REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #39:
MACON AND PIATT COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2022

Release Date:  April 19, 2023

FINDINGS THIS AUDIT: 5

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

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

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 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 GAAP basis of accounting to
prepare financial statements for
audit. The ROE has chosen to utilize
the GAAP 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 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).

During review of the ROE’s accounting
records, auditors noted the ROE did
not have adequate controls over the
maintenance of complete records of
investments, receivables, unavailable
revenues, net position/fund balance,
revenues, and expenditures. While the
ROE did maintain records to indicate
the balances of these items, numerous
material adjustments were required to
present balances in accordance with
GAAP.

Regional Office management indicated
that the bookkeeper is inexperienced
in financial statement preparation and
was unable to use the information in
the old system for accurate
preparation of the FY21 financial
statements. The ROE has limited
resources and no CPA on staff.
(Finding 21-001, pages 10a – 10b) This
finding was first reported in 2018.

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 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 continues to
make additional training available for
the bookkeeper and business office
employees to expand their technical
accounting knowledge. The ROE 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 26 of the 34
(76%) quarterly expenditure reports
required by the Illinois State Board
of Education (ISBE) were not submitted
timely. Nine of the quarterly
expenditure reports were submitted 1
day late, two were submitted 2 days
late, three were submitted between 20
and 30 days late, two were submitted
between 60 and 90 days late, and ten
submitted over 100 days late.

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 bookkeeper did not have a schedule
in place for completing expenditure
reports in a timely manner. Prior
management did not monitor the reports
nor their deadlines. (Finding 21-002,
page 10c) This finding was first
reported in 2019.

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

ROE Response: ROE management hired an
outside accountant on an as-needed
basis to support the bookkeeper with
creating procedures and protocols for
routine and timely grant reporting.
All expenditure report due dates are
now on a shared calendar for FY23, and
management is monitoring the
completion of the reports. With the
correct data now reflected in the new
accounting software, additional
training and systems in place, the ROE
anticipates that this issue will be
remedied.

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 September 26, 2022.

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). A regional office of
education or educational service
center is to utilize a cash basis,
modified cash basis, or generally
accepted accounting principles (GAAP)
basis of accounting to prepare the
financial statements for audit.

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.

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

Regional Office management indicated
the bookkeeper, hired in May of 2019,
submitted the FY19 audit data nine
months late. This led to the FY20
audit data being submitted ten months
late. The bookkeeper has been so
behind that it has been difficult to
catch up, making the FY21 audit late
as well. Previous management was not
monitoring this timeline, which led to
the audits getting farther and farther
behind. (Finding 21-003, pages 10d –
10e) This finding was first reported
in 2019.

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).
Additionally, ROE management should
consider if changing to the cash or
modified cash basis would be allowable
or beneficial to the ROE and users of
the ROE financial statements. These
financial statements need to be
presented to the Auditor General’s
independent auditors for audit by the
August 31 deadline.

ROE Response: The ROE recognizes the
urgency to get the audits back on
schedule. The ROE is working to
schedule the FY22 audit as soon as the
FY21 audit is completed.

CONTROLS OVER CASH

The Regional Office of Education #39’s
(ROE) had inadequate internal controls
over cash. Auditors noted the initial
bank reconciliation of the main
operating account had a material
variance when comparing the balance
per the bank reconciliation to the
balance per the trial balance. The
variance required the ROE to revise
the June 30, 2021 bank reconciliation.
The revised bank reconciliation was
provided to the auditors on September
26, 2022.

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 bookkeeper has struggled with
basic accounting tasks and the
preparation of the monthly bank
reconciliations since he took over the
business office in 2019. The
bookkeeper got so behind on the
monthly reconciliations that catching
up on these reconciliations became
very difficult. Previous management
was not effectively monitoring the
monthly bank reconciliation process.
(Finding 21-004, page 10f) This
finding was first reported in 2019.

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.

ROE Response: ROE management and
bookkeeper worked with an outside
accountant who assisted in the
development of systems and procedures
that allowed for better controls over
cash. The implementation of these new
procedures will simplify the bank
reconciliation process for the
bookkeeper and will assist in accurate
and timely preparation of the monthly
bank reconciliations.

CONTROLS OVER REVIEW OF JOUNRAL
ENTRIES

The Regional Office of Education #39
(ROE) had inadequate controls over
review of journal entries. During
auditors’ review of journal entries,
they noted 15 out of the 15 (100%)
journal entries tested lacked the
necessary documentation to indicate
the entry had been reviewed and
approved by the Regional
Superintendent or Assistant Regional
Superintendent.

The ROE is responsible for
establishing and maintaining an
internal control system over journal
entries to prevent errors or fraud. In
addition, adequate controls over
compliance with laws, regulations, and
grant agreements require supervisory
review of expenditures charged to
grant programs.

Regional Office personnel indicated
management was not reviewing and
approving the journal entries.
(Finding 21-005, page 10g)

The auditors recommended the Regional
Superintendent or Assistant Regional
Superintendent should formally review
and approval all journal entries,
along with supporting documentation,
prior to the entries being posted to
the accounting records.

ROE Response: The former Regional
Superintendent retired on September
30, 2022. The new Regional
Superintendent took over on October 1,
2022. ROE management is very aware of
the possible risks to the office of
not reviewing and approving journal
entries. All journal entries will be
reviewed by the Regional
Superintendent or Assistant Regional
Superintendent moving forward in FY23.
The Regional Superintendent will also
go back and review AJEs for FY22.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #39’s financial
statements as of June 30, 2021 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:BAO