REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #39:
MACON AND PIATT COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  November 17, 2021

FINDINGS THIS AUDIT:  4

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

FINDINGS LAST AUDIT: 4

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 #39 did not have sufficient
internal controls over the financial
reporting process.

• (20-2) The Regional Office of
Education #39 had inadequate controls
over grant compliance.

• (20-3) The Regional Office of
Education #39 did not provide
completed financial statements in an
auditable form by the August 31
deadline.

• (20-4) The Regional Office of
Education #39 had inadequate controls
over cash.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #39
(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 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) basis
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 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). Additionally, effective
June 25, 2021, Public Act 102-0025
allows that a Regional Office of
Education or Educational Service
Center may utilize a cash basis,
modified cash basis, or GAAP basis of
accounting to prepare the financial
statements for audit.

During review of the ROE’s accounting
records, auditors noted the ROE did
not have adequate controls over the
maintenance of complete records of
cash, receivables, unavailable
revenue, and revenue. While the ROE
did maintain records to indicate the
balances of these items, numerous
adjustments were required to present
balances in accordance with GAAP.

Regional Office management indicated
that at the end of Fiscal Year 2019 a
new bookkeeper was hired. Fiscal Year
2020’s audit was the second time that
the new bookkeeper went through the
process of closing the books. (Finding
20-001, pages 10a – 10b)

The auditors recommended that as part
of its 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.
Additionally, ROE management should
consider Public Act 102-0025 to
determine if changing to the cash or
modified cash basis would be allowable
or beneficial to the ROE and users of
the ROE financial statements.

ROE Response: The ROE hired a new
bookkeeper at the end of Fiscal Year
2019. Fiscal Year 2020’s audit was the
second time that the new bookkeeper
went through the process of closing
the books. The bookkeeper has been
working with an outside CPA firm to
remedy these issues going forward.

CONTROLS OVER GRANT COMPLIANCE

The Regional Office of Education #39
(ROE) had inadequate controls over
grant compliance. During the course of
the audit, auditors noted 15 of the 20
(75%) quarterly expenditure reports
required by the Illinois State Board
of Education (ISBE) were not submitted
timely. Four of the quarterly
expenditure reports were submitted 2
days late, 9 quarterly expenditure
reports were submitted between 10 and
20 days late, 1 quarterly expenditure
report was submitted between 20 and 30
days late, and 1 quarterly expenditure
report was submitted 45 days late. In
addition, 4 quarterly expenditure
reports required by ISBE were not
submitted.

As a recipient of federal, State, and
local funds from various grantor
agencies, the ROE must incorporate
certain procedures into its operations
in order to comply with the grant
agreements with these entities.

The ROE is responsible for
establishing and maintaining an
internal control system over the
completion of timely quarterly
expenditure reports required for
grants administered by ISBE. ISBE
requires expenditure reports to be
filed within 20 days of the applicable
end of each quarter.

Regional Office management indicated
the transition to a new bookkeeper
caused a delay in the Fiscal Year 2019
expenditure reporting and set the
expenditure reporting behind for
Fiscal Year 2020. The restrictions of
Covid-19 and the pandemic during FY20,
coupled with the integration of the
new bookkeeper made it more difficult
to complete the expenditure reports in
a timely manner and ensure the
accuracy of the information. (Finding
20-002, page 10c-10d)

The auditors recommended the ROE
should implement adequate internal
controls to ensure that expenditure
reports are filed timely.

ROE Response: The restrictions of
Covid-19 and the pandemic during FY20,
coupled with the integration of the
new bookkeeper made it more difficult
to complete the expenditure reports in
a timely manner and ensure the
accuracy of the information. Reports
will be submitted in a timelier manner
going forward.

DELAY OF AUDIT

The Regional Office of Education #39
(ROE) did not provide completed
financial statements in an auditable
form by the August 31 deadline. The
preliminary draft was provided to the
auditors on April 7, 2021.

In addition, auditors noted
inconsistencies with the bank
reconciliation of the main operating
account that required the ROE to
revise the June 30, 2020 bank
reconciliation. Auditors discussed
concerns about the bank reconciliation
with ROE management on June 7, 2021.
The revised bank reconciliation was
provided to the auditors on July 26,
2021.

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 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).
Additionally, effective June 25, 2021,
Public Act 102-0025 allows that a
Regional Office of Education or
Educational Service Center may utilize
a cash basis, modified cash basis, or
GAAP basis of accounting to prepare
the financial statements for audit.

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

Regional Office management indicated
that at the end of Fiscal Year 2019 a
new bookkeeper was hired. This
transition caused a delay in the
Fiscal Year 2019 audit and set the
audit schedule behind for Fiscal Year
2020. The restrictions of Covid-19 and
the pandemic during Fiscal Year 2020,
coupled with the integration of the
new bookkeeper effectively derailed
the audit timing. (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.
Additionally, ROE management should
consider Public Act 102-0025 to
determine if changing to the cash or
modified cash basis would be allowable
or beneficial to the ROE and users of
the ROE statements. These financial
statements need to be presented to the
Auditor General’s independent auditors
for audit by the August 31 deadline.

ROE Response: At the end of Fiscal
Year 2019 a new bookkeeper was hired.
This transition caused a delay in the
Fiscal Year 2019 audit and set the
audit schedule behind for Fiscal Year
2020. The restrictions of Covid-19 and
the pandemic during Fiscal Year 2020,
coupled with the integration of the
new bookkeeper effectively derailed
the audit timing. Management will
continue to work with the ROE’s hired
CPA firm to minimize audit delays
going forward.

CONTROLS OVER CASH

The Regional Office of Education #39’s
(ROE) bank reconciliations were not
being reviewed or did not show
documentation of review to ensure the
reconciliation was taking place and
that the reconciliation was complete.

In addition, auditors noted the bank
reconciliation of the main operating
account had a material variance when
comparing the balance per the bank
reconciliation to the balance per the
adjusted trial balance. The variance
required the ROE to revise the June
30, 2020 bank reconciliation. Auditors
discussed concerns about the bank
reconciliation with ROE management on
June 7, 2021. The revised bank
reconciliation was provided to the
auditors on July 26, 2021.

Sound internal control requires bank
reconciliations to be performed
monthly to ensure that all
transactions have been recorded. The
bank reconciliation process should
include identifying and correcting all
discrepancies between the bank records
and the books on a timely basis. Sound
internal control over cash requires
bank reconciliations to be completed
and reviewed by the appropriate level
of management on a monthly basis.

Regional Office management indicated
the ROE’s accounting software is a
fairly dated Disk Operating System
command accounting system. The new
bookkeeper had difficulties
reconciling cash variances at the end
of Fiscal Year 2019. The ROE’s hired
CPA firm was able to help the new
bookkeeper manually reconcile the cash
accounts, but did not fix the
reconciliation issues inside of the
accounting software. The recording of
cash transactions into the accounting
software was completed monthly for
Fiscal Year 2020; however the
variances created while closing Fiscal
Year 2019 made it difficult to
reconcile to Fiscal Year 2020 bank
accounts in the accounting system.
(Finding 20-004, pages 10g – 10h)

The auditors recommended that as part
of its internal controls over cash,
the ROE should reconcile all bank
statements every month and correct any
discrepancies in a timely manner. In
addition, the ROE’s management should
review bank reconciliations and
document their review each month after
the reconciliation has been completed.

ROE Response: Reconciliation issues
rolling forward from Fiscal Year 2019
in the ROE’s accounting software
caused reconciliation issues for
Fiscal Year 2020. Management will
continue to work with the ROE’s hired
CPA firm to resolve reconciliation
issues going forward.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #39’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:RSH