REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #20: EDWARDS,
GALLATIN, HAMILTON, HARDIN, POPE, SALINE,
WABASH, WAYNE, AND WHITE COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED: JUNE 30, 2016

Release Date:  August 1, 2017

FINDINGS THIS AUDIT:  4

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

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

SYNOPSIS

• (16-1)  The Regional Office of Education
#20 did not have sufficient internal
controls over the financial reporting
process.

• (16-2)  The Regional Office of Education
#20 did not have sufficient internal
controls over monthly bank
reconciliations.

• (16-3)  The Regional Office of Education
#20 did not adequately monitor cash
balances.

• (16-4)  The Regional Office of Education
#20 did not have adequate controls over
Institute Fund expenditures.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #20 (ROE)
is required to maintain a system of
controls over the preparation of financial
statements in accordance with generally
accepted accounting principles (GAAP).
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).

The ROE did not have sufficient internal
controls over the financial reporting
process.  While the ROE maintains controls
over the processing of most accounting
transactions, there are not sufficient
controls over the preparation of GAAP
based financial statements for management
or employees in the normal course of
performing their assigned functions to
prevent or detect financial statement
misstatements and disclosure omissions in
a timely manner.

During review of the ROE’s financial
information prepared by the ROE, auditors
noted the ROE’s financial information
required material adjusting entries to
accounts receivable, accounts payable,
accrued payroll, and unearned revenue in
order to present its financial statements
in accordance with generally accepted
accounting principles.  In addition, the
ROE did not have adequate controls to
record and report net accrued pension
liabilities/assets, deferred outflows of
resources, deferred inflows of resources
and pension expenses in accordance with
GAAP.  Proposed adjusting entries were
approved and accepted by ROE management.

According to ROE officials, they did not
have adequate funding to hire and/or train
their accounting personnel in order to
comply with these requirements. (Finding
2016-001, pages 11a-11b) This finding was
first reported in 2011.

The auditors recommended that as part of
internal control over the preparation of
financial statements, the ROE should
implement comprehensive preparation
procedures to ensure that the financial
statements are complete and accurate.
These procedures should be performed by a
properly trained individual possessing a
thorough understanding of applicable GAAP,
GASB pronouncements, and knowledge of the
ROE’s activities and operations.

The ROE responded that it accepts the
auditor’s recommendation. The ROE will
work with other Regional Offices of
Education for professional development and
necessary training to ensure that the
proper employees possess the knowledge
required to compile the necessary GAAP
based financial statements.  (For previous
Regional Office response, see Digest
Footnote #1 located at the end of the
digest.)

PREPARATION OF MONTHLY BANK
RECONCILIATIONS

As a basic cash management procedure, the
ROE should be preparing bank
reconciliations for each of its cash
accounts on a monthly basis.  This
procedure should be incorporated as part
of the monthly closing procedures.

During the fiscal year, the ROE prepared
bank reconciliations for each of its
accounts on a monthly basis, but the
reconciled balance was not being compared
to the general ledger balance. On the bank
reconciliation for the month ended June
30, 2016, auditors noted a difference of
$24,785 between the reconciled balance per
the bank reconciliation and the actual
cash balances per the ROE’s general
ledger. The ROE determined the difference
was due to mistakes made with journal
entries and adjustments were made to the
balances reported in these financial
statements to correct the difference.

The ROE did not have sufficient internal
controls over its monthly financial
closing process. (Finding 2016-002, page
11c) This finding was first reported in
2014.

The auditors recommended that the ROE
should amend its internal control
processes over the monthly bank
reconciliations to ensure the reconciled
balance per the bank reconciliation agrees
to the cash balances per the general
ledger.

The ROE responded that it accepts the
auditor’s recommendation. The ROE is now
reconciling the monthly bank statement
with the cash balances per the general
ledger. This ensures accuracy of all
entries made into the computer system, is
done on a monthly basis, and reviewed by
an individual that did not take part in
the monthly bank reconciliation process.
(For previous Regional Office response,
see Digest Footnote #2 located at the end
of the digest.)

INADEQUATE MONITORING OF CASH BALANCES

The ROE should monitor the cash balance of
each fund on a periodic basis to determine
the balances are reasonable in relation to
the activity of the fund.

Near the beginning of each fiscal year,
the ROE requests short-term funding from
the school districts within the region to
reduce the ROE’s need to obtain financing
from a bank while they are waiting for
reimbursements and other funding from the
State of Illinois. Near the conclusion of
each fiscal year, the ROE remits the
funding back to the respective school
districts. During fiscal year 2015, the
ROE remitted $32,900 to two school
districts that did not provide funding to
it at the beginning of the fiscal year. As
of June 30, 2016, $25,900 was still
receivable from one school district and
resulted in a negative cash balance on the
ROE’s general ledger.

The ROE receives funding from the Illinois
State Board of Education which is
deposited in the Ohio and Wabash Valley
Special Education District (District)
agency fund. After the deposit is made,
the funding is intended to be disbursed to
the District shortly thereafter. However,
the ROE received $10,000 in June 2015 that
had still not been disbursed as of June
30, 2016, resulting in a $10,000 cash
balance in this fund.

The ROE did not adequately monitor cash
balances, and these errors occurred during
a period of transitioning to new
accounting staff. (Finding 2016-003, page
11d)

The auditors recommended that the ROE
should monitor cash balances to ensure
they coincide with the intended activity
of the fund they are recorded in and
should monitor all disbursements to ensure
they are only made to satisfy an actual
liability or other obligation.

The ROE responded that it accepts the
auditor’s recommendation. The ROE is now
monitoring cash balances on a semi-monthly
to monthly basis to ensure the intended
balances of the fund. Monies due from the
one school district for fiscal year 2015
were recovered in January 2017.

CONTROLS OVER INSTITUTE FUND EXPENDITURES

The Illinois School Code 105 ILCS 5/3-12
states that all certificate license fees
and a portion of renewal and duplicate
fees shall be used by the Regional
Superintendent to defray expenses
associated with the work of the regional
professional development review
committees; to defray expenses connected
with improving technology necessary for
the efficient processing of licenses; to
defray all costs associated with the
administration of teaching licenses; and
to defray expenses incidental to teachers’
institutes, workshops, or meetings of a
professional nature that are designed to
promote the professional growth of
teachers or for the purpose of defraying
the expense of any general or special
meeting of teachers or personnel of the
region, which has been approved by the
Regional Superintendent.

The ROE made interfund loans totaling
$37,912 from the Institute Fund to other
funds. Loaning of Institute Fund cash to
cover cash deficits in other funds is not
a statutorily approved use of Institute
funds.

The ROE did not record interfund lending
activity internally and also did not
monitor the cash balance in each of its
funds to determine if restricted cash was
used for unallowable purposes. (Finding
2016-004, page 11e)

The auditors recommended that the ROE
should ensure that funds generated from
license, renewal, and duplicate fees are
expended in accordance with the Illinois
School Code 105 ILCS 5-3/12.

The ROE responded that it accepts the
auditor’s recommendation. Due to this
oversight, the ROE is monitoring funds on
a monthly/semi-monthly basis to ensure
fees are expended in accordance with
Illinois School Code. A line of credit has
been approved and is on file in order to
prevent interfund loans from restricted
funds.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #20’s financial statements as of
June 30, 2016 are fairly presented in all
material respects.

This financial report was conducted by the
firm of Doehring, Winders & Co., LLP.

AMEEN DADA
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

DIGEST FOOTNOTES

#1: Controls Over Financial Statement
Preparation - Previous Regional Office
Response

In its prior response in 2015, the
Regional Office of Education #20 responded
that it will work with other Regional
Offices of Education for professional
development and necessary training to
ensure that the proper employees possess
the knowledge required to compile the
necessary GAAP based financial statements.

#2  Preparation of Monthly Bank
Reconciliations – Previous Regional Office
Response


In its prior response in 2015, the
Regional Office of Education #20 responded
that all bank accounts are reconciled
monthly to the general ledger. The
reconciled statements are then reviewed by
a third party that did not participate in
the reconciliation.