REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #32 :
IROQUOIS AND KANKAKEE COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  AUGUST 24, 2021

FINDINGS THIS AUDIT:  3

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

FINDINGS LAST AUDIT: 2

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

• (20-1) The Regional Office of
Education #32 did not have sufficient
internal controls over the financial
reporting process.

• (20-2) The Regional Office of
Education #32 lacked adequate controls
over the review of internal controls
over external service providers.

• (20-3) The Regional Office of
Education #32 did not provide
completed financial statements in an
auditable form by the August 31
deadline.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #32
(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 year-end accrual and other
applicable entries 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 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 errors
and 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 the
GAAP based financial statements and
include all disclosures as required by
the Governmental Accounting Standards
Board (GASB).

During review of the ROE’s financial
information prepared by the ROE,
auditors noted the ROE’s financial
information required a material
adjusting entry in order to present
its financial statements in accordance
with GAAP.

Regional Office management indicated
the complex requirements of GASB
statements will require additional
time and training before the ROE can
fully implement the requirements on
its own. (Finding 20-001, pages 10a –
10b)

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

ROE Response: The ROE will train I-KAN
Staff to improve skills in
implementing comprehensive preparation
and/or review procedures as part of
internal control over the preparation
of financial statements.

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

As part of the audit process, auditors
held discussions with Regional Office
of Education #32 (ROE) personnel
regarding the ROE’s change in
accounting software. The ROE switched
to an accounting software which
utilizes a service provider to provide
hosting and backup services for the
ROE.

The ROE is responsible for the design,
implementation, and maintenance of
internal controls, including the
controls that are outsourced to
service providers, related to
information systems and operations to
ensure resources and data are
adequately protected from unauthorized
or accidental disclosure,
modifications, or destruction.

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.

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) report
from the service provider and related
subservice organization or performing
alternative procedures to determine
the impact of such services on its
internal control environment prior to
signing an agreement with the service
provider.
• Documented its review of the SOC
report, 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.

Regional Office management indicated
the ROE transitioned software and did
not have the current SOC report prior
to the site visit of the auditing
firm. (Finding 20-002, pages 10c –
10d)

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, prior to
signing agreements with the providers
and annually thereafter.
• Document its review of the SOC
report, or perform alternative
procedures, to evaluate all
significant issues to ascertain if a
corrective action plan exists, when it
will be implemented, any impacts to
the ROE, and any compensating
controls.
• Monitor and document the operation
of the CUECs relevant to the ROE’s
operations.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

ROE Response: The ROE will:
• Obtain SOC reports or perform
independent reviews of internal
controls associated with outsourced
systems, including services provided
by subservice organizations, prior to
signing agreements with the providers
and annually thereafter.
• Document its review of the SOC
report, or perform alternative
procedures, to evaluate all
significant issues to ascertain if a
corrective action plan exists, when it
will be implemented, any impacts to
the ROE, and any compensating
controls.
• Monitor and document the operation
of the CUECs relevant to the ROE’s
operations.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

DELAY OF AUDIT

The Regional Office of Education #32
(ROE) did not provide completed
financial statements in an auditable
form by the August 31 deadline.
Financial statements were provided on
November 24, 2020.

The ROE 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
Government 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 generally accepted
accounting principles (GAAP).

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

Regional Office management indicated
the delay of audit was due to
implementing a new accounting system.
Specialized Data Systems (SDS) was not
set up properly when the conversion
took place in October 2019. (Finding
20-003, pages 10e – 10f)

The auditors recommended 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 Delay of Audit was
due to implementing a new accounting
system. Specialized Data Systems (SDS)
was not set up properly when the
conversion took place in October 2019.
The Finance Officer had to go back and
manually recalculate each payroll from
October 2019 to June 2020 to post each
payroll to the correct cash account.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #32’s financial
statements as of June 30, 2020 are
fairly presented in all material
respects.

This financial audit was conducted by
the firm of West & Company, 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:JRB