REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #9:
CHAMPAIGN AND FORD COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH
THE UNIFORM GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  July 27, 2022

FINDINGS THIS AUDIT:  2

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

INTRODUCTION

SYNOPSIS

•	(21-1)

•	(21-2)	The Regional Office of
Education #9 improperly applied an
accounting principle.

The Regional Office of Education #9
lacked adequate controls over the
review of internal controls over
external service providers.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

IMPROPER APPLICATION OF ACCOUNTING
PRINCIPLE

The Regional Office of Education #9
(ROE) reported an asset for its
proportionate share of the net pension
asset for the Illinois Municipal
Retirement Fund (IMRF) pension plan
amounting to $643,177 and a liability
for its proportionate share of the net
pension liability for the Teachers’
Retirement System (TRS) pension plan
amounting to $241,399. However, the
Statement of Net Position did not
separately display the net pension
liability and reported a net pension
asset of $401,778 in the financial
statements. Accordingly, the net
position restricted for educational
purposes was understated by $241,399.

Governmental Accounting Standards
Board (GASB) Statement No. 68,
Accounting and Financial Reporting for
Pensions – an Amendment of GASB
Statement No. 27 and No. 71, Pension
Transition for Contributions Made
Subsequent to the Measurement Date –
an Amendment of GASB Statement No. 68,
require governments to record and
present net accrued pension
liabilities/assets, deferred outflows
of resources, deferred inflows of
resources, and pension expenses. These
standards further prescribe the
methods and assumptions that are to be
used to project benefit payments,
discount projected benefit payments to
their actuarial present value, and
attribute that present value to
periods of service.

GASB Implementation Guide on GASB
Statement No. 68 Question Number 43
states liabilities for net pension
liabilities associated with different
pension plans may be aggregated for
display, and pension assets for net
pension assets associated with
different pension plans may be
aggregated for display. However,
aggregated pension assets and
aggregated pension liabilities should
be separately displayed.

GASB Statement No. 84, Fiduciary
Activities, establishes criteria for
identifying fiduciary activities of
all state and local governments. The
new requirements change the definition
of fiduciary activity and establish
new financial reporting requirements
for state and local governments that
report fiduciary activity. The focus
of the criteria generally is on (1)
whether a government is controlling
the assets of the fiduciary activity
and (2) the beneficiaries with whom a
fiduciary relationship exists.

The draft financial statements
originally submitted did not properly
implement GASB Statement No. 84.
Beginning balances and transactions in
the Payroll Clearing Fund (a custodial
fund) included operations that are not
fiduciary activities and should have
been reported in the governmental and
proprietary fund financial statements.

Following are the balances and
transactions that are not fiduciary
activities per GASB Statement No. 84
and should have been reported in the
proper funds:

Governmental Activities

Cumulative interest income earned as
of June 30, 2020 should have been
reported as Fund Balance of the
General Fund:   $13,355
Cash not reported in the Governmental
Funds and Internal Service Fund:
$58,072
Accounts Payable not reported in the
Governmental Funds and Internal
Service Fund:   $45,142

Proprietary Activities

Cumulative fingerprinting services
income earned as of June 30, 2020
should have been reported as Net
Position in a separate Proprietary
Fund:   $22,541
Cash not reported in the Proprietary
Fund:   $24,215
Accounts Payable not reported in the
Proprietary Fund	$1,100
Fingerprinting charges for services
not reported in the Proprietary Fund:
$3,510
Expenses for purchased services not
reported in the Proprietary Fund:
$2,936

In addition, beginning balances of
$2,932 and net transactions of $4,830
that are fiduciary activities in the
Payroll Clearing Fund were also not
reported in the Statement of Fiduciary
Net Position and Statement of Changes
in Fiduciary Net Position.

There was also no disclosure related
to GASB Statement No. 84
implementation. The ROE subsequently
submitted revised financial statements
implementing the requirements of GASB
Statement No. 84.

Regional Office management indicated
this was an oversight. (Finding
21-001, pages 14 – 16)

The auditors recommended the ROE
should establish procedures to ensure
that financial statements be carefully
reviewed for proper accounting and
reporting in accordance with generally
accepted accounting principles (GAAP).
Additionally, ROE management should
consider Public Act 102-0025, which
allows a Regional Office to determine
if changing from the GAAP basis to the
cash or modified cash basis of
accounting would be allowable or
beneficial to the ROE and users of the
ROE statements.

ROE Response: Management has
considered Public Act 102-0025 and has
decided to change from GAAP basis to
the cash basis of accounting beginning
with the Fiscal Year 2022 financial
statements. Management will continue
to work with a hired CPA firm to aid
with closing the books at year end and
preparing draft financial statements.

LACK OF ADEQUATE CONTROLS OVER THE
REVIEW OF INTERNAL CONTROLS OVER
EXTERNAL SERVICE PROVIDERS

As part of the audit process, the
auditors requested the Regional Office
of Education #9 (ROE) to provide a
population of the service providers
utilized. The ROE was able to identify
service providers that provided
various hosting and backup services
for the ROE.

During testing, the auditors noted the
ROE had not:
• Developed a formal process for
identifying service providers and for
either obtaining the Service
Organization Controls (SOC) reports
from the service providers and related
subservice organization or performing
alternative procedures to determine
the impact of such services on its
internal control environment on an
annual basis.
• Documented its review of each of the
SOC reports, or performed alternative
procedures, to evaluate any issues
relevant to the ROE’s internal
controls.
• Monitored and documented the
operation of the Complementary User
Entity Controls (CUECs) relevant to
the ROE’s operations.

The ROE is responsible for the design,
implementation, and maintenance of
internal controls related to
information systems and operations to
ensure resources and data are
adequately protected from unauthorized
or accidental disclosure,
modifications, or destruction. This
responsibility is not limited due to
the process being outsourced.

Generally accepted information
technology guidance endorses the
review and assessment of internal
controls related to information
systems and operations to assure the
accurate processing and security of
information.

Regional Office officials indicated
they understand the importance of a
formal process to monitor service
providers and did not realize the
current process did not address all
the issues noted. (Finding 21-002,
pages 17 – 18)

The auditors recommended the ROE
identify all third-party service
providers and determine and document
if a review of controls is required.
If required, the ROE should:
• Obtain SOC reports or perform
independent reviews of internal
controls associated with outsourced
systems including services provided by
subservice organizations at least
annually.
• Monitor and document the operations
of the CUECs relevant to the ROE’s
operations.
• Document its review of the SOC
reports or perform alternative
procedures to evaluate all significant
issues to ascertain if a corrective
action plan exists and when it will be
implemented, any impacts to the ROE,
and any compensating controls.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

ROE Response: We have begun to review
the SOCs and we are in the process of
documenting a formal process of review
and will utilize that moving forward.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #9’s financial statements
as of June 30, 2021 are fairly
presented 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:BAO