REPORT DIGEST

INTERMEDIATE SERVICE CENTER #2: WEST COOK

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  July 9, 2025

FINDINGS THIS AUDIT: 6

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  1 -- 1 -- 2
Category 2:  0 -- 2 -- 2
Category 3:  0 -- 2 -- 2
TOTAL:  1 -- 5 -- 6

FINDINGS LAST AUDIT: 6

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

• (21-1)  The Intermediate Service Center #2
did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (21-2)  The Intermediate Service Center #2
did not have adequate internal control
procedures.

• (21-3)  The Intermediate Service Center #2
lacked adequate controls over the
identification of federal awards.

• (21-4)  The Intermediate Service Center #2
did not have adequate internal controls over
grant compliance.

• (21-5)  The Intermediate Service Center #2
did not have adequate internal controls over
procurement-card transactions.

• (21-6)  The Intermediate Service Center #2
did not have adequate internal controls over
payroll processing.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DELAY OF AUDIT

The Intermediate Service Center #2 (ISC) did
not provide completed financial statements
in an auditable form by the August 31, 2021
deadline. The June 30, 2020 report was not
released until August 14, 2024. The FY21
completed financial statements were provided
to auditors on December 19, 2024.

The ISC is subject to 105 ILCS 5/2-3.17a
which requires the Auditor General’s office
to cause an audit to be made, as of June
30th of each year, of the financial
statements of all accounts, funds, and other
moneys in the care, custody, or control of
the executive director of each educational
service region in the State and of each
educational service center established in
the School Code. The audit is to be
conducted in accordance with Generally
Accepted Government Auditing Standards. The
Regional Office of Education or Educational
Service Center may utilize a cash basis,
modified cash basis, or Generally Accepted
Accounting Principles (GAAP) basis of
accounting to prepare the financial
statements for audit. The ISC has chosen the
cash basis of accounting for financial
reporting.

In accordance with 105 ILCS 5/2-3.17a, the
Auditor General has promulgated
administrative rules and regulations to
govern this process. Those rules, 74 Ill.
Adm. Code 420.320 (c) (2), state that for
audit purposes, each regional office of
education and educational service center
shall make available to the Auditor General
or his designee all books and records deemed
necessary to make and complete the required
audits. The records shall be in auditable
form by August 15 of the succeeding fiscal
year. Financial reports are to be available
no later than August 31 in order for the
annual audit to be completed by an
independent auditor selected by the Auditor
General.

In addition, prudent business practices and
transparency require timely preparation and
completion of financial statements.

ISC management indicated they incurred key
employee turnover which has put them behind
in financial reporting. (Finding 21-001,
pages 10 – 11) This finding was first
reported in 2015.

The auditors recommended the ISC should
implement procedures to ensure compliance
with 105 ILCS 5/2-3.17a and 74 Ill. Adm.
Code 420.320 (c) (2). These financial
statements need to be presented to the
Auditor General’s independent auditors for
audit by the August 31 deadline.

ROE Response: As this writing is occurring
in FY25, we expect to see this as an ongoing
finding for the audits yet to be completed
for FY21-24. We have worked with our
contracted accountant over the past eight
years, who has experience with ROE/ISC
audits and knows the requirements, to have
reports available in a timely manner moving
forward. We have also hired a Chief School
Business Official (CSBO) who started work
here in July 2021 to address this issue and
other findings in this document.

INADEQUATE INTERNAL CONTROL PROCEDURES

The Intermediate Service Center #2 (ISC) did
not have adequate internal control
procedures. Auditors noted the following
weaknesses in the ISC’s internal control
system for which there were no mitigating
controls:

• All transactions were not initially posted
directly to the correct funds in the general
ledger. Subsequent adjusting entries had to
be recorded to reclassify them to the proper
fund.
• There was a lack of segregation of duties
within the cash receipts process. The same
employee was primarily responsible for
creating invoices for programs and
academies, receiving and depositing cash
receipts, and following up on outstanding
balances. Additionally, there was no formal
process for reviewing amounts owed to the
ISC.

The ISC is responsible for establishing and
maintaining an internal control system over
accounting transactions to prevent errors
and fraud.

ISC management indicated it had not
established or documented sufficient
internal control procedures. (Finding
21-002, pages 12 – 13) This finding was
first reported in 2012.

The auditors recommended the ISC implement
internal control procedures to ensure the
following:
• Transactions should be posted directly to
appropriate accounts upon initial recording
to avoid subsequent reclassifications.
• Incompatible accounting functions need to
be segregated and a formal process for
reviewing amounts owed to the ISC
implemented.

ROE Response:
• Since the original finding regarding
reclassifications, we have been training
staff to provide accurate account coding to
minimize the number of journal entries
needed.
• A receivables module in our financial
software has been implemented which allows
departments to better monitor any
outstanding invoices.

LACK OF ADEQUATE CONTROLS OVER THE
IDENTIFICATION OF FEDERAL AWARDS

As part of the audit process, we noted that
the Intermediate Service Center No. 2 (ISC)
erroneously recorded $320,000 of federal
grant revenue as local revenue in the
General Fund Local Sources account. The
revenue should have been shown as a program
in the Education Fund.

The Illinois State Board of Education (ISBE)
State and Federal Grant Administration
Policy, Fiscal Requirements and Procedures,
requires all State and federal grants
awarded from ISBE to follow Title 2 U.S.
Code of Federal Regulations Part 200,
Uniform Administrative Requirements, Cost
Principles and Audit Requirements for
Federal Awards (Uniform Guidance). Section
§200.303 of the Uniform Guidance Internal
Controls requires that recipients and
subrecipients must establish, document, and
maintain effective internal control over the
Federal award that provides reasonable
assurance that the recipient or subrecipient
is managing the Federal award in compliance
with Federal statutes, regulations, and the
terms and conditions of the Federal award.

By improperly classifying federal awards as
local revenue, the ISC runs the risk of:

• failing to identify federal expenditures
which could necessitate a Single Audit;
• improperly reflecting a federal program on
their financial statements; and
• failing to restrict fund balance for any
unspent grant proceeds at year end.

ISC management indicated that separate
revenue and expenditure accounts were
maintained in the general ledger for this
grant but it was not identified as a federal
award.  (Finding 21-003, page 14)

The auditors recommended the ISC should
implement adequate internal controls to
ensure that federal grants are properly
identified and accounted for in their
general ledger and on their financial
statements.

ROE Response: A Director of Grants was hired
in FY23 and has built a team with experience
and expertise in grant requirements and
proper coding of grant revenue and expenses.


CONTROLS OVER GRANT COMPLIANCE

The Intermediate Service Center #2 (ISC) did
not have adequate internal controls over
grant compliance. During the course of the
audit, auditors noted 23 of the 70 (33%)
expenditure reports required by the Illinois
State Board of Education (ISBE) were not
submitted timely. Three expenditure reports
were submitted more than 22 days late, one
was submitted 19 days late, one was
submitted 12 days late, one was submitted 7
days late, five were submitted 4 days late,
two were submitted 2 days late and ten were
submitted one day late.

As a recipient of federal, State and local
funds from various grantor agencies, the ISC
must incorporate certain procedures into its
operations to comply with the grant
agreements with these entities.

The ISC is responsible for establishing and
maintaining an internal control system over
the completion of timely quarterly
expenditure reports required for grants
administered by ISBE. ISBE requires
expenditure reports to be filed within 20
days of the applicable end of each quarter.

ISC management indicated that this occurred
due to key employee turnover which has put
them behind in financial reporting. (Finding
21-004, page 15)

The auditors recommended the ISC should
implement adequate internal controls to
ensure that expenditure reports are filed
timely.

ROE Response: A Director of Grants and
Assistant Director of Grants were hired in
FY23 to oversee and monitor all grant
purchases.

INADEQUATE CONTROLS OVER PROCUREMENT-CARD
TRANSACTIONS

The Intermediate Service Center #2 (ISC) did
not have adequate internal controls over
procurement-card (P-card) transactions.
Internal controls over disbursements were
not effectively designed and implemented.
During the auditors testing of a sample of
three months of P-card transactions,
supporting receipts were not provided for 20
cardholders' transactions totaling $24,158.

The ISC is required to maintain a system of
controls over disbursements to prevent
errors, omissions, and fraud.

ISC management indicated charge receipts
were misplaced and could not be found.
(Finding 21-005, page 16)

The auditors recommended the ISC procedures
should be implemented to ensure
documentation of P-card activity is obtained
and retained.

ROE Response: Intermediate Service Center
No. 2 will implement procedures to ensure
documentation of P-card activity is obtained
and retained.

INADEQUATE CONTROLS OVER PAYROLL PROCESSING

The Intermediate Service Center #2 (ISC) did
not have adequate internal controls over
payroll processing. During auditors’ testing
of a sample of 40 payroll transactions,
auditors noted that 3 (7.5%) employees had
no documentation of an approved pay rate on
file. As a result, auditors were unable to
determine the accuracy of the payment to
those employees.

In addition, another employee had an
incorrect FY20-21 Salary Employee Agreement
on file which indicated a salary of $61,728
rather than the correct salary of $48,189.
The employee was paid based on the correct
salary for the period tested.  Finally,
preparation of time and effort reports with
percentage of time spent on various programs
was discontinued in fiscal 2021.

Best practices require the ISC to maintain a
system of controls over payroll processing
which includes documentation supporting
approved pay rates, provides reasonable
assurance that the salary and benefit
charges are accurate and properly allocated,
and requires records to be used to support
the distribution of employee salaries and
benefits among specific activities if the
employee works on multiple programs.

ISC management indicated that the
discontinuation of time and effort reports
was due to the fact that the reports were
not being reviewed and a new time keeping
system was going to be purchased. Approved
pay rates may not have been documented or
copies were not made for the employee files
and an updated Salary Employee Agreement was
not generated even though the correct pay
rate was used. (Finding 21-006, pages 17 –
18)

The auditors recommended the ISC employ best
practices to require time sheets or time and
effort reports and ensure that accurate
documentation supporting pay rates is
maintained in personnel files.

ROE Response: Salaries are entered by one
employee and now reviewed for accuracy by
another staff member. Staff whose salaries
are funded by a grant are required to track
their time in recently purchased time
tracking software.
AUDITORS’ OPINION

Our auditors state the Intermediate Service
Center #2’s financial statements as of June
30, 2021 are fairly presented in all
material respects.

This financial audit was conducted by the
firm of GW & Associates PC.

JOE BUTCHER
Division Director

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

FRANK J. MAUTINO
Auditor General

FJM:JMM