REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #30
ALEXANDER, JACKSON, PERRY, PULASKI, AND UNION
COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM
GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  May 27, 2020

FINDINGS THIS AUDIT:  5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 4 -- 4
Category 2:  0 -- 0 -- 0
Category 3:  1 -- 0 -- 1
TOTAL:  1 -- 4 -- 5

FINDINGS LAST AUDIT: 5

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

• (17-1) The Regional Office of Education #30
did not have sufficient internal controls over
the financial reporting process.
• (17-2) The Regional Office of Education #30
did not have adequate internal controls over
the preparation of grant expenditure reports.
• (17-3) The Regional Office of Education
#30’s salaries and benefits were not supported
by proper time and effort documentation.
• (17-4) The Regional Office of Education #30
did not provide completed financial statements
in an auditable form by the August 31
deadline.
• (17-5) The Regional Office of Education #30
lacked written policies for federal grant
administration.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT PREPARATION

The Regional Office of Education #30 (ROE) did
not have sufficient internal controls over the
financial reporting process. The ROE
maintained its accounting records on the cash
basis of accounting during the fiscal year and
posted or maintained a list of year-end
accrual adjustments for financial statement
purposes. While the ROE maintained controls
over the processing of most accounting
transactions, there were not sufficient
controls over the preparation of 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 Regional Office 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, including the schedule of
expenditures of federal awards, and include
all disclosures as required by the
Governmental Accounting Standards Board
(GASB).

During review of the financial information
prepared by the ROE, the following internal
control deficiencies were noted:

• While the ROE did maintain records to
indicate the balances of accounts receivable/
due from other governments and unavailable
revenue, not all entries were provided or
recorded correctly to reconcile the ROE’s
grant and general ledger activity.
• Expenses used to meet cost reimbursement
requirements for certain State and federal
grants, including indirect costs, were not
allocated to the proper fund and were instead
charged to unrestricted funds. Audit
adjustments were also necessary to correct
certain other expenses that were
misclassified, and one entry was posted twice.
• Audit adjustments were necessary to properly
classify State and federal revenue, which had
originally been classified as local revenue.
• The ROE did not have adequate controls over
the proper recognition of on-behalf revenues
and expenses. Information to calculate and
record these amounts had not been obtained by
the ROE.
• 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.

Regional Office management indicated they did
not have adequate funding to hire and/or train
their accounting personnel in order to comply
with these requirements and present the
financial statements in accordance with GAAP.
In addition, the complex requirements of GASB
Statements No. 68 and 71 will require
additional time and training before the ROE
can fully implement the requirements on its
own. (Finding 2017-001, pages 14a-14c) This
finding was first reported in 2015.

The auditors recommended that as part of
internal control over the preparation of
financial statements, the ROE should implement
comprehensive preparation procedures to ensure
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.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. Part of this fiscal audit was under
prior management.

INTERNAL CONTROLS OVER EXPENDITURE REPORT
PREPARATION

The Regional Office of Education #30 (ROE) did
not maintain separate expenditure accounts or
subsidiary ledger accounts for grant
expenditures. A separate responsibility code
must be created for each grant and each grant
year.

In addition, the ROE did not timely submit
certain Mathematics and Science Partnerships
expenditure reports. The ROE also did not have
adequate internal controls over the
preparation of grant expenditure reports.

Expenditure reports submitted to granting
agencies to request reimbursement did not
reconcile to the underlying accounting records
for the following State and federal grant
programs: ROE/ISC Operations, Mathematics and
Science Partnerships, Title I – School
Improvement and Accountability, and RAMPDUP
and Onward. Additionally, expenses were
overstated to the granting agencies for the
IDEA – Improvement Grant – Part D program and
the Mathematics and Science Partnerships
program. The questioned costs for IDEA –
Improvement Grant – Part D were $5,638 and the
questioned costs for Mathematics and Science
Partnerships were $48,759.

Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal
Awards (Uniform Guidance) requires that a non-
federal entity’s financial management system,
including records documenting compliance with
federal statutes, regulations, and the terms
and conditions of the federal award, must be
sufficient to permit 1) the preparation of
reports required by general and program-
specific terms and conditions, and 2) the
tracing of funds to a level of expenditures
adequate to establish that such funds have
been used according to the federal statutes,
regulations, and the terms and conditions of
the federal award. Furthermore, the non-
federal entity must establish and maintain
effective internal control over the federal
award.

Regional Office management indicated the
following:

• Prior to the implementation of a new
accounting program in March of 2017, the ROE
was unable to adequately separate the grant
activity for grants that ran multiple years.
• Untimely submission of certain Mathematics
and Science Partnerships expenditures reports
was due to an oversight.
• They obtained general ledger reports with
preliminary information and did not perform
further follow-up to verify all applicable
expenses were moved to the appropriate
accounts. (Finding 2017-002, pages 14d-14e)

The auditors recommended that the Regional
Office management create a system of internal
controls to ensure all expenditure reports are
submitted accurately and timely, are fully
supported by adequate cost documentation
records, and reconcile to the underlying
accounting records.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report.

SALARIES AND BENEFITS NOT SUPPORTED BY PROPER
TIME AND EFFORT DOCUMENTATION

The Regional Office of Education #30 (ROE)
assigned salary and benefit costs to the
Mathematics and Science Partnership grants
based on budgeted amounts. Comparisons of
actual costs to budgeted distributions based
on time and effort records were performed and
adjustments for actual time spent on the
grants, if different from budgeted amounts,
were made; however, time and effort
documentation was not always complete. For
example, time and effort reporting did not
always include 100% of the employees’ time.
Some employees turned in monthly calendars to
management, but they only included time spent
on grants, not 100% of the employees’ hours,
and/or they did not include the number of
hours worked per day or the program worked.

Employees of the ROE are required to document
their time and effort working on federal
programs. Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform
Guidance) requires charges for salaries and
benefits to be supported by a system of
internal control which provides reasonable
assurance that charges are accurate,
allowable, and properly allocated.
Documentation records should reasonably
reflect the total activity for which the
employee is compensated, not exceeding 100% of
compensated activities, and should encompass
both federally assisted and non-federally
assisted activities. It further states that
budget estimates alone do not qualify as
support for salary and benefit charges to a
federal award. Significant changes in the
corresponding work activity should be
identified and entered into the accounting
records in a timely manner. All necessary
adjustments must be made such that the final
amount charged to the federal award is
accurate, allowable, and properly allocated.

Regional Office management indicated, until
the prior year audit, they were unaware of the
time and effort log requirements for all
personnel. (Finding 2017-003, pages 14f-14g)

The auditors recommended that the ROE should
implement a system of internal controls over
time and effort reporting. The ROE should use
time and effort documentation to distribute
salary and benefit costs for employees who
work in whole or in part on grant program
activity in accordance with the Uniform
Guidance.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report.

DELAY OF AUDIT

The Regional Office of Education #30 (ROE) 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 the accrual basis of accounting in
accordance with generally accepted accounting
principles (GAAP).

In addition, prudent business practices and
transparency require timely preparation and
completion of financial statements.

Fieldwork was originally scheduled for the
week of June 25, 2018. During this time,
issues were noted which delayed our audit
procedures: not all prior year adjusting
journal entries were posted correctly; not all
accrual entries were posted or posted
correctly; there were negative cash balances
in various funds; due to/froms between funds
were not posted; capital asset records were
incomplete; and grant expenditure reports were
not reconciled to the underlying general
ledger.

The ROE hired an outside accounting firm to
assist in correcting the issues noted during
our initial fieldwork. A new general ledger
was provided to auditors at the end of October
2018 and audit fieldwork was scheduled for the
week of December 10, 2018. Fieldwork was not
completed this time due to continuing issues
with the capital asset records, grant
expenditure reports and the underlying general
ledger, and other issues noted. Fieldwork was
scheduled again for the week of May 13, 2019.
Again, fieldwork was not able to be completed
as the financial statements still required
numerous material journal entries to correct
additional errors and omissions noted.

In late September 2019, the ROE hired a
different outside accounting firm to assist
with the remaining outstanding audit items.
Final audit items were received in November
2019.

Regional Office management indicated the
issues appeared to begin in the prior year and
were not adequately addressed for the current
year audit due to timing. Transition to a new
accounting software package during the current
year also did not help with the issues.
(Finding 2017-004, pages 14h-14i)

The auditors recommended 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: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report.

LACK OF WRITTEN POLICIES FOR FEDERAL GRANTS

The Regional Office of Education #30 (ROE) did
not have written procedures concerning cash
management, the determination of allowability
of costs in accordance with Subpart E – Cost
Principles of the Uniform Guidance and the
terms and conditions of the federal award, or
standards of conduct covering conflicts of
interest and governing the performance of its
employees engaged in the selection, award, and
administration of contracts. In lieu of
written procedures, the ROE utilized informal
procedures in which each purchase made or cost
allocated to the Mathematics and Science
Partnerships was reviewed for allowability by
an individual with knowledge of the budget,
allowable costs and activities, and the cash
management requirements. The allowability
determinations were based on the amounts
included in the budgets for the Mathematics
and Science Partnerships approved by, and the
grant periods set by, the Illinois State Board
of Education.

Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal
Awards (Uniform Guidance) requires the ROE to
have written procedures to implement the
requirements of Part 200.305, Payment, related
to cash management, and for determining the
allowability of costs in accordance with
Subpart E – Cost Principles of the Uniform
Guidance and the terms and conditions of the
federal award. The ROE must also maintain
written standards of conduct covering
conflicts of interest and governing the
performance of its employees engaged in the
selection, award, and administration of
contracts.

Regional Office management indicated they were
unable to dedicate the time needed to fully
implement the Uniform Guidance due to
competing priorities. (Finding 2017-005, pages
15b-15c)
The auditors recommended that the ROE prepare
written procedures to implement the
requirements of Part 200.305, Payment, related
to cash management, for determining the
allowability of costs in accordance with
Subpart E – Cost Principles of the Uniform
Guidance and the terms and conditions of the
federal award, and to document standards of
conduct covering conflicts of interest and
governing the performance of its employees
engaged in the selection, award, and
administration of contracts.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #30’s financial statements as of
June 30, 2017 are fairly stated in all
material respects.

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

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:JMM