REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #34
LAKE COUNTY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2017

Release Date:  September 18, 2019

FINDINGS THIS AUDIT:  2

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

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

• (17-1) The Regional Office of Education
#34 did not have sufficient internal
controls over the financial reporting
process.

• (17-2) The Regional Office of Education
#34 did not have adequate controls over
bank reconciliations.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Lake County Regional Office of
Education #34 (ROE) did not have sufficient
internal controls over the financial
reporting process. 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 and correct
financial statement misstatements and
disclosure 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 GAAP based financial
statements and include all disclosures as
required by the Governmental Accounting
Standards Board (GASB).

The ROE did not have adequate controls to
ensure financial statement balances were
accurate. While the Regional Office did
maintain records to indicate the balances
of financial statement accounts, numerous
material audit adjustments were proposed in
order to ensure balances of supporting
records and reconciliations agreed to the
general ledger financial statement
accounts.

Regional Office officials indicated
management did not effectively detect all
of the material adjustments, including
those required under GASB Statements No. 68
and No. 71 needed in order to present
financial statements in accordance with
GAAP. (Finding 17-001, 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, including
disclosures, the ROE should implement
comprehensive preparation procedures to
ensure the financial statements, including
disclosures, are complete and accurate. The
ROE should ensure all general ledger
financial statement accounts agree to
supporting records and reconciliations. In
addition, the ROE should perform a detailed
review of activity subsequent to fiscal
year end to ensure all accruals are
properly recorded. These procedures should
be performed by a properly trained
individual possessing a thorough
understanding of applicable GAAP, GASB
pronouncements, and knowledge of the ROE’s
activities and operations.

ROE Response: The Lake ROE agrees with the
finding and will continue to implement
comprehensive preparation and review
procedures to ensure that financial
statements including disclosures are
complete and accurate. To streamline
preparation of comprehensive financial
statements, the Lake ROE has finalized
efforts to consolidate multiple
installations of the financial management
software. This merged data system has been
tested and validated. The new merged system
is undergoing continual review and will be
the sole financial system in use for the FY
2018 audit. Also included in the corrective
activities are continued consulting
services and training to Lake ROE finance
staff regarding preparation of financial
statements (including review for
completeness and accuracy). In addition,
the Lake ROE has continued to contract with
a part-time business consultant who
continues to review Lake ROE business
procedures and controls. Finally, the Lake
ROE will work to integrate Regional Safe
School accounting records into the Lake
ROE’s financial management software system
for the FY 2018 audit.

Prior Year ROE Response: The Lake ROE
agrees with the finding and will continue
to implement comprehensive preparation and
review procedures to ensure that financial
statements including disclosures are
complete and accurate. In order to
streamline preparation of comprehensive
financial statements, the Lake ROE has
finalized efforts to consolidate multiple
installations of the financial management
software. This merged data system has been
tested and validated. The new merged system
is undergoing continual review and will be
the sole financial system in use for the FY
2017 audit. Also included in the corrective
activities are continued consulting
services and training to Lake ROE finance
staff regarding preparation of financial
statements (including review for
completeness and accuracy). In addition,
the Lake ROE has continued to contract with
a part-time business consultant who
continues to review Lake ROE business
procedures and controls.

INADEQUATE CONTROLS OVER BANK
RECONCILIATIONS

Although bank reconciliations were
performed for the period ended June 30,
2017, auditors noted the total of all cash
accounts per the general ledger was not
properly reconciled to the Regional Office
of Education #34’s (ROE) bank accounts.

Adequate internal controls over cash
require that all cash in the custody of the
ROE be recorded in the general ledger and
that each month’s bank statements be
reconciled to the related general ledger
account balances.

Regional Office officials indicated the ROE
had inadequate internal controls in place
to ensure bank statements are properly
reconciled to the related general ledger
cash accounts.  (Finding 17-002, page 12)

The auditors recommended the ROE’s
management should ensure all cash accounts
per the general ledger are properly
reconciled to the relating bank accounts.
Management should ensure that all
reconciling items are reviewed for accuracy
with the appropriate follow-up as
necessary.

ROE Response: The Lake ROE agrees with the
finding and will establish adequate
internal controls over cash to ensure all
cash accounts per the general ledger are
properly reconciled to the relating bank
accounts. Management will also ensure that
all reconciling items are reviewed for
accuracy with the appropriate follow-up as
necessary. This will be done using the
newly refined merged financial management
system/database and the resulting
consolidation of multiple bank accounts.
All cash in the custody of the ROE shall be
recorded in the general ledger and each
month’s bank statements will be reconciled
to the related general ledger account
balances.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #34’s financial statements as of
June 30, 2017 are fairly presented in all
material respects.

This financial audit was conducted by the
firm of Lauterbach & Amen, LLP.

JEANNE MICHAUD
Audit Manager

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

FRANK J. MAUTINO
Auditor General

FJM:JMM