REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #4: BOONE AND
WINNEBAGO COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  March 26, 2025

FINDINGS THIS AUDIT: 4

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

FINDINGS LAST AUDIT: 4

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

• (20-1) The Regional Office of Education #4
had inadequate controls over receipts.

• (20-2) The Regional Office of Education #4
had inadequate controls over the bank
reconciliation process.

• (20-3) The Regional Office of Education #4
failed to fully insure and collateralize
cash balances.

• (20-4) The Regional Office of Education #4
did not provide completed financial
statements in an auditable form by the
August 31 deadline.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE INTERNAL CONTROL OVER RECEIPTS

The Regional Office of Education #4 (ROE)
had inadequate controls over receipts.
During testing of receipts, auditors noted
the following:

• The ROE’s 14 of 40 receipts tested (35%),
totaling $173,682, had no documentation when
the checks were received. As a result, we
were unable to determine whether non-
electronic cash receipts were deposited in a
timely manner.

• 1 of 40 receipts tested (3%) totaling
$1,000, did not have any supporting
documentation.

Sound internal controls require a policy on
timeliness of deposits, either based on
dollar threshold or defined timeframe, from
the date of receipt. There should be
documentation of the date when cash and
checks are received. Supporting
documentation should be maintained for
receipt transactions.

According to ROE officials, the exceptions
noted relate primarily to miscellaneous
receipts (principally those received non-
electronically) and not necessarily all cash
receipts. The exceptions noted were due
primarily to oversight. (Finding 2020-001,
pages 11-12) This finding was first reported
in 2019.

The auditors recommended the ROE as part of
internal control should maintain adequate
documentation to ensure cash receipts are
deposited in a timely manner and receipts
are properly supported.

ROE Response: When this matter was called to
management’s attention in May 2024 (as part
of the audit of fiscal year 2019),
management promptly implemented improved
procedures regarding miscellaneous cash
receipts including improved documentation
and standards for prompt deposit to the
bank. We believe our improved procedures
have addressed the concerns of this finding.

INADEQUATE CONTROLS OVER BANK RECONCILIATION
PROCESS

The Regional Office of Education #4 (ROE)
had inadequate controls over the bank
reconciliation process.

The ROE maintains 17 bank accounts. Auditors
tested 5 of 17 (29%) bank accounts and
reviewed their monthly reconciliations and
noted the following:

• 47 of 60 (78%) monthly bank
reconciliations were missing the date of
when the reconciliation was prepared,
therefore auditors were unable to determine
if the bank reconciliation was prepared
timely.

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, no later than the end of the
following month. 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.

According to ROE officials the exceptions
noted were due to the volume of accounts,
and lack of sufficient staff. (Finding
2020-002, pages 13-14)

The auditors recommended that the ROE should
prepare monthly bank reconciliations no
later than the end of the following month.

ROE Response: The ROE has taken steps to
reduce the number of cash bank accounts
necessary for the organization, and has also
placed a higher priority on the timely
completion of monthly bank reconciliations.
When this matter was particularly called to
management’s attention in May 2024 (as part
of the audit of fiscal year 2019),
management took prompt steps to assure that
all bank reconciliations since that time
were begun timely, and all reconciling items
identified by the end of the following
month. In most cases, the reconciling items
are now resolved in a similar timeframe or
shortly thereafter, allowing timely final
completion of the bank reconciliations.

FAILURE TO FULLY INSURE AND COLLATERALIZE
CASH BALANCES

The Regional Office of Education #4 (ROE)
failed to fully insure and collateralize
cash balances.  As of June 30, 2020, the ROE
had fifteen cash and investment accounts
with bank balances totaling $6,823,423 at
one financial institution. The Federal
Deposit Insurance Corporation (FDIC) covers
up to a maximum of $250,000. The financial
institution pledged collateral with a value
of $6,409,419. The ROE did not have
depository insurance or collateral for the
remaining $164,004.

The ROE is required to follow the Illinois
Public Funds Investment Act (30 ILCS 235/6
(d)) (Act). The Act gives the authorization
for deposits in excess of the federally
insured limit to be covered by pledged
collateral held by the financial
institution’s trust departments in the ROE’s
name. In addition, prudent business practice
requires that all cash and investments held
by the financial institutions for the ROE be
adequately covered by depository insurance
or collateral.

According to ROE officials, the exception
noted was due to oversight and the practical
limitations of managing the daily
fluctuations in cash and in the market value
of pledged securities.  (Finding 2020-003,
pages 15-16)

Auditors recommended that the ROE should
regularly monitor balances held with
financial institutions and secure sufficient
pledged collateral. The Regional Office
should ensure the value of collateral
remains adequate for the balance of the
Regional Office’s accounts according to the
agreement in place.

ROE Response: Pledged collateral is
monitored and managed at least monthly by
the ROE and its bank. In June 2020, a rapid
decline in market value (tied to the effects
of the COVID- 19 pandemic) affected the
adequacy of market value for collateral,
resulting in the shortfall of market value
as of June 30, 2020. It should be noted,
however, that the face value of the pledged
securities was significantly higher at all
times than the market value. Should
circumstances have dictated, holding only a
small portion of the collateral securities
to maturity would have eliminated the risk
of financial loss.
Further, in the normal course of its
responsibilities, the ROE’s bank identified
the need to pledge additional collateral to
address a market value shortfall. It did so
promptly in July 2020.

DELAY OF AUDIT

The Regional Office No. 4 (ROE) did not
provide completed financial statements in an
auditable form by the August 31 deadline.
The June 30, 2019, audit was not released
until July 17, 2024. The completed June 30,
2020, financial statements were provided to
auditors on July 30, 2024.

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. The
ROE may utilize a cash basis, modified cash
basis, or generally accepted accounting
principles (GAAP) basis of accounting to
prepare the financial statements for audit.
The ROE has chosen the cash basis of
accounting for financial reporting.

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 15th of the succeeding fiscal
year. Financial reports are to be available
no later than August 31st in order for the
annual audit to be completed by an
independent auditor selected by the Auditor
General. In addition, prudent business
practices and transparency require timely
preparation and completion of financial
statements.

Regional Office officials indicated that the
initial delays that affected earlier years
related to internal personnel issues and
software program changes that caused the
office to experience difficulty in providing
information by the required timeline. Since
those initial causes have been largely
resolved, the ROE 4 has experienced delays
in the preparation of the financial
statements and schedules which contributed
to an inability to get caught up. (Finding
2020-004, pages 17-18)

The auditors recommended that the ROE should
implement procedures to ensure compliance
with 105 ILCS 5/2-3.17a and 74 Ill. Adm.
Code 420.320 (c) (2). These financial
statements need to be presented to the
Auditor General’s independent auditors for
audit by the August 31st deadline.

ROE Response: The ROE has changed to the
cash basis of accounting (as was previously
recommended) and has continued to engage a
Certified Public Accounting firm to prepare
all financial statements and schedules
necessary for audit. The Regional Office of
Education No. 4 expects that it can
cooperate with an accelerated schedule of
past due audits so that this matter may be
fully resolved without significant further
delay. The cooperation of the Illinois
Auditor General will be sought in order to
explore an accelerated audit schedule.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #4’s financial statements as of
June 30, 2020 are fairly stated 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:JMM