Regional superintendent takes responsibility for financial reporting problems identified in audit

In each of the past five years, the Illinois Auditor General’s Office has identified multiple problems in the McHenry County Regional Office of Education’s financial reporting.

Some of these shortcomings have spanned several years, and if it were to be determined that funds were mismanaged, state statute indicates that McHenry County Board members would be liable for any damages caused by such oversight.

Regional Superintendent of Schools Leslie Schermerhorn said most of the deficiencies were from not adhering to the auditor general’s reporting policies and that there wasn’t a penny missing from any of her office’s accounts.

However, Schermerhorn said she holds herself accountable for reporting deficiencies identified in each annual audit – such as recording different grant funds as general revenues and expenditures and the acceptance of over-the-counter cash receipts.

“Being the head of the department, I have to accept responsibility, and we’re moving forward to correct these problems,” Schermerhorn said.

McHenry County Board Chairman Jack Franks, meanwhile, said the persistent errors – which began after Schermerhorn became regional superintendent in 2012 – have made the ROE one of the worst-run offices in the state.

“[Schermerhorn] violated state laws for five years,” Franks said. “In the private sector, if that happened once, that board would fire her.”

In fiscal 2018, the Auditor General’s Office – which performs annual audits on all 35 ROEs in the state – determined that the McHenry County office did not have sufficient control over the financial reporting process. This same problem was reported in fiscal 2014 and each year after.

According to the auditor general’s report, there were not sufficient controls over the preparation of financial statements based on the generally accepted accounting principles nor were there employees actively preventing or detecting misstatements and omitted materials in a timely manner.

When the ROE’s accounting records were reviewed in 2018, the initial trial balance had four funds with a balance that did not correctly roll forward from the previous year. Accounts payable, accounts receivable and unearned revenue also were not properly recorded.

ROE officials said there was not adequate funding to hire or train accounting personnel with the knowledge, skills and experience to prepare the necessary financial statements based on generally accepted accounting principles, according to the auditor general’s report.

In fiscal 2018, the ROE had $1,382,090 in total revenue and $1,233,987 in total expenditures, according to the auditor general’s report. The office has a number of responsibilities, including health and life safety visits to all school buildings in the county, school district audits, drug-free services for schools, fingerprinting officials and monitoring truancy.

A couple of deficiencies in the reporting of grant money dating back to 2016 also were observed.

The ROE is required to keep its accounting consistent with the Illinois State Board of Education, which tracks grant funding activity separately by funding sources. However, various grant programs used by the ROE were recorded as general revenue when received and as a general expenditure when spent.

Schermerhorn said that the ROE’s previous bookkeeper wasn’t well-versed enough to deal with the numerous grant programs used by the office.

The auditor general also found that the individual responsible for reconciling cash accounts was accepting over-the-counter cash receipts.

Lastly, the ROE was flagged for not providing completed financial statements in a format that could be audited by the Aug. 31 deadline.

During the McHenry County Board’s Committee of the Whole meeting Thursday, board member Tom Wilbeck asked what is being done to rectify these shortcomings and what sort of timeframe is necessary for them to be resolved.

After experiencing budget cuts and the elimination of her office’s bookkeeper in December, Schermerhorn said assistant county administrator of finance, Ralph Surbaugh, and a temporary employee have been working with the district to transition into a new QuickBooks bookkeeping system to remain in compliance with the state.

Schermerhorn said her office still is looking to hire a part-time employee for about 10 hours a week with CPA-level accounting knowledge to submit grant funding and general bookkeeping data.

“It’s a complex program, which is why we need someone with a higher level of accounting authority,” Schermerhorn said.

Franks said the ROE is an antiquated office that needs to be eliminated. He suggested that the McHenry County Sheriff’s Office handle the fingerprinting of school district employees, the McHenry County State’s Attorney handle truancy issues and other obligations could be performed by other ROEs in the area.

“There’s no reason for taxpayers to spend hundreds of thousands [of dollars] on an office that is so mismanaged and unnecessary,” Franks said.