REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #39
MACON AND PIATT COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2022

Release Date:  January 31, 2024

FINDINGS THIS AUDIT: 7

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  3 -- 1 -- 4
Category 3:  0 -- 2 -- 2
TOTAL:  3 – 4 -- 7

FINDINGS LAST AUDIT:  5

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

INTRODUCTION

SYNOPSIS

• (22-1) The Regional Office of Education
#39 did not have sufficient internal
controls over the financial reporting
process.

• (22-2) The Regional Office of Education
#39 had inadequate controls over grant
compliance.

• (22-3) The Regional Office of Education
#39 did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (22-4) The Regional Office of Education
#39 had inadequate controls over review of
journal entries.

• (22-5) The Regional Office of Education
#39 had inadequate controls over allowable
costs and costs principles.

• (22-6) The Regional Office of Education
#39 had inadequate controls over
subrecipient monitoring.

• (22-7) The Regional Office of Education
#39 had inadequate controls over
subrecipient monitoring.

The Regional Office of Education #39 had
inadequate controls over the preparation of
the Schedule of Expenditures of Federal
Awards.

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
financial statements required material audit
adjustments in order to ensure the balances
were accurate for the basis of accounting
selected for financial statement
preparation.

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 financial statements
for audit. The ROE chose 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.

Specifically, auditors noted the following
adjustments:

• Unavailable revenue totaling $106,153
related to revenues collected beyond 60 days
from the reporting date was not recorded.
• Receivables of $41,239 were incorrectly
recorded.
• Variances of interfund accounts amounting
to $3,000 were not identified.
• Unearned revenues of $12,092 were not
recorded.
• Noncapitalizable assets of $76,779 were
incorrectly capitalized.
• Additional depreciation expense amounting
to $2,445 was not recognized.

Additionally, the financial statements
submitted for audit did not include the
impact of the new lease accounting in
accordance with Governmental Accounting
Standards Board (GASB) Statement No. 87. As
a result, the government-wide financial
statements submitted did not report the
right to use assets and lease liabilities
amounting to $75,618 and $76,389. In
addition, expenditures representing
purchased services, principal lease
payments, and lease interest expenses
totaling $62,340 were not reported in the
Governmental Funds’ statement of revenues,
expenditures, and changes in fund balances.

Regional Office management indicated the
above exceptions were due to oversight.
(Finding 22-001, pages 16 – 17) This finding
was first reported in 2018.

The auditors recommended that as part of
internal control over the preparation of
financial statements, the ROE should
implement comprehensive preparation
procedures to ensure the financial
statements and disclosures are complete and
accurate. 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’s
financial statements.

ROE Response: The ROE agrees with this
finding.

CONTROLS OVER GRANT COMPLIANCE

The Regional Office of Education #39 (ROE)
had inadequate controls over grant
compliance. The ROE did not submit or timely
submit the required reports to the Illinois
State Board of Education (ISBE) in
compliance with the grant award agreement.

The grant award agreement between the ROE
and ISBE requires the ROE to complete and
submit expenditure reports quarterly and
performance reports semi-annually. The
quarterly expenditure reports are due 20
calendar days after the end of the reporting
quarter while the semi-annual performance
reports are due 30 calendar days after the
reporting semi-annual period. The ROE is
also required to submit an annual
performance report describing how the ROE
used the awarded funds during the
performance period. The annual reports are
due March 17, 2023.

During testing of the ROE’s compliance with
the grant reporting requirements, auditors
noted the following:

• Thirty-four of 38 (89%) quarterly
expenditure reports were submitted 20 to 342
days late.
• Three of 38 (8%) quarterly expenditure
reports were not submitted.
• Four of six (67%) semi-annual reports were
not submitted.
• One of six (17%) semi-annual report was
submitted 158 days late.
• Three of three (100%) annual reports were
not submitted.

Regional Office management indicated
required reports were not submitted or
timely submitted due to oversight and
competing priorities. (Finding 22-002, pages
18 – 19) This finding was first reported in
2019.

The auditors recommended the ROE implement
procedures to ensure adherence to the grant
reporting requirements.

ROE Response: The ROE agrees with this
finding. Previous management did not monitor
grant compliance.

DELAY OF AUDIT

The Regional Office of Education #39 (ROE)
did not provide completed financial
statements in an auditable form by the
August 31, 2022 deadline. The preliminary
draft was provided to the auditors on August
10, 2023.

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
Fiscal Year 2020 and 2021 audits were late
resulting in the delay of the Fiscal Year
2022 audit. Previous management was not
monitoring this timeline, which led to the
audits falling behind. (Finding 22-003,
pages 20 – 21) 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 basis would be beneficial to the
ROE and users of its 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 agrees with this
finding. Previous management did not monitor
the new bookkeeper’s need for training and
the difficult transition to a new online
accounting software system, leading to
delays in audits.

CONTROLS OVER REVIEW OF JOURNAL ENTRIES

The Regional Office of Education #39 (ROE)
did not have adequate controls over review
of journal entries. During the auditor’s
review of journal entries, auditors noted 3
of 15 (20%) 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 management indicated this
was due to oversight. (Finding 22-004, page
22)

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

ROE Response: The ROE agrees with this
finding. Previous management did not review
journal entries.

CONTROLS OVER ALLOWABLE COSTS AND COSTS
PRINCIPLES

The Regional Office of Education #39 (ROE)
did not ensure costs or expenditures were
adequately documented, reviewed, and
approved to ensure allowability under the
federal award.

The ROE’s procedures requires the Regional
Superintendent or the Program Director to
review and approve invoices and requisitions
before forwarding to the business office for
processing.

The Code (2 CFR § 200.303 (a)) requires the
ROE to establish and maintain effective
internal control over the federal award to
provide reasonable assurance the ROE is
managing the federal award in compliance
with federal statutes, regulations, and the
terms and conditions of the federal award.
Effective internal controls should include
procedures to ensure expenditures under
Federal awards are supported, reviewed, and
approved.

During testing of 60 expenditures totaling
$471,516, auditors noted eight (13%)
expenditures were not signed by the Program
Director or Regional Superintendent to
indicate review and approval of the
expenditures.

Regional Office management indicated
expenditures were not signed by the Regional
Superintendent or Program Director due to
oversight. (Finding 22-005, pages 23 – 24)

The auditors recommended the ROE ensures all
expenditures are properly supported,
reviewed, and approved prior to payment.

ROE Response: The ROE agrees with this
finding. However, according to the ROE
Employee Handbook (Fiscal Policies, page
16), updated and implemented in March 2021,
monthly bills such as rent, phone, etc. did
not require a requisition and were signed by
the Business Manager. Reoccurring payments
were approved with the contract lease
agreement based on budgeted amounts.

CONTROLS OVER SUBRECIPIENT MONITORING

The Regional Office of Education #39 (ROE)
did not have adequate controls over
subrecipient monitoring in compliance with
the Code of Federal Regulations (Code).

The Code (2 CFR § 200.332 (a)) requires the
ROE to ensure that every subaward is clearly
identified to the subrecipient as a subaward
and include information to comply with
federal statutes, regulations, and the terms
and conditions of the award. The required
information includes the subrecipient’s name
and unique identifier, assistance listing
number, federal award date, federal awarding
agency, etc. When some of this information
is not available, the pass-through entity
shall provide the best information available
to describe the Federal award.

The Code (2 CFR § 200.332 (f)) requires the
ROE to verify every subrecipient is audited
as required by Subpart F when it is expected
that the subrecipient’s Federal awards
expended during the respective fiscal year
equaled or exceeded the threshold set forth
in 2 CFR § 200.501.

The Code (2 CFR § 200.332 (d)) requires the
ROE to monitor the activities of the
subrecipient to ensure the subaward is used
for authorized purposes, in compliance with
Federal statutes, regulations, and the terms
and conditions of the subaward, and that
subaward performance goals are achieved.

The Code (2 CFR § 200.303 (a)) requires the
ROE to establish and maintain effective
internal control over the federal award to
provide reasonable assurance the ROE is
managing the federal award in compliance
with federal statutes, regulations, and the
terms and conditions of the federal award.
Effective internal controls should include
procedures over subrecipient monitoring.

During auditor’s testing of four
subrecipients, the following was noted:

• The ROE did not communicate the required
federal award information to all (100%)
subrecipients to comply with federal
statutes, regulations, and the terms and
conditions at the start of the award. All
the subaward agreements were signed and
became effective after the start date of the
grant.
• The ROE did not verify whether
subrecipients were required to be audited or
not.
• The ROE did not have written policies and
procedures for subrecipient monitoring and
could not provide evidence the ROE monitored
its subrecipients during the audit period.

Regional Office management indicated this
was due to oversight and staffing
limitations (Finding 22-006, pages 25 – 26)

The auditors recommended the ROE establish
and implement procedures over subrecipient
monitoring.

ROE Response: The ROE agrees with this
finding.

CONTROLS OVER PREPARATION OF SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS

The Regional Office of Education #39 (ROE)
did not have sufficient internal controls
over the preparation of the Schedule of
Expenditures of Federal Awards (SEFA) to
ensure all federal expenditures during the
fiscal year were reported and information in
the SEFA was accurately reported.

The Code of Federal Regulations (Code) (2
CFR § 200.510 (b)), establishes criteria and
requirements related to the preparation of
the schedule of expenditures of federal
awards.

The Code (2 CFR § 200.303 (a)) requires the
ROE to establish and maintain effective
internal control over the federal award to
provide reasonable assurance the ROE is
managing the federal award in compliance
with federal statutes, regulations, and the
terms and conditions of the federal award.
Effective internal controls should include
procedures over preparation of the schedule
of expenditures of federal awards.

During the auditor’s review of the SEFA, the
following was noted:

• Program title descriptions were incorrect,
and COVID-19 related grants were not
properly identified in the program title.
• Assistance listing numbers and pass-
through grant numbers were incorrectly
listed.
• Federal expenditures did not match the
expenditures in the general ledger.
• Subrecipient expenditures were
inappropriately reported on grants that did
not actually have subrecipients.
• The Education Stabilization Fund was not
specifically categorized in the SEFA and the
total federal awards expended for the
program was not reported.

The ROE subsequently revised its SEFA to
correct these errors.

Regional Office management indicated the
errors on the SEFA were due to oversight.
(Finding 22-007, pages 27 – 28)

The auditors recommended the ROE should
establish and implement internal controls
over the preparation of the SEFA to ensure
accurate reporting.

ROE Response: The ROE agrees with this
finding.

AUDITORS’ OPINION

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