REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #54:
VERMILION COUNTY

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  April 27, 2022

FINDINGS THIS AUDIT:  3

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

FINDINGS LAST AUDIT: 3

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

• (21-1) The Regional Office of
Education #54 lacked adequate controls
over the review of internal controls
over external service providers.

• (21-2) The Regional Office of
Education #54 had an improper
application of accounting principle.

• (21-3) The Regional Office of
Education #54 did not provide
completed financial statements in an
auditable form by the August 31st due
date.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

LACK OF ADEQUATE CONTROLS OVER THE
REVIEW OF INTERNAL CONTROLS OVER
EXTERNAL SERVICE PROVIDERS

The Regional Office of Education #54
(ROE) lacked adequate controls over
the review of internal controls over
external service providers. During
testing, the auditors noted the ROE
had not:
• Developed a formal process for
identifying service providers and for
either obtaining the Service
Organization Controls (SOC) reports
from the service providers and related
subservice organization or performing
alternative procedures to determine
the impact of such services on its
internal control environment on an
annual basis.
• Documented its review of each of the
SOC reports, or performed alternative
procedures, to evaluate any issues
relevant to the ROE’s internal
controls.
• Monitored and documented the
operation of the Complementary User
Entity Controls (CUECs) relevant to
the ROE’s operations.

The ROE is responsible for the design,
implementation, and maintenance of
internal controls related to
information systems and operations to
ensure resources and data are
adequately protected from unauthorized
or accidental disclosure,
modifications, or destruction. This
responsibility is not limited due to
the process being outsourced.

Generally accepted information
technology guidance endorses the
review and assessment of internal
controls related to information
systems and operations to assure the
accurate processing and security of
information.

Regional Office officials indicated
they understand the importance of a
formal process to monitor service
providers and due to competing
priorities, they were still not able
to address the issues noted. (Finding
21-001, pages 11 – 12)

The auditors recommended the ROE
identify all third-party service
providers and determine and document
if a review of controls is required.
If required, the ROE should:
• Obtain SOC reports or perform
independent reviews of internal
controls associated with outsourced
systems including services provided by
subservice organizations, at least
annually.
• Monitor and document the operation
of the CUECs relevant to the ROE’s
operations.
• Document its review of the SOC
reports or perform alternative
procedures to evaluate all significant
issues to ascertain if a corrective
action plan exists and when it will be
implemented, any impacts to the ROE,
and any compensating controls.
• Review contracts with service
providers to ensure applicable
requirements over the independent
review of internal controls are
included.

ROE Response: The ROE acknowledges the
need to have System and Organizational
Controls processes and policy in place
to monitor service providers. Third
party service providers with access to
the confidential data of ROE #54 must
have their internal controls reviewed
prior to entering into a purchasing
contract. An SOC audit is the
preferred documentation of appropriate
internal controls. In the event an SOC
audit is not available from a third-
party service provider, optional
documentation covering the depth and
breadth of an SOC audit may be
considered. Contracts with third party
service providers will be at the
discretion of the Regional
Superintendent.

IMPROPER APPLICATION OF ACCOUNTING
PRINCIPLE

The Regional Office of Education #54
(ROE) reported and disclosed revenue
receipts totaling $38,370 as an
extraordinary item in its originally
submitted financial statements for
audit. Auditors determined the amount
was actually ordinary local revenues
and should not be reported and
disclosed as extraordinary. The ROE
submitted revised financial statements
to report these amounts as local
revenues and removed the note
disclosure about the extraordinary
item.

Governmental Accounting Standards
Board (GASB) Statement No. 62,
Codification of Accounting and
Financial Reporting Guidance Contained
in Pre-November 30, 1989 FASB and
AICPA Pronouncements defines
extraordinary items as transactions or
other events that are both unusual in
nature and infrequent in occurrence.
GASB Statement No. 62 states an event
or transaction should be presumed to
be ordinary and usual activity of the
government, unless the evidence
clearly supports its classification as
a special or extraordinary item.

Regional Office management indicated
this was an oversight. The revenue
receipts were charged to an account
used in the prior year for receipts
related to an actual extraordinary
item reported in the prior audit and
was assumed to be related to the same
transaction. (Finding 21-002, pages 13
– 14)

The auditors recommended the ROE
should establish procedures to ensure
that transactions which include
special items and reporting be
carefully reviewed for proper
accounting and recognition in
accordance with generally accepted
accounting principles.

ROE Response: The ROE acknowledges
that revenue receipts totaling $38,370
was originally disclosed as an
extraordinary item when they were
submitted for the audit. However, the
revenue should have been reported as
ordinary.

DELAY OF AUDIT

The Regional Office of Education #54
(ROE) did not provide completed
financial statements in an auditable
form by the August 31st due date. The
financial statements were provided on
September 24, 2021.

The ROE 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. Additionally,
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 GAAP basis of
accounting to prepare financial
statements for audit. The ROE has
chosen to change to the modified cash
basis of accounting for financial
statement reporting.

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

The ROE indicated additional time was
needed both by the contracted
accountant and the ROE bookkeeper to
convert the financial statements to
modified cash basis. (Finding 21-003,
pages 15 – 16)

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).
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 acknowledges
that the completed financial
statements were not in an auditable
form by the August 31st due date.
Unfortunately, there were some
unforeseeable challenges that created
the delay, but the office acknowledges
that it is our responsibility to
ensure that the financial statements
are prepared and ready prior to the
August 31st due date.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #54’s financial
statements as of June 30, 2021 are
fairly presented 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:BAO