REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #8:
CARROLL, JO DAVIESS, AND STEPHENSON
COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date: March 3, 2022

FINDINGS THIS AUDIT:  2

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

FINDINGS LAST AUDIT: 1

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 #8 did not have sufficient
internal controls over the financial
reporting process.

• (21-2) The Regional Office of
Education #8 did not have adequate
controls over bank reconciliations.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

During review of the Regional Office
of Education #8’s (ROE) financial
information, it was noted the ROE did
not have adequate controls to ensure
financial statement balances and
disclosures were accurate. While the
ROE maintained records to indicate the
balances of financial statement
accounts, material audit adjustments
and changes to the related disclosures
were proposed in order to ensure those
balances and disclosures were accurate
and appropriate for the basis of
accounting selected for financial
statement presentation. The ROE
implemented Governmental Accounting
Standards Board (GASB) Statement No.
84 – Fiduciary Activities for fiscal
year 2021. The E.H. Parriott
Scholarship Trust Principal and Trust
Income Funds were misclassified as
General Funds instead of Fiduciary
Funds; the misclassification caused
the ROE’s financial statements to be
materially misstated.

Effective June 25, 2021, Public Act
102-0025 allowed that a Regional
Office of Education or Educational
Service Center 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 chose to utilize
the cash basis of accounting for
financial statement reporting. The ROE
is required to maintain a system of
controls over the preparation of
financial statements in accordance
with its selected basis of accounting.
The ROE’s internal controls over
financial reporting should include
adequately trained personnel with the
knowledge, skills, and experience to
prepare financial statements and
include all related disclosures as
required by the GASB. GASB Statement
No. 84 – Fiduciary Activities provides
guidance regarding properly
identifying fiduciary activities,
determining the correct fiduciary fund
type to use to report fiduciary
activities, and presenting the
financial statements of fiduciary
funds.

The Regional Office’s management
indicated there was miscommunication
between their contracted CPA firm and
their new bookkeeper as the financial
statements were prepared, regarding
the classification of the Parriott
Trust funds. (Finding 2021-001, pages
11-12) This finding was first reported
in 2010.

The auditors recommended that as part
of internal control over the
preparation of financial statements,
including disclosures, the ROE should
implement a comprehensive preparation
and/or review procedure to ensure that
the financial statements, including
disclosures, are complete and
accurate. These procedures should be
performed by a properly trained
individual possessing a thorough
understanding of the basis of
accounting selected for financial
statements, GASB pronouncements, and
knowledge of the ROE’s activities and
operations.

ROE Response: The ROE 8 has contracted
with an outside company to prepare
financial statements on a cash basis
for the first time this year. The ROE
8 has also employed a new bookkeeper
that is inexperienced in the
requirements of financial reporting
for a Regional Office of Education;
this misclassification of funds has
been corrected and will not be
repeated. We will continue to work on
our internal procedures and with our
financial report preparer to improve
our accuracy in reporting.

CONTROLS OVER BANK RECONCILIATIONS

The Regional Office of Education #8
did not have adequate controls over
bank reconciliations. During the
auditors’ review of the June 2021 bank
reconciliation, they noted a transfer
in transit that was not properly
reflected in the reconciliation or the
general ledger. Although the bank
reconciliation was performed and
reviewed, it did not accurately
reflect the transfer in transit and
the relating receipt of funds was not
properly recorded in the general
ledger.

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 management indicated
that this error in reconciliation was
a product of a new bookkeeper in
training that did not understand how
to properly record the receipt of
funds. (2021-002, page 13)

The auditors recommended the ROE
should ensure transfers between bank
accounts are properly accounted for in
bank reconciliations and receipt of
those funds is recorded upon initial
collection. The ROE should ensure
review of bank reconciliations
includes reviewing the accounting
treatment of receipts collected and
transferred to other bank accounts.

ROE Response: As a product of this
finding, our bookkeeper is now keenly
aware of how the receipt of funds
should be recorded. This issue is a
one-time occurrence due to a
bookkeeper inexperienced with all of
the ROE requirements on
reconciliations; it is an error that
won’t happen again.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #8’s financial statements
as of June 30, 2021 are fairly
presented in all material respects.

This financial audit was conducted by
the firm of Winkel, Parker & Foster,
CPA PC.

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:BAO