REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #40: CALHOUN/
GREENE/JERSEY/MACOUPIN COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED: JUNE 30, 2015

Release Date:  September 22, 2016

FINDINGS THIS AUDIT:  3

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

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

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

• (15-2) The Regional Office of Education
#40 did not have sufficient internal
controls over cash, receipts, and
disbursements.

• (15-3) The Regional Office of Education
#40 did not have sufficient internal
controls over adult education expenditure
reporting.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #40 is
required to maintain a system of controls
over the preparation of financial
statements in accordance with generally
accepted accounting principles (GAAP).  A
Regional Office’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).

The Regional Office of Education #40 did
not have sufficient internal controls over
the financial reporting process.  The
Regional Office maintains its accounting
records on cash basis accounting during
the fiscal year and posts year-end accrual
entries for financial statement purposes.
While the Regional Office maintains
controls over the processing of most
accounting transactions, there were not
sufficient controls over the preparation
of the 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 of
Education #40’s financial information
prepared by the Regional Office of
Education #40, the auditors noted that the
Regional Office did not have adequate
controls over the maintenance of complete
records of accounts receivable, accounts
payable, or unearned revenue.  While the
Regional Office did maintain records to
indicate the balances of accounts
receivable, accounts payable, and unearned
revenue, not all entries were provided to
post grant receivables and unearned
revenue.  Audit entries were also proposed
to reclassify reimbursements from others,
adjust fund balances to actual, and to
correct interfund transfer entries.

Through inquiries and discussions with the
Regional Office’s accounting personnel and
Regional Superintendent, auditors noted
the Regional Office of Education #40 also
did not have adequate controls to record
and report the Regional Office’s net
accrued pension liabilities/assets,
deferred outflows of resources, deferred
inflows of resources, and pension expenses
in accordance with GAAP.

According to Regional Office of Education
#40 management, they did not have adequate
funding to hire a certified public
accountant or other financial
professionals with the appropriate
training and expertise as full-time staff.

Additionally, the complex requirements of
GASB Statements No. 68 and 71 were new for
fiscal year 2015 and will require
additional time and training before the
Regional Office can fully implement the
requirements on its own. (Finding
2015-001, pages 11a-11b) This finding was
first reported in 2007.

The auditors recommended that, as part of
internal control over the preparation of
financial statements, the Regional Office
of Education #40 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 #40’s
activities and operations.

The Regional Office of Education #40
responded that at this time, the Regional
Office cannot afford to hire an individual
to assist with financial statement
preparation; however, fiscal personnel of
the Regional Office will strive to do
their best to prepare the financial
statements in accordance with GAAP. (For
previous Regional Office response, see
Digest Footnote #1 located at the end of
the digest.)

CONTROLS OVER CASH, RECEIPTS, AND
DISBURSEMENTS

The Regional Office of Education #40 is
required to maintain a system of controls
such that all cash balances held by the
Regional Office, as well as all cash
receipts and disbursements, are recorded
in the Regional Office’s accounting
records.  All Regional Office program
transactions should be subject to
established internal controls.

For the majority of the fiscal year, the
Regional Office operated a program, which
provided diapers and other parenting
supplies to teen parents, with cash funds
that were not recorded in the Regional
Office’s accounting records.  Checks
written to the Regional Office by donors
to fund this program were cashed by a
contractor of the Regional Office at a
local bank and then used to purchase
supplies for the program.  The off-book
transactions included fiscal year 2015
local revenues of $4,133 and expenditures
of $3,110.  The Regional Office recorded
this program’s cash transactions in its
accounting records at the end of the
fiscal year, but these transactions were
not subject to any of the Regional
Office’s internal controls over cash
receipts and cash disbursements during the
year.

This was caused by a lack of communication
with accounting personnel and a
misunderstanding of accounting and
internal control procedure requirements by
program directors. (Finding 2015-002, page
11c)

Auditors recommended that in the future,
all Regional Office program transactions
should be recorded in the accounting
records and be subject to the same
established internal controls as other
Regional Office transactions.
Furthermore, Regional Office staff/
contractors should be instructed not to
cash checks written to the Regional
Office.

The Regional Office responded that the
bookkeeping department has taken control
of all of the money for the teen parenting
program.  All of the Regional Office’s
controls over cash receipts and
disbursements during the year are now
applied to this program.

CONTROLS OVER ADULT EDUCATION REPORTING

The Regional Office of Education #40 is
required to maintain a system of controls
over grant compliance requirements to
ensure grant reporting is accurate.

The end of the year expenditure reports
for the Illinois Community College Board
Adult Education grants contained expense
amounts that were misclassified when
compared to actual expenses:  State
Performance, State Basic, Public
Assistance, and Federal Basic.  Also, for
the Public Assistance grant, actual
instruction expenses did not exceed 45% as
required by the grant guidelines.

The individual preparing the expenditure
reports was inexperienced in how to
properly prepare the reports. (Finding
2015-003, pages 11d-11e)

Auditors recommended that all expenditure
reports be reviewed by an individual
separate from the preparer and compared to
underlying accounting records for
completeness and accuracy.

The Regional Office responded that staff
have been trained on how to complete
expenditure reports.  Expenditure reports
must match bookkeeping ledgers.
Furthermore, administration will review
all expenditure reports for completeness
and accuracy.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #40’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 FOOTNOTE

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

In its prior response in 2014, the
Regional Office of Education #40 responded
that at this time, the Regional Office
cannot afford to hire an individual to
assist with financial statement
preparation; however, fiscal personnel of
the Regional Office will strive to do
their best to prepare the financial
statements in accordance with GAAP.