certifications that the applicants had to remain compliant with and attest
to during the application process. Under the Program-Specific Covenants,
Representations, and Warranties section it states, “The subrecipient (and all
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businesses owned, operated, or affiliated with the subrecipient) is eligible to
receive a subaward in this round of disbursements and to apply for grant funds in
future rounds. However, the value of the current subaward will be deducted
from any future subaward granted to the business under this program.”
[Emphasis added.]
On March 29, 2023, DCEO reported, “This certification was prepared before
Round 1 was launched, when we had not yet formulated the process or policies
for future rounds. The award in Round 2 was based on losses incurred at a
different, non-overlapping time period than the award for Round 1. As a result,
while receipt of an award in Round 1 impacted priority, it did not impact the
award amount in Round 2.” Auditors note that while DCEO states that
deductions were not necessary in Round 2, DCEO continued to utilize the exact
language in the Round 2 certification document. That language is shown in
Appendix E of this report. Additionally, we saw no documentation to show that
DCEO notified applicants that the deduction language to which the applicants
were certifying to was being disregarded.
Failure to follow BIG program requirements can result in applicants either
receiving an award they are not eligible for or can result in overpayments. Either
way, the result is funding not being available for other applicants.
Failure to Deduct Previous Awards
RECOMMENDATION DCEO should take steps to ensure that grant administrators
appropriately apply program requirements to applications
NUMBER including, when applicable, the deduction of previous awards.
13
Additionally, DCEO should not approve awards until adequate
review has been conducted.
DCEO Response:
The Department agrees with the recommendation and would like to clarify that deductions were not a
part of the program design. In this instance there was a regretful administrative error in the language
used in the certification statements. The line pertaining to deductions included in the certification
statement was not indicative of actual program policies and requirements. The single line pertaining to
deductions was not included in any other program documents.
Auditor Comment #9:
As stated in the audit, certifications for both rounds of the small business component
contained language that, “the value of the current subaward will be deducted from any
future subaward granted to the business under this program.” While DCEO contends
this was a “regretful administrative error,” this was published criteria for the BIG
program; even though DCEO chose not to follow the criteria.
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Tax Reporting Issue
DCEO failed to monitor all terms of the grant agreements with grant
administrators. The lack of monitoring resulted in one grant administrator not
providing tax information on $4.4 million in BIG funds to 305 sub-recipients.
At the beginning of the audit DCEO officials indicated to auditors that the use of
grant administrators to receive and review applications, select winners and make
payments was a new process at DCEO and was implemented due to the pandemic.
DCEO confirmed that funds provided from the BIG program were taxable and
that grant administrators were to send 1099 forms to sub-recipients of BIG funds
for tax purposes.
All applicants seeking funding were required to submit a W-9 as part of the
application process. The W-9s include information to be used to fill in 1099s for
recipients of taxable income.
We asked the grant administrators whether they issued 1099s for the BIG funding.
Only one grant administrator, the Chicago Urban League, indicated on June 3,
2022, that it did not issue 1099s for the BIG program. The grant administrator
confirmed that response again on June 29, 2022.
BIG award documentation from Round 1 of the small business component of the
BIG program showed that the Chicago Urban League issued $4.4 million in BIG
awards to 305 sub-recipients.
DCEO told us on June 28, 2022, it was not aware that the Chicago Urban League
had not provided 1099s to award recipients. Further, when we asked DCEO
whether the $4.4 million in BIG funds issued by the Chicago Urban League were
taxed or not, DCEO responded, “DCEO does not have information on whether
program beneficiaries paid federal or state income taxes on awards provided
through the BIG program.”
Section 2.2 of the grant agreement between the Chicago Urban League and
DCEO, executed August 12, 2020, required the grantee (Chicago Urban League)
to comply with all provisions of the federal Internal Revenue Code and the
Illinois Income Tax Act.
Section 17.2 of the grant agreement required the grantee to advise any sub-grantee
of funds awarded of the requirements imposed on it by the federal and state laws
and regulations.
DCEO stated, “It is not part of DCEO’s routine monitoring procedures to test
compliance with the [S]tate of Illinois tax code. The [S]tate of Illinois tax code is
upheld by the Illinois Department of Revenue.”
As the Grantor in the agreements with grant administrators for the BIG program,
DCEO has the responsibility to monitor the terms of the agreement and ensure
that the grantee complies with the agreement. Failure to ensure that grant
administrators provide 1099 forms to funding recipients increases the chance that
taxes are not paid to federal and state institutions.
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Tax Reporting Issue
RECOMMENDATION DCEO should take the steps necessary to ensure that the terms
of grant agreements, including sending 1099 forms when
NUMBER applicable, are complied with by grant administrators.
14
DCEO Response:
The Department agrees with the recommendation.
Child Care Component Monitoring
The agreement between DHS and INCCRRA required DHS to review two
samples of subawards. One sample was to review program eligibility and the
second sample was to review operating capacity. DHS provided auditors the
sample of subawards and the results of its review. DHS reported that INCCRRA
provided support for one set of recipients that satisfied the requirements of the
two samples. DHS also reported that INCCRRA received monthly financial and
program reporting from the recipients. INCCRRA verified the follow-
up/monitoring process as described by DHS.
Livestock Management Component Monitoring
Unlike the small business and child care components of the BIG program, the
Livestock Management Facility Program (LMFP) was overseen by DOA officials
rather than a grant administrator and LMFP applicants were awarded based on a
reimbursement process. The calculations and maximum allowable amounts used
to determine the award amount were outlined in the BIG administrative rules. In
order for an applicant to receive an award under LMFP, the applicant had to
provide actual inventory records or accrued expenses for reimbursement.
Additionally, DOA conducted a review of the headcount records and amounts
paid under the Agriculture Business Interruption Program (ABIP) portion of
LMFP. ABIP was the largest part of LMFP and included 564 of 611, or 92
percent, of the awards made under LMFP. During their review, DOA found
discrepancies in 16 of its awards and requested a return of funds for overpayments
from the applicants.
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Compliance with Funding Allocations
DCEO allocated funding based on the requirements in State statute for the BIG program. Our
analysis of BIG payment documentation showed 39 percent of the funding went to businesses
located in disproportionately impacted areas (DIAs) of the State of Illinois.
LAC Resolution 159 asked us to conduct an examination of how DCEO allocated
funding in the BIG program to disproportionately impacted areas and whether the
allocation was at least 30 percent of total funding.
The funding requirement for DIAs found in Public Act 101-636 specifically
states, “Funds will be appropriated to the BIG Program for distribution to or on
behalf of Qualifying Businesses. Of the funds appropriated, a minimum of 30%
shall be allotted for Qualified Businesses with ZIP codes located in the most
disproportionately impacted areas of Illinois, based on positive COVID-19
cases.”
We examined grant expenditure documentation on the three components of the
BIG program: DHS’ child care restoration grant program (CCRG), DOA’s
livestock management facilities grant program (LMFP) and DCEO’s small
business program to determine whether DCEO met the 30 percent minimum of
BIG funding for DIAs as required by the Act. We found that businesses located
in DIA zip codes met the requirement and accounted for $225 million of the $580
million, or 39 percent, of the total BIG funding. See Exhibit 15 for a breakdown
of DIA percentages by program.
Exhibit 15
BIG PROGRAM – ALLOCATIONS TO DISPROPORTIONATELY IMPACTED AREAS
Percentage of Overall BIG
Program Grant Amounts to DIA Zip Codes Funding
DHS-CCRG $106,259,924 18.33%
DOA-LMFP $345,401 .06%
DCEO-Small Business $117,933,246 20.36%
Total $224,598,571 38.72%
Source: OAG developed from DCEO BIG program documentation.
Also, Public Act 101-636 has a percentage funding requirement for critical care.
Specifically, the Act states, “From appropriations for the BIG Program, the
Department shall provide financial assistance through grants, expense
reimbursements, or subsidies to Qualifying Businesses or a Qualified Partner to
cover expenses or losses incurred due to the COVID-19 public health emergency.
With a minimum of 50% going to Qualified Businesses that enable critical
support services such as child care, day care, and early childhood education, the
BIG Program will reimburse costs or losses incurred by Qualifying Businesses
due to business interruption caused by required closures…”
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We determined that DHS’ CCRG program met the qualification for critical
support services based on the language in the Act. We compared the total amount
of grants awarded from DHS’ CCRG program to the total amount of grants
funded as part of the BIG program. We found that the grants awarded as part of
the CCRG program met the requirement and accounted for $290 million of the
$580 million, or 50 percent, of the overall BIG funding. See Exhibit 16 for the
breakdown of BIG funding by component.
Exhibit 16
BIG PROGRAM – ALLOCATIONS BY PROGRAM COMPONENT
Percentage of Overall BIG
Program BIG Program Funding Funding
DHS-CCRG $290,000,000 50.00%
DOA-LMFP $3,478,084 1.00%
DCEO-Small Business $286,088,000 49.00%
Total $579,566,084 100.00%
Source: OAG developed from DCEO BIG program documentation.
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Priority for Severely Impacted Businesses
DCEO developed a listing of Disproportionately Impacted Areas (DIAs) for the BIG program.
The listing, as stated in statute, was based on the COVID-19 levels and areas that had certain
poverty levels.
LAC Resolution 159 asked us to examine DCEO’s compliance with prioritizing
severely impacted businesses and industries. Disproportionately Impacted Areas
(DIAs) were generally not used during the selection process for BIG program.
DCEO used the economic impact language found in the Public Act related to the
BIG program and implemented it through inclusion of a severe DIA eligibility
criteria in Round 1, which focused on property damage in areas with civil unrest.
However, the use of these severe DIA eligibility criteria was different than how
DIA was defined and excluded a number of zip codes that would have been
otherwise eligible.
Public Act 101-636, with an effective date of June 10, 2020, authorized the BIG
program and gave DCEO oversight of the program. Section (d) of the Act states,
“Funds will be appropriated to the BIG Program for distribution to or on behalf
of Qualifying Businesses. Of the funds appropriated, a minimum of 30% shall be
allotted for Qualified Businesses with ZIP codes located in the most
disproportionately impacted areas of Illinois….” In order to implement this
Section of the Act, DCEO was given the power to use “data provided by the
Illinois Department of Public Health and other reputable sources, determine
which geographic regions in Illinois have been most disproportionately impacted
by the COVID-19 public health emergency, considering factors or positive cases,
positive case rates, and economic impact.” Appendix D of this report provides a
listing of the 176 zip codes that comprise the DIAs relevant to the BIG program.
DCEO reported that three of its officials were involved in the determination of the
DIAs. The officials were the former Assistant Director, the former Chief of Staff,
and the Deputy Director for Policy Development, Planning and Research.
During our review of emails, we found that DCEO knew as early as May 2020
they would be statutorily mandated to administer the BIG Program. Also
included in that correspondence was direction from DCEO’s CFO to a DCEO
Budget Analyst on May 28, 2020, defining a DIA. The CFO said, “I’ve written
the statute to utilize zip codes…The task I have for you…develop a
recommendation for which ZIP codes should be used for the above definition.
For now, ignore the ‘economic impact’ part and focus just on the COVID cases
piece.”
DCEO published a memo on June 25, 2020, with the methodology for
identifying DIA’s as well as the definition a DIA. The memo defined a DIA as
“zip codes that have high rates of COVID cases per capita AND high rates in at
least one of the four poverty metrics relative to other zip codes within their
region. To ensure DIAs adequately cover areas in need, they also include zip
codes with very high rates of COVID cases per capita AND modest rates of
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poverty, and very high rates of poverty AND modest rates of COVID cases per
capita.”
The memo listed the following criteria for DIAs:
• Positive COVID-19 case rates;
• Persons living at or below 133% of the federal poverty level;
• Children living in households that meet the free lunch or breakfast eligibility
guidelines;
• Persons eligible for the Supplemental Nutrition Assistance Program;
• Persons eligible for Women, Infants, and Children assistance.
The memo made no mention of severe DIAs including language related to civil
unrest or property damage.
However, when the eligibility criteria was posted, severe DIA was used as a
criterion. In Round 1, DCEO created an eligibility category for severe DIAs that
was based on specific zip codes that not only had high COVID and poverty rates
but were also deemed to have property damage due to civil unrest. In Round
2, DIA zip codes were not used for eligibility and were only used for
prioritization of award. Severe DIAs were not used for eligibility or any other
reason in Round 2.
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Community Navigators
During the small business component of the BIG program, we found that DCEO only
minimally utilized a few firms to provide technical outreach and assistance. Community
Navigators were not utilized until the BIG successor program, Back to Business, was initiated.
LAC Resolution 159 asked us to conduct an examination of the role of the
Community Navigators, if any, in the selection of grant recipients in the BIG
program. According to DCEO’s website, the Small Business Community
Navigators program is a support program for small businesses in the State of
Illinois, which is a hub and spoke model that brings together community
organizations from across the State. The Community Navigator awardees, or
hubs, will provide support and training services to the spokes in their program,
and the spokes will offer grassroots engagement with small businesses to assist
with access to grants, marketing outreach, and technical assistance.
For the BIG program, which ended on June 30, 2021, we found that Community
Navigators were generally not utilized. DCEO did conduct a competitive
Notice of Funding Opportunity to contract with Community Navigators for the
successor to BIG, the Back to Business program in FY22.
Effective September 29, 2020, the administrative rules for BIG were amended.
The amendment added 14 Ill. Adm. Code 690.500, which required that, “The
Department shall utilize funds from the State Coronavirus Urgent Remediation
Emergency (CURE) Fund to implement a program that will provide financial
assistance to qualified non-profit organizations to provide technical assistance to
diverse, underserved and minority-owned small businesses. Technical assistance
will be provided to increase the awareness of, and to assist in the procurement of,
financial assistance under BIG and other relevant resources.”
We found that for the BIG program DCEO did not utilize a hub and spoke model.
Rather, DCEO utilized four organizations to provide technical assistance and
outreach (TA&O) for the BIG program. According to DCEO, “The scope and
breadth of the hub-and-spoke model used for community navigators in 2021 is
much greater than that used for the TA&O partners [in 2020], but the concept
was similar.” As shown in Exhibit 17, the four partners, which signed grant
agreements with DCEO, received $874,508 for TA&O services. We also note
that $191,646 or 22 percent of the funds received for technical assistance and
outreach were unused and returned.
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Exhibit 17
BIG PROGRAM – TA&O FUNDING
Small Business Component Round 2
Total Amount Total Amount Amount % of Total
Entity Paid Used Returned Returned
Greater Auburn Gresham
$310,000 $259,365 $50,635 16.3%
Development Corporation
The Resurrection Project $227,530 $206,186 $21,344 9.4%
Chicago Urban League $219,645 $99,978 $119,667 54.5%
American Business
$117,333 $117,333 $0 0%
Immigration Coalition
Total $874,508 $682,862 $191,646 21.9%
Source: OAG developed from DCEO BIG program information.
Just as with other components of the BIG program, DCEO allowed the TA&O
partners to operate without an executed grant agreement in place. DCEO
stated that the TA&O partners started working in September 2020. The TA&O
grant notifications were sent by DCEO on: November 23, 2020, to the Greater
Auburn Gresham Development Corporation; November 24, 2020, to the
Resurrection Project; December 18, 2020, to the Chicago Urban League; and
December 14, 2020, to the Illinois Business Immigration Coalition.
It was difficult for us to see how the TA&O partners actually contributed much to
the BIG program. If TA&O partners did not start working until September 2020,
they could not have been conducting outreach for Round 1 of BIG. The BIG
small business Round 1 application period was over before the partners even
began work. DCEO admitted that the technical assistance and outreach partners
were “onboarded” August 2020, and services to businesses began being provided
after Round 1 concluded.
While DCEO reported the TA&O partners worked the entirety of Round 2 of
BIG, the Round 2 small business application period was September 17, 2020,
through December 15, 2020. The Round 2 application period start date was still
more than two months prior to the execution of the grant agreements with the
TA&O partners.
During the Round 2 small business application process, applicants were asked,
“Did you receive technical assistance or outreach from any of the following
entities?” Using the Round 2 universe of applications, we analyzed BIG small
business responses. We found applicants named 20 different technical
assistance and outreach entities. Of the 20 entities, 13 were either a TA&O
partner or subcontractor. Overall, for all Round 2 applications submitted, only
1.5 percent of applicants reported using a TA&O partner or subcontractor.
See Exhibit 18 for use by applicant of technical assistance and outreach. Based
on those responses, not only were the TA&O partners not used in Round 1, they
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appeared to have been minimally involved in Round 2. Additionally, applicants
named a number of other entities that were providing similar TA&O services.
Exhibit 18
BIG PROGRAM – TA&O INVOLVEMENT
Small Business Component Round 2
Total % of TA&O % of Overall
Entity Applications Involvement Applications
TA&O Partner or Subcontractor 632 18.83% 1.50%
Named Entity Other Than TA&O Partner or
2,724 81.17% 6.40%
Subcontractor
None/Blank/Other 39,298 N/A 92.10%
Total 42,654 100.00% 100.00%
Source: OAG developed from DCEO BIG program information.
We asked DCEO, specifically, what type of technical assistance and outreach was
being referenced in the question. DCEO responded, “These responses likely
reflected a range of support provided by technical assistance and outreach
partners, including: referral to the program, information regarding eligibility and
how to apply, and assistance in filling out the application.… It was used for our
tracking purposes.”
Using the same universe of Round 2 applicants, we analyzed the location and
county of the applicant for the applicants reported having used a TA&O partner
or subcontractor. We found for the 632 applicants responding to use the partner
or subcontractor, 532 or 84 percent of the applicants were located in Cook or the
collar counties (Will, Lake, Kane, DuPage) and 100 or 16 percent were elsewhere
in the State. While DCEO stated the TA&O program supported all counties and
businesses, the overwhelming majority of responding applicants were in Cook or
the collar counties.
It is unclear what work for the BIG program the TA&O partners did after the end
of the BIG Round 2 application period. The amendments to TA&O grant
agreements were not executed until April 6, 2021, and changed the scope of work
to include Paycheck Protection Program outreach and technical assistance.
Based on Exhibit 18, it does not appear that TA&O partners and subcontractors
provided the majority of technical assistance and outreach services to applicants
applying to Round 2 of the BIG program. In fact, DCEO and the BIG grant
administrators Accion and WBDC, provided 81 percent of those services to
applicants reporting such use. DCEO stated the four partners and their
subcontractors could cover the entire State during the BIG program. We
questioned DCEO why there was a need to expand these services for the Back to
Business program, the successor program to BIG. DCEO said, “We knew that we
could do more to reach underserved communities that lacked broadband, were
disenfranchised, and not covered by the initial group of navigators due to
bandwidth and capacity…Furthermore, the Community Navigators program is
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rooted in equity, we know that small businesses have better trust, and
relationship, with organizations in their community than the State of Illinois and
four organizations couldn’t provide that trust for 102 counties.”
Our analysis of the applicant reported information on technical assistance and
outreach in Round 2 found minimal instances where the entities contracted and
paid for outreach actually were identified as the source of outreach or assistance.
See Exhibit 19 for a breakdown of the TA&O contractors, their subcontractors
and how many were identified as a source of assistance.
Exhibit 19
BIG PROGRAM – TA&O FUNDING PARTNERS OUTREACH ASSISTANCE
BIG Round 2
Amount Count of Applicant
TA&O Partner and Subcontractors Paid Reported Use
Greater Auburn Gresham Development Corporation $105,458 16
South Holland Business Association $49,984 30
Southland Juvenile Justice Council $41,423 0
Southland Development Authority $12,500 98
Chamber 57 $50,000 20
Chicago Urban League $0 81
Sunshine Enterprise $0 31
Hope Excel Center $49,978 21
Springfield Urban League $50,000 21
Urban League of Madison County $0 0
The Resurrection Project $159,109 102
Hispanic American Community Education and Services $14,530 70
North American Institute for American Advancement $21,865 64
Carpentersville Family Resource Center $10,681 61
American Business Immigration Coalition $117,333 17
Total $682,861 632
Source: OAG developed from DCEO BIG program information.
We asked DHS and DOA about the identification and role of the Community
Navigators within CCRG and LMFP, respectively. DHS and DOA both reported
that Community Navigators were not applicable to their portions of the BIG
program.
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Return of Funds
DCEO did not initially have a formal process to claw back funds that were paid to BIG recipients
that were in violation of the terms of the BIG program. DCEO reported, “It was developed after
awards began to be distributed.”
LAC Resolution 159 asked us to conduct an examination of the actions taken by
DCEO, DHS, and DOA when a BIG participant was not in compliance with any
step in the application process or made a material misrepresentation in reporting
on the use of funds provided as part of the BIG program.
In February 2021, DCEO officials reported to the Senate Commerce Committee
that its main focus was not to claw back funds but to increase communications
with awardees of BIG funds that may have not accurately represented their
situation during the application process.
Grant Program Violators
DCEO did not claw back funds for noncompliance with the Executive Order.
DCEO became aware of instances of violations but did not initially have a system
in place to manage businesses found to be in violation of law, regulations, and
executive orders. DCEO relied on the attestations of the recipients that they
would comply or were already complying with the mitigation efforts.
As part of the BIG program application process, applicants were required to sign a
Requirements and Certifications document as a condition of BIG program
participation. Section 7 of the document states, “The subrecipient has complied
and will continue to comply with all relevant laws, regulations, and executive
orders from the State and federal government, including the social distancing
guidelines as promulgated by the Executive Orders of the Illinois Governor.”
[Emphasis added.]
During the audit, we found that DCEO was aware of businesses having signed the
Requirements and Certifications document yet were not in compliance with all
laws, regulations, and executive orders. DCEO became aware of notices of BIG
program violations from news stories, forwarded complaints, and internal agency
reviews. Businesses most often having documented violations were restaurants
failing to follow local mitigations and executive orders. We found that DCEO
was not prepared to handle such notices of violation, did not have complete
information on all violators, and did not always enforce a return of funds when
such violations were confirmed.
DCEO Not Prepared to Handle Notices of Violation
During our search of the emails, we found correspondence which was initiated by
a local county health department on October 28, 2020, to a DCEO program
manager asking about enforcement for bars or restaurants having received a BIG
grant but refusing to comply with public health mandates. The DCEO program
manager was not aware and forwarded the question to other DCEO officials
asking about claw backs for noncompliance. Later that same day, a DCEO
Deputy Director responded, “Yes, if they are found to be in violation of their
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signed certification – which includes language that they will follow Executive
Orders related to social distancing – we tell them to return the funds.” The
DCEO Program Manager then followed up by saying, “Given this question is
from a health department, is there a process for this or direction for health
departments regarding this?”
In additional correspondence from Winnebago County on October 30, 2020,
involving DCEO, the Attorney General and the Governor’s Office, Winnebago
County officials cited businesses in their county, which had received at least one
Order of Closure, yet received grant funds despite rejecting executive order and
mitigation measures from the County. After review of the list, DCEO found
additional businesses not in compliance and decided to issues notices of violation.
At the time of the correspondence above, DCEO was unsure whether it or the
grant administrator was responsible for issuing notices of violation. On
November 4, 2020, days after the inquiries from the local health departments,
DCEO’s Chief of Staff asked the Deputy Director about responsibility for follow-
up communication with the grantee accused of being in violation. The Deputy
Director stated, “…my understanding of the way that this program works is that
this certification is an agreement between Accion and the BIG recipient, and it’s
technically on Accion to make these determinations with our input and
oversight.”
The named entities on the final template of the letter to be sent to grantees for
noncompliance with COVID restrictions were DCEO and the grantee, not the
grant administrator. This template was also issued by DCEO’s General Counsel
on November 4, 2020, and allowed violators a chance to comply rather than
requesting a return of funds for the violation. The letter included the following
language: “You have five (5) days to respond to this letter and confirm for DCEO
that you will comply with all state laws, restrictions and guidelines, including the
current Restaurant and Bar guidelines for regions in mitigation as promulgated
by the department [sic] of Public Health and DCEO…” [Emphasis added.]
Complete Information
Auditors asked and received the universe of correspondence regarding notices of
noncompliance from DCEO. DCEO provided a spreadsheet as of January 18,
2022, which contained the names of 66 businesses having received a notice of
violation. The ‘first’ notices were sent between September 3, 2020, and February
19, 2021.
As a step to check the completeness of the spreadsheet, we decided to contact the
Sangamon County Department of Public Health with regard to its records of
businesses not compliant with State and local rules during COVID-19 restrictions.
It was able to provide its listing of Sangamon County businesses that where the
Department of Public Health suspended permits due to defiance of the Governor’s
mandates relative to indoor dining during COVID mitigations. The listing
provided by Sangamon County named 21 different businesses that were cited for
indoor dining, against Governor’s mandates, on at least one occasion during the
timeframe of November 15 through December 30, 2020.
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We compared the list of 21 businesses with the universe of awards during BIG
Rounds 1 and 2. Three businesses received a BIG award in either Round 1 or
Round 2 and were cited by the Sangamon County Department of Public Health
for violation of the Governor’s mandates relative to indoor dining. We would
note that none of the three businesses were on the listing of problem applicants
which received correspondence from DCEO regarding noncompliance with the
BIG program. Such compliance was required as condition of BIG program
award. See Exhibit 20 for citation and award dates of the three businesses.
Exhibit 20
BIG PROGRAM – EXAMPLES OF SMALL BUSINESS AWARD WINNERS AND VIOLATIONS
Rounds 1 and 2
Sangamon County
Business BIG Award $ BIG Award Date Citation Date
A – Round 1 $20,000.00 06/30/20 11/16/20
B – Round 2 $35,000.00 12/14/20 11/16/20
C – Round 2 $30,000.00 12/21/20 12/01/20
Source: OAG developed from DCEO BIG program information and the Sangamon County Department of Public
Health.
Not Enforcing
DCEO neither intended to request a return of grant funds when a grantee admitted
noncompliance nor enforced return of grant funds. Based on responses DCEO
received from grantees to the notice of violation correspondence, we asked DCEO
what actions they took if the grantee confirmed noncompliance or did not
respond. DCEO stated, “If recipients confirmed they were in noncompliance,
they were then required to ensure their future compliance or to return the funds
received. All businesses communicated they would comply. As a result, DCEO
did not clawback [sic] funds for noncompliance.” [Emphasis added.]
During our email review, we found an email correspondence between DCEO’s
Deputy General Counsel and a BIG recipient on January 7, 2021, regarding
noncompliance. The email from DCEO stated, “It has come to our attention that
your business, [restaurant], may be operating outside of the parameters of the
certification agreement your business agreed to when receiving financial
assistance under the Business Interruption Grant program…” The restaurant
owner responded on the same day, “Thank you very much for your concern into
this matter, throughout the month of November and December the weather was
very beautiful some days…” The restaurant owner admitted noncompliance, yet
there was no evidence DCEO took back funds.
The Fiscal Control and Internal Auditing Act [30 ILCS 10/3001] requires all State
agencies to “establish and maintain a system, or systems, of internal fiscal and
administrative controls.” These controls should include a system of review for
noncompliance and enforcement when there is a known program violation.
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DCEO reported, “For a program of this size, unidentified noncompliance is
always possible, as seen by other state and federal jurisdictions administering
similar program.”
Additionally, we also asked if DCEO conducted any other research on these cases
or if DCEO simply accepted the word of the recipient of the correspondence with
respect to compliance. DCEO stated they had to “rely on the attestations of the
recipient that they would comply or were already complying with the mitigation
efforts.”
Allowing State funds to be spent on grantees who are known violators of the
program requirements reduces the amount of grant funds available to other
businesses who are in compliance with all requirements. Additionally, when
DCEO chooses not to enforce program requirements, it provides disincentive for
businesses to comply.
Grant Program Violators
RECOMMENDATION DCEO should have a system in place to manage notices of grant
program violators and should enforce the program requirements
NUMBER it creates.
15
DCEO Response:
The Department agrees with the recommendation that systems should be in place to manage
compliance and notices of violation. The Department implemented a process by which complaints or
claims of awardee ineligibility or noncompliance were referred to our legal bureau for investigation.
Auditor Comment #10:
While the legal department at DCEO was utilized when a report came in on
noncompliance, it lacked an adequate control to recover funds. As stated in the audit,
DCEO reported, “If recipients confirmed they were in noncompliance, they were then
required to ensure their future compliance or to return the funds received. All
businesses communicated they would comply. As a result, DCEO did not claw back
funds for noncompliance.”
Child Care Component Return of Funds
DHS reported that it had neither distributed nor recovered funds for CCRG. DHS
further reported that INCCRRA did not have the need to recover any funds from
its distribution of CCRG. INCCRRA also confirmed that there were no instances
where it was instructed by DCEO or DHS to recover any CCRG funds paid out.
Livestock Management Component Return of Funds
DOA reported that there were a total of 16 participants reviewed for overpayment.
Of the 16, two provided additional documentation in support of the award and 12
returned the amount of overpayment. The total amount returned to DOA was
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$18,894. DOA further reported that as of October 4, 2021, there were two
overpayments yet to be collected and that multiple letters had been sent out. The
amount of the two outstanding overpayments totals $1,037.
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Appendix A
Legislative Audit Commission Resolution Number 159
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Appendix B
Audit Scope and Methodology
This performance audit was conducted in accordance with generally accepted
government auditing standards and the audit standards promulgated by the Office
of the Auditor General at 74 Ill. Adm. Code 420.310. Those standards require
that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives found in Legislative
Audit Commission (LAC) Resolution 159.
We examined the five components of internal control – control environment, risk
assessment, control activities, information and communication, and monitoring –
along with the underlying principles. We considered all five components to be
significant to the audit objectives. Any deficiencies in internal control that were
significant within the context of the audit objectives are discussed in the body of
the report.
The audit objectives were delineated by LAC Resolution Number 159 which
directed the Auditor General to conduct a program audit of the Business
Interruption Grant program (Program), a program administered by the Department
of Commerce and Economic Opportunity (DCEO), Department of Human
Services (DHS) and the Department of Agriculture (DOA). The Resolution
contained several objectives for the audit (listed below):
1. An examination of the application process, the documentation submitted, and
the selection of grants by DCEO, DHS, and DOA for the BIG program;
2. An examination of the monitoring oversight by DCEO, DHS, and DOA for
grant recipients including whether all eligibility requirements were satisfied
and expenses submitted were allowable;
3. An examination of how DCEO allocated funding in the BIG program to
disproportionately impacted areas and whether the allocation was at least 30
percent of total funding;
4. An examination of DCEO compliance with prioritizing severely impacted
businesses and industries;
5. An examination of the role of the Community Navigators, if any, in the
selection of grant recipients in the BIG program; and
6. An examination of the actions taken by DCEO, DHS, and DOA when a BIG
participant was not in compliance with any step in the application process or
made a material misrepresentation in reporting on the use funds provided as
part of the BIG program.
The audit timeframe was defined as March 2020 through July 2021 in the
Resolution.
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In conducting the audit, we reviewed applicable federal laws, State statutes and
rules. We reviewed compliance with those laws and rules to the extent necessary
to meet the audit’s objectives. Additionally, we reviewed the certifications and
requirements for each of the small business, child care and livestock management
and facilities programs for each of the BIG components. We also reviewed all
guidance used during the application and award processes. Any instances of non-
compliance are included in this report.
We reviewed all applicable interagency agreements, grant agreements and related
policies and procedures. We found that DCEO and DHS had an
intergovernmental agreement for the Child Care Restoration Grant (CCRG)
portion of BIG. We found that DCEO and DOA had an intergovernmental
agreement for the Livestock Management Facilities Program (LMFP) portion of
BIG. The purpose of these interagency agreements was for DCEO to provide
funding to DHS for the CCRG and to DOA for the LMFP programs and for DHS
and DOA to develop and implement each of the CCRG and LMFP programs.
Any instances of non-compliance are included in this report.
We reviewed all grant agreements for all of the grant administrators involved with
the small business and child care portions of BIG. There were six different grant
administrators used for the small business program: Accion, Chicago Community
Loan Fund (CCLF), Chicago Neighborhood Initiatives (CNI), Somercor, Chicago
Urban League (CUL), and Women’s Business Development Center (WBDC).
There was one grant administrator used for the child care program, Illinois
Network of Child Care Resource and Referral Agencies (INCCRRA). DOA did
not utilize a grant administrator to implement the LMFP; rather, DOA used State
personnel. Any instances of non-compliance are included in this report.
We also reviewed the four technical assistance and outreach grant agreements in
support of the BIG program with Chicago Urban League, Greater Auburn
Gresham Development Corporation, The Resurrection Project and American
Business Immigration Coalition. Any instances of non-compliance are included
in this report.
We reached out to a number of officials as part of the audit. We had a number of
phone conferences and email correspondence with State officials at DCEO, DHS
and DOA. We contacted the Department of Innovation and Technology (DoIT)
to ask about their capability and technology to send mass e-mails. We contacted
the Department of Public Health (DPH) for COVID case rate data. We contacted
the Office of the Attorney General to determine how it handled COVID related
complaints. We reached out to officials at Lake County, DuPage County, Will
County, Kane County, Cook County and the City of Chicago for information on
businesses receiving grant funds from the CARES Act funding for COVID relief
that the collar counties received directly from the federal government. We
contacted and received information from the Sangamon County Department of
Public Health relative to violations of open businesses during COVID restrictions.
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We had phone conferences and email correspondence with all seven of the grant
administrators. We asked each of the administrators questions such as how each
became involved with the BIG program, what types of business the administrators
normally do with the State of Illinois, what processes were used for the BIG
program, and the types of monitoring conducted by not only the administrators
but also the State. We also had to rely on the administrators for all documentation
requests related to small business and CCRG BIG applicants because the State
agencies did not maintain this information.
We requested and reviewed the email vaults of 11 individuals from DCEO. We
provided 33 key word phrases for a search. This resulted in 47,979 emails
matching the criteria of the search. After our review, we selected 1,227 pages of
emails for our public work papers. The emails were used to provide context and
support decisions made as part of the BIG program. References to such emails
can be found throughout the report.
We requested and received the universe of small business applicants for Rounds 1
and 2. The total number of small business applicants in Round 1 was 5,244. The
total number of small business applicants in Round 2 was 42,654. We randomly
selected a sample of 150 awards in Round 1 for testing and 150 awards in Round
2 for testing. We randomly selected samples of 150 denials in Round 1 for testing
and 150 denials in Round 2 for testing. We requested and received all supporting
sample documentation from the small business grant administrators and tested the
samples against applicable criteria. The samples were randomly selected and the
results of the testing are based on the samples and not projected to the entire
populations. The results of the testing can be found throughout the report.
We requested and received the universe of awards for all 3 rounds of CCRG
awards at DHS. The total number of CCRG awards was 7,459. Of the 7,459
awards, we randomly selected a sample of 100 awards for testing. We requested
and received the universe for all 3 rounds of CCRG for applicants not funded.
The total number of CCRG applicants not funded was 105. Of the 105 applicants
not funded, we randomly selected a sample of 20 for testing. We requested and
received the supporting sample documentation from the grant administrator,
INCCRRA, and tested the sample cases against the applicable criteria. We did
not find any significant or pervasive issues as a result of testing of both samples.
The samples were randomly selected and the results of the testing should be based
on the sample and not projected to the entire population.
We requested and received the universe of LMFP awards at DOA. The total
number of LMFP awards was 611. Of the 611 awards, we judgmentally selected
15 awards for testing. We requested and received the universe of LMFP denials.
The total number of LMFP denials was 152. Of the 152 denials, we
judgmentally selected 15 for testing. We requested and received the supporting
sample documentation from DOA and tested the sample against the applicable
criteria. We did not find any significant or pervasive issues as a result of testing
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of both samples. However, the samples should be considered on their own and
not projected to the population.
On April 26, 2023, we sent DCEO, DHS, and DOA the draft audit report. On
May 1, 2023, DHS waived a formal exit conference. On May 3, 2023, DOA
waived a formal exit conference. An exit conference was held with DCEO on
May 5, 2023. The principal attendees are noted below:
Exit Conference May 5, 2023
Agency Name and Title
DCEO • Kristin Richards, Director
• Khama Sharp, Assistant Director
• Becky Locker, Chief of Staff
• Kimberly Hill, Chief Operating Officer
• Garrett Carter, General Counsel
• Jason Horwitz, Policy and Development
• Jared Walkowitz, Chief Accountability
Officer
• Megan Buskirk, Assistant Deputy Director
Office of Accountability
Illinois Office of the Auditor General • Mike Maziarz, Senior Audit Manager
• Jill Paller, Audit Manager
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Appendix C
Timeline of Activities – BIG Program
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Source: OAG developed from BIG documentation.
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APPENDIX D AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Appendix D
Disproportionately Impacted Area Zip Codes and Cities
BIG Program
Zip Code City Zip Code City Zip Code City
60018 Des Plaines 60432 Joliet 60640 Chicago
60033 Harvard 60433 Joliet 60641 Chicago
60040 Highwood 60435 Joliet 60643 Chicago
60064 North Chicago 60436 Joliet 60644 Chicago
60071 Richmond 60438 Lansing 60645 Chicago
60077 Skokie 60455 Bridgeview 60646 Chicago
60085 Waukegan 60458 Justice 60649 Chicago
60087 Waukegan 60459 Burbank 60651 Chicago
60090 Wheeling 60466 Park Forest 60652 Chicago
60099 Zion 60469 Posen 60653 Chicago
60101 Addison 60471 Richton Park 60659 Chicago
60104 Bellwood 60472 Robbins 60706 Harwood Heights
60106 Bensenville 60473 South Holland 60707 Elmwood Park
60110 Carpentersville 60478 Country Club Hills 60714 Niles
60115 DeKalb 60501 Summit Argo 60804 Cicero
60120 Elgin 60505 Aurora 60827 Riverdale
60133 Hanover Park 60506 Aurora 60901 Kankakee
60139 Glendale Heights 60534 Lyons 60912 Beaverville
60141 Hines 60545 Plano 60915 Bradley
60145 Kingston 60608 Chicago 60927 Clifton
60153 Maywood 60609 Chicago 60955 Onarga
60155 Broadview 60612 Chicago 60958 Pembroke Township
60160 Melrose Park 60616 Chicago 60970 Watseka
60164 Melrose Park 60617 Chicago 61012 Capron
60165 Stone Park 60619 Chicago 61020 Davis Junction
60171 River Grove 60620 Chicago 61032 Freeport
60185 West Chicago 60621 Chicago 61054 Mount Morris
60402 Berwyn 60623 Chicago 61101 Rockford
60406 Blue Island 60624 Chicago 61102 Rockford
60409 Calumet City 60626 Chicago 61103 Rockford
60411 Chicago Heights 60628 Chicago 61104 Rockford
60415 Chicago Ridge 60629 Chicago 61109 Rockford
60419 Dolton 60632 Chicago 61201 Rock Island
60425 Glenwood 60633 Chicago 61235 Atkinson
60426 Harvey 60636 Chicago 61239 Carbon Cliff
60428 Markham 60637 Chicago 61282 Silvis
60429 Hazel Crest 60639 Chicago 61341 Marseilles
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Zip Code City Zip Code City Zip Code City
61401 Galesburg 62018 Cottage Hills 62448 Newton
61410 Abingdon 62056 Litchfield 62471 Vandalia
61443 Kewanee 62059 Lovejoy 62474 Westfield
61455 Macomb 62060 Madison 62522 Decatur
61462 Monmouth 62090 Venice 62526 Decatur
61469 Oquawka 62095 Wood River 62560 Raymond
61603 Peoria 62201 East St. Louis 62565 Shelbyville
61604 Peoria 62203 East St. Louis 62618 Beardstown
61605 Peoria 62204 East St. Louis 62681 Rushville
61606 Peoria 62205 East St. Louis 62702 Springfield
61610 Creve Coeur 62206 East St. Louis 62703 Springfield
61701 Bloomington 62207 East St. Louis 62801 Centralia
61739 Fairbury 62232 Caseyville 62864 Mount Vernon
61801 Urbana 62233 Chester 62882 Sandoval
61802 Urbana 62237 Coulterville 62901 Carbondale
61820 Champaign 62238 Cutler 62906 Anna
61832 Danville 62239 Dupo 62907 Ava
61866 Rantoul 62242 Evansville 62912 Buncombe
61910 Arcola 62254 Lebanon 62951 Johnston City
61920 Charleston 62272 Percy 62966 Murphysboro
61938 Mattoon 62274 Pinckneyville 62992 Ullin
62002 Alton 62286 Sparta
Note: Red indicates that the area is identified as a Severely Impacted Disproportionately Impacted Area.
Source: OAG developed from DCEO and Illinois zip code documentation.
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Appendix E
BIG Applicant Certification Statements – Small Business
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Appendix F
Agency Responses
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Finding #, Name, Auditor’s Agency Response
and Page # Recommendation
#1- Lack of DCEO should The Department agrees that it would have been preferable to have
Documentation to develop and additional documentation in place as it pertains to selecting the
Support Selection maintain administrator for BIG Round 1.
of Grant documentation on
Administrators why and how it has During this time period in 2020, emergency flexibilities permitted the
selected grant Department to select grant administrators without a competitive
administrators Notice of Funding Opportunity (NOFO) process, as noted in OMB
when DCEO Memo 20-17.
delegates the
responsibility for The Department would also like to note that a competitive NOFO
that administration process was utilized for selecting the administrator in BIG Round 2,
to outside parties. which resulted in Accion being selected after scoring the highest on
merit-based criteria, consistent with the documentation provided to
OAG pertaining to this process.
Regarding the status of the investigation mentioned on page 4, the
Department concluded that the campaign contribution that took place
prior to the former Assistant Director’s employment with the
Department did not create a conflict of interest. Nevertheless, the
Department forwarded this issue to the Office of the Executive
Inspector General to determine whether to conduct any additional
investigation.
Auditor Comment #1:
DCEO notified auditors on January 5, 2022, that it was
investigating the situation with the former Assistant
Director. Sixteen months later, in the formal
responses to the audit, DCEO informs us of the
investigation results. We have seen no documentation
relative to the investigation.
#2 - Failure to DCEO should The Department agrees with the recommendation that it would have
Develop Timely develop been preferable to have formal Administrative Rules adopted prior to
Administrative administrative rules the launch of the program. The Department would also like to note
Rules for the BIG for new grant that program administration did follow the policies that were adopted
Program programs prior to as part of the program's Administrative Rules.
the initiation of the
program.
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#3 - Self- When DCEO The Department agrees with the recommendation that it is important
Certifications allows grant to implement processes, checks and balances for programs that
applicants to self- necessitate the use of self-certification.
certify information
on the grant It is a standard practice to ask entities to certify that they will follow
application, DCEO the law and attest that the information they have provided is correct,
should develop especially for information that is not feasibly verifiable for thousands
controls to check of businesses. For example, the Department did not have access to
those certifications PPP/CARES data to cross reference while BIG award determinations
for accuracy. were being made and therefore, needed to rely on attestations.
However, PPP/CARES was not a determinant of eligibility or funding
amount and therefore, the Department believes the use of self-
certification was appropriate.
To ensure accessibility for the most vulnerable businesses, the
Department required information and documentation that was
consistently available to all businesses within a short time period.
BIG was designed first and foremost to quickly help businesses that
have been adversely impacted by the pandemic, all of whom suffered
immense hardship.
For future rounds of COVID-19 funding programs through its B2B
program, the Department implemented the following processes to
improve its ability to verify attested information:
• Basing award size on tax form information for year-over-year
losses occurred. Tax information was not available for 2020
during the BIG program and therefore, the Department had to use
less preferable proxies to determine need (e.g. bank statements
comparing months in different years).
• Implementation of standard, manual review checks against
external data sources for verification, such as receipt of other
sources of government relief, status with the Secretary of State’s
office, verification of proper licensing, and additional quality
assurance checks.
Auditor Comment #2:
As stated in the audit, in Round 2 of the small business
component of BIG, 29 percent (36 of 125) of the sampled
applicants failed to accurately report PPP or other
CARES Act funding on the application. Despite DCEO
asserting, “PPP/CARES was not a determinant of
eligibility” for BIG, the reporting, or lack of reporting of
PPP/CARES funding did influence the place in line for
review of the applications by the grant administrator.
Relative to the Back to Business (B2B) program, we
cannot comment on the DCEO assertions, as B2B was
not within the scope of this audit.
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#4 - Use of Non- DCEO should DCEO agrees with the recommendation, and the Department did use
Approved design grant selection criteria aligned with state statute. Creating a specific
Selection Criteria application eligibility criterion for businesses located in DIAs that experienced
selection criteria property damage due to civil unrest falls within DCEO’s authority
that are aligned granted by statute and administrative rule. 20 ILCS 605-105(h)
with directives in granted DCEO the authority to “establish procedures that prioritize
State statute. greatly impacted industries and businesses” attributable to the
COVID-19 public health emergency. The program Administrative
Rules define “Severely Disproportionately Impacted Areas” (DIAs)
as those that “...experienced heightened adverse economic conditions
since March 13, 2020.” The civil unrest that occurred in May 2020
resulted in “heightened adverse economic conditions since March 13,
2020” for businesses in those areas that experienced civil unrest,
through direct damage inflicted on some businesses and through
extended closures.
Auditor Comment #3:
As stated in the finding, DCEO reported that there is no
mention of civil unrest in State or federal statutes, rules,
or guidance. The audit also notes that the former DCEO
Chief of Staff reported, “…prioritizing the property
damage DIAs may come at the expense of businesses in
other DIAs.” The former DCEO Assistant Director stated,
“I generally don’t think we should communicate that
businesses with damages will get priority though we
should implement on the back end.” Finally, the audit
notes that the administrative rules DCEO references in
its response were effective July 21, 2020, which was 14
days after the end of the Round 1 application period for
the small business component.
#5 - Applications DCEO should DCEO agrees with the recommendation.
Outside make sure that
Eligibility Criteria eligibility criteria is This error was due to a misunderstanding of the criteria among one of
followed when our partners; the Department takes responsibility for not having
conducting a grant caught the error during the review and approval of awards.
program and not For BIG Round 2 and in subsequent programs providing small
allow ineligible business relief, DCEO worked with its grant administrators to
applicants to maintain more extensive documentation and consistent processes for
receive funding. review and met directly with the administrators performing review
multiple times a week to ensure a common understanding on program
policy, how it should be operationalized, and to quickly address any
issues or questions that arose.
Additional improvements include a more robust set of internal
reviews of awards prior to allowing grant administrator to release
funds, including DCEO staff closely reviewing samples of award
determinations on an ongoing basis.
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Auditor Comment #4:
DCEO states the error was a misunderstanding among
one of the partners. While that may be true, the system
developed by that partner, which DCEO approved,
allowed the ineligible applications to go forward. DCEO
also states that additional improvements were made in
Round 2 and subsequent programs. While we cannot
comment on additional programs, we can comment that
we were only able to concur with 41 percent of the BIG
awards in Round 2 from our sample.
#6 - Award DCEO should, The Department agrees with the recommendation that oversight, due
Selection Testing when utilizing diligence and reviews are critically important when making grant
Results for Small grant awards, and it takes responsibility for the program’s shortcomings.
Business administrators to The amount of time in which the Department established the program
Component make funding and delivered funding to businesses in dire need of support ultimately
selections, conduct resulted in an imperfect process.
more extensive
oversight by The Department would like to note that the majority of businesses in
ensuring the OAG’s case study that are in question are considered minor
administrators administrative errors, such as failing to sign/date a tax return:
understand the Round 1: 91 of 150 (failure to sign/date tax return)
evaluation criteria
and by reviewing a Round 2: 85 of 150 (failure to sign/date tax return)
significant amount
of application As stated in the Department’s prior response, it did not reject an
documentation to application on the basis of a tax return not being signed or dated. The
determine if awards vast majority of small businesses are generally not accustomed to
were correctly applying for state grants. With the added stress of a global pandemic,
made. it was decided that grants should not be withheld for minor
administrative concerns.
The Department also confirms receipt regarding additional
inconsistencies identified and will evaluate the findings.
For future rounds of COVID-19 funding programs through its B2B
program, the Department implemented the following processes to
improve overall program administration:
• Basing award size on tax form information for year losses
occurred. Tax information was not available for 2020 during the
BIG program and therefore, the Department had to use less
preferable proxies to determine need (e.g. bank statements
comparing year over year)
• Use of a portal maintained by our grant administrator where
DCEO has full access to all submitted application data, uploaded
documents, and reviewer actions. The application portal provides
a full scope of information and documentation for oversight of
administrator decisions.
• Implementation of standard, manual review checks against
external data sources for verification, such as receipt of other
sources of government relief, status with the Secretary of State’s
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
office, verification of proper licensing, and additional quality
assurance checks.
Auditor Comment #5:
The DCEO response chooses to ignore the cases where
applicants were ineligible to receive funding yet the
grant administrator and DCEO approved the funding
anyway. Instead, DCEO chooses to highlight a “minor”
administrative error relative to tax returns. We note that
it was DCEO criteria that required tax returns to be
legible, complete and signed to be accepted.
Relative to the Back to Business (B2B) program, we
cannot comment on the DCEO assertions, as B2B was
not within the scope of this audit.
#7 - Overpayment DCEO should The Department agrees with the recommendation that it should
of COVID Losses comply with comply with requirements in State statute but respectfully disagrees
by BIG Program requirements in with OAG’s assertion that the practice of rounding up represented
State statute non-compliance. Based on the language of the statute (20 ILCS 605-
relative to award of 105(h)) it was within the purview of DCEO to design the program in
funding for specific a manner that would efficiently and effectively support businesses
purposes. most in need.
Further, DCEO respectfully disagrees with OAG’s assertion that
rounding up constituted “excess amounts” given the unprecedented
hardship faced by small businesses in Illinois.
As noted in our response on page 31, “[documents showing losses
were] significantly lower than the actual financial hardship any
business had incurred due to COVID].”
The Department had the legal authority to identify a process that
provided an award to compensate businesses for losses and costs
incurred due to the COVID-19 pandemic. The documents required
from businesses in Round 2 reflected a snapshot of losses incurred
during a 2-month period that followed multiple prior months of
business closures and interruptions. It was within DCEO’s authority
to round up that amount to reflect that required documentation did not
include losses from revenue declines in other months, nor did it
include any increased costs associated with the pandemic.
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Auditor Comment #6:
State statute required DCEO, as part of the BIG
program, to provide financial assistance to cover
expenses or losses incurred due to the COVID-19
public health emergency. When an applicant submitted
proper documentation for a certain level of COVID
losses, DCEO was justified in providing funding.
However, DCEO elected to implement a process to
award additional funding for hypothetical losses not
supported by documentation. As noted in the audit,
one applicant demonstrated $97 in losses, yet DCEO
provided $5,000 to this applicant. This does not appear
to be within the spirit of the statute.
#8 - Exception to DCEO should take The Department agrees with the recommendation.
Policy on the the steps necessary
Number of to ensure that grant
Awards awardees do not
receive funds in
excess of program
policy.
#9 - Grant DCEO should, The Department agrees with the recommendation.
Administrators when utilizing
Working Without outside grant
Executed administrators,
Agreements ensure that grant
agreements are
executed prior to
allowing the
entities to work on
the grant program.
Additionally, when
the grant
administrators are
able to view
confidential
information as part
of the program,
DCEO should
develop procedures
to monitor that the
confidential
documents are
securely
maintained.
#10 - Lack of DCEO should The Department agrees with the recommendation and acknowledges
Documentation to maintain a history that the system by which notifications were made was not adequate.
Support Applicant of notifications to The Department is wholly committed to providing timely and
Notifications applicants of grant accurate information to grantees and in future rounds of COVID-19
programs it is funding through the B2B program, it utilized grant administrators
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
responsible for with more advanced technological capabilities to provide
when it decides to notifications.
utilize a third party
for those
notifications.
Auditor Comment #7:
Relative to the Back to Business (B2B) program, we
cannot comment on the DCEO assertions, as B2B was
not within the scope of this audit.
#11 - Timely DCEO should, The Department agrees with the recommendation and regrets any
Payment of BIG when allowing instance of untimely payment. The Department has found these
Awards grant instances often occur when bank account information changes or
administrators to varies from its original submission. The Department made significant
pay out grant improvements to this element for its B2B program, including 1)
funds, develop requesting banking information at the time of award (rather than the
controls to ensure time of application as was done for BIG); and 2) utilizing a secure
that payments are online platform to automatically verify banking information. This
timely made by drastically streamlined the funding process and reduced the number of
those grant instances where incorrect or out-of-date bank information resulted in
administrators. instances of back-and-forth with grantees.
Auditor Comment #8:
Relative to the Back to Business (B2B) program, we
cannot comment on the DCEO assertions, as B2B was
not within the scope of this audit.
#12 - Failure to DCEO should: The Department agrees with the recommendation.
Enforce Funding - conduct the
Monitoring monitoring that it
develops for grant
program criteria;
- follow
contractual criteria
it develops and
obtain the
documentation to
support grant
awards when a
third party
administrator is
utilized to select
grant recipients;
- comply with
administrative rules
and obtain
documentation to
demonstrate how
grant funds are
utilized; and
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
- conduct
monitoring efforts
to ensure that
multiple sources of
funding are not
utilized for the
same expenses.
#13 - Failure to DCEO should take The Department agrees with the recommendation and would like to
Deduct Previous steps to ensure that clarify that deductions were not a part of the program design. In this
Awards grant instance there was a regretful administrative error in the language
administrators used in the certification statements. The line pertaining to deductions
appropriately apply included in the certification statement was not indicative of actual
program program policies and requirements. The single line pertaining to
requirements to deductions was not included in any other program documents.
applications
including, when
applicable, the
deduction of
Auditor Comment #9:
previous awards.
Additionally, As stated in the audit, certifications for both rounds of
DCEO should not the small business component contained language that,
approve awards “the value of the current subaward will be deducted from
until adequate any future subaward granted to the business under this
review has been program.” While DCEO contends this was a “regretful
conducted. administrative error,” this was published criteria for the
BIG program; even though DCEO chose not to follow the
criteria.
#14 - Tax DCEO should takes The Department agrees with the recommendation.
Reporting Issue the steps necessary
to ensure that the
terms of grant
agreements,
including sending
1099 forms when
applicable, are
complied with by
grant
administrators.
#15 - Grant DCEO should have The Department agrees with the recommendation that systems should
Program a system in place to be in place to manage compliance and notices of violation. The
Violators manage notices of Department implemented a process by which complaints or claims of
grant program awardee ineligibility or noncompliance were referred to our legal
violators and bureau for investigation.
should enforce the
program
requirements it
creates.
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APPENDIX F AUDIT OF THE BUSINESS INTERRUPTION GRANT PROGRAM
Auditor Comment #10:
While the legal department at DCEO was utilized when a
report came in on noncompliance, it lacked an adequate
control to recover funds. As stated in the audit, DCEO
reported, “If recipients confirmed they were in
noncompliance, they were then required to ensure their
future compliance or to return the funds received. All
businesses communicated they would comply. As a
result, DCEO did not clawback funds for
noncompliance.”
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