REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #40: CALHOUN,
GREENE, JERSEY AND MACOUPIN COUNTIES

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM GUIDANCE)
FOR THE YEAR ENDED June 30, 2023

Release Date:  August 27, 2025

FINDINGS THIS AUDIT: 5

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

FINDINGS LAST AUDIT: 5

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, 400 West
Monroe, Suite 306, Springfield, IL
62704-9849
(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

DISCLAIMER

During the process of closing the books for
the audit, the Regional Office of Education
#40’s staff noted that cash was overstated
by $33,011.  In response, the Regional
Office of Education #40’s staff posted an
adjusting journal entry to reduce the
General Fund’s cash and increase the General
Fund’s purchased services expense by
$33,011.  The Regional Office of Education
was unable to provide further audit evidence
to support the allocation of this
transaction of the General Fund and to the
purchased services line item.  As a result
of these matters, we were unable to
determine whether any adjustments to the
basic financial statements might be
necessary.  Because of the significance of
the matter described, we have not been able
to obtain sufficient appropriate audit
evidence to provide a basis for an audit
opinion.  Accordingly, WE DO NOT EXPRESS AN
OPINION ON THESE FINANCIAL STATEMENTS.

SYNOPSIS

• (23-1) The Regional Office of Education
#40 did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (23-2) The Regional Office of Education
#40 had inadequate controls over bank
reconciliations.

• (23-3) The Regional Office of Education
#40 did not comply with grant reporting
requirements.

• (23-4) The Regional Office of Education
#40 had inadequate controls over payroll.

• (23-5) The Regional Office of Education
#40 did not have sufficient internal
controls over the financial reporting
process.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DELAY OF AUDIT

The Regional Office of Education #40 (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 22,
2024.

The ROE is subject to ILCS 5/2-3.17a which
requires the Auditor General’s office to
cause an audit to 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. 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 utilizes the
cash basis of accounting for financial
statement 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 management indicated the
unexpected passing of our bookkeeper in the
final month of FY22 caused the FY22 delay
that affected FY23 to be able to report in a
timely manner. (Finding 2023-001, pages
15A-15B) This finding was first reported in
2021.

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). Annual financial
statements should be compiled on an accrual
basis of accounting in accordance with GAAP,
on the cash basis of accounting, or on the
modified cash basis of accounting. These
financial statements need to be presented to
the Auditor General’s independent auditors
for audit by the August 31 deadline.

ROE Response: ROE #40 will implement
procedures to ensure compliance with 105
ILCS 5/2-3.17a and 74 Ill. Adm. Code 420.320
(c) (2). Future financial statements will be
presented to the Auditor General’s
independent auditors for audit by the August
31 deadline.

CONTROLS OVER CASH

The Regional Office of Education #40 (ROE)
had inadequate controls over bank
reconciliations.

Monthly bank reconciliations had significant
unexplained variances and were not completed
timely. The bank reconciliations for fiscal
year 2023 were not completed accurately
until the hired CPA firm helped prepare the
6/30/23 reconciliation while closing the
books. The 6/30/23 bank reconciliation was
not prepared until May 22, 2024.

In addition, during the hired CPA firm’s
preparation of the 6/30/23 bank
reconciliation, it was noted that cash was
overstated by $33,011. In response, the ROE
posted an adjusting journal entry to reduce
the General Fund’s cash and increase the
General Fund’s purchased services
expenditures by $33,011.

Sound internal control requires bank
reconciliations to be performed monthly to
ensure 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 also requires bank
reconciliations to be completed and reviewed
by the appropriate level of management on a
monthly basis.

Regional Office management indicated the new
administrative staff didn’t have the
necessary training to prepare accurate bank
reconciliations on a timely basis. (Finding
2023-002, page 15C)  This finding was first
reported in 2021.

The auditors recommended that as part of its
internal controls over cash, the ROE should
reconcile all bank statements every month
and correct any discrepancies in a timely
manner. In addition, ROE management should
review bank reconciliations and document
their review each month after the
reconciliation has been completed.

ROE Response: ROE #40 will reconcile all
bank statements monthly and correct
discrepancies in a timely manner. ROE 40
management will review and document bank
reconciliations monthly.

GRANT REPORTING NONCOMPLIANCE

The Regional Office of Education #40 (ROE)
did not comply with grant reporting
requirements.

During the course of the audit, auditors
noted that 8 of the 29 (28%) quarterly
expenditure reports required by the Illinois
State Board of Education were not submitted
timely. Five of the quarterly expenditure
reports were submitted 1-30 days late, one
expenditure report was submitted 30 to 60
days late, and two expenditure reports were
submitted 60 to 90 days late. For the
federal programs, auditors noted that 3 out
of the 9 (33%) quarterly expenditure reports
required by the Illinois State Board of
Education for the federal programs were not
submitted timely. Two of the quarterly
expenditure reports were submitted 1 to 30
days late and one quarterly expenditure
report was submitted 60 to 90 days late.

In addition, auditors noted that supplies
and materials expenditures exceeded budgeted
amounts by $6,851 for the Elementary and
Secondary School Emergency Relief Fund 2022
grant.

Auditors also noted that the 6/30/23
expenditure report for the Elementary and
Secondary School Emergency Relief Fund 2022
grant claimed $54,708 of expenditures prior
to the expenditures actually being paid by
the ROE. The Illinois State Board of
Education requires that expenditure reports
be prepared on the cash basis of accounting.
Therefore, an expenditure should not be
submitted for reimbursement prior to the ROE
paying for the expenditure.

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 timely quarterly
expenditure reports and budget requirements
for grants administered by the Illinois
State Board of Education. The Illinois State
Board of Education requires expenditure
reports to be filed within 20 days of the
applicable end of each quarter. In addition,
the ROE is responsible for submitting grant
budgets to the Illinois State Board of
Education and adhering to those approved
budgets.

The Illinois State Board of Education
requires expenditure reports to be prepared
on the cash basis of accounting. The
expenditure reports submitted should
reconcile directly to the ROE’s general
ledger and should only include expenditures
that have already been paid.

Regional Office management indicated the new
administrative staff did not have the
necessary training to understand all grant
reporting requirements. (Finding 2023-003,
pages 15D-15E) This finding was first
reported in 2021.

The auditors recommended that the ROE should
implement adequate internal controls to
ensure that expenditure reports are
submitted timely and to ensure that
expenditures reported on the expenditure
reports agree to the actual expenditures
recorded in the general ledger. Budgets
should be amended when expenditure line
items exceed the threshold. The ROE should
implement adequate internal controls to
ensure that expenditures included on
expenditure reports have been paid by the
ROE before the ROE requested reimbursement
for the expenditures.

ROE Response: Regional Office of Education
#40 will implement adequate internal
controls to ensure that expenditure reports
are submitted timely and to ensure that
expenditures reported on expenditure reports
agree with actual expenditures recorded in
the general ledger. Budgets will be amended
when expenditure line items exceed the
threshold. The ROE will implement adequate
internal controls to ensure that
expenditures included on expenditure reports
have been paid by the ROE before the ROE
requests reimbursement for the expenditures.

CONTROLS OVER PAYROLL

The Regional Office of Education #40 (ROE)
had inadequate controls over payroll.

During the course of audit fieldwork,
auditors noted the following:

• The ROE did not use time and effort
documentation to distribute salary and
benefit costs for employees paid from
multiple funding sources. The ROE budgeted
amounts at the beginning of the year to
allocate payroll expense to each fund;
however, the ROE never reconciled the
amounts expensed in the general ledger to
the employees’ submitted timesheets.
Therefore, the ROE was unable to determine
the reasonableness of the allocation of
salaries and benefits amongst federal and
State programs.

• For four out of the twenty-four (17%)
payroll disbursements tested, the
withholding information used to calculate
the employees’ pay did not agree to the
Federal or Illinois Forms W-4 on file. For
the federal program, auditors noted 3 out of
the 4 (75%) payroll disbursements tested,
the withholding information used to
calculate the employees’ pay did not agree
to the Federal or Illinois Forms W-4 on
file.

• One out of the twenty-four (4%) payroll
disbursements tested inaccurately omitted
the employees wages from being subject to
Medicare tax.

The ROE is responsible for establishing and
maintaining an internal control system over
payroll to prevent errors or fraud. In
addition, the Grant Accountability and
Transparency Act (GATA) 30 ILCS 708/1
establishes that State grant programs are
subject to the requirements set forth in
Title 2 U.S. Code of Federal Regulations
Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards (Uniform
Guidance). The Uniform Guidance (2 CFR
200.430) requires charges for salaries and
benefits to be supported by a system of
internal controls which provide reasonable
assurance that the charges are accurate and
properly allocated. It also requires records
to be used to support the distribution of
employee salaries and benefits among
specific activities if the employee works on
multiple programs. It further states that
budget estimates alone do not qualify as
support for salary and benefit expenditures
charged to federal and State grants.

The ROE is responsible for calculating
payroll taxes and the related withholdings
in compliance with requirements of the
Internal Revenue Service and the Illinois
Department of Revenue.

Regional Office management indicated the
cause was due to unexpected staff turnover
due to bookkeeper’s passing along with a new
payroll clerk learning her responsibilities.
(Finding 2023-004, pages 15F-15G)

The auditors recommended the ROE use time
and effort documentation to distribute
salary and benefit costs for all employees.
Auditors also recommended the ROE implement
the necessary controls over payroll to
ensure that payroll is being properly
prepared and calculated.

ROE Response: The ROE #40 will use time and
effort documentation to distribute salary
and benefit costs for all employees. The ROE
will implement the necessary controls over
payroll to ensure that payroll is being
properly prepared and calculated.

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #40 (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 the cash basis financial
statements for management or employees in
the normal course of performing their
assigned functions to prevent or detect
financial statement misstatements and
disclosure errors and omissions in a timely
manner.

During review of the ROE’s accounting
records, auditors noted the ROE should be a
single audit for the year ended June 30,
2023. Auditors then reviewed the initial
draft financial statements provided by the
ROE and noted the ROE had not included the
Schedule of Expenditures of Federal Awards
in the financial statements.

The School Code 105 ILCS 5/2-3.17a allows a
Regional Office of Education or Educational
Service Center to utilize a cash basis,
modified cash basis, or generally accepted
accounting principles (GAAP) basis of
accounting to prepare financial statements
for audit. The ROE has chosen to utilize the
cash basis of accounting for financial
statement reporting. The ROE is required to
maintain a system of controls over the
preparation of financial statements in
accordance with its selected basis of
accounting.

ROE management indicated this was an
oversight by the ROE. ROE 40 staff will work
with the hired CPA firm going forward to
make sure that the financial statements are
complete.  (Finding 2023-005, pages 15H-15I)

The auditors recommended, 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 accounting
principles, GASB pronouncements, and
knowledge of the ROE’s activities and
operations.

ROE Response: ROE #40 has implemented
comprehensive preparation procedures to
ensure the financial statements are complete
and accurate. These procedures will be
performed by a properly trained individual
possessing a thorough understanding of the
applicable accounting principles, GASB
pronouncements, and knowledge of the ROE’s
activities and operations.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education was unable to provide further
audit evidence to support the allocation of
a transaction of the General Fund and to the
purchased services line item.  As a result,
our auditors were unable to determine
whether any adjustments to the basic
financial statements might be necessary.

Because of the significance of this matter,
our auditors have not been able to obtain
sufficient appropriate audit evidence to
provide a basis for an audit opinion.
Accordingly, they do not express an opinion
on these financial statements.

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:JRB