When asked what ten activities their offices spent the most time administering, ROEs and ISCs most often listed teacher and administrator certification, training and professional development, health life safety, and the Regional Safe Schools Program.

ROEs generally act as a program and fiscal intermediary between ISBE and local schools.

ROEs are required to provide certain School Services and regulatory functions.

According to ISBE audits, the 45 ROEs and 3 ISCs received a total of $110,816,155 in funding for fiscal year 2000.

Three State agencies (Illinois State Board of Education, the Illinois Department of Corrections, and the Illinois Department of Human Services) accounted for 98% of the total State funding to ROEs and ISCs.

The responsibility for monitoring programs and funding provided to ROEs/ISCs is decentralized at ISBE.

ISBE’s grant agreements contained few guidelines regarding allowable expenses, program reporting and fiscal monitoring.

Our determination of whether these funds were being used in an appropriate, efficient, and effective manner was complicated by the lack of clear criteria from ISBE as to what were allowable or unallowable expenses.

Regional Improvement Plans submitted to ISBE by the ROEs/ISCs did not always contain the information required by ISBE rule.

ISBE is not complying with the ROE/ISC monitoring requirements found in the administrative rules.

The 10 smallest ROEs by population are required to enter into cooperative agreements with one or more of the larger 35 ROEs to provide the School Services functions.

Agreements were not specific regarding funding and program responsibilities.

Audits were inconsistent in the reporting of funding.

REPORT CONCLUSIONS

The 45 Regional Offices of Education (ROEs) and 3 Intermediate Service Centers (ISCs) received a total of $110,816,155 in funding from all sources in fiscal year 2000 for their operations and programs, according to audits contracted by the Illinois State Board of Education (ISBE). Of this amount, $65,874,005 (59%) was from the State. Chicago School District #299 serves as a fourth ISC in Cook County through a waiver granted by ISBE.

ISBE provides the majority of State funding to ROEs and ISCs. This funding is provided for activities such as staff development and training, education of gifted children, computer technology education, alternative schools, and other program activities. ROEs also receive a large amount of funding to pass through to local schools. In fiscal year 2000, ISBE total funding to ROEs and ISCs, including pass through to local school districts, exceeded $1.83 billion.

Generally, Regional Offices of Education act as a program and fiscal intermediary between ISBE and local school districts. ROEs perform various programmatic, regulatory, and other voluntary functions. ISCs, which are located in Cook County, perform some of the same programmatic functions as ROEs, but are not responsible for the regulatory functions that ROEs are statutorily responsible for administering. While the Regional Superintendents are elected officials, the ISC executive directors are appointed by each ISC’s governing board. When asked what ten activities their offices spent the most time administering, ROEs and ISCs most often listed teacher and administrator certification, training and professional development, health life safety, and the Regional Safe Schools Program. However, responses varied considerably.

The responsibility for monitoring programs and funding provided to ROEs/ISCs is decentralized at ISBE. ISBE officials stated that monitoring is conducted by each program within ISBE. During fiscal year 2000, there were numerous divisions that were involved in program administration and funding of ROEs. ISBE has undergone reorganizations in November 1999 and October 2000, and another is currently underway. Several of the ROE/ISC officials we interviewed expressed confusion resulting from the ISBE reorganizations, such as whom to contact with questions. Although ISBE has a Division of Regional Offices Support, it is only responsible for a small portion of overall ROE program activities.

Some ROEs provide services through cooperative agreements with other ROEs. However, some of these agreements are not specific regarding funding and program responsibilities. The activities of ROE cooperatives are not monitored by ISBE. ISBE could not provide the amount of funding each cooperative received or whether the funding was sent directly from ISBE on behalf of another ROE or whether the funding was first given to one ROE and then sent to another.

Given the decentralized organizational structure, strong management controls need to be in place to ensure that ROE/ISC programs are meeting ISBE's intended goals and are using resources properly. We found that while ISBE had established a system of management controls, several of the controls were not being carried out or needed to be strengthened. We found that:

• ISBE's grant agreements contained few guidelines regarding allowable expenses, program reporting, and fiscal monitoring. While we found that ROE/ISC expenditures sampled were generally spent on ROE/ISC related activities, we had questions on 15 percent of the expenditures sampled, for reasons such as a lack of documentation or whether use of funds was consistent with the purpose of the grant. Our conclusions regarding these expenditures were complicated due to the lack of clear ISBE guidelines as to what were allowable uses of these funds.

• ISBE did not conduct many of the site visits, record reviews, and evaluations of ROEs and ISCs required by administrative rule (23 Ill. Adm. Code 525.140).

• Regional Improvement Plans did not always include all components required by the administrative rule (23 Ill. Adm. Code 525.120).

• A-133 audits conducted of the ROEs/ISCs did not express an opinion on whether the ROE or ISC complied with State laws, regulations, or agreements. One of the primary management controls frequently cited by ISBE officials is the annual audit conducted of each ROE/ISC.

There is an overreliance at ISBE on self-reporting of expenditures by ROEs/ISCs. ISBE approves budgets and monitors overall program expenditures. However, we found that in 156 of 397 (39%) of the expenditures reviewed, ROEs/ISCs did not use function and object codes correctly which may lead to inaccurate expenditure reporting.

We identified interest income earned from State funds being used for purposes other than the principal. The grant agreements reviewed contained no guidelines for use of interest income earned from State funds. The Illinois Grant Funds Recovery Act (30 ILCS 705/10) requires that interest earned on grant funds becomes part of the grant principal when earned and is to be treated accordingly unless the grant agreement provides otherwise.

We also reviewed funding received by ROEs from the Illinois Department of Human Services (DHS) and the Illinois Department of Corrections (DOC). Generally, we found that the grant agreements and contracts provided controls to ensure that funds were used appropriately.

• ROE Advisory Boards are not meeting the required six times per year. Only 5 of the 45 offices surveyed reported meeting the required number of times.

• Regional Superintendents and Assistant Superintendents receive compensation in addition to their statutory salaries. For fiscal year 2000, ROEs reported a total of $105,552 in additional compensation, most of it coming from county government.

• Statutory provisions related to Regional Offices of Education contain outdated references and confusing language caused by the historical reduction in the number of offices.

• Contracts between the private accounting firms and ISBE to conduct annual audits did not specifically provide that all records should be available for review by the Auditor General as is required by the Illinois Procurement Code (30 ILCS 500/20-65).

OVERVIEW OFROE/ISC FUNCTIONS

Generally, Regional Offices of Education act as a program and fiscal intermediary between ISBE and local school districts. ROEs and ISCs are required to perform certain functions by both the statutes and administrative rules. These functions include School Services and alternative schools programs. ROEs also perform regulatory functions.

Each ROE and ISC, with the exception of the Suburban Cook ROE, is required by statute and administrative rule to offer certain core services, referred to as "School Services". These may be offered by each ROE or in cooperation with one or more other ROEs. These services include such activities as providing staff development and training to teachers and administrators, collecting data, and planning, implementing, and evaluating certain programs.

In addition to the School Services functions discussed above, ROEs are mandated to perform other statutory and regulatory duties. These include, among others, such functions as: GED, Health/Life Safety, Regional Safe Schools Program, School Bus Driver Training, Teacher and Administrator Certification, Training and Professional Development, and Truancy Activities.

When asked what ten activities their offices spent the most time administering, ROEs and ISCs most often listed teacher and administrator certification, training and professional development, health life safety, and the Regional Safe Schools Program. However, responses varied considerably.

Some functions and activities, although not statutorily required, have been delegated to the ROEs by ISBE. ROEs carry out activities for ISBE such as grants management, educational programming for the local school districts, recognition of private schools, and distribution of materials to local districts. (Pages 11-17)

ROE/ISC FUNDING

Digest Exhibit 1 shows the total funding by source for ROEs and ISCs for fiscal years 1998 through 2000. Of all ROE/ISC sources of revenues for fiscal year 2000, 59 percent was from the State. ROE/ISC funding increased from $90,116,291 in fiscal year 1998 to $110,816,155 in fiscal year 2000. The funding information presented was taken from the A-133 audits conducted by private accounting firms that contract with ISBE.

ROEs also received funding to be passed through to local school districts. In total, ROEs and ISCs received $1.83 billion in fiscal year 2000 from ISBE, most of which was pass through to local school districts.

Many ROEs also receive support from the counties in their region. This may include free building space, in-kind or on behalf payments, and direct funding of staff. For a summary of each ROE’s funding for fiscal years 1998 through 2000, see Appendix C of the full report.

Three State agencies (Illinois State Board of Education, the Illinois Department of Corrections, and the Illinois Department of Human Services) accounted for 98% of the total State funding to ROEs and ISCs in fiscal year 1999. In fiscal year 1999, ISBE provided the majority of funding to ROEs/ISCs from State agencies (87%). Other State agencies providing funding included, among others, the Department of Commerce and Community Affairs, Secretary of State, and the Department of Children and Family Services.

ROEs/ISCs received funding from several sources. For example:

• ISBE provided $47,039,334 and $55,025,367 in State funding to ROEs/ISCs in fiscal years 1999 and 2000 respectively. ISBE was also appropriated $6.46 million for fiscal years 1999 and 2000 for the Regional Superintendents’ and Assistant Superintendents’ salaries.

• The Department of Human Services (DHS) provided $3,514,212 in fiscal year 1999 and $6,311,137 to ROEs in fiscal year 2000.
• The Department of Corrections (DOC) provided funding to one ROE to administer and operate special education services and programs for the DOC Statewide school district. DOC also provided funding to ROEs for GED education, scoring, and reimbursement for GED certificates issued to inmates within each ROE area.
• Local funding provided from counties to ROEs for fiscal year 2000, according to survey results, was almost $7 million.
• Federal funding provided to ROEs/ISCs that was identified in the fiscal year 2000 A-133 audits totaled $18,661,089. (Pages 19-29)

MANAGEMENT CONTROLS AT STATE AGENCIES

Legislative Audit Commission Resolution Number 118 asks whether State agencies providing funding to the ROEs and any other similar entities have in place adequate management controls to review the financial and programmatic aspects of those offices. Management controls include the plan of organization, methods and procedures adopted by management to ensure that its goals are met.

We reviewed management controls at the three State agencies that provided the largest amounts of funding to ROEs/ISCs in fiscal year 1999 (over $1,000,000). These agencies included the State Board of Education, Department of Human Services, and Department of Corrections.

Illinois State Board of Education (ISBE)

The operations and responsibilities for monitoring programs and funding provided to ROEs/ISCs are decentralized at ISBE. ISBE provides funding to ROEs and ISCs for many different programs. ROEs also provide some services in cooperation with one another. ISBE officials noted that there are over 100 programs at ISBE that provide funding to ROEs and ISCs and that each program is responsible for program monitoring. The decentralized nature of financial and programmatic responsibilities at ISBE, as they relate to ROEs/ISCs, increases the need for a strong system of management controls. We concluded that ISBE's management controls need to be strengthened.

ISBE had major reorganizations in November 1999 and October 2000, and there is another reorganization currently underway. For instance, in fiscal year 1999 the entity responsible for ROE School Services programs and funding was located under the Deputy Superintendent of Educational Programs and was called ROE Liaison/ROE Services. In November 1999 this was moved under the Chief Deputy Superintendent and called Regional Office of Education. Finally, in October 2000, the responsibility was moved under the Education Center and called Regional Offices Support. Even though there is a Division of Regional Offices Support, this Division is only responsible for the School Services programs that accounted for approximately 20 percent of total ISBE State funding to ROEs/ISCs.

The reorganizations at ISBE have led to problems related to communication and management of the programs that ROEs/ISCs are responsible for administering. In our meetings with Regional Superintendents and ISC Executive Directors, several expressed confusion resulting from the ISBE reorganizations, such as whom to contact with questions. We recommended that ISBE establish a central contact responsible for providing guidance to, and addressing questions raised by, ROEs/ISCs. (Pages 32-34)

Guidelines for Allowable Expenses

ISBE's grant agreements contained few guidelines regarding allowable expenses, program reporting, and fiscal monitoring. We reviewed grant agreements for funding of School Services, the Regional Safe Schools Program (RSSP), and the Truants’ Alternative and Optional Education Program (TAOEP) which comprise about 70 percent of the total State funding ISBE provides to ROEs/ISCs. None of these programs’ grants contained guidelines defining what types of expenses were allowable or unallowable. One program’s grant application we reviewed, Career Awareness, contained a section that detailed unallowable costs. The Illinois Grant Funds Recovery Act (30 ILCS 705/10) requires that all grant agreements specify permissible expenditures of grant funds and the financial controls applicable to the grant.

Our expenditure testing focused on the three largest ISBE programs but also included testing of other programs at ISBE and other State agencies. In total, we sampled 397 expenditures for a total of $1,249,121 at 9 ROEs/ISCs throughout the State.

We generally found that the expenditures tested were consistent with the overall mission and purpose of the ROE/ISC. However, for 15 percent (58 of 397) of the expenditures tested, we had some question, such as whether the expenditure was related to the purpose of the specific program to which it was charged. Our determination of whether these funds were being used in an appropriate, efficient, and effective manner was complicated by the lack of clear criteria from ISBE as to what were allowable or unallowable expenses. We recommended that ISBE develop guidelines for allowable or unallowable expenditures for programs which provide funding to ROEs/ISCs. (Pages 37-42)

ROE Accounting Systems and Policies

ROE offices used different accounting systems throughout the State. ISBE, in an effort to standardize ROE accounting systems, received funding to develop an accounting software package called the Regional Accounting Program or RAP. According to Activity Reports provided by ISBE, expenditures for the RAP project development were $50,000 in fiscal year 1997, $180,956 in fiscal year 1999, and $84,250 in fiscal year 2000. As of July 17, 2001, ISBE expended $35,819 and obligated another $45,248 toward the development of RAP for fiscal year 2001.

During our testing visits, only one ROE office was able to provide written accounting policies for their operations. We found that the practices and procedures for approval of expenditures, vouchers, and checks varied among offices.

We also found that expenditures were miscoded according to the ROE Accounting Manual expenditure codes. These codes are used by ROEs and ISCs to report expenditures to ISBE. In 39 percent of expenditures tested (156 of 397), we found that ROEs/ISCs were not following the expenditure codes required by the ROE Accounting Manual. We found that expenditure coding was also inconsistent from one ROE/ISC to another. We recommended that ISBE work with ROEs/ISCs to improve the use of appropriate expenditure codes as is required in the ROE Accounting Manual and consider training ROE/ISC accounting and bookkeeping staff. (Pages 43-44)

ROE/ISC School Services - Regional Improvement Plans

The Regional Improvement Plans submitted to ISBE by the ROEs/ISCs did not always contain the information required by ISBE rule. We reviewed 12 fiscal year 2000 Regional Improvement Plans and found that their content varied widely. Only 3 of the 12 plans included all the criteria required by ISBE rule. Some Regional Improvement Plans did not adequately document the standards and procedures by which the completion of each outcome will be evaluated or did not specify how the services would be delivered. Regional Improvement Plans also did not always adequately document whether programs or services were being done directly or whether they were provided through a cooperative agreement with another ROE or third party. (Pages 45-46)

Monitoring (Site Visits, Record Reviews, and Evaluations)

The administrative code (23 Ill. Adm. Code 525.140) requires that the State Board of Education annually evaluate programs for the five School Service functions. The rule requires that this will include at least an annual review of program records. The rule also requires a site visit to be conducted at least every two years. We found that ISBE is not complying with the ROE/ISC monitoring requirements found in the administrative rules.

• ISBE provided a list of 13 ROE/ISC site visits (27%) conducted in fiscal year 2000, but could not provide any documentation of these visits other than staff travel vouchers. Some ROE officials stated that ISBE Division of Regional Offices Support staff had never visited their office or it had been several years since they last visited.
• ISBE did not have documentation of required evaluations of whether ROEs met their objectives covered in the Regional Improvement Plans; and
• ISBE did not have policies or procedures governing these site visits.

We recommended that ISBE should ensure that programs meet requirements set forth in the agency’s administrative rules including conducting site visits, record reviews, and annual evaluations. We also recommended that Regional Improvement Plans contain all required elements. (Pages 46-47)

Cooperative Agreements and Third Party Transactions

ISBE’s administrative rules require that the 10 Regional Offices of Education with the smallest populations "shall enter into cooperative agreements with one or more of the larger regions" to provide the five services outlined under the programs and services to be provided by ROEs (23 Ill. Adm. Code 525.110(b)).

We found that, in fiscal year 2000, 8 of the 10 smallest ROEs had formal agreements as required by the administrative rules and were providing services in cooperation with a larger ROE. However, based on our review of the Regional Improvement Plans, cooperative agreements, ROE/ISC survey data, ROE/ISC budgets, and ROE/ISC websites, we concluded that two of the ten smallest ROEs did not have a formal cooperative agreement.

Our review of cooperative agreements generally concluded that they are not specific about the assignment of program responsibilities. Monitoring of program services is difficult without direct assignment of responsibilities. Although we found instances in which ROEs provided funding to others to perform certain functions, the agreements reviewed did not specifically discuss the exchange of funding.

ISBE also could not provide the amount of funding each cooperative received for ROE School Services or whether the funding was sent directly from ISBE on behalf of another ROE or whether the funding was first given to one ROE and then sent to another.

ISBE does not financially monitor contracts between ROEs and third parties. During expenditure testing we found that some program funding provided to ROEs by ISBE was expended through contracts with third parties. These include local school districts or colleges which are then responsible for operating the program. We recommended that ISBE ensure that each of the ten smallest ROEs provides services through a cooperative agreement which includes sufficient information and that third party transactions are adequately monitored. (Pages 48-50)

ROE/ISC Audits

One of the primary management controls frequently cited by ISBE officials was the annual A-133 audit conducted of each ROE/ISC. State law requires ISBE to annually audit the financial statements of all accounts, funds and other moneys in the care, custody or control of the Regional Superintendents and educational service centers (105 ILCS 5/2-3.17a). The audits were inconsistent in the reporting of funding and did not express an opinion regarding compliance with statutory requirements or monitor specifically if State funding is used in accordance with applicable laws, rules, and grant requirements or in an efficient and effective manner. In our review of program and agency funding, we noticed that the same program had several different names depending upon which ROE audit was reviewed.

These audits did not show which State agencies provided funds to ROEs and ISCs. Therefore, for our analysis ISBE staff coded the data to identify the State agencies that provided funding to ROEs and ISCs. During our analysis we concluded that ISBE did not always identify the correct State agency providing the funding.

We compared ISBE funding information for fiscal year 2000 with fiscal year 2000 audit reports and concluded that some funding was not reported in the audits. These included funds provided to some ROEs for Regional Safe Schools and Certificate Renewal Administrative Payments.

We reviewed five desk reviews conducted by ISBE’s internal audit staff of the A-133 audits for fiscal year 1999 audits. We found that ISBE staff checked the federal funding amounts in the audits to ISBE's accounting systems but did not check the State funding amounts to any source documents. We recommended that ISBE review funding data presented in the A-133 audits for accuracy and ensure consistency in the reporting of programs in these audits. (Pages 50-52)

Interest Income

Some ROEs/ISCs were not using interest earned from State funds for the same purpose as the principal, as required by the Illinois Grant Funds Recovery Act. Of the 9 ROEs/ISCs tested, 7 did not account for an allocation of their interest earnings based on the source of funds in their general ledger. These 7 received a total of $8,650,249 in State funding for fiscal year 2000. For example, one ROE earned a total of $24,866 in interest from a variety of State programs and funds. The interest was then deposited into a separate fund/account and used for such purposes as festivals, photo processing, dining, hotel expenses, and charitable donations.

According to the Regional Office of Education Accounting Manual, the ROE must allocate a portion of the interest earned on a bank account in which two or more sources of funds are combined using a reasonable basis. We recommended that ISBE monitor the use of interest income earned on State funds to ensure that these funds are used for the same purpose as the principal unless otherwise stated in the grant. (Pages 52-53)

OTHER STATE AGENCIES

We also reviewed funding received by ROEs from the Illinois Department of Human Services (DHS) and the Illinois Department of Corrections (DOC).

ROEs received State funds from DHS for several different programs. During the audit we met with DHS officials, and reviewed grant agreements and other management controls for the Addiction Prevention Program, Early Intervention Program, and Project Success Program. Generally, the grant agreements provided controls to ensure that funds were used appropriately. We are conducting a detailed review of the Early Intervention Program in accordance with Legislative Audit Commission Resolution Number 122 in which we will further review DHS’s monitoring of the Early Intervention Program.

The Illinois Department of Corrections (DOC) has contracts with ROEs and also reimburses ROEs for the cost of issuing GEDs. These agreements were for services to be provided by the ROEs. The largest of the agreements is with one ROE to administer and operate special education programs for the DOC School District #428. A second contract requires another ROE to score and report GED tests for the Department. Generally, the two contracts contained controls to ensure that funds are spent appropriately. (Pages 53-56)

OTHER ISSUES

We also identified other issues regarding Regional Offices of Education. These included:

• ROE Advisory Boards are not meeting the required six times per year. Only 5 of the 45 offices surveyed reported meeting the required number of times.
• Some Regional Superintendents and Assistant Superintendents receive compensation in addition to their statutory salaries. This additional compensation came primarily from the counties. For fiscal year 2000, this additional compensation ranged from $99 to more than $20,000 annually.
• State laws related to Regional Offices of Education contain outdated references and confusing language caused by the historical reduction in the number of offices.

• Contracts between the private accounting firms and ISBE to conduct annual audits did not specifically provide that all records should be available for review by the Auditor General as is required by the Illinois Procurement Code (30 ILCS 500/20-65). (Pages 57-61)

AUDIT RECOMMENDATIONS

The audit report contains 11 recommendations to the Illinois State Board of Education. Appendix G to the audit report contains complete agency responses.

WGH\MP

August 2001