REPORT DIGEST

INTERMEDIATE SERVICE CENTER #4: SOUTH COOK

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2018

Release Date:  August 22, 2019

FINDINGS THIS AUDIT:  2

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

FINDINGS LAST AUDIT: 5

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

• (18-1) The South Cook Intermediate
Service Center #4 lacked an adequate system
of internal controls over financial
reporting.

• (18-2) The South Cook Intermediate
Service Center #4 did not properly
recognize and disclose postemployment
benefits other than pensions as required by
Governmental Accounting Standards Board
Statement No. 75.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INTERNAL CONTROL DEFICIENCIES

The South Cook Intermediate Service Center
#4 (ISC) lacked an adequate system of
internal controls over financial reporting.
Auditors noted the following weaknesses:

• There was no formal review and approval
over the manual journal entry process by an
individual independent of the general
ledger process.
• No formal documentation was maintained to
indicate review of the reconciliation of
deposit totals by account to the general
ledger by the bookkeeper after Bloom
Township Trustees of schools had deposited
and recorded the cash receipts.

The ISC is responsible for establishing and
maintaining a system of internal controls
over the accounting function sufficient to
prevent errors and fraud.

ISC officials indicated they had not
established sufficient internal control
procedures. (Finding 18-001, page 11a)

The auditors recommended a formal review
and approval process over manual journal
entries by an individual independent of the
general ledger process should be
implemented. Additionally, formal
documentation should be maintained of the
ISC’s review of the reconciliation of
deposit totals by account to the general
ledger after Bloom Township Trustees of
Schools has deposited and recorded the cash
receipts.

ROE Response: The ISC now maintains all
supporting documentation for manual journal
entries and a formal review process occurs.
All journal entries originate with the ISC
bookkeeper; journal entries are then
approved by the Executive Director and
documentation of the entry and the approval
process are maintained on file for the
auditor’s review. In addition, all
documentation is reviewed by a public
accounting firm and is prepared before the
audit year begins. The ISC will work with
the Bloom Township Treasurer’s Office and
request copies of reconciliation statements
to confirm/verify that all of the ISC’s
accounts were properly reconciled. The ISC
bookkeeper will maintain documentation of
reconciliation deposit totals.

DEPARTURE FROM U.S. GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)

The South Cook Intermediate Service Center
#4 (ISC) did not properly recognize and
disclose postemployment benefits other than
pensions (OPEB) for all employees as
required by Governmental Accounting
Standards Board (GASB) Statement No. 75 in
their financial statements or notes.

The ISC participates in a defined benefit
Other Postemployment Benefits – Health
Insurance Plan (“OPEB Plan”), which
provides postemployment benefits other than
pensions to its employees in exchange for
employee services rendered. Under accrual
accounting, the cost of OPEB, and any
related OPEB liability for the OPEB Plan,
should generally be recorded in the period
when the exchange for the employees’
services occurs, rather than when the
benefits are paid. Currently, the ISC’s
OPEB Plan is financed on a pay-as-you-go
basis, and as such, the financial
statements do not report the financial
effects of OPEB until the promised benefits
are paid. The ISC’s actuarial valuation of
its OPEB liability included Teachers’
Retirement System (TRS) employee
information; however Illinois Municipal
Retirement Fund (IMRF) employee information
was not included in order to be in
compliance with GASB Statement No. 75.

The Illinois Administrative Code (74 Ill.
Adm. 420.320 (c) (1) and (2)) requires that
each Regional Office of Education and
Intermediate Service Center maintain the
accounting records necessary to prepare
financial statements in accordance with
U.S. generally accepted accounting
principles (GAAP).

GASB Statement No. 75 – Accounting and
Financial Reporting for OPEB requires that
employers recognize and disclose OPEB
expense. Net OPEB obligations, if any,
should be reported as liabilities (or
assets if overfunded) in the financial
statements. For financial reporting
purposes, an actuarial valuation, prepared
in accordance with GASB Statement No. 75,
is required to measure and disclose the
annual OPEB cost. In certain circumstances,
an alternative measurement method can be
applied instead of obtaining an actuarial
valuation.

In the absence of an actuarial valuation
prepared in accordance with GASB Statement
No. 75 for the IMRF employees, the auditors
could not reasonably determine the amount
by which this departure would affect
assets, liabilities, deferred outflows of
resources, deferred inflows of resources,
and/or expenditures of the ISC as of June
30, 2018.

ISC officials indicated their actuarial
valuation did not include IMRF employee
information in order to be in compliance
with GASB Statement No. 75. (Finding
18-002, pages 11b – 11c)

The auditors recommended the ISC should
obtain an actuarial valuation of its OPEB
Plan that includes IMRF employee
information to be in compliance with GASB
Statement No. 75 and include all
disclosures required by the Statement in
its financial statements.

ROE Response: The ISC has contracted with
an actuary to obtain an actuarial valuation
for its IMRF employees. The ISC will
include the required disclosures in the
fiscal year 2019 financial statements.

AUDITORS’ OPINION

Our auditors state the South Cook
Intermediate Service Center #4’s financial
statements as of June 30, 2018 are fairly
presented in all material respects except
for the effects of not recognizing  or
disclosing Illinois Municipal Retirement
Fund postemployment benefits other than
pensions in the Statement of Net Position
and the Statement of Activities.

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

JEANNE MICHAUD
Audit Manager

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

FRANK J. MAUTINO
Auditor General

FJM:JRB