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, 2017

Release Date:  May 11, 2021

FINDINGS THIS AUDIT:  8

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  3 -- 1 -- 4
Category 2:  0 -- 2 -- 2
Category 3:  1 -- 1 -- 2
TOTAL:  4 -- 5 -- 8

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

• (17-1) The Regional Office of Education
#4 did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (17-2) The Regional Office of Education
#4 lacked adequate internal controls over
fund accounting.

• (17-3) The Regional Office of Education
#4 did not have sufficient internal
controls over timely expenditure report
submission.

• (17-4) The Regional Office of Education
#4 had inadequate internal controls over
pay-rate authorizations.

• (17-5) The Regional Office of Education
#4 was not in compliance with grant
requirements.

• (17-6) The Regional Office of Education
#4 did not have sufficient internal
controls over the financial statement
reporting process.

• (17-7) The Regional Office of Education
#4 lacked adequate subrecipient
monitoring documentation.

• (17-8) The Regional Office of Education
#4 did not have adequate supporting
documentation of salaries and benefits.

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, 2017 deadline. The ROE
initially provided adjusted working trial
balances and substantial audit supporting
schedules on February 6, 2020. Revised
working trial balances were provided on
March 2, 2020, and final financial
statements on March 9, 2020. The final
remaining outstanding audit support
schedule was not provided until November
16, 2020.

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 Government Auditing
Standards.

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 generally accepted
accounting principles (GAAP).

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

Regional Office management indicated
internal personnel issues and software
program changes caused the office to
experience difficulty in providing
information by the required timeline.
(Finding 17-001, 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)
lacked adequate controls and monitoring
over the maintenance of complete and
accurate records of employee benefits. A
Teachers’ Retirement System (TRS) audit
for the year of July 1, 2014 – June 30,
2015 disclosed TRS members had net excess
TRS withholdings of $8,972. The ROE
determined gross TRS withholdings due to
individual members as of June 30, 2016
was $13,190. The ROE received the excess
contributions from the State of Illinois
on November 3, 2015. Current employees
were reimbursed December 2020 and non-
current employees have not yet been
reimbursed. Additionally, costs incurred
from employee underpayments were absorbed
by the Regional Office.

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. In addition,
the Regional Superintendent of Schools is
responsible for establishing and
maintaining an internal control system to
prevent errors and irregularities.

Regional Office management indicated due
to internal personnel issues and software
program changes, the office experienced
difficulty in performing their required
duties. (Finding 17-002, page 14c)

The auditors recommended the ROE should
assign a member of management with
suitable skills, knowledge and experience
to review the accuracy of payroll
calculations each pay period.
Additionally, supporting payroll
schedules and trial balance reports need
to be monitored for completeness and
accuracy at regular intervals throughout
the year.

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. Six
expenditure reports for 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 (17-4331-
SS)	09/30/16	10/24/16	4
System of Support Title I – School
Improvement and Accountability (17-4331-
SS)	12/31/16	02/03/17
14
Title II – Teacher Quality-Leadership
(17-4935-02)	06/30/17	07/24/17
4
Truants Alternative/Optional Education
(16-3695-14)	06/30/17	07/27/17
7
Other State Programs        (17-3999-RS)
09/30/16	12/21/16	62
Other State Programs        (17-3999-RS)
06/30/17	07/21/17	1

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.

Regional Office management indicated due
to internal personnel issues and software
program changes, the office experienced
difficulty in providing information by
the required timeline. (Finding 17-003,
pages 14d – 14e)

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 PAY-
RATE AUTHORIZATIONS

The Regional Office of Education #4 (ROE)
had inadequate internal controls over
pay-rate authorizations. The ROE
Accounting Manual general policies
concerning payroll procedures state that
a master record should be maintained on
each employee or contractor for federal
and State reporting purposes. The master
payroll record should contain at least
the following: employee name, social
security number, address, date of hire,
and rate and terms of contract/agreement.
Any employee compensation adjustments
should be documented and maintained in
employee personnel files. In addition,
sound business practices dictate the
Regional Office is responsible for
establishing and maintaining an internal
control system over the payroll process
in order to prevent errors and/or fraud.
This internal control system should also
be completely documented within the ROE’s
financial reporting system policy manual.

During the course of the audit, auditors
noted the following control issues:
• 7 of the 37 (19%) employment agreements
tested were not retained in Regional
Office personnel files.
• In 5 of the 37 (14%) employment
agreements tested, employees were paid
more than the compensation agreed to
within the employment agreement. No
payroll change order to document the
approved increase or additional
compensation was included in the Regional
Office personnel files.
• In 1 of 8 (13%) timesheets tested, the
pay rate within the payroll system did
not agree to the compensation stated in
the employment agreement. No payroll
change order to document the approved
increase or additional compensation was
included in the Regional Office personnel
files.
• Payroll processes documented in the
ROE’s financial reporting system policy
manual did not include processes for
obtaining and retaining employment
agreements.

Regional Office management indicated an
Administrative Assistant maintained
separate files, records, and storage and
only turned in a spreadsheet for payment
to payroll. When consultant rates changed
the grant manager was not consistent in
follow up with amended contracts or
agreements and no written policy existed
outlining the process to obtain
employment agreements. (Finding 17-004,
pages 14f – 14g)

The auditors recommended the ROE complete
and maintain employment agreements.
Documentation should also be maintained
for any payment received outside of any
employee’s annual agreed upon salary.
Auditors also recommended the ROE update
the written payroll policy procedures to
include obtaining and maintaining the
employment agreement documentation and
payroll change orders.

ROE Response: All employee agreements
will be kept in one location within
employee file in the HR department.
Policies will be updated to include
procedures to obtain and retain
employment agreements. Any changes to
rates must be accompanied by a signed
agreement from employee and management
and maintained in the HR department. HR
will verify and enter rate changes in the
software and either the Director of
Finance or Office Manager will verify any
rate changes prior to payment being
issued.

NONCOMPLIANCE WITH GRANT REQUIREMENTS

The Regional Office of Education #4 (ROE)
was not in compliance with grant
requirements. The Technology for Success
grant program payments to other
governments were reported on the
expenditure report as being expended
rather than obligated; these payments to
other governments have not been paid and
caused the payments to other governments
to be overstated on the grant expenditure
report.

The ROE must comply with grant accounting
and reporting requirements established by
grant agreements with the Illinois State
Board of Education (ISBE) and other
grantors in addition to the requirements
established by the ISBE’s fiscal policies
and procedures for grantees. Among these
requirements are accurate, current, and
complete disclosure of grant financial
activity.

Regional Office management indicated
change in staffing and lack in training
on how to report expenditures in ISBE Web
Application Security resulted in the
finding. (Finding 17-005, page 14h)

The auditors recommended the ROE should
ensure that grant expenditure reports are
prepared using current and accurate
financial data based on reports obtained
from the Regional Office’s accounting
system. Unpaid payments to other
governments should be reported as
obligations rather than expended. The ROE
should contact the ISBE to determine what
should be done with the unexpended funds.

ROE Response: Additional training was
provided and added to procedure manual
for FY18.

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #4 (ROE)
did not have sufficient internal controls
over the financial statement reporting
process. The ROE maintained its
accounting records on the cash basis of
accounting during the fiscal year and
posted year-end accrual entries for
financial statement purposes. While the
ROE maintained controls over the
processing of most accounting
transactions, there were not sufficient
controls over the preparation of the
generally accepted accounting principles
(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.

The ROE is required to maintain a system
of controls over the preparation of
financial statements in accordance with
GAAP. The ROE’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).

During the review of the financial
information prepared by the Regional
Office, the following were noted:
• The ROE did not have adequate controls
over the maintenance of complete records
of prepaid expenses. Prepaid expenses of
$51,954 were not recognized and recorded
within the initial trial balance received
from the ROE.
• The ROE did not have adequate controls
over the recognition of capital assets.
The ROE did maintain a list of capital
assets; however, the ROE did not
initially provide all entries to
accurately recognize these items within
the financial statements.

Regional Office management indicated
change in staffing and lack in training
on how to report prepaid expenses on
financial statements resulted in the
finding. (Finding 17-006, pages 14i –
14j)

The auditors recommended as part of
internal control over the preparation of
financial statements, the ROE should
implement comprehensive preparation
procedures to ensure the financial
statements are complete and accurate.
These procedures should be performed by a
properly trained individual possessing a
thorough understanding of the applicable
GAAP, GASB pronouncements, and knowledge
of the ROE’s activities and operations.

ROE Response: Training was provided to
ensure prepaid expenses on financial
statements are recorded accurately.

SUBRECIPIENT MONTIORING DOCUMENTATION

During the audit, the Regional Office of
Education #4 (ROE) was providing 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.

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 awards did
not include the Catalog of Federal
Domestic Assistance (CFDA) number.

Auditors also noted that although a ROE
employee maintains an informal checklist
for monitoring subrecipients of its Title
I School Improvement and Accountability
program, there are 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.

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.

Additionally, 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))
also 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 (cites were
changed to 2 CFR 200.332(a) and 2 CFR
200.332(b), respectively, in November
2020).

Regional Office management indicated 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
payments, and conversely, requires the
ROE to obtain such certification from its
subrecipients.

Regional Office management also indicated
they were 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.

Regional Office management also indicated
they were not aware of the 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 17-007, 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. Auditors 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, auditors also 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.

SALARIES AND BENEFITS NOT SUPPORTED BY
PROPER DOCUMENTATION

The Regional Office of Education #4 (ROE)
assigned a total of $45,248 in salary and
benefits costs for five employees to the
Title I grant based on a one-month time
study. Personnel activity reports or
other comparisons of actual payroll
costs, based on time and effort records
to the initial time study, were not
performed and adjustments for actual time
spent on the grants, if differences were
present, were not made. These five
employees did submit bi-weekly timesheets
based on the one-month salary schedule
but actual time tracking did not occur to
support the amount of salaries and
benefits charged to Title I expense
accounts.

Employees of the ROE are required to
document their time and effort working on
federal programs. Title 2 U.S. Code of
Federal Regulations Part 200, Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards (Uniform Guidance)
requires charges for salaries and
benefits be supported by a system of
internal controls which provides
reasonable assurance that charges are
accurate, allowable, and properly
allocated. Documentation records should
reasonably reflect the total activity for
which the employee is compensated, not
exceeding 100% of compensated activities,
and should encompass both federally
assisted and non-federally assisted
activities. It further states that budget
estimates alone do not qualify as support
for salary and benefit charges to a
federal award. Significant changes in the
corresponding work activity should be
identified and entered into the
accounting records in a timely manner.
All necessary adjustments must be made
such that the final amount charged to the
federal award is accurate, allowable, and
properly allocated.

Regional Office management indicated the
only time study done was to get an
average time spent on the grant for the
first month and then an allocation was
given for the year, but the grant manager
did not require employees to record their
actual time spent on the grants on a
daily basis so that it could be used to
compare on a quarterly basis to make any
necessary adjustments. (Finding 17-008,
pages 15e – 15f)

The auditors recommended the ROE should
implement a system of internal controls
over time and effort reporting for all
employees paid with restricted grant
funds. The ROE should track actual time
charged to restricted grant revenue and
perform periodic comparisons to time
studies to determine if adjustments are
necessary.

ROE Response: The ROE will implement a
system of internal controls over time and
effort to ensure accurate allocations are
charged to restricted grant funds.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #4’s financial statements as of
June 30, 2017 are fairly presented 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