REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #44: MCHENRY
COUNTY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2023

Release Date:  February 19, 2025

FINDINGS THIS AUDIT: 3

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

FINDINGS LAST AUDIT: 3

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

• (23-1) The Regional Office of Education
#44 did not have sufficient internal
controls over financial statement
preparation.

• (23-2) The Regional Office of Education
#44 had inadequate control procedures.

• (23-3) 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.
During the review of the ROE’s financial
information, it was noted the ROE did not
have sufficient internal controls over the
financial reporting process to ensure
financial statement transactions were
accurately reported.

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 has chosen to utilize the modified cash
basis of accounting for financial 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 financial reporting should include
adequately trained personnel with the
knowledge and expertise to prepare and/or
thoroughly review financial statements to
ensure that they are free of material
misstatements and include all disclosures as
required by the Governmental Accounting
Standards Board (GASB).

Section C of the State and Federal Grant
Administration Policy, Fiscal Requirements,
and Procedures and 23 Illinois
Administrative Code 100 (Subtitle A)
requires separate accounting and expenditure
reporting of each grant/project.

GASB Statement No. 54, Fund Balance
Reporting and Governmental Fund Type
Definitions, states special revenue funds
are used to account for and report the
proceeds of specific revenue sources that
are restricted or committed to expenditures
for specified purposes other than debt
service or capital projects. The general
fund should be used to account for and
report all financial resources not accounted
for and reported in another fund. Fund
balance should be reported as
restricted when constraints placed on the
use of resources are externally imposed by
grantors.

The auditors noted the following
misstatements during the review of the ROE’s
financial information:

• Overstatements in the Statement of Net
Position for the Due from Other Governments
by $11,969, Due from Other Funds by $12,443,
Due to Other Funds by $12,443, and Due to
Other Governments by $231,753; and
understatements in Cash by $474, Net
Position, Restricted for Education Purposes
by $204,799, and Net Position, Unrestricted
by $15,459.

• Overstatements in the Statement of
Activities for Expenses, Purchased Services
and Other Support Services by $948 and
$5,000 respectively; and understatements in
Expenditures, Supplies and Materials and
Capital Outlay by $474 and $5,000,
respectively. Consequently, the Change in
Net Position was understated by $474.

• In the General Fund Balance Sheet, the Due
from Other Funds and Due to Other
Governments were overstated by $3,615 and
$18,600, respectively; while the Fund
Balance, Unassigned was understated by
$14,985.

• Overstatements in the Education Fund
Balance Sheet for the Due from Other
Governments by $11,969, Due from Other Funds
by $474, Due to Other Funds by $474, Due to
Other Funds by $12,443, and Due to Other
Governments by $213,153; and understatements
in Cash by $474, Fund Balance, Restricted by
$213,153, and Fund Balance, Unassigned by
$474.

• In the Institute Fund Balance Sheet, the
Due from Other Funds and Fund Balance,
Restricted were both overstated by $8,354.

• In the Education Fund Statement of
Revenues, Expenditures and Changes in Fund
Balances, Expenditures, Purchased Services
and Other Support Services were overstated
by $948 and $5,000 respectively; while
Expenditures, Supplies and Materials and
Capital Outlay were understated by $474 and
$5,000, respectively. Consequently, the Net
Change in Fund Balances was understated by
$474.

• Overstatements in the combining Schedule
of Accounts, General Fund, for the Due from
Other Funds by $3,615 and Due to Other
Governments by $18,600. The Unassigned Fund
Balance was understated by $14,985.

• Overstatements in the Combining Schedule
of Accounts, Education Fund, ROE/ISC
Operations, for the Due from Other
Governments by $11,969, Due from Other Funds
by $474, Due to Other Funds by $11,969, and
Due to Other Governments by $213,153.
Cash and Restricted Fund Balance were
understated by $474 and $213,153,
respectively.

• In the Combining Schedule of Accounts,
Education Fund, Elementary and Secondary
School Emergency Relief, Due to Other Funds
was overstated by $474 and Unassigned Fund
Balance was understated by $474.

• Overstatements in the Combining Schedule
of Revenues, Expenditures and Changes in
Fund Balance, ROE/ISC Operations, for
Revenues, Federal Sources by $49,742;
Expenditures, Salaries and Benefits by
$5,899, Purchased Services by $27,881,
Supplies and Materials by $10,962 and Other
Support Services by $5,000.

• Understatements in the Combining Schedule
of Revenues, Expenditures and Changes in
Fund Balance, Elementary and Secondary
School Emergency Relief, for Revenues,
Federal Sources totaling $20,030;
Expenditures, Salaries and Benefits by
$5,899, Purchased Services by $10,577, and
Supplies and Materials by $3,080.
Consequently, the Net Change in Fund
Balances was understated by $474.

• Understatements in the Combining Schedule
of Revenues, Expenditures and Changes in
Fund Balance, Digital Equity, for Revenues,
Federal Sources totaling $29,712;
Expenditures, Purchased Services by $16,356,
Supplies and Materials by $8,356, and
Capital Outlay by $5,000.

• The ROE improperly classified transactions
from federal sources totaling $49,742 as
General Fund (Fund) activities under the
General Fund instead of a special revenue
fund-the Education Fund. As a result, the
unassigned fund balance is overstated, and
the restricted fund balance is understated
by $49,742.

• Budgetary Comparison Schedules for the
Education Fund Accounts, Elementary and
Secondary School Emergency Relief Fund
(ESSER) Project Years 2021 to 2023 and
Digital Equity Project Years 2021 to 2022
were not properly prepared.

• The cash balance amounting to $5,000 from
one of the ROE’s bank accounts was not
recorded, thus understating the cash account
balance of the General Fund.

• The beginning Net Position and Fund
Balance were not properly restated to
consider the ROE 44’s conversion from
modified accrual to modified cash basis of
accounting, as well as the related financial
statement disclosure was not included.

• The On-Behalf Payments – Local amounting
to $231,692 was not recorded as Revenues and
Expenditures under the General Fund. Since
the amounts that should be recorded under
Revenues and Expenditures offset each other,
the Net Change in Fund Balance and Ending
Fund Balance for the General Fund was not
affected.

The ROE subsequently revised its financial
statements to correct these misstatements
and omissions.

Regional Office management indicated that
this was due to the transition with a newly
hired 3rd party bookkeeper during the fiscal
year.  (Finding 23-001, pages 11 – 14)

The auditors recommended the ROE should
implement comprehensive preparation and/or
review procedures as part of their internal
control over the preparation of financial
statements to ensure the financial
statements, including disclosures, are
complete and accurate. These procedures
should be performed by a properly trained
individual(s) possessing a thorough
understanding of the basis of accounting
selected for financial statements, GASB
pronouncements, and knowledge of Regional
Office of Education No. 44’s activities and
operations.

 ROE Response: Accounting firm who is
 contracted by the ROE to fulfill all
 accounting and audit preparation will
 review FY23 to prepare more accurately for
 FY24.

INADEQUATE INTERNAL CONTROL PROCEDURES

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

• 6 of 36 receipts tested (17%), totaling
$1,705, did not have sufficient
documentation to support the nature,
purpose, and classification of the
transaction.
• 8 of 36 receipts tested (22%), totaling
$82,879, had no documentation when the
checks were received. As a result, we were
unable to determine whether non-electronic
receipts were deposited in a timely manner.
• 45 of 48 (94%) monthly bank
reconciliations were missing the date of
when the reconciliation was prepared,
therefore we were unable to determine if the
bank reconciliation was prepared timely.


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
exceptions noted in the internal controls
were due to the transition with a newly
hired 3rd party bookkeeper during the fiscal
year. (Finding 23-002, pages 15-16) This
finding was first reported in 2016.

The auditors recommended that the ROE should
ensure supporting documentation for receipt
transactions are properly maintained;
receipts have a documented received date to
ensure timely deposits; and bank
reconciliations for all bank accounts are
performed timely with documentation of date
performed.

ROE Response: The accounting firm contracted
by the ROE will request sufficient
documentation or retrieve it from automatic
deposit companies. For checks received by
mail, the ROE will write the date received.
The assistant superintendent will deposit
within 5 business days excluding his
vacation time. The accounting firm
contracted by the ROE will date all monthly
bank reconciliations.

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 April 25, 2024.

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.  The ROE may 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 has chosen the
modified cash basis of accounting for
financial reporting.

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
delay was due to not having a bookkeeper on
a full-time basis.  (Finding 23-003, 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). These financial
statements need to be presented to the
Auditor General’s independent auditors for
audit by the August 31 deadline.

ROE Response: The accounting firm contracted
by the ROE will be late on FY24 due to
catching up in the audit process for FY22
and FY23. Since FY24 is a full year with the
accounting firm, they will have a much
easier time preparing documents. It is our
intention depending on the timing of the
FY24 audit, to have the FY25 audit on time.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #44’s financial statements as of
June 30, 2023 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