External auditor gives district clean opinion but flags controls, recommends FY25 amendment after fraud and large fund transfers

An external audit of Proviso Township High School District 209 found the district’s FY24 financial statements materially reliable but identified several internal-control weaknesses and recommended administrative actions, including an amended FY25 budget and stronger reconciliation procedures.

The auditor, identified in the meeting as Dr. Hill, told the Board on March 11 that the firm issued an unmodified (clean) opinion on the district’s audited financial statements, the Illinois State Board of Education annual financial report and the schedule of expenditures of federal awards. “An unmodified audit opinion is the highest level of assurance that you can receive from your external auditor,” Dr. Hill said.

The audit highlighted three substantive issues for board attention. First, auditors noted a significant transfer of $50,000,000 into the capital projects fund during FY24. That transfer remediated a previously reported deficit of about $13,800,000 in the capital projects fund but also materially changed fund positions.

Second, the audit documented a wire-fraud incident during the year. Dr. Hill said the district and its banks, and the district’s insurers, recovered some funds; an insurance claim resulted in a recovery of roughly $1,900,000 that was paid back to the district in February. Because some insurance proceeds were not collected within 60 days of the fiscal year end, the FY24 financial statements show a receivable and a deferred inflow in the capital projects column. The auditor pointed to a receivable labeled “insurance proceeds” for $1,000,008.77 on the balance sheet as the accounting treatment for amounts not available within 60 days.

Third, auditors found weaknesses in how student activity funds and the district’s self-insurance bank account are reconciled. Dr. Hill said the bank balance for student activities was “significantly higher” than the total of individual club account balances tracked in the books — roughly $1.9 million in the bank compared with about $670,000 shown in activity accounts — and recommended regular bank reconciliations and improved tracking. The self-insurance bank account, used for employee health-claims payments, was being managed outside the central accounting system and the auditor recommended moving that activity into the district accounting system or otherwise improving controls and documentation.

The auditor also reported compliance testing for federal awards: the district expended approximately $10.4 million in federal awards for FY24. Two major programs — Title I and the Education Stabilization Fund — were audited as major programs; auditors reported no deficiencies in internal-control tests for those programs.

Dr. Hill also told the board that statement-of-economic-interest filings appear to be missing for six individuals on the county website; auditors flagged this as a compliance item for attention.

District administrators said they will present an FY25 amended budget for public display and board approval to comply with Illinois rules limiting administrative-cost increases, and to reflect audit adjustments and clarified estimates. Treasurer and business-office staff described a planned 30-day public display of the amended budget and said the board would vote on it at the May 11 meeting.

The business office gave a list of internal-control improvements already underway: requiring two employees to process and approve ACH transactions; regular and timely reconciliations; restricting system access; verifying new vendors before initiating payments; enhanced staff training on fraud recognition; and increased monitoring and audit frequency.

Why it matters: an unmodified audit opinion affirms that the district’s financial statements present fairly in conformity with accounting standards, but the audit’s internal-control findings — particularly the fraud event and reconciliation gaps — carry operational and reputational risks and have prompted near-term budget and process changes.

Board follow-up: administrators said they will (1) post and seek board approval of an amended FY25 budget to align estimates with audited figures, (2) incorporate student activity accounts into the district’s accounting system and reconcile bank balances to book balances, and (3) put the self-insurance transactions into a reconciled accounting structure and secure required surety bonding for accounts not pooled with the township treasurer’s custody.

Quotes from the meeting: “We rendered an unmodified audit opinion on your financial statements,” Dr. Hill told the board. On student activities, the auditor said the district should decide “what are we going to do to remediate this matter and have a system to track this.”

Background: Audits of Illinois school districts include financial-statement examination and a single-audit component when federal expenditures exceed the threshold for major-program testing; the auditor reported the district met those thresholds and had no scope limitations for FY24.

The board took no formal vote directly on audit findings at the March 11 meeting beyond placing an amended budget item on the April newspaper notice and scheduling the May 11 approval vote.

Ending note: The district’s administrative team said it is implementing tighter controls immediately and will return to the board with formal budget amendments and reconciliation plans in coming meetings.