REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #30: ALEXANDER,
JACKSON, PERRY, PULASKI, AND UNION COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM
GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2016

Release Date:  April 5, 2018

FINDINGS THIS AUDIT:  5

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  4 -- 1 -- 5
Category 2:  0 -- 0 -- 0
Category 3:  0 -- 0 -- 0
TOTAL:  4 -- 1 -- 5

FINDINGS LAST AUDIT: 1

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 #30
did not have sufficient internal controls
over the financial reporting process.
• (16-2) The Regional Office of Education #30
under-reported salaries paid from federal and
special trust funds resulting in an
underpayment in employer contributions for
those funds.
• (16-3) The Regional Office of Education #30
did not have adequate internal controls over
the preparation of grant expenditure reports.
• (16-4) The Regional Office of Education
#30’s salaries and benefits were not
supported by proper time and effort
documentation.
• (16-5) The Regional Office of Education #30
had a lack of written policies for federal
grant administration.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT PREPARATION

The Regional Office of Education #30 (ROE)
did not have sufficient internal controls
over the financial reporting process. The ROE
maintains its accounting records on the cash
basis of accounting during the fiscal year
and posts or maintains a list of year-end
accrual adjustments for financial statement
purposes. While the ROE maintained controls
over the processing of most accounting
transactions, there are not sufficient
controls over the preparation of generally
accepted accounting principles (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.

The Regional Office is required to maintain a
system of controls over the preparation of
financial statements in accordance with GAAP.
The ROE’s internal controls over GAAP
financial reporting should include adequately
trained personnel with the knowledge, skills,
and experience to prepare GAAP based
financial statements, including the schedule
of expenditures of federal awards, and
include all disclosures as required by the
Governmental Accounting Standards Board
(GASB).

During review of the financial information
prepared by the ROE, the following internal
control deficiencies were noted:

• While the ROE did maintain records to
indicate the balances of accounts receivable/
due from other governments, accounts payable/
due to other governments, and fund balance,
not all entries were provided to reconcile
the ROE’s grant and general activity, such as
posting receivables and payables and posting
all prior period audit entries.
• The ROE did not provide entries to
eliminate negative cash balances within
certain funds.
• Expenses used to meet cost reimbursement
requirements for State and federal grants,
including indirect costs, were not allocated
to the proper fund and were instead charged
to unrestricted funds. Audit adjustments were
also necessary to correct insurance
reimbursements that were not netted against
the associated expenses, certain other
expenses that were misclassified, and one
entry was posted backwards.
• Audit adjustments were necessary to
properly classify State and federal revenue,
which had originally been classified as local
revenue.
• The ROE did not have adequate controls over
the proper recognition of on-behalf revenues
and expenses. Information to calculate and
record on-behalf revenues and expenses
amounts had not been obtained by the ROE.
• Reclassifications of beginning fund
balances were necessary to properly classify
funds within the financial statements.
• Prior period adjustments of the beginning
fund balance were necessary to correct an
accounting error.

Through inquiries and discussions with the
ROE’s accounting personnel and Regional
Superintendent, auditors noted that the ROE
did not have adequate controls to record and
report the ROE’s net accrued pension
liabilities/assets, deferred outflows of
resources, deferred inflows of resources, and
pension expenses in accordance with GAAP.

According to Regional Office management, they
did not have adequate funding to hire and/or
train their accounting personnel in order to
comply with these requirements or to hire a
third party to present the financial
statements in accordance with GAAP. In
addition, the complex requirements of GASB
Statements No. 68 and 71 will require
additional time and training before the ROE
can fully implement the requirements on its
own. (Finding 2016-001, pages 14a-14c)

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

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. This fiscal audit was under prior
management.

UNDERPAYMENT OF EMPLOYER FEDERAL FUNDS
TEACHERS’ RETIREMENT SYSTEM CONTRIBUTIONS

The Regional Office under-reported salaries
paid from federal and special trust funds for
the year ended June 30, 2016, resulting in an
underpayment of $14,009 in employer
contributions for those funds.

Illinois statutes 40 ILCS 5/16-158 require an
employer contribution on any portion of a
Teachers’ Retirement System (TRS) member’s
salary that is creditable earnings and paid
from special trust or federal funds
administered by the employer. Additionally,
the Teachers’ Retirement System Employer
Guide states the employer contribution for
federally-funded salary must be paid in
addition to (not in lieu of) the member TRS
retirement contribution. For the year ended
June 30, 2016, the required employer pension
contribution was 36.06% of salaries paid from
federal and special trust funds, including
stipends and substitute pay.

According to Regional Office management, the
fiscal staff was unaware that certain
salaries were paid with federal funds. In
addition, due to employee oversight, not all
salaries claimed as federal expenditures with
granting agencies were allocated to the
proper funds and accounts in the ROE’s
general ledger. An incorrect amount was then
submitted as salaries paid from federal and
special trust funds, resulting in an
incorrect calculation of the contribution
due. (Finding 2016-002, page 14d)

The auditors recommended that the ROE
reconcile all grant expenditure reports or
other expense tracking systems to the amounts
recorded in the general ledger. They also
recommend a system of internal controls be
put in place to ensure management and fiscal
staff are aware of all sources of federal
funds, including contacting the granting
agency, if necessary, to determine if a grant
is paid with federal funds. Also, an
individual independent of the TRS report
preparation should be reviewing the reporting
for accuracy.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. This fiscal audit was under prior
management.

INTERNAL CONTROLS OVER EXPENDITURE REPORT
PREPARATION

The ROE did not have adequate internal
controls over the preparation of grant
expenditure reports. Expenditure reports
submitted to granting agencies to request
reimbursement did not reconcile to the
underlying accounting records for the
following State and federal grant programs:
Regional Safe Schools, Truants Alternative/
Optional Education, IDEA – Improvement Grant
– Part D, Mathematics and Science
Partnerships, McKinney Education for Homeless
Children, Title I – School Improvement and
Accountability, and RAMPDUP and Onward.
Expenses were overstated to the granting
agencies for the RAMPDUP and Onward program
and the Title I – School Improvement and
Accountability Program. The questioned costs
for RAMPDUP and Onward were $4,442, and the
questioned costs for Title I – School
Improvement and Accountability were $1,432.

Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance) requires
that a non-federal entity’s financial
management system, including records
documenting compliance with federal statutes,
regulations, and the terms and conditions of
the federal award, must be sufficient to
permit 1) the preparation of reports required
by general and program-specific terms and
conditions, and 2) the tracing of funds to a
level of expenditures adequate to establish
that such funds have been used according to
the federal statutes, regulations, and the
terms and conditions of the federal award.
Furthermore, the non-federal entity must
establish and maintain effective internal
control over the federal award.

According to Regional Office management, they
obtained general ledger reports with
preliminary information and did not perform
further follow-up to verify all applicable
expenses were moved to the appropriate
accounts. Further, ROE management indicated
they were not aware that salary and benefit
amounts should not be claimed based on
budgeted amounts alone. (Finding 2016-003,
pages 14e-14f)

The auditors recommended that the Regional
Office management create a system of internal
controls to ensure all expenditure reports
are submitted accurately, are fully supported
by adequate cost documentation records, and
reconcile to the underlying accounting
records.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. This fiscal audit was under prior
management.

SALARIES AND BENEFITS NOT SUPPORTED BY PROPER
TIME AND EFFORT DOCUMENTATION

The Regional Office assigned salary and
benefit costs to the Mathematics and Science
Partnership grants based on budgeted amounts.
Comparisons of actual costs to budgeted
distributions based on time and effort
records were not performed and adjustments
for actual time spent on the grants, if
different from budgeted amounts, were not
made. Employees who worked on the Mathematics
and Science Partnerships grants turned in
time and effort reports to the granting
agencies, but these time records did not
always include 100% of the employees’ time.
Some employees also turned in monthly
calendars to management, but they only
included time spent on grants, not 100% of
the employee’s hours. The questioned costs
are unknown since the difference between
budgeted and actual costs is undeterminable.

Employees of the ROE are required to document
their time and effort working on federal
programs. Title 2 U.S. Code of Federal
Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform
Guidance) requires charges for salaries and
benefits to be supported by a system of
internal control which provides reasonable
assurance that charges are accurate,
allowable, and properly allocated.
Documentation records should reasonably
reflect the total activity for which the
employee is compensated, not exceeding 100%
of compensated activities, and should
encompass both federally assisted and non-
federally assisted activities. It further
states that budget estimates alone do not
qualify as support for salary and benefit
charges to a federal award. Significant
changes in the corresponding work activity
should be identified and the necessary
adjustments entered into the accounting
records in a timely manner. All necessary
adjustments must be made such that the final
amount charged to the federal award is
accurate, allowable, and properly allocated.

The ROE also did not maintain time and effort
documentation for part-time lunchroom
supervisors working on the National School
Lunch and School Breakfast Programs (Child
Nutrition programs) and did not break out the
portion of their salaries and benefits
dedicated to food service.

According to Regional Office officials, they
were unaware of the time and effort log
requirements for administrative personnel,
including the requirement to adjust budget to
actual. (Finding 2016-004, pages 14g-14h)

The auditors recommended that the ROE should
implement a system of internal controls over
time and effort reporting. The ROE should use
time and effort documentation to distribute
salary and benefit costs for employees who
work in whole or in part on grant program
activity in accordance with the Uniform
Guidance.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. This fiscal audit was under prior
management.

LACK OF WRITTEN POLICIES FOR FEDERAL GRANTS

The Regional Office did not have written
procedures concerning cash management, the
determination of allowability of costs in
accordance with Cost Principles of the
Uniform Guidance and the terms and conditions
of the federal award, or standards of conduct
covering conflicts of interest and governing
the performance of its employees engaged in
the selection, award, and administration of
contracts. In lieu of written procedures, the
ROE utilized informal procedures in which
each purchase made or cost allocated to the
Mathematics and Science Partnerships was
reviewed for allowability by an individual
with knowledge of the budget, allowable costs
and activities, and the cash management
requirements. The allowability determinations
were based on the amounts included in the
budgets for the Mathematics and Science
Partnerships approved by, and the grant
periods set by, the Illinois State Board of
Education.

Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for
Federal Awards (Uniform Guidance) requires
the ROE to have written procedures to
implement the requirements of Part 200.305,
Payment, related to cash management, and for
determining the allowability of costs in
accordance with Subpart E – Cost Principles
of the Uniform Guidance and the terms and
conditions of the federal award. The ROE must
also maintain written standards of conduct
covering conflicts of interest and governing
the performance of its employees engaged in
the selection, award, and administration of
contracts.

According to Regional Office management, they
were unable to dedicate the time needed to
fully implement the Uniform Guidance due to
competing priorities. (Finding 2016-005,
pages 15b-15c)

The auditors recommended that the ROE prepare
written procedures to implement the
requirements of Part 200.305, Payment,
related to cash management, for determining
the allowability of costs in accordance with
Subpart E – Cost Principles of the Uniform
Guidance and the terms and conditions of the
federal award, and to document standards of
conduct covering conflicts of interest and
governing the performance of its employees
engaged in the selection, award, and
administration of contracts.

ROE Response: I agree with the finding and
corrective actions are being implemented, as
noted in the Corrective Action Plan for
Current Year Audit Findings section of this
report. This fiscal audit was under prior
management.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #30’s financial statements as of
June 30, 2016 are fairly stated in all
material respects, except for not recognizing
assets, liabilities, deferred outflows of
resources, and/or deferred inflows of
resources for pension benefits in the
Statement of Net Position and Statement of
Activities.

This financial report was conducted by the
firm of Kemper CPA Group 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:KJM