REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #4: BOONE AND
WINNEBAGO COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2016

Release Date:  December 11, 2019

FINDINGS THIS AUDIT:  5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  4 -- 0 -- 4
Category 2:  0 -- 0 -- 0
Category 3:  1 -- 0 -- 1
TOTAL:  5 -- 0 -- 5

FINDINGS LAST AUDIT: 4

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

• (16-1) The Regional Office of Education #4
did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (16-2) The Regional Office of Education #4
did not have sufficient internal controls
over fund accounting.

• (16-3) The Regional Office of Education #4
did not have sufficient internal controls
over timely expenditure report submission.

• (16-4) The Regional Office of Education #4
did not have adequate internal controls over
payroll.

• (16-5) The Regional Office of Education #4
did not have adequate subrecipient
monitoring documentation.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DELAY OF AUDIT

The Regional Office of Education #4 (ROE)
did not provide completed financial
statements in an auditable form by the
August 31 deadline. Financial records
provided were not prepared on an accrual
basis in accordance with generally accepted
accounting principles (GAAP).

The ROE is subject to 105 ILCS 5/2-3.17a
which requires the Auditor General’s office
to cause an audit to be made, as of June
30th of each year, of the financial
statements of all accounts, funds and other
moneys in the care, custody or control of
the regional superintendent of schools of
each educational service region in the State
and of each educational service center
established in the School Code. The audit is
to be conducted in accordance with Generally
Accepted Governmental Auditing Standards
(GAGAS).

In accordance with 105 ILCS 5/2-3.17a, the
Auditor General has promulgated
administrative rules and regulations to
govern this process. Those rules, 74 Ill.
Adm. Code 420.320 (c) (2), state that for
audit purposes, each regional office of
education and educational service center
shall make available to the Auditor General
or his designee all books and records deemed
necessary to make and complete the required
audits. The records shall be in auditable
form by August 15 of the succeeding fiscal
year. Financial reports are to be available
no later than August 31 in order for the
annual audit to be completed by an
independent auditor selected by the Auditor
General. Annual financial statements are to
be prepared on an accrual basis of
accounting in accordance with GAAP.

In addition, prudent business practices and
transparency require timely preparation and
completion of financial statements.

On numerous occasions over the past two and
a half years, the Office of the Auditor
General and Special Assistant Auditors
communicated via conference calls and email
the need for complete and balanced financial
records in order to complete an audit.
During this time frame, multiple versions of
incomplete and unbalanced financial records
were evaluated by Special Assistant
Auditors.

Original fieldwork was set for December
2016, but the vast majority of the fieldwork
was unable to be completed due to an
incomplete and unbalanced general ledger.

Fieldwork was rescheduled for May 2017,
January 2018 and June 2018. Completed and
balanced financial records were still not
available at these times.

January 2018, February 2018 and March 2018
deadlines were established for the ROE to
have all financial records to the Special
Assistant Auditors so a determination of
auditability could be made. On those dates,
interfund balances and the payroll clearing
account were still not ready for audit.

As the result of a conference call with the
ROE in which a solution to the continued
delay in audit progress was discussed in
March 2018, the ROE contacted a firm to
prepare its financial records. It was agreed
the completed financial statements would be
provided to the auditors by April 30, 2018.
This date was not met by the ROE and the
June 2018 fieldwork date had to be
rescheduled.

The majority of fieldwork took place in July
2018 and October 2018.

A final copy of the financial report which
included updated pension information was
submitted to the auditor on December 14,
2018.

Fieldwork was substantially completed in
April 2019.

According to Regional Office management, due
to internal personnel issues and software
program changes, the office experienced
difficulty in providing information by the
required timeline. (Finding 16-001, pages
14a – 14b)

The auditors recommended the ROE should
implement procedures to ensure compliance
with 105 ILCS 5/2-3.17a and 74 Ill. Adm.
Code 420.320 (c) (2). Annual financial
statements should be compiled on an accrual
basis of accounting in accordance with GAAP.
These financial statements need to be
presented to the Auditor General’s
independent auditors for audit by the August
31 deadline.

ROE Response: The ROE hired a Certified
Public Accounting firm to prepare all
financial statements for the audit.

CONTROLS OVER FUND ACCOUNTING

The Regional Office of Education #4 (ROE)
did not ensure individual funds were self-
balanced, opening fund balance amounts
agreed to the prior period closing fund
balance amounts, all balance sheet accounts
were reconciled to supporting documentation,
and all clearing accounts had a zero
balance.

The ROE is required by the Illinois State
Board of Education (ISBE) to maintain its
accounting system in accordance with the
Regional Office of Education Accounting
Manual (Manual). The Manual requires the ROE
to maintain an accounting system on a fund
basis. A fund is defined as a fiscal and
accounting entity with a self-balancing set
of accounts. These funds are segregated for
the purpose of carrying on specific
activities or attaining certain objectives
in accordance with special regulations,
restrictions or limitations.

Auditors specifically noted the following:

• The ROE did not have adequate controls
over the maintenance of complete records of
cash, accounts receivable, due from other
governments, interfund activity, accounts
payable, accrued salaries and benefits,
unavailable revenue and fund balance.
• Payroll transfers from the individual
programs to the payroll clearing account
were not monitored. Incorrect amounts and
late payroll transfers were made into the
payroll clearing account causing a large
balance of cash to accumulate. These errors
were not identified and corrected timely.
• Initially, the ROE did not make any effort
to ensure its general ledger agreed to the
audited financial statements for the year
ended June 30, 2015, leading to issues with
the opening balances for the year ended June
30, 2016.
• A Teachers’ Retirement System (TRS) audit
for the year of July 1, 2014 – June 30, 2015
disclosed TRS members had excess TRS
withholdings of $8,972. The ROE received the
excess contributions from the State of
Illinois on November 3, 2015, but has not
yet reimbursed the individual members.

Auditors requested and subsequently received
balanced trial balances and supporting
schedules from the firm hired by the ROE to
prepare its financial statements.

According to Regional Office management, due
to internal personnel issues and software
program changes, the office experienced
difficulty in providing information by the
required timeline. (Finding 16-002, pages
14c – 14d)

The auditors recommended the ROE should
assign a member of management with suitable
skills, knowledge and experience to review
its trial balance reports and supporting
schedules at regular intervals throughout
the year. The ROE should ensure individual
funds are self-balanced, opening fund
balance amounts agree to the prior period
closing fund balance amounts, all balance
sheet accounts are reconciled to supporting
documentation and all clearing accounts have
a zero balance.

ROE Response: The ROE hired a Certified
Public Accounting firm to prepare all
financial statements for the audit.

CONTROLS OVER TIMELY EXPENDITURE REPORT
SUBMISSION

The Regional Office of Education #4’s (ROE)
internal controls over expenditure report
submission were not effective. Numerous
expenditure reports for the Illinois State
Board of Education (ISBE) grants were not
submitted timely. Specifically, the
following expenditure reports were not
submitted timely:

Program Name  --  Quarter Ended  --  Submit
Date  --  Days Late

System of Support Title I – School
Improvement and Accountability (16-4331-SS)
--  06/30/16  --  07/21/16  --  1
Title II – Teacher Quality (16-4932-00)  --
06/30/16  --  08/01/16  --  12
Title II – Teacher Quality (16-4935-02)  --
06/30/16  --  08/02/16  --  13
Title II – Teacher Quality (16-4935-02)  --
08/31/16  --  09/23/16  --  3
Truants Alternative/Optional Ed.
(16-3695-14)  --  06/30/16  --  07/21/16  --
1
Regional Safe Schools (16-3696-00)  --
06/30/16  --  07/21/16  --  1
Technology for Success (16-3780-00)  --
12/31/15  --  01/27/16  --  7
Technology for Success (16-3780-00)  --
06/30/16  --  08/01/16  --  12
Other State Programs (16-3999-RS)  --
06/30/16  --  07/21/16  --  1
Other State Programs (16-3999-RS)  --
08/31/16  --  10/03/16  --  13

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
progress of the grant program. The ISBE
requires all grant recipients, regardless of
the 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 requires expenditure reports to be
filed within 20 calendar days of the end of
each reporting quarter.

According to Regional Office management, due
to internal personnel issues and software
program changes, the office experienced
difficulty in providing information by the
required timeline. (Finding 16-003, pages
14e – 14f)

The auditors recommended the ROE should take
appropriate steps to ensure the expenditure
reports are filed within the prescribed
guidelines set forth by the ISBE.

ROE Response: Personnel changes transpired,
more training was provided to new staff, and
the ROE began transitioning to a new finance
program to expedite reporting.

INADEQUATE INTERNAL CONTROLS OVER PAYROLL

The Regional Office of Education #4 (ROE)
did not have adequate internal controls over
payroll. During the course of the audit,
auditors noted 7 of the 22 (32%) timesheets
tested were not signed for approval by
management. Also, in the same sample of
timesheets tested, 5 of the 22 (23%) were
not signed by the employee.

The ROE is responsible for establishing and
maintaining an internal control system over
the payroll process in order to prevent
errors and/or fraud.

Total salaries for the ROE for fiscal year
2016 were $278,584 for Title I – School
Improvement and Accountability.

According to Regional Office management,
they utilized a web based program for field
service workers to submit timecards
electronically. The director, at the time,
did not submit complete records to the
bookkeeper and only provided spreadsheets
which were mass approved. (Finding 16-004,
page 14g)

The auditors recommended the ROE comply with
its established system of internal controls
to ensure timesheets are properly signed by
the employee and approved by management
before the payroll is run and posted to the
general ledger.

ROE Response: Beginning with the FY20 fiscal
year, under new management, all employees
will submit timecards signed by the employee
and the supervisor/director to the
bookkeeper.

SUBRECIPIENT MONITORING DOCUMENTATION

During the audit, the Regional Office of
Education #4 (ROE) provided the required
certification to the Illinois State Board of
Education (ISBE), the funding agency for the
Title I School Improvement and
Accountability Grant. However, the
certifications were not obtained by the ROE
from its subrecipients of this program.

For fiscal year 2016, the Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards (Uniform Guidance), contained
in 2 CFR Part 200, became effective for all
federal award programs administered by the
ROE that were issued on or after December
26, 2014. The Uniform Guidance (2 CFR
200.415(a)) requires the ROE to provide a
specific certification to funding agencies
on all annual and final fiscal reports or
vouchers requesting payment, and conversely,
requires the ROE to obtain such
certification from its subrecipients.

The Uniform Guidance (2 CFR 200.331(a))
requires certain information be communicated
to the recipients of the subaward, including
the CFDA Number and Name.

The Uniform Guidance (2 CFR 200.331(b))
requires the ROE to evaluate each
subrecipient’s risk of noncompliance with
Federal statutes, regulations and the terms
and conditions of the subaward for purposes
of determining the appropriate subrecipient
monitoring.

Also, during the audit, the ROE was not
providing all grant information required to
the subrecipient. The required communication
letter informing the subrecipients of their
grant award did not include the CFDA number.

Auditors also noted that although an ROE
employee maintained an informal checklist
for monitoring subrecipients of its Title I
School Improvement and Accountability
program, there were no formal documented
procedures for monitoring subrecipients,
including formal documentation of an
assessed level of risk of noncompliance for
each subrecipient as required by the Uniform
Guidance.

The Regional Office passed through $309,420
of federal funding to five different
subrecipients of the Title I School
Improvement and Accountability program.

According to Regional Office management,
they were not aware of the Uniform Guidance
(2 CFR 200.415(a)) requiring the ROE to
provide a specific certification to funding
agencies on all annual and final fiscal
reports or vouchers requesting payment, and
conversely, requiring the ROE to obtain such
certification from its subrecipients.
Additionally, the ROE was not aware of the
Uniform Guidance (2 CFR 200.331(a))
requiring certain information be
communicated to the recipients of the
subaward, including the CFDA Number and
name. The Director of the program verbally
communicated the information at a joint
meeting and failed to send appropriate
documentation to the subrecipients. The ROE
was also not aware of Uniform Guidance (2
CFR 200.331(b)) requiring the ROE to
evaluate each subrecipient’s risk of
noncompliance with Federal statutes,
regulations and the terms and conditions of
the subaward for purposes of determining the
appropriate subrecipient monitoring.
(Finding 16-005, pages 15b – 15d)

The auditors recommended the ROE create a
standard form of communication ensuring that
all required elements to be addressed with
each individual subrecipient are included.
They also recommended the ROE develop
policies and procedures to ensure all annual
and final fiscal reports or vouchers
requesting payment received from
subrecipients of federal awards include the
certification required by 2 CFR 200.415(a).
In addition, the auditors recommended the
ROE formalize, in writing, its subrecipient
monitoring procedures, which would include a
formal risk assessment of each subrecipient,
as required and described in 2 CFR
200.331(b).

ROE Response: If the ROE becomes fiscal
agent for programs with subrecipients we
will create a standard form of communication
to ensure all required elements are
addressed. Furthermore, we will obtain, in
writing, confirmation of said communication
as required. Internal policies and
procedures will be developed for reporting
and voucher requests. Current staff will
receive training and guidance in compliance
with items 2 CFR Part 200, 2 CFR 200.415(a),
2 CFR 200.331(a) and 2 CFR 200.331(b) for
future grants. The ROE will formalize, in
writing, our subrecipient monitoring
procedures, which would include a formal
risk assessment of each subrecipient, as
required and described in 2 CFR 200.331 (b).
The auditor’s recommendations will be
followed.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #4’s financial statements as of
June 30, 2016 are fairly stated in all
material respects.

This financial audit was conducted by the
firm of Wipfli, 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