REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #20: EDWARDS,
HARDIN, GALLATIN, POPE, SALINE, WABASH,
WAYNE AND
WHITE COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED: JUNE 30, 2015

Release Date:  September 22, 2016

FINDINGS THIS AUDIT:  5

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

FINDINGS LAST AUDIT: 6

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

• (15-1) The Regional Office of Education
#20 did not have sufficient internal
controls over the financial reporting
process.

• (15-2) The Regional Office of Education
#20 did not have adequate controls over
grant compliance.

• (15-3) The Regional Office of Education
#20 did not have sufficient internal
controls over monthly bank
reconciliations.

• (15-4) The Regional Office of Education
#20 did not have adequate internal
controls over cash balances.

• (15-5) The Regional Office of Education
#20 did not have adequate internal
controls over the preparation of journal
entries.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #20 is
required to maintain a system of controls
over the preparation of financial
statements in accordance with generally
accepted accounting principles (GAAP).
Regional Office 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).

The Regional Office of Education #20 did
not have sufficient internal controls over
the financial reporting process.  While
the Regional Office maintains controls
over the processing of most accounting
transactions, there are not sufficient
controls over the preparation of 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.

During review of the Regional Office’s
financial information prepared by the
Regional Office of Education #20, auditors
noted the ROE’s financial information
required material adjusting entries to
accounts receivable, accounts payable,
accrued payroll, and unearned revenue in
order to present its financial statements
in accordance with generally accepted
accounting principles.  In addition, the
ROE did not have adequate controls to
record and report the ROE’s net accrued
pension liabilities/assets, deferred
outflows of resources, deferred inflows of
resources and pension expenses in
accordance with GAAP.  Proposed adjusting
entries were approved and accepted by ROE
management.

According to Regional Office officials,
they did not have adequate funding to hire
and/or train their accounting personnel in
order to comply with these requirements.
Additionally, the complex requirements of
GASB Statements No. 68 and No. 71 were new
for fiscal year 2015 and will require
additional time and training before the
ROE can fully implement the requirements
on its own. (Finding 2015-001, pages
11a-11b) This finding was first reported
in 2011.

The auditors recommended that as part of
internal control over the preparation of
financial statements, the Regional Office
of Education #20 should implement
comprehensive preparation procedures to
ensure that the financial statements are
complete and accurate.  These procedures
should be performed by a properly trained
individual possessing a thorough
understanding of applicable GAAP, GASB
pronouncements, and knowledge of the
Regional Office of Education #20’s
activities and operations.

The Regional Office of Education #20
responded that it will work with other
Regional Offices of Education for
professional development and necessary
training to ensure that the proper
employees possess the knowledge required
to compile the necessary GAAP based
financial statements.  (For previous
Regional Office response, see Digest
Footnote #1 located at the end of the
digest.)

CONTROLS OVER GRANT COMPLIANCE

Grant agreements require the Regional
Office to report actual expenditures
incurred rather than reporting based on
the amount budgeted in the grant
agreement.

Currently, the Regional Office does not
document the time and effort of employees
that are paid from multiple grants in
order to allocate salaries to the grants
based on actual cost.

The Regional Office of Education #20 did
not have a system of internal controls in
place to ensure that salary and benefit
costs for employees paid from multiple
grants are allocated based on actual time
and effort expended on each program.
(Finding 2015-002, page 11c)

The auditors recommended that the Regional
Office of Education #20 should formally
document the time and effort spent on each
grant for employees paid from multiple
grant sources and allocate actual costs to
each grant accordingly.

The Regional Office of Education #20
responded that it has implemented the use
of time and effort sheets for federal
funded grants to ensure accurate
allocation of funds to each grant
accordingly.  (For previous Regional
Office response, see Digest Footnote #2
located at the end of the digest.)

PREPARATION OF MONTHLY BANK
RECONCILIATIONS

As a basic cash management procedure, the
Regional Office of Education #20 should be
preparing bank reconciliations for each of
its cash accounts on a monthly basis.
This procedure should be incorporated as
part of the monthly closing procedures.

During the fiscal year, the Regional
Office of Education #20 did not reconcile
any of its cash accounts until after the
fiscal year end in preparation for the
annual audit.

The Regional Office of Education #20 did
not have sufficient internal controls over
its monthly financial closing process that
includes monthly bank reconciliations.
(Finding 2015-003, page 11d)

The auditors recommended that the Regional
Office of Education #20 should develop and
implement sufficient internal controls
over its monthly financial closing process
to ensure that all bank statements are
reconciled to the general ledger in a
timely manner and that reconciliations are
reviewed by an individual independent of
the preparation process to ensure the
reconciliation is mathematically correct
and the reconciled balance agrees to the
general ledger accounts(s).

The Regional Office of Education #20
responded that all bank accounts are
reconciled monthly to the general ledger.
The reconciled statements are then
reviewed by a third party that did not
participate in the reconciliation. (For
previous Regional Office response, see
Digest Footnote #3 located at the end of
the digest.)

CONTROLS OVER CASH BALANCES

The Regional Office of Education’s
investment policy indicates that it
follows the Illinois Public Funds
Investment Act (30 ILCS 235/1 et. seq.)
(Act).  The Act gives the authorization
for deposits in excess of the federally
insured limit to be covered by pledged
collateral held by the financial
institutions’ trust departments in the
Regional Office #20’s name.  In addition,
prudent business practice requires that
all cash and investments held by financial
institutions for the Regional Office be
adequately covered by depository insurance
or collateral.  (Finding 2015-004, page
11e)

During the current fiscal year, the
Regional Office had funds in excess of the
federally insured limit that were not
collateralized.  At June 30, 2015, $67,526
of the Regional Office of Education #20’s
$429,972 deposited with financial
institutions was uncollateralized and
uninsured.

The financial institution and the Regional
Office failed to monitor deposit and
collateral balances. (Finding 2015-004,
page 11e)

The auditors recommended that the Regional
Office of Education #20 should monitor
deposit and collateral balances throughout
the year to ensure sufficient collateral
is held to secure its bank deposits.

The Regional Office of Education #20
responded that Security Pledges have been
received to ensure adequate collateral
balances.

CONTROLS OVER PREPARATION OF JOURNAL
ENTRIES

The Regional Superintendent of Schools is
required to maintain a system of controls
over financial processes.

During review of the Regional Office’s
financial information, auditors noted the
journal entries posted to the Regional
Office’s accounting system were not
supported by documentation to indicate the
purpose of the journal entry.  In
addition, there was no indication the
journal entries were reviewed and approved
by an individual independent of the
general ledger process.

The Regional Office did not maintain
sufficient support for journal entries
made during the year. (Finding 2015-005,
page 11f)

The auditors recommended that the Regional
Office should maintain supporting
documentation for all journal entries that
are made throughout the year and each
journal entry should have documented
review and approval by an individual
independent of the general ledger process.

The Regional Office responded that it is
maintaining and attaching supporting
documentation to each journal entry.  More
descriptive reasons for the entries and a
review by a third party for approval and
verification of accuracy have been
implemented.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #20’s financial statements as of
June 30, 2015 are fairly presented in all
material respects.

FRANK J. MAUTINO
Auditor General

FJM:JRB

AUDITORS ASSIGNED:  Kemper CPA Group, LLP
were our special assistant auditors.

DIGEST FOOTNOTES

#1: Controls Over Financial Statement
Preparation - Previous Regional Office
Response

In its prior response in 2014, the
Regional Office of Education #20 responded
that it is completing actions, with
regards to the preparation of the
financial statements, on a timely manner,
and not waiting until the end of the year
in preparation for the annual audit.  The
Regional Office stated that monthly and
quarterly duties are performed timely and
approved by the Regional Superintendent.
Extra training is not deemed possible due
to the added cost of the training, but it
is taking into account all of the
suggestions of its auditors and
implementing any and all suggestions that
they may provide.  The Regional Office
noted that once the cost of additional
training is plausible, the proper
employees will receive the necessary
training.  The Regional Office of
Education is adding additional information
to support the adjusting journal entries.

#2: Controls Over Grant Compliance -
Previous Regional Office Response

In its prior response in 2014, the
Regional Office of Education #20 responded
that it was unaware that time and effort
sheets were needed.  Time and effort
sheets are currently being completed.

#3  Preparation of Monthly Bank
Reconciliations – Previous Regional Office
Response

In its prior response in 2014, the
Regional Office of Education #20 responded
that all bank reconciliations are
currently being completed on a monthly
basis.