REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #1:
ADAMS, BROWN, CASS, MORGAN, PIKE AND
SCOTT COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  April 13, 2022

FINDINGS THIS AUDIT:  4

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 0 -- 0
Category 2:  1 -- 2 -- 3
Category 3:  1 -- 0 -- 1
TOTAL:  2 -- 2 -- 4

FINDINGS LAST AUDIT: 2

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

• (21-1) The Regional Office of
Education #1 had inadequate controls
over the bank reconciliation process.

• (21-2) The Regional Office of
Education #1 had inadequate controls
over receipts.

• (21-3) The Regional Office of
Education #1 lacked adequate controls
over the review of internal controls
over external service providers.

• (21-4) The Regional Office of
Education #1 was in noncompliance with
grant requirements.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

INADEQUATE CONTROLS OVER BANK
RECONCILIATION PROCESS

The Regional Office of Education #1
(ROE) did not have adequate controls
over the bank reconciliation process.
The ROE maintained 11 bank accounts.
During the audit, auditors noted that
in 4 bank accounts, 28 of 48 monthly
bank reconciliations (58 percent) were
reconciled more than a month late.

Effective internal control policies
require complete and accurate
accounting records of all transactions
of the entity. Sound internal controls
require bank reconciliations to be
performed accurately and promptly.
Reconciling items should be
investigated immediately, and
adjustments made to the general
ledger. Bank reconciliations should
also be reviewed and approved by a
person independent of the preparer in
a timely manner.

Regional Office officials indicated
bank reconciliations were delayed due
to system issues that were not
resolved timely for them to prepare
their bank reconciliations. (Finding
21-001, pages 11 – 12)

The auditors recommended the ROE
should prepare monthly bank
reconciliations on a timely basis.
This would ensure that the cash
balance per ledger is correct and cash
transactions are fully accounted for.
The ROE should identify alternative
procedures to manage future system
issues.

ROE Response: The data transfer of
moving to a new accounting system
created unexpected challenges that
resulted in monthly bank
reconciliations not being completed in
a timely manner. Management accepts
this finding and will identify
alternative procedures to manage
future system issues.

INADEQUATE CONTROLS OVER RECEIPTS

The Regional Office of Education #1
(ROE) did not document the date of
cash receipts. During the audit,
auditors used the dates of the checks
received to determine the timeliness
of deposit. Auditors noted 11 of 40
receipts tested (28%), totaling
$192,081, were not timely deposited,
ranging from 1 to 33 days late.

Sound internal controls require a
policy on timeliness of deposits,
either based on dollar threshold or
defined timeframe, from the date of
receipt.

Regional Office officials indicated
the exceptions noted were because they
have not formally documented their
deposit policy, which includes timing
of deposit and required supporting
documentation such as receipt date.
(Finding 21-002, page 13)

The auditors recommended the ROE
should implement controls and maintain
adequate supporting documentation to
ensure cash receipts are deposited in
a timely manner.

ROE Response: Management accepts this
finding and will implement controls
and maintain adequate supporting
documentation to ensure cash receipts
are deposited in a timely manner.

LACK OF ADEQUATE CONTROLS OVER THE
REVIEW OF INTERNAL CONTROLS OVER
EXTERNAL SERVICE PROVIDERS

The Regional Office of Education #1
(ROE) lacked adequate controls over
the review of internal controls over
external service providers. During
testing, the auditors noted the ROE
had not:
• Developed a formal process for
identifying service providers and for
either obtaining the Service
Organization Controls (SOC) reports
from the service providers and related
subservice organization or performing
alternative procedures to determine
the impact of such service on its
internal control environment prior to
signing an agreement with the service
provider.
• Documented its review of each of the
SOC reports or performed alternative
procedures to evaluate any issues
relevant to the ROE’s internal
controls.
• Monitored and documented the
operation of the Complementary User
Entity Controls (CUECs) relevant to
the ROE’s operations.

The ROE is responsible for the design,
implementation, and maintenance of
internal controls, including the
controls that are outsourced to
service providers, related to
information systems and operations to
ensure resources and data are
adequately protected from unauthorized
or accidental disclosure,
modifications, or destruction.

Generally accepted information
technology guidance endorses the
review and assessment of internal
controls related to information
systems and operations to assure the
accurate processing and security of
information.

Regional Office management indicated
they understand the importance of a
formal process to monitor service
providers and did not realize the
current process was not adequate to
address all the issues noted. (Finding
21-003, pages 14 – 15)

The auditors recommended ROE identify
all third-party service providers and
determine and document if a review of
controls is required. If required, the
ROE should:
• Obtain SOC reports or perform
independent review of internal
controls associated with outsourced
systems including services provided by
subservice organizations prior to
signing agreements with the providers
and annually thereafter.
• Monitor and document the operation
of the CUECs relevant to the ROE’s
operations.
• Document its review of the SOC
reports or perform alternative
procedures, to evaluate all
significant issues to ascertain if a
corrective action plan exists and when
it will be implemented, any impacts to
the ROE, and any compensating
controls.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

ROE Response: Management accepts this
finding. ROE No. 1 will identify all
third-party service providers and
determine and document if a review of
controls is required. If required, ROE
No. 1 will:
• Obtain SOC reports prior to signing
agreements and annually thereafter.
• Monitor and document the operation
of the CUECs relevant to ROE No. 1’s
operations.
• Document the review of the SOC
reports, evaluate all significant
issues to ascertain if a corrective
action plan exists and when it will be
implemented, any impacts to ROE No. 1,
and any compensating controls.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

NONCOMPLIANCE WITH GRANT REQUIREMENTS

The Regional Office of Education #1
(ROE) was in noncompliance with grant
requirements. The ROE did not timely
submit 8 of 25 (32%) quarterly
expenditure reports, ranging from 2 to
21 days late.

The Illinois Grant Funds Recovery Act
(30 ILCS 705/4) requires State grant
recipients with awards in excess of
$25,000 to submit quarterly
expenditure reports to reflect the
process of the grant program. The
Illinois State Board of Education
(ISBE) requires all grant recipients
regardless of amount awarded, to
submit quarterly expenditure reports.
The State and Federal Grant
Administration Policy, Fiscal
Requirements, and Procedures of the
ISBE Division of
Funding and Disbursement Services
require expenditure reports to be
filed within 20 calendar days of the
end of each reporting quarter.

Regional Office management indicated
in four of the exceptions noted, there
were no expenditures during the
quarter and they were not aware that
reports were still required to be
submitted. For the remaining four
exceptions, it was an oversight on
their end as two of the grants were
new grants. (Finding 21-004, page 16)

The auditors recommended the ROE
should develop internal controls to
ensure expenditure reports are
submitted within the grantors’ due
date.

ROE Response: Management accepts this
finding and will develop internal
controls to ensure expenditure reports
are submitted within the grantors’ due
date.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #1’s financial statements
as of June 30, 2021 are fairly
presented in all material respects.

This financial audit was conducted by
the firm of Adelfia LLC.

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:JRB