REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #3
BOND, CHRISTIAN, EFFINGHAM, FAYETTE, AND
MONTGOMERY COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  May 27, 2020

FINDINGS THIS AUDIT:  3

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

FINDINGS LAST AUDIT: 3

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

• (19-1) The Regional Office of Education #3 did
not have sufficient collateral on deposits.

• (19-2) The Regional Office of Education #3 did
not properly implement internal controls over
payroll and grant compliance.

• (19-3) The Regional Office of Education #3 did
not have adequate subrecipient monitoring
documentation.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INSUFFICIENT COLLATERAL ON DEPOSITS

The Regional Office of Education #3 (ROE) did not
have sufficient collateral on deposits. As of
June 30, 2019, cash balances held with various
banks exceeded Federal Deposit Insurance
Corporation (FDIC) coverage and pledged
collateral by $35,599.

The Public Funds Deposit Act (30 ILCS 225/1)
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 ROE’s
name. In addition, prudent business practice
requires that all cash and investments held by
financial institutions for the ROE be adequately
covered by depository insurance or collateral.

Regional Office management indicated they did not
consistently monitor the level of collateral to
determine it was at a sufficient amount. (Finding
19-001, page 10a)

The auditors recommended the ROE should
periodically monitor cash balances, FDIC
coverage, and pledged collateral to determine all
cash balances are secured, especially around
times when large deposits are being received.
Additionally, the ROE should work with its
financial institutions to provide sufficient
collateral or enter into agreements with its
financial institutions to have the cash balances
monitored for adequate collateral periodically
and adjusted as necessary.

ROE Response: ROE #3 is now monitoring the level
of collateral on a more regular basis.

INTERNAL CONTROLS OVER PAYROLL AND GRANT
COMPLIANCE

Based on testing performed and discussion with
Regional Office of Education #3 (ROE) personnel,
Regional Office employees, who are partially paid
from a federal or State program, prepared time
sheets using the budgeted percentage allocation
from their quarterly time and effort studies
rather than documenting their actual time spent
on each program for the months of July 2018 –
October 2018. As of November 1, 2018, the ROE
developed and implemented written policies and
procedures to document actual time worked on each
program. Actual time worked from November 1, 2018
– June 30, 2019, was compared to the actual
amount of payroll charged to each program and
adjusted, if necessary, to ensure amounts charged
were accurate, allowable, and properly allocated
as required by Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform
Guidance) and the Illinois State Board of
Education (ISBE) State and Federal Grant
Administration Policy, Fiscal Requirements and
Procedures manual.

The Uniform Guidance requires charges for
salaries and benefits to be supported by a system
of internal control which provides reasonable
assurance that the charges are accurate,
allowable, and properly allocated. It also
requires that records are used to support the
distribution of employees’ salary and benefits
among specific activities if the employee only
works part of the time on a federal award
program. It further states that budget estimates
alone do not qualify as support for salary and
benefit charges to a federal award.

The ISBE State and Federal Grant Administration
Policy, Fiscal Requirements and Procedures manual
requires that auditable “time and effort”
documentation should be written, after the fact
(not estimated or budgeted) documentation of how
the time was spent. Time and effort reports
should be prepared by any staff with salary
charged (1) directly to a federal award, (2)
directly to multiple federal awards, or (3)
directly to any combination of a federal award or
other federal, state or local funds.
Additionally, all time and effort sheets and
other supporting documentation must be retained
at the local level and be available for review or
audit any time within three years after
termination of the project or until the local
entity is notified in writing from ISBE that the
records are no longer needed for review or audit.

ROE management indicated proper time sheets were
not implemented until November 1, 2018, to
compare actual time spent to budgeted time spent
in order to provide amounts charged to programs
that were accurate, allowable, and properly
allocated. (Finding 19-002, pages 10b – 10c) This
finding was first reported in 2016.

The auditors recommended that the Regional Office
should continue to follow written policies and
procedures over payroll implemented November 1,
2018, to ensure proper controls are in place to
document actual time worked on each program.
Actual time worked should be compared to
allocated payroll charges for the entire fiscal
year in order to ensure amounts charged to
programs are accurate, allowable, and properly
allocated as required by the Uniform Guidance and
the ISBE State and Federal Grant Administration
Policy, Fiscal Requirements and Procedures
manual.

ROE Response: The ROE implemented new procedures
for payroll on July 1, 2018. After
implementation, the auditors did not feel our
processes were enough, so further changes were
made in November 2018 that now meet the auditing
standard of actual hours worked, not budgeted.

NONCOMPLIANCE WITH SUBRECIPIENT MONITORING
DOCUMENTATION

During the audit, the Regional Office of
Education #3 (ROE) was not providing all required
grant information to subrecipients of the
McKinney-Vento Education for Homeless Children
and Youth Program – Area V Subgrant. The required
communication letter informing the subrecipients
of their grant awards did not include the Catalog
of Federal Domestic Assistance (CFDA) number.

The Grant Accountability and Transparency Act
(GATA) (30 ILCS 708/1) establishes that State
agencies that pass State and federal grant
funding through to other entities are subject to
the requirements set forth in Title 2 U.S. Code
of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (Uniform
Guidance). The Uniform Guidance (2 CFR
200.331(a)) requires certain information to be
communicated to the recipients of the subaward,
including the CFDA number. One of the many
functions of the ROE is to receive grants
directly or indirectly as subrecipients from
grantors and operate the grant programs, which
may include forwarding some or all of the grant
funding to other entities. As an agency within
the granting hierarchy, the ROE is required to be
in compliance with GATA to ensure that every
subaward is clearly identified as a subaward and
communicates the required information to
subrecipients, including the CFDA number.

Regional Office management indicated they did not
communicate the CFDA number to subrecipients at
the time the grant was awarded. (Finding 19-003,
page 10d)

The auditors recommended the ROE create a
standard form of communication ensuring that all
required elements are provided to each individual
subrecipient.

ROE Response: The CFDA number is indicated on the
subgrantee’s RFP. Official award notice for
grants in a renewal year is a simple email with
dollar amounts. Grantees can refer to their
signed RFP for the CFDA. Award emails will now
include the CFDA number.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #3’s financial statements as of June
30, 2019 are fairly presented in all material
respects.

This financial audit was conducted by the firm of
Doehring, Winders & Co. LLP.

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