REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #17: DEWITT,
LIVINGSTON, LOGAN, AND MCLEAN COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2018

Release Date:  April 4, 2019

FINDINGS THIS AUDIT:  3

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

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

• (18-1) The Regional Office of Education
#17 did not have sufficient internal
controls over the financial reporting
process.
• (18-2) The Regional Office of Education
#17 did not have adequate internal control
procedures.
• (18-3) The Regional Office of Education
#17 did not provide financial statements in
an auditable form and in accordance with
GAAP by the August 31 deadline.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #17 (ROE)
did not have sufficient internal controls
over the financial reporting process. 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 review of the ROE’s accounting
records, auditors noted the ROE’s financial
information required several adjusting
entries to present the financial statements
in accordance with GAAP.

In addition, the ROE did not have adequate
controls to record and report its net
accrued pension or OPEB liability/asset,
deferred outflows and inflows of resources,
and pension or OPEB expense in accordance
with GAAP. Proposed adjusting entries were
approved and accepted by the ROE’s
management.

According to Regional Office management,
the complex requirements of the GASB
statements will require additional time and
training before the ROE #17 can fully
implement the requirements on its own
(Finding 18-001, pages 10a-10b).

The auditors recommended that as part of
its internal control over the preparation
of financial statements, including
disclosures, the ROE #17 should implement
comprehensive preparation and/or review
procedures to ensure the financial
statements, including disclosures, are
complete and accurate. Such procedures
should be performed by a properly trained
individual(s) possessing a thorough
understanding of applicable GAAP, GASB
pronouncements, and knowledge of the ROE’s
activities and operations.


ROE Response: The ROE will outsource the
compilation of the financial statements and
disclosures. The Regional Office has also
taken steps to properly record financial
transactions and follow GAAP. In regards to
the standards related to financial
reporting for pensions, we will review
internal controls and determine what can be
done within agency resources to mitigate or
eliminate this internal control deficiency.

INADEQUATE INTERNAL CONTROL PROCEDURES

The Regional Superintendent of Schools is
responsible for establishing and
maintaining an internal control system over
accounting transactions to prevent errors
and fraud.

In addition, the Regional Office of
Education (ROE) Accounting Manual requires
each ROE to maintain detailed fixed asset
records for both accounting purposes as
well as insurance purposes, for fixed
assets costing $500 or more.  Generally
accepted accounting principles require that
an inventory of all fixed assets and
depreciation schedules for assets meeting
the capitalization threshold for reporting
be maintained.

Auditors noted the following weaknesses in
the Regional Office’s internal control
system for which there were no mitigating
controls:

• All fourth quarter expenditure reports
were not filed by the due date.
• The Regional Office had not included all
capital additions on the asset schedule
provided by the Regional Office. In
addition, the Regional Office had recorded
a capital asset purchase as a capital
outlay expenditure in the Professional
Development fund rather than a capital
asset.

According to Regional Office management,
the ROE had not established sufficient
internal control procedures (Finding
18-002, pages 10c-10d).

The auditors recommended the Regional
Office should monitor the reporting
deadlines of grantors and file the required
expenditure reports timely. The Regional
Office should also follow internal control
procedures to ensure that all items meeting
the Regional Office’s capitalization
threshold are appropriately capitalized and
included on the capital asset listing.

ROE Response: The Regional Office agrees
with the auditors’ recommendations. In
addition, the Regional Office has already
corrected the internal control issues noted
and continues to work on improving controls
over our financial processes.

DELAY OF AUDIT

The Regional Office 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 GAAP.

The Regional Office 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.

Auditors noted the following deficiencies
in the records provided by the ROE:

• The initial trial balance provided by the
ROE was not fully adjusted. The ROE
provided journal entries made by its
contractor the first day of fieldwork,
October 29, 2018; however, several
additional material journal entries were
required to adjust the balances to be
recorded in accordance with GAAP.
• A complete draft of the GAAP financial
statements with all required disclosures
was not provided.
• The required information for the Schedule
of Disbursements to School District
Treasurers and Other Entities was not
provided to us until December 3, 2018, and
only after several requests.
• Due to the departure of the previous
long-term bookkeeper in May 2018 there was
difficulty locating supporting
documentation by the ROE’s staff, which
caused delays in receiving requested
documentation.

According to Regional Office Management,
the ROE’s long-term controller left in May
2018 and the ROE was not able to find a
replacement for the position until July
2018. The gap and subsequent transition in
this key position caused some delay in the
ROE being able to provide its outsourced
accounting firm and auditors with complete
and accurate information (Finding 18-003,
pages 10e-10f).

The auditors recommend 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). 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 Regional Office agrees
with the auditors’ recommendations.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #17’s financial statements as of
June 30, 2018 are fairly presented in all
material respects.

This financial audit was conducted by the
firm of Kemper CPA Group, LLP.

KELLY MITTELSTAEDT
Audit Manager

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

FJM:BAO