REPORT DIGEST REGIONAL OFFICE OF EDUCATION #22: FULTON AND SCHUYLER COUNTIES FINANCIAL AUDIT FOR THE YEAR ENDED: JUNE 30, 2015 Release Date: October 27, 2016 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 1 -- 1 Category 2: 0 -- 0 -- 0 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 1 -- 1 FINDINGS LAST AUDIT: 0 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 • (15-1) The Regional Office of Education #22 did not have sufficient internal controls over the financial reporting process. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS CONTROLS OVER FINANCIAL STATEMENT PREPARATION The Regional Office of Education #22 is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). Regional Office 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). The Regional Office of Education #22 did not have sufficient internal controls over the financial reporting process. The Regional Office maintains its accounting records on the cash basis of accounting during the fiscal year and posts year-end accrual entries for financial statement purposes. While the Regional Office maintains controls over the processing of most accounting transactions, there are not sufficient controls over the preparation of 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. During review of the Regional Office of Education #22’s financial information prepared by the Regional Office of Education #22, auditors noted the Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable, accounts payable, or unearned revenue. While the Regional Office did maintain records to indicate the balances of accounts receivable, accounts payable, and unearned revenue, no entries were provided to reconcile the Regional Office of Education #22’s grant activity, such as posting grant receivables. In addition, the Regional Office did not have adequate controls to record and report the Regional Office’s net accrued pension liabilities/assets, deferred outflows of resources, deferred inflows of resources, and pension expense in accordance with GAAP. Finally, cash receipts and disbursements that occurred after June 30, 2015 were posted in the accounting software as cash transactions at June 30, 2015 instead of appropriately recording the transactions as accounts receivable or accounts payable at June 30, 2015. Proposed adjusting entries by auditors were approved and accepted by Regional Office management. According to Regional Office officials, they did not have adequate funding to hire and/or train their accounting personnel in order to comply with these requirements. In addition, the complex requirements of GASB Statements No. 68 and No. 71 were new for fiscal year 2015 and will require additional time and training before the Regional Office can fully implement the requirements on its own. (Finding 2015-001, pages 11a-11c) This finding was first reported in 2007. The auditors recommended that since the Regional Office of Education #22 has been dissolved and its counties were merged into the Regional Office of Education #26, ROE #26 should implement comprehensive preparation procedures to ensure that the financial statements are complete and accurate. These procedures should be performed by a properly trained individual(s) possessing a thorough understanding of applicable GAAP, GASB pronouncements, and knowledge of the Regional Office’s activities and operations. The Regional Office of Education #26 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in an organization of this size. The Regional Office noted that it accepts the degree of risk associated with this condition because the added expense of seeking additional accounting expertise to prepare and/or review financial statements would take away from the funds available to provide educational services for the schools in the region. (For previous Regional Office response, see Digest Footnote #1 located at the end of the digest.) AUDITORS’ OPINION Our auditors state the Regional Office of Education #22’s financial statements as of June 30, 2015 are fairly presented in all material respects. FRANK J. MAUTINO Auditor General FJM:KJM AUDITORS ASSIGNED: Kemper CPA Group LLP were our special assistant auditors. DIGEST FOOTNOTE #1: Controls Over Financial Statement Preparation - Previous Regional Office Response In its prior response in 2014, the Regional Office of Education #22 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in an organization of this size. The Regional Office noted that it accepts the degree of risk associated with this condition because the added expense of seeking additional accounting expertise to prepare and/or review financial statements would take away from the funds available to provide educational services for the schools in the region.