REPORT DIGEST

INTERMEDIATE SERVICE CENTER #1: NORTH COOK

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  June 28, 2018

FINDINGS THIS AUDIT:  1

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  0 -- 1 -- 1

FINDINGS LAST AUDIT: 1

Category 1: Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State laws
and regulations (material noncompliance).
Category 2: Findings that are significant
deficiencies in internal control and
noncompliance with State laws and
regulations.
Category 3: Findings that have no internal
control issues but are in noncompliance
with State laws and regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are also
available on the worldwide web at
www.auditor.illinois.gov

SYNOPSIS

• (17-1) The North Cook Intermediate
Service Center #1 did not have sufficient
internal controls over the financial
reporting process.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The North Cook Intermediate Service Center
#1 (ISC #1) did not have sufficient
internal controls over the financial
reporting process. ISC #1 maintained its
accounting records on the cash basis of
accounting during the fiscal year and
posted year-end accrual entries for
financial statement purposes. While the
Center maintained controls over the
processing of most accounting transactions,
there were not sufficient controls over the
preparation of generally accepted
accounting principles (GAAP) based
financial statements for management or
employees in the normal course of
performing their assigned functions to
prevent or detect financial statement
misstatements and disclosure omissions in a
timely manner.

ISC #1 is required to maintain a system of
controls over the preparation of financial
statements in accordance with GAAP. ISC
#1’s internal controls over GAAP financial
reporting should include adequately trained
personnel with the knowledge, skills, and
experience to prepare GAAP based financial
statements and include all disclosures as
required by the Governmental Accounting
Standards Board (GASB).

During review of the ISC #1’s financial
information prepared by the Center,
adjustments were necessary to properly
record the following:

• Interfund receivables and payables.

• Additional accounts receivable,
unavailable revenue, and reverse prior year
accounts payable.

• Individual fund cash balances and fund
balances to actual.

Through inquiries and discussions with the
ISC #1’s accounting personnel and Executive
Director, auditors noted that the Center
did not have adequate controls to record
and report the Center’s net accrued pension
liabilities/assets, deferred outflows of
resources, deferred inflows of resources,
and pension expenses in accordance with
GAAP.

According to ISC management, it did not
effectively detect all of the adjustments
needed in order to present financial
statements in accordance with GAAP. This is
due in part to limitations of the software
used by the Center. Although significant
strides were made during the current fiscal
year, additional time is necessary to
successfully detect all adjustments
necessary to present the Center’s financial
statements in accordance with GAAP. In
addition, the complex requirements of GASB
Statements No. 68 and No. 71 will require
additional time and training before the
accounting staff can fully implement the
requirements on its own. (Finding 2017-001,
pages 11a-11b) This finding was first
reported in 2014.

The auditors recommended that as part of
internal control over the preparation of
financial statements, ISC #1 should
implement comprehensive preparation
procedures to ensure the financial
statements are complete and accurate. These
procedures should be performed by a
properly trained individual possessing a
thorough understanding of the applicable
GAAP, GASB pronouncements, and knowledge of
the ISC’s activities and operations.

ROE Response: The Business Manager,
District 62, and Maine Township School
Treasurer are working together to put into
practice comprehensive preparation
procedures to ensure the financial
statements are complete and accurate.
Substantial progress has been made to
achieve this goal thus far and will
continue through implementation and
conversion to new financial software in FY
2018 that ISC #1 and District 62 jointly
have procured. The use of this new
financial software will facilitate GAAP
reporting and improved internal control
procedures.

Prior Year ROE Response: With the
retirement of the ISC #1’s Business Manager
during FY 2015, a replacement was hired who
is an accountant and possesses many years
of experience in school finance. The new
Business Manager will strive to do her best
to prepare the financial statement in
accordance with GAAP. In addition, the
Business Manager and District 62 personnel
are working to secure new financial
software that will help achieve GAAP
reporting and improved internal control
procedures.

AUDITORS’ OPINION

Our auditors state the North Cook
Intermediate Service Center #1’s financial
statements as of June 30, 2017 are fairly
presented in all material respects.

This financial report was conducted by the
firm of Kemper CPA Group LLP.

KELLY MITTELSTAEDT
Audit Manager

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

FRANK J. MAUTINO
Auditor General

FJM:JMM