REPORT DIGEST

INTERMEDIATE SERVICE CENTER #2 - WEST COOK

FINANCIAL AUDIT (IN ACCORDANCE WITH THE
UNIFORM GUIDANCE)
FOR THE YEAR ENDED JUNE 30, 2022

Release Date:  August 26, 2026

FINDINGS THIS AUDIT: 7

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  1 -- 2 -- 3
Category 2:  0 -- 2 -- 2
Category 3:  0 -- 2 -- 2
TOTAL:  1 -- 6 -- 7

FINDINGS LAST AUDIT: 6

State of Illinois, Office of the Auditor
General
CHRISTOPHER B. MEISTER, 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

SYNOPSIS

• (22-1) The Intermediate Service Center
#2 did not provide completed financial
statements in an auditable form by the
August 31 deadline

• (22-2) The Intermediate Service Center
#2 did not have adequate internal control
procedures.

• (22-3) The Intermediate Service Center
#2 lacked adequate controls over the
identification of federal awards.

• (22-4) The Intermediate Service Center
#2 did not have adequate internal controls
over grant compliance.

• (22-5) The Intermediate Service Center
#2 did not have adequate internal controls
over procurement-card transactions.

• (22-6) The intermediate Service Center
#2 did not have adequate internal controls
over payroll processing

• (22-7) The Intermediate Service Center
#2 had inadequate controls over financial
reporting.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

DELAY OF AUDIT

The Intermediate Service Center #2 (ISC)
did not provide completed financial
statements in an auditable form by the
August 31, 2022 deadline. The June 30,
2021, report was not released until July
9, 2025. The FY22 completed financial
statements were initially provided to
auditors on July 7, 2025. However, several
revised versions were subsequently
provided based on the auditor’s review.
The final corrected financial statements
were not provided until November 18, 2025.

The ISC 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 executive director 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 Education 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. Intermediate Service Center No. 2
has chosen the cash 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.

ISC management indicated they incurred key
employee turnover which has put them
behind in financial reporting. (Finding
22-001, pages 13-14) This finding was
first reported in 2015. The auditors
recommended the ISC #2 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.

ISC Response: As this writing is occurring
in FY26, we expect to see this as an
ongoing finding for the audits yet to be
completed for FY23-26. We have worked with
our contracted accountant over the past
ten years, who has experience with ROE/ISC
audits and knows the requirements, to have
reports available in a timely manner
moving forward. We have also hired a Chief
School Business Official (CSBO) who
started work here in July 2021 to address
this issue and other findings in this
document. In addition, at a significant
cost to West 40, we contracted the
accounting firm who completes our
financial statements to complete financial
statements through FY25 in an expedited
timeline. This was done so that there
would be no delays on our end in having
our audits be current.

INADEQUATE INTERNAL CONTROL PROCEDURES

The Intermediate Service Center #2 (ISC)
did not have adequate internal control
procedures.  Auditors noted the following
weaknesses in the ISC’s internal control
system for which there were no mitigating
controls:

• All transactions are not initially
posted directly to the correct funds in
the general ledger. Subsequent adjusting
entries must be recorded to reclassify
them to the proper fund.
• There is a lack of segregation of duties
within the cash receipts process. The same
employee is primarily responsible for
creating invoices for programs and
academies, receiving and depositing cash
receipts, and following up on outstanding
balances. Additionally, there is no formal
process for reviewing amounts owed to the
ISC.

The ISC is responsible for establishing
and maintaining an internal control system
over accounting transactions to prevent
errors and fraud.

ISC management indicated it has not
established or documented sufficient
internal control procedures. (Finding
22-002, pages 15-16) This finding was
first reported in 2012.

The auditors recommended the ISC implement
internal control procedures to ensure the
following:

• Transactions should be posted directly
to appropriate accounts upon initial
recording to avoid subsequent
reclassifications.
• Incompatible accounting functions need
to be segregated and a formal process for
reviewing amounts owed to the ISC
implemented.

ISC Response:
• Since the original finding regarding
reclassifications, we have been training
staff to provide accurate account coding
to minimize the number of journal entries
needed.
• A receivables module in our financial
software has been implemented which allows
departments to better monitor any
outstanding invoices. Finally, an Accounts
Receivable Clerk was hired in FY26 in an
effort to centralize the invoicing
process.

INADEQUATE INTERNAL CONTROLS OVER THE
IDENTIFICATION OF FEDERAL AWARDS

The Intermediate Service Center #2 (ISC)
lacked adequate controls over the
identification of federal awards.  As part
of the audit process, we noted that the
ISC erroneously recorded $240,000 of
federal grant revenue for the IL-AWARE
grant as local revenue in the General Fund
Local Sources account. Related
expenditures of $157,752 were also
recorded in the General Fund rather than
in the Education Fund. The revenue and
related expenditures should have been
shown as a program in the Education Fund.
In addition, the ending fund balance of
$281,940 should have been restricted.

Also, the administrative fee of $371,240
received by the ISC as part of the
Emergency Assistance to Non-Public Schools
(EANS) grant was recorded in the General
Fund Local Sources account as local
revenue. Related administrative
expenditures were also recorded in the
General Fund rather than in the EANS fund
and the administrative fee was omitted
from the schedule of expenditures of
federal awards.

The Illinois State Board of Education
(ISBE) State and Federal Grant
Administration Policy, Fiscal Requirements
and Procedures requires all State and
federal grants awarded from ISBE to follow
Title 2 U.S. Code of Federal Regulations
Part 200, Uniform Administrative
Requirements, Cost Principles and Audit
Requirements for Federal Awards (Uniform
Guidance). 2 CFR 200.303 Internal Controls
of the Uniform Guidance requires that
recipients and subrecipients must
establish, document, and maintain
effective internal control over the
Federal award that provides reasonable
assurance that the recipient or
subrecipient is managing the Federal award
in compliance with Federal statutes,
regulations, and the terms and conditions
of the Federal award.

ISC management indicated that separate
revenue and expenditure accounts were
maintained in the general ledger for the
IL-AWARE grant, but it was not identified
as a federal award.

In addition, ISC management indicated that
the administrative fee for the EANS grant
was recorded in the General Fund because
it was a fee paid to the ISC and not a
reimbursement for payments of grant funds
to a third party. (Finding 22-003, pages
17-18)

The auditors recommended the ISC should
implement adequate internal controls to
ensure that federal grants are properly
identified and accounted for in their
general ledger and on their financial
statements.

ISC Response: A Director of Grants was
hired in FY23 and has built a team with
experience and expertise in grant
requirements and proper coding of grant
revenue and expenses.
Regarding the second condition, the
Intergovernmental Agreement (“IGA”)
presented to West 40 to manage the EANS
funds is their standard grant IGA.
However, in reality, we did not enter into
a grantor-grantee relationship with ISBE.
Rather, West 40 was contracted to manage
EANS funds on behalf of ISBE. Therefore,
we had a vendor-customer relationship with
ISBE and the $371,240 referenced in this
condition was in fact a fee, not grant
revenue, that West 40 was paid to manage
these funds on behalf of ISBE. These were
federal funds and payments to vendors had
to be made by a governmental entity - such
as West 40. Non-public schools could not
directly pay a vendor using federal funds
so West 40 essentially served as a paying
agent for EANS funds.

Auditors’ Comment: The ISC has indicated
that the EANS funds received from ISBE
were not a grant, but rather the result of
a contractual relationship.  The
intergovernmental agreement provided to
the auditors is between Illinois State
Board of Education (Grantor or ISBE) and
West Cook 40 Intermediate Service Center
(Grantee or West 40 or ISC) and was signed
on June 25, 2021. The IGA clearly
identifies the Intermediate Service Center
#2 as a “grantee” receiving federal funds.
The grant agreement indicated the amount
of federal funds provided, the assistance
listing number, and a representation by
the “grantee” that it will adhere to
Uniform Guidance requirements.  Subsequent
amendments to the agreement continued to
refer to the Intermediate Service Center
#2 as the grantee, ISBE as the grantor,
and the agreement as a grant agreement.

CONTROLS OVER GRANT COMPLIANCE

The Intermediate Service Center #2 did not
have adequate internal controls over grant
compliance.  During the course of the
audit, auditors noted 6 of the 54 (11%)
expenditure reports required by the
Illinois State Board of Education (ISBE)
were not submitted timely. Three
expenditure reports were submitted 2 days
late and three were submitted 1 day late.

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

The ISC is responsible for establishing
and maintaining an internal control system
over the completion of timely expenditure
reports required for grants administered
by ISBE. ISBE requires expenditure reports
to be filed within 20 days of the
applicable end of each quarter.

ISC management indicated that this
occurred due to key employee turnover
which has put them behind in financial
reporting. (Finding 22-004, page 19).
This finding was first reported in 2018.

The auditors recommended the ISC should
implement adequate internal controls to
ensure that expenditure reports are filed
timely.

ISC Response: A Director of Grants and
Assistant Director of Grants were hired in
FY23 to oversee and monitor all grant
purchases.

INADEQUATE CONTROLS OVER PROCUREMENT CARD
TRANSACTIONS

The Intermediate Service Center #2 (ISC)
did not have adequate internal controls
over procurement card transactions.
Internal controls over disbursements are
not effectively designed and implemented.
During our testing of a sample of three
months of procurement-card (P-card)
transactions, supporting receipts were not
provided for thirteen cardholders’
transactions totaling $25,996 and six
cardholders’ transactions were missing
approvals for the purchases.

The ISC is required to maintain a system
of controls over disbursements to prevent
errors, omissions, and fraud.

ISC management indicated charge receipts
were misplaced and could not be found.
(Finding 22-005, page 20).
This finding was first reported in 2019.

The auditors recommended procedures should
be implemented to ensure documentation of
P-card activity is obtained and retained.

ISC Response: The ISC will implement
procedures to ensure documentation of P-
card activity is obtained and retained.

INADEQUATE CONTROLS OVER PAYROLL
PROCESSING

The Intermediate Service Center #2 (ISC)
did not have adequate internal controls
over payroll processing.  During our
testing of a sample of 40 payroll
transactions, we noted that 5 (12.5%)
employees had no documentation of an
approved pay rate on file. As a result, we
were unable to determine the accuracy of
the payment to those employees.

Finally, preparation of time and effort
reports with percentage of time spent on
various programs was discontinued in
fiscal 2021 for full-time employees. In
addition, 2 (50%) of the 4 part-time
employees tested did not have time sheets.

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 assurances that
the charges are accurate and properly
allocated. It also requires records be
used to support the distribution of
employee salaries and benefits among
specific activities if the employee works
on multiple programs.

In addition, best practices require the
ISC to maintain a system of controls over
payroll processing which includes
documentation supporting approved pay
rates, provides reasonable assurance that
the salary and benefit charges are
accurate and properly allocated, and
requires records to be used to support the
distribution of employee salaries and
benefits among specific activities if the
employee works on multiple programs.

ISC management indicated that the
discontinuation of time and effort reports
was due to the fact that the reports were
not being reviewed and a new time keeping
system was going to be purchased. Approved
pay rates may not have been documented or
copies were not made of the employee
files. (Finding 22-006, pages 21-22).
This finding was first reported in 2020.

The auditors recommended the ISC follow
best practices, GATA requirements, and
Uniform Guidance requirements to require
time sheets or time and effort reports and
ensure that accurate documentation
supporting pay rates is maintained in
personnel files.

ISC Response: Salaries are entered by one
employee and now reviewed for accuracy by
another staff member. Staff whose salaries
are funded by a grant are required to
track their time in recently purchased
time tracking software.

INADEQUATE CONTROLS OVER FINANCIAL
REPORTING

The Intermediate Service Center #2 (ISC)
had inadequate controls over financial
reporting.  The following errors were
noted in the financial statements during
our audit:
• The Philip J. Rock Center and School,
for which the ISC became the fiscal agent
beginning August 1, 2020, was not reported
as a custodial fund in the first draft of
the financial statements for fiscal 2022
or in the fiscal 2021 report.
• The revised fiscal 2022 draft report
omitted a beginning cash balance in the
custodial fund for the Philip J. Rock
Center of $429,086 resulting in the
reporting of a negative cash balance of
$142,589 rather than the correct balance
of $286,497 in the revised draft for that
fund.
• Misallocation of expenditures between
general fund accounts were identified as
follows (positive numbers indicate
overstatements and negative numbers
indicate understatements):

Expenditure:  Local Account - GSA/RSSP
Tuition Account - ALOP Account
Salaries:  $1,785,316  -  $-519,718  -
$-1,265,598
Benefits:  $549,560  -  $-39,620  -
$-509,940
Pension:  $157,635  -  $-45,419  -
$-112,216
Purchased Serv.:  $148,330  -  $-84,319  -
$-64,011
Supplies:  $98,209  -  $-11,842  -
$-86,367

• Beginning net position did not agree to
ending net position as reported in the
fiscal 2021 financial statements for
governmental activities and beginning fund
balances in the general fund and the
education fund did not agree to ending
fund balances in the respective funds in
the fiscal 2021 financial statements.
• General ledger fund balance accounts
differed from the amounts reported in the
financial statements.
• General ledger expenditure amounts did
not agree to the amounts reported in the
financial statements for ESSER and ESSER-
Digital Equity accounts.
• Indirect costs related to ESSER were not
recorded in the ESSER account of the
Education Fund in the financial
statements.

ISC management indicated that:

• They were unaware of the need to include
the Philip J. Rock Center and School as a
custodial fund in their financial
statements.
• They were unaware at the time of
preparing the financial statements that
the Philip J. Rock Center and School
agreement began in fiscal 2021.
• The expenditure misallocations were the
result of errors in the Account Grouping
classification of general ledger accounts
in the General Fund subaccounts for
financial statement purposes.
• The differences in beginning net
position and fund balance were the result
of the financial statement preparer
erroneously changing the recording of the
Midwest PBIS Network from the prior year’s
presentation and not updating the
reporting of IL-AWARE as part of the
Education Fund as it was presented last
year.
• The differences between general ledger
account balances and financial statement
amounts appears to be the result of
directly updating financial statement
amounts without recording the underlying
general ledger entries.
• Financial Reimbursement Information
System (FRIS) reports were used to report
expenditures in the financial statements
for the ESSER and ESSER-Digital Equity
accounts.
• The ISC only records direct costs of a
grant within the grant accounts of the
Education Fund and was not aware of the
requirement to include indirect costs in
those accounts. (Finding 22-007, pages
23-25).

The auditors recommended ISC enhance their
review process over financial statement
drafts prepared by outside accountants
prior to presenting them for audit. In
addition, we recommend that the ISC ensure
that all financial statement amounts are
derived from general ledger accounts.

ISC Response:
• West 40 will include The Philip Rock
Center as a custodial fund in future
financial statements.
• West 40 will include fund balances in
future financial statements.
• This has been corrected in our financial
statements.
• This is related to a change in how a
custodial fund was recorded and has been
corrected in our financial statements.
• This was primarily due to an effort to
move dormant funds. This was not completed
using a transfer in/transfer out account.
Going forward an effort to consolidate/
eliminate dormant funds will be completed
using transfer in/transfer out accounts.
• A grants team was formed in FY23 to
oversee and monitor all grant expenditures
and reporting.
• A grants team was formed in FY23 to
oversee and monitor all grant expenditures
and reporting.

AUDITORS’ OPINION

Our auditors state the Intermediate
Service Center #2’s financial statements
as of June 30, 2022 are fairly presented
in all material respects.

This financial audit was conducted by the
firm of GW & Associates PC.

TRICIA WAGNER
Division Director

This report is transmitted in accordance
with Section 3-14 of the Illinois State
Auditing Act.

CHRISTOPHER B. MEISTER
Auditor General

CBM:JMT