REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #24: GRUNDY
AND KENDALL COUNTIES

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2018

Release Date:  October 9, 2019

FINDINGS THIS AUDIT:  3

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

FINDINGS LAST AUDIT: 3

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

• (18-1) The Regional Office of Education
#24 had insufficient collateralization of
bank deposits.

• (18-2) The Regional Office of Education
#24 did not provide completed financial
statements in an auditable form by the
August 31 deadline.

• (18-3) The Regional Office of Education
#24 had inadequate census data for Illinois
Municipal Retirement Fund employees.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INSUFFICIENT COLLATERALIZATION OF BANK
DEPOSITS

The Regional Office of Education #24 (ROE)
had not ensured that its cash deposits in
excess of federally insured limits were
sufficiently collateralized.  At June 30,
2018, $84,520 of the ROE’s $1,898,292 cash
deposited with financial institutions was
uncollateralized and uninsured.

The Regional Office is permitted to invest
in securities as authorized by the Illinois
Public Funds Investment Act (30 ILCS 235/6
(d)) (Act). The Act gives the authorization
for deposits in excess of the federally
insured limit to be covered by pledged
collateral held by the financial
institutions’ trust departments in the
ROE’s name. In addition, prudent business
practice requires that all cash and
investments held by the financial
institutions for the Regional Office be
adequately covered by depository insurance
or collateral.

Regional Office officials indicated the
financial institution and the ROE failed to
monitor deposit and collateral balances.
(Finding 18-001, page 11)

The auditors recommended the ROE should
monitor collateral balances throughout the
year to ensure sufficient collateral is
held to secure its bank deposits.

ROE Response: Upon hearing of this issue,
the Regional Superintendent of Schools
contacted the financial institution and
made sure sufficient collateral was being
held.

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 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.

According to the ROE’s management, the ROE
hired an outside CPA firm to assist with
the preparation of the audit. Due to
training of new staff at the Regional
Office, the CPA firm found errors that
needed to be corrected. Due to corrections,
scheduling conflicts ensued which led to
the delay in audit fieldwork. (Finding
18-002, pages 12 – 13)

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

ROE Response: Incorrect Fiscal Year 2017
Fund balances was the main cause of the
delay.

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.

According to Regional Office officials, 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
of 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 18-003, page 14)

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.

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, 2018.

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