REPORT DIGEST REGIONAL OFFICE OF EDUCATION #24: GRUNDY AND KENDALL COUNTIES FINANCIAL AUDIT FOR THE YEAR ENDED: JUNE 30, 2016 Release Date: June 8, 2017 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: 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 • (16-1) The Regional Office of Education #24 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 #24 (ROE) is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The Regional Office’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). ROE #24 did not have sufficient internal controls over the financial reporting process. The ROE 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 ROE 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 ROE #24’s financial information prepared by the ROE, auditors noted the Regional Office’s financial information required material adjusting entries to cash, accounts receivable, accounts payable, operating lease obligation, and capital assets in order to present its financial statements in accordance with generally accepted accounting principles. Through inquiries and discussions with the ROE’s accounting personnel and Regional Superintendent, auditors noted that the ROE did not have adequate controls to record and report the ROE’s net accrued pension liabilities/ assets, deferred outflows of resources, deferred inflows of resources, and pension expenses in accordance with GAAP. Proposed adjusting entries were approved and accepted by ROE management. According to ROE officials, they did not have adequate funding to hire and/or train their accounting personnel in order to comply with these requirements. Additionally, the complex requirements of GASB Statements No. 68 and No. 71 were implemented in fiscal year 2015 and will require additional time and training before the ROE can fully implement the requirements on its own. (Finding 2016-001, pages 10-11) This finding was first reported in 2010. The auditors recommended that as part of internal control over the preparation of financial statements, the ROE 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 possessing a thorough understanding of the applicable GAAP, GASB pronouncements, and knowledge of the ROE’s activities and operations. The ROE responded that it has taken the following steps to address this finding: 1. Implemented a new software system--now in its fourth year of use; 2. Provided professional development opportunities to personnel. The ROE also stated it will continue to address this finding using the limited resources it has. (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 #24’s financial statements as of June 30, 2016 are fairly presented in all material respects. This financial audit was conducted by the firm of West & Company, LLC. AMEEN DADA Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:KJM DIGEST FOOTNOTE #1: Controls Over Financial Statement Preparation - Previous Regional Office Response In its previous response in 2015, the Regional Office responded that it has taken the following steps to address this finding: 1. Implemented a new software system--now in its third year of use; 2. Provided professional development opportunities to personnel. The Regional Office also stated that it will continue to address this finding using the limited resources it has.