REPORT DIGEST REGIONAL OFFICE OF EDUCATION #32: IROQUOIS AND KANKAKEE COUNTIES FINANCIAL AUDIT (IN ACCORDANCE WITH THE UNIFORM GUIDANCE) FOR THE YEAR ENDED JUNE 30, 2022 Release Date: May 10, 2023 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 0 -- 1 -- 1 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 • (22-1) The Regional Office of Education #32 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 #32 (ROE) did not have sufficient internal controls over the financial reporting process. During review of the ROE’s financial information, it was noted the ROE did not have adequate controls to ensure financial statement balances were accurate. While the ROE did maintain records to indicate the balances of financial statement accounts, material audit adjustments were proposed in order to ensure those balances were accurate for the basis of accounting selected for financial statement presentation. The ROE implemented Governmental Accounting Standards Board (GASB) Statement No. 87, Leases, for Fiscal Year 2022. The ROE erroneously identified and recorded a lease contract that does not qualify as a lease under GASB Statement No. 87, requiring an adjustment to report accurate balances. The ROE subsequently revised its financial statements to correct the errors noted above. The School Code (105 ILCS 5/2-3.17a) allows a Regional Office of Education or Educational Service Center to utilize a cash basis, modified cash basis, or generally accepted accounting principles (GAAP) basis of accounting to prepare the financial statements for audit. The ROE has chosen to utilize the modified cash basis of accounting for financial statement reporting. The ROE is required to maintain a system of controls over the preparation of financial statements in accordance with its selected basis of accounting. The ROE’s internal controls over financial reporting should include adequately trained personnel with the knowledge, skills, and experience to prepare financial statements and include all related disclosures as required by the GASB. GASB Statement No. 87, Leases, provides guidance regarding properly identifying lease contracts and determining contracts that qualify as a lease under GASB Statement No. 87. Regional Office management indicated when the new standard was implemented, they did not timely and effectively detect all material adjustments needed in order to present financial statements in accordance with modified cash basis of accounting. (Finding 22-01, pages 13 – 14) This finding was first reported in 2019. 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 basis of accounting selected for financial statements, GASB pronouncements, and knowledge of the ROE’s activities and operations. ROE Response: While the ROE No. 32’s management does agree that the financial statement balances that were initially presented were not accurate as related to GASB Statement No. 87, it is important to emphasize that it was the ROE No. 32’s management that detected the misstatement on February 8, 2023, and brought it to the attention of the auditors at that time. An adjustment was then recorded to correct the financial statements. AUDITORS’ OPINION Our auditors state the Regional Office of Education #32’s financial statements as of June 30, 2022 are fairly presented in all material respects. This financial audit was conducted by the firm of Roth & Co., 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:JRB