REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #24:
GRUNDY AND KENDALL COUNTIES

FINANCIAL AUDIT
FOR THE TWO YEARS ENDED JUNE 30, 2021

Release Date:  July 25, 2023

FINDINGS THIS AUDIT: 5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 1 -- 2
Category 2:  0 -- 0 -- 0
Category 3:  2 -- 1 -- 3
TOTAL:  3 -- 2 -- 5

FINDINGS LAST AUDIT: 2

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 #24 did not provide completed
financial statements in an auditable
form by the August 31 deadline.

• (21-2) The Regional Office of
Education #24 had inadequate census
data for Illinois Municipal Retirement
Fund employees.

• (21-3) The Regional Office of
Education #24 had inadequate controls
over grant compliance.

• (21-4) The Regional Office of
Education #24 had inadequate monitoring
of collateral on deposits.

• (21-5) The Regional Office of
Education #24 had inadequate controls
over cash.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

DELAY OF AUDIT

The Regional Office of Education #24
(ROE) did not provide completed
financial statements in an auditable
form by the August 31 deadline. The
preliminary draft was provided to the
auditors on May 5, 2022. The
preliminary draft required multiple
adjustments and revisions after
Regional Office records were adjusted.
The final draft was provided on
December 14, 2022.

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 (GAGAS).
The Regional Office of Education or
Educational Service Center 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 to use the
GAAP 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 officials indicated
prior staff that handled the financials
was unable to finalize records in a
timely manner. (Finding 21-001, pages
10 – 11) This finding was first
reported in 2018.

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 Regional Office of
Education #24 made changes to staff
that handles the financials. A new
Business Manager was hired along with
an Office Assistant. Those two
positions, along with the county paid
employee, work together to reconcile
all balances, complete payroll, and all
other office financial information. The
ROE contracts with a CPA Firm to assist
them with preparing the financial
statements. The new ROE financial team
has reconciled financials and is now
currently on pace to meet the future
deadlines.

INADEQUATE CENSUS DATA FOR ILLINOIS
MUNICIPAL RETIREMENT FUND EMPLOYEES

During the audit of the Regional Office
of Education #24 (ROE), auditors noted
the actuarially determined pension
report for the ROE Illinois Municipal
Retirement Fund (IMRF) had census data
that could not be confirmed as
reasonably accurate.

Management is responsible for the
design, implementation, and maintenance
of internal control relevant to the
preparation and fair presentation of
financial statements that are free from
material misstatement, whether due to
error or fraud. Management of cost-
sharing and agent employer plans are
also responsible for the preparation
and fair presentation of the financial
statements in accordance with the
applicable financial reporting
framework, including completeness and
accuracy of census data.

Regional Officials indicated a local
special education cooperative
(cooperative) and the ROE previously
paid IMRF contributions using the same
IMRF employer number. This arrangement
was agreed upon several years ago by
previous governing bodies. Upon the
cooperative obtaining its own employer
number in June 2016, IMRF, with
cooperation from the ROE, transferred
the active employees of the cooperative
to the new employer number. However, it
cannot be determined at this time if
the inactive and retired employees of
the cooperative have been properly
transferred to the new IMRF employer.
(Finding 21-002, page 12) This finding
was first reported in 2017.

The auditors recommended the ROE should
work with IMRF to determine all
employees associated with the ROE’s
IMRF account are actually employees of
the ROE.

ROE Response: The Regional Office has,
and continues to, work with IMRF
regarding this finding.

CONTROLS OVER GRANT COMPLIANCE

The Regional Office of Education #24
(ROE) had inadequate controls over
grant compliance. Auditors noted that
two grants (Regional Safe School and
Truants Alternative Optional Education
Program) had year-end expenditure
reports that did not agree to the trial
balance provided to auditors by the
ROE. The expenditure reports submitted
were for more than the general ledger
balance.

As a recipient of federal, State, and
local funds from various grantor
agencies, the ROE must incorporate
certain procedures into its operations
in order to comply with the grant
agreements with these entities.

The ROE is responsible for establishing
and maintaining an internal control
system over the completion of
expenditure reports required for grants
administered by the Illinois State
Board of Education.

Regional Office officials indicated the
new financial team discovered
expenditures were classified
incorrectly. (Finding 21-003, page 13)

The auditors recommended the ROE should
implement adequate internal controls to
ensure that year-end expenditure
reports match the trial balance.

ROE Response: The newly established ROE
financial team reviews the expenditures
on a monthly basis to ensure financial
reports match trial balance figures.

INADEQUATE MONITORING OF COLLATERAL ON
DEPOSITS

The Regional Office of Education #24
(ROE) had inadequate monitoring of
collateral on deposits. As of June 30,
2021, the ROE had four cash accounts
with bank balances totaling $666,988 at
one financial institution. The Federal
Deposit Insurance Corporation (FDIC)
covers up to a maximum of $250,000, and
the ROE had pledged securities of
$406,656. The ROE did not have
depository insurance or collateral for
the remaining $10,332, an immaterial
amount.

The Public Funds Deposit Act (30 ILCS
225/1) gives the ROE the authorization
to request financial institutions to
pledge collateral for deposits in
excess of the federally insured limit.
In addition, prudent business practice
requires that all cash and investments
held by financial institutions for the
ROE be adequately covered by depository
insurance or collateral.

Regional Office officials indicated the
cause of this finding is based on what
specific day the auditors check bank
deposits and collateralization.
(Finding 21-004, page 14)

The auditors recommended the ROE should
monitor the bank balances on all
accounts and work with the financial
institution to provide collateral or
enter into an agreement with the
financial institution to have the cash
balances monitored for adequate
collateral periodically and adjusted as
necessary.

ROE Response: Bank officials have
provided clarification as to what
happened to cause the accounts held in
the bank to not be 100% fully
collateralized for a brief period of
time. Bank officials have changed their
procedures to ensure that accounts are
100% collateralized 100% of the time.

CONTROLS OVER CASH

The Regional Office of Education #24
(ROE) had inadequate controls over
cash. Auditors noted that the cash
reconciliations were not done properly.
The cash balances per the general
ledger were not originally compared to
the bank balance due to the new
software implementation. The revised
reconciliation required an immaterial
$23,480 plug to tie to the trial
balance.

Sound internal controls require bank
reconciliations to be performed monthly
to ensure that all transactions have
been recorded. The bank reconciliation
process should include identifying and
correcting all discrepancies between
the bank records and the books in a
timely manner. Sound internal control
over cash requires bank reconciliations
to be completed and reviewed by the
appropriate level of management on a
monthly basis.

Regional Office officials indicated the
transfer of funds from the old software
system to the new software system was
inaccurate and was not reconciled by
the past ROE employee. This was
discovered by the new financial team.
(Finding 21-005, page 15)

The auditors recommended as part of its
internal controls over cash, the ROE
should reconcile all bank statements
every month, compare it to the general
ledger balance, and correct any
discrepancies in a timely manner.

ROE Response: The new financial team is
working with the new financial software
system company to address the amount
mentioned in the condition section of
this finding. Our internal records have
been corrected and balance with the
bank statements and balance sheets.

AUDITORS’ OPINION

Our auditors state the Regional Office
of Education #24’s financial statements
are fairly presented in all material
respects, except for the effect of not
recognizing or disclosing Illinois
Municipal Retirement Fund pension
activity in the governmental activities
as of June 30, 2021.

This financial audit was conducted by
the firm of West & Company, 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