REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #44:
MCHENRY COUNTY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2020

Release Date:  January 26, 2022

FINDINGS THIS AUDIT:  0

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

FINDINGS LAST AUDIT: 0

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

• (20-2) The Regional Office of
Education #44 did not comply with
grant requirements.

• (20-3) The Regional Office of
Education #44 did not have adequate
internal control procedures over cash.

• (20-4) The Regional Office of
Education #44 did not provide
completed financial statements in an
auditable form by the August 31
deadline.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #44
(ROE) did not have sufficient internal
controls over the financial reporting
process.

Effective June 25, 2021, Public Act
102-0025 allowed 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 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.
The Regional Office’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).

For the year ended June 30, 2020, the
General Education Development Fund and
the Transportation Fund met the
criteria as major funds; however,
these funds were reported in aggregate
as nonmajor funds.

In addition, the ROE inaccurately
reversed prior year unavailable
revenue amounting to $50,474 as a
prior period adjustment of
governmental activities, therefore
understating the net position –
beginning balances and overstating the
program revenues – operating grants/
contributions of the governmental
activities in the statement of
activities.

The notes to the financial statements
in summary of significant accounting
policies, basis of presentation –
special revenue funds, budgetary
information, deposits and investments,
due from/to other governments, and net
position/fund balance were not updated
with current year information. In
addition, the disclosure on
restatement of the net position –
beginning balance of the business-type
activities was not included.

The ROE subsequently revised its
financial statements to present the
General Education Development Fund and
the Transportation Fund as major
funds, adjusted the misstatements in
the net position – beginning balances
and program revenues of the
governmental activities in the
statement of activities, and updated
the notes to the financial statements.

Regional Office management indicated
the ROE did not have adequate funding
to hire and/or train accounting
personnel with the knowledge, skills
and experience to prepare GAAP based
financial statements during Fiscal
Year 2020. The ROE contracted a part-
time accountant after June 30, 2020.
(Finding 2020-001, pages 10 – 12) This
finding was first reported in 2014.

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 are complete and
accurate. These procedures should be
performed by a properly trained
individual(s) possessing a thorough
understanding of 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 McHenry County
Regional Office of Education No. 44
agrees with the finding and has an
agreement with the McHenry County’s
Finance Division to take over the
financial reporting and accounting
responsibilities of the ROE effective
December 1, 2021. ROE-related journal
entries will now follow the County’s
Journal Entries Policy. Additionally,
statement preparation and audit work
will fall under the Finance Division’s
responsibilities as well.

NONCOMPLIANCE WITH GRANT REQUIREMENTS

The Regional Office of Education #44
(ROE) did not comply with grant
requirements. The Regional Safe
Schools and Regional Safe Schools
Cooperative grant programs’ budgets
and final expenditure reports
indicated the ROE expended funds for
salaries and benefits, purchased
services, and supplies and materials.
However, all of the funding was
forwarded to other entities as
payments to other governments to
administer the programs; therefore,
the expenditure reports were not
completed based on the approved budget
and general ledger details. Further,
auditors noted 11 of 15 expenditure
reports were submitted late, ranging
from 1 to 32 days late.

The Regional Office must comply with
grant accounting and reporting
requirements established by grant
agreements with the Illinois State
Board of Education (ISBE) and other
grantors in addition to the
requirements established by ISBE’s
fiscal policies and procedures for
grantees. Among these requirements are
accurate, current, and complete
disclosure of grant financial activity
to the grantor.

Regional Office management indicated
that due to vacancy of the bookkeeper
position, expenditure reports were not
completed accurately. The ROE
contracted a part-time accountant
after June 30, 2020. (Finding
2020-002, pages 13 –14) This finding
was first reported in 2016.

The auditors recommended the ROE
should ensure grant budgets and
expenditure reports are prepared using
current and accurate financial data
based on reports obtained from the
ROE’s accounting system.

ROE Response:  The McHenry County
Regional Office of Education No. 44
agrees with the finding and has an
agreement with the Finance Division to
address all expenditure reporting and
ensuring that reports match the State
of IL ROE Accounting Codes. The
McHenry County’s Finance Division will
be responsible for such reports
effective December 1, 2021.

INADEQUATE INTERNAL CONTROL PROCEDURES

The Regional Office of Education #44
(ROE) did not have adequate internal
control procedures over cash. Auditors
noted the following weaknesses in the
ROE’s internal control system for
which there were no mitigating
controls:

• The individual responsible for
reconciling cash accounts can accept
over-the-counter cash receipts;
• Missing supporting documentation for
receipt transactions for 11 of 40
receipts selected for testing;
• No documented evidence of
independent review of completed bank
reconciliations; and
• Untimely performance of monthly bank
reconciliations for 5 bank accounts,
51 of 60 months, ranging from 1 month
to 11 months late.

The Regional Superintendent of Schools
is responsible for establishing and
maintaining an internal control system
over accounting transactions to
prevent errors and fraud.

Regional Office management indicated
the ROE weaknesses noted in the
internal controls were also due to the
vacancy of the bookkeeper position.
The ROE contracted a part-time
accountant after June 30, 2020.
(Finding 2020-003, pages 15 – 16) This
finding was first reported in 2016.

The auditors recommended that the ROE
should ensure the individual
responsible for reconciling cash
accounts does not accept over-the-
counter cash receipts. In addition,
the ROE should ensure supporting
documentation for receipt transactions
are maintained; monthly bank
reconciliations are performed for all
bank accounts accurately and timely;
and document evidence of independent
review.

ROE Response: The McHenry County
Regional Office of Education No. 44
agrees with the finding and will have
the cash accounts brought into a
centralized account structure within
the County Treasurer. ROE staff will
no longer reconcile bank statements;
ROE staff will prepare deposits.
Deposits will be managed by staff at
the County Treasurer. The County
Treasurer (separate staff member
within the office) will then reconcile
bank statements. Receipt documentation
for transactions will follow the
County’s procedure in the County’s ERP
system, where we maintain all
documentation including scanned
documents.

DELAY OF AUDIT

The Regional Office of Education #44
(ROE) did not provide completed
financial statements in an auditable
form by the August 31 deadline. The
completed financial statements were
provided on March 25, 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.

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).

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

Regional Office management indicated
the bookkeeper’s position remained
vacant during the fiscal year. The ROE
contracted a part-time accountant
after June 30, 2020. (Finding
2020-004, pages 17 – 18) This finding
was first reported in 2018.

The auditors recommended that 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.
These financial statements need to be
presented to the Auditor General’s
independent auditors for audit by the
August 31 deadline.

ROE Response: The McHenry County
Regional Office of Education No. 44
agrees with the finding and has asked
the County’s Finance Division to
assume financial and accounting
responsibilities of the ROE. Completed
financial statements will be provided
by the deadline effective August 31,
2022 in accordance with 105 ILCS
5/2-3.17a and 74 Ill. Admin Code
420.320 (c).


AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #44’s financial
statements as of June 30, 2020 are
fairly stated in all material
respects.

This financial audit was conducted by
the firm of Adelfia 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:JRB