REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #13:
CLINTON, JEFFERSON, MARION AND WASHINGTON
COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2019

Release Date:  June 30, 2020

FINDINGS THIS AUDIT:  5

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

FINDINGS LAST AUDIT: 6

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

• (17-1) The Regional Office of Education
#13 did not have sufficient internal
controls over the financial reporting
process.

• (17-2) The Regional Office of Education
#13 did not have adequate internal
controls over cash.

• (17-3) The Regional Office of Education
#13 did not have adequate internal
controls over property and equipment.

• (17-4) The Regional Office of Education
#13 did not have sufficient internal
controls over payroll and grant
compliance.

• (17-5) The Regional Office of Education
#13 did not provide completed financial
statements in an auditable form by the
August 31 deadline.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #13
(ROE) did not have sufficient internal
controls over the financial reporting
process. While the ROE maintained
controls over the processing of most
accounting transactions, there were 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
and correct, financial statement
misstatements and disclosure omissions in
a timely manner.

The ROE 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
and include all disclosures as required
by the Governmental Accounting Standards
Board (GASB).

During the auditor’s review of the ROE’s
financial information prepared by the
ROE, it was noted the ROE did not have
adequate controls to ensure financial
statement balances were accurate. While
the ROE did maintain records to indicate
the balances of financial statement
accounts, material audit adjustments were
proposed in order to ensure those
balances were accurate.

The ROE management indicated while
working with an outside CPA firm, it
appears various balance adjustments were
inadvertently missed between the actual
year-end and the drafting of financial
statements. (Finding 17-001, pages 10 –
11) This finding was first reported in
2014.

The auditors recommended that as part of
internal control over the preparation of
financial statements, including
disclosures, the ROE should implement a
comprehensive preparation and/or review
procedure to ensure that the financial
statements, including disclosures, 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: The ROE agrees with the
recommendation. The ROE has hired an
outside accounting firm to assist in the
preparation of the financial statement.
Since the accounts of the previous two
combined regional offices have been
combined, the preparation should not
require the previous adjustments. The ROE
staff will also continue to receive
training in GAAP accounting procedures.

CONTROLS OVER CASH

The Regional Office of Education #13
(ROE) did not have adequate controls over
the preparation and review of bank
reconciliations.

The ROE is responsible for establishing
and maintaining a system of internal
controls over cash to prevent errors and
fraud. This includes the timely
preparation and review of bank
reconciliations. Bank reconciliations
should be performed within a month of the
closing date on the bank statement and
evidence of review should be documented.

During the auditor’s review of the ROE’s
monthly bank reconciliations for its
three (3) bank accounts, auditors noted
bank reconciliations were not prepared or
reviewed in a timely manner.
Specifically, auditors noted the
following:

• Two (6%) monthly reconciliations were
prepared 31 and 39 days after month end.
• Two (6%) monthly reconciliations were
reviewed 21 and 56 days after
preparation.
• For three (8%) monthly reconciliations,
auditors were unable to determine if the
reconciliations were timely reviewed as
the ROE did not document the date the
reconciliations were performed.
• For nine (25%) monthly reconciliations,
evidence of review were not found.

The ROE management indicated job duties
had been reassigned in fiscal year 2017
and the Regional Superintendent did not
appropriately sign off and date the
completed bank statements. (Finding
17-002, pages 12 – 13)

The auditors recommended that as part of
internal control over cash, the ROE
should prepare and review the monthly
bank reconciliations within a month of
the closing date on the bank statement.
The review should be indicated in
writing, including the individual
performing the review and the date.

ROE Response: The ROE agrees with the
recommendation. The Regional
Superintendent has assigned a different
staff member to complete the monthly
reconciliations in a timely manner and it
will be checked monthly by the Regional
Superintendent or Assistant Regional
Superintendent.

CONTROLS OVER PROPERTY AND EQUIPMENT

The Regional Office of Education #13
(ROE) did not have adequate controls over
its capital assets.

The ROE Accounting Manual requires each
ROE to maintain detailed capital asset
records for both accounting purposes as
well as insurance purposes, for capital
assets costing $500 or more. Generally
accepted accounting principles (GAAP)
require records of all capital assets and
depreciation schedules for assets meeting
the capitalization threshold for
reporting to be maintained so that this
information can be reported within the
financial statements. The ROE capitalizes
assets with an individual cost of more
than $500 and an estimated useful life in
excess of one year.

In addition, sound internal controls
require that policies and procedures on
capital assets should cover acquisition
and tagging, recording and reporting,
depreciation (if applicable), transfers
and dispositions and annual physical
inventory, and they should be formally
documented and consistently applied.
Further, good internal controls require
capital assets that are obsolete, damaged
or no longer used in operations be
removed from the ROE’s capital asset
listing.

During the auditor’s physical observation
and review of the ROE’s capital assets,
the following was noted:

• Eight of 25 (32%) equipment items
tested were not included in the ROE’s
capital asset listing. Four of these
equipment items were found in the Mount
Vernon office and the other four
equipment items were found in the Carlyle
office. In addition, one of the eight
equipment items did not have an asset
tag.
• A number of equipment items which were
considered no longer in use by the ROE
were not yet disposed of and still
included in the ROE’s capital asset
listing.
• A physical inventory of capital assets
was not taken at year-end.

The ROE management indicated as the ROE
consolidated and offices were closed,
equipment was moved to different
locations. Changes in staff assignments
led to an incomplete analysis of
equipment that was still in use and items
which were no longer needed. (Finding
17-003, pages 14 – 15)

The auditors recommended the Regional
Office should adhere to the ROE
Accounting Manual capital asset policy
and procedures to effectively and
efficiently monitor property
acquisitions, transfers and disposals and
provide for the accurate reporting of
capital asset balances.

In addition, the capital asset listing
should be completed to include all
details required by the ROE Accounting
Manual and should be checked for accuracy
and existence through an annual physical
inventory by an individual independent of
the accounting process. A reconciliation
should be performed between the capital
asset listing and the recorded capital
outlay expenditures for the year. All
reconciling items should be cleared in a
timely manner.

ROE Response: The ROE agrees with the
recommendation. The ROE capital assets
and inventories are being reviewed by
staff and an accurate list should be
completed by May 30, 2020.

CONTROLS OVER PAYROLL AND GRANT
COMPLIANCE

The Regional Office of Education #13
(ROE) was unable to provide adequate time
and effort documentation used to
distribute the salary and benefit costs.

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 the charges are
accurate, allowable and properly
allocated. It also requires that records
are used to support the distribution of
employees’ salary and benefits among
specific activities if the employee only
works part of the time on a federal award
program. It further states that budget
estimates alone do not qualify as support
for salary and benefit charges to a
federal award.

The Illinois State Board of Education
(ISBE) State and Federal Grant
Administration Policy, Fiscal
Requirements and Procedures, requires
that auditable “time and effort”
documentation should be written, after
the fact (not estimated or budgeted)
documentation of how the time was spent.
Time and effort reports should be
prepared by any staff with salary charged
(1) directly to a federal award, (2)
directly to multiple federal awards, or
(3) directly to any combination of a
federal award or other federal, State or
local funds. Additionally, all time and
effort sheets and other supporting
documentation must be retained at the
local level and be available for review
or audit any time within three years
after termination of the project or until
the local entity is notified in writing
from ISBE that the records are no longer
needed for review or audit.

During the auditor’s review of the ROE’s
payroll expenditures of 25 employees, the
following was noted:

• Four employees (16%), who worked on
multiple programs, completed time and
effort documentation but did not indicate
the actual time worked on each program.
Three of the four employees worked
partially on the Homeless Children and
Youth and National School Lunch/Breakfast
federal programs.
• Eight employees (32%), who worked on
multiple programs, did not have time and
effort documentation on file. Four of the
eight employees worked partially on the
Homeless Children and Youth and National
School Lunch/Breakfast federal programs.

Upon further review and discussion, these
employees completed inadequate time
sheets, thus salary and benefits costs
reported were based on estimated time
rather than actual time. Furthermore,
there was no review of the amounts
charged to federal awards based on budget
estimates in order to make necessary
adjustments ensuring that the final
amounts charged to the federal awards are
accurate, allowable, and properly
allocated.

The ROE management indicated it is
understood that the type of time and
effort sheets used by staff that work
under multiple grants was not sufficient
for fiscal year 2017. Limited amounts of
funds from these grants were used to pay
portions of salaries and many times these
do not meet the actual time invested in
providing the services described in the
grants. (Finding 17-004, pages 16 – 17)

The auditors recommended the ROE should
develop and implement written policies
and procedures over payroll to ensure
that proper controls are in place over
the use and maintenance of adequate time
and effort documentation as required by
the Uniform Guidance and the ISBE State
and Federal Grant Administration Policy,
Fiscal Requirements and Procedures.

ROE Response: The ROE agrees with the
recommendation. New electronic time and
effort forms were created in 2018. Staff
currently complete the forms, which are
then reviewed quarterly by the Regional
Superintendent.

DELAY OF AUDIT

The Regional Office of Education #13
(ROE) did not provide completed financial
statements in an auditable form within
the required timeframe. An outside
accounting firm was hired by the ROE to
assist in the preparation of financial
statements and related disclosures.

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 Governmental Auditing
Standards (GAGAS).

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. Annual
financial statements are to be prepared
on an accrual basis of accounting in
accordance with generally accepted
accounting principles (GAAP).

In addition, prudent business practices
and transparency require timely
preparation and completion of financial
statements.

The ROE management indicated financial
statements were not able to be prepared
in a timely manner because the fiscal
year 2016 audit had not been completed
prior to the August deadline. All
materials were presented for the fiscal
year 2017 audit when requested. (Finding
17-005, pages 18 – 19)

The auditors recommended the Regional
Office 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. These
financial statements need to be presented
to the Auditor General’s independent
auditors for audit by the August 31
deadline.

ROE Response: The ROE agrees with the
recommendation. An outside accounting
firm has been hired to prepare the ROE’s
financial statements according to the
required timeframe.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #13’s financial statements as
of June 30, 2017 are fairly presented in
all material respects.

This financial audit was conducted by the
firm of E. C. Ortiz & Co., LLP.

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