REPORT DIGEST ILLINOIS STATE BOARD OF EDUCATION FINANCIAL AND COMPLIANCE AUDIT For the One Year Ended: June 30, 2000 Summary of Findings: Total this audit 10 Total last audit 8 Repeated from last audit 4 Release Date: State of Illinois Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL To obtain a copy of the Report contact: (217)782-6046 or TDD (217) 524-4646 This Report Digest is also available on |
SYNOPSIS
{Expenditures and Activity Measures are summarized on the reverse page.} |
STATE BOARD OF EDUCATION
FINANCIAL AND COMPLIANCE AUDIT
FOR THE YEAR ENDED JUNE 30, 2000
EXPENDITURE STATISTICS | FY 2000 |
FY 1999 |
Total Expenditures (All
Funds) OPERATIONS TOTAL % of Total Expenditures Personal Services % of Operations Expenditures Average No. of Employees Other Payroll Costs (FICA, Retirement) % of Operations Expenditures Contractual Services % of Operations Expenditures All Other Operations Items % of Operations Expenditures GRANTS, REFUNDS, OTHER % of Total Expenditures Federal Expenditures Passed Through to Other Entities % of Total Expenditures Cost of Property and Equipment |
$6,276,126,345 $37,454,430 |
$5,803,275,351 $27,012,063 |
SELECTED ACTIVITY MEASURES (Unaudited) | FY 2000 |
FY 1999 |
Number of School Districts Number of Schools With Report Card Information Enrollment (in thousands) Dropout Rate Attendance Rate Graduation Rate Total Number of Teachers Students Per Teacher (Elementary) Students Per Teacher (Secondary) Students Per Administrator Instructional Expenditures Per Pupil Operational Expenditures Per Pupil |
894 $7,146 |
895 $6,682 |
STATE SUPERINTENDENT OF EDUCATION |
During Audit Period: Glenn W. "Max" McGee |
Outstanding obligation of $17.875 million not communicated to proper division
Poor controls over food commodities totaling $1.2 million
Calculated absences overstated by $280,725
$7 million paid from the General Revenue Fund rather than Common School Fund
Inadequate controls over School Technology Revolving Loan Fund with expenditures of approximately $16 million
Controls lacking over computer hardware and applications costing approximately $22 million |
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS LACK OF COMMUNICATION BETWEEN DIVISIONS The Agencys lack of communication between divisions led to the failure to properly communicate essential financial reporting information. During our testing, we noted an outstanding obligation of $17.875 million existing at June 30, 2000 which was not properly accounted for in the Agencys financial statements. The short-term and long-term portion of this obligation was not included in the Agencys financial statements until auditor adjustments were recorded. Generally accepted accounting principles require the reporting of all current liabilities in the proper fund and all long-term obligations in the General Long-Term Debt Account Group. Statewide Accounting Management System (SAMS) procedure 27.20.99 requires the reporting of contingencies and commitments in a manner clearly establishing the existence, amount and nature of the obligation. In addition, proper internal controls require adequate communication of essential information among divisions to enhance the quality and effectiveness of financial reporting. (Finding 1, pages 16-17) We recommended the Agency establish policies and procedures ensuring effective communication among all divisions to provide management with the information necessary to evaluate the financial reporting impact of all events and transactions affecting the Agency. We further recommended the Agency record all obligations in its financial statements. Agency officials agreed with our recommendation and stated the Agency has agreed to record the identified liability. INADEQUATE CONTROLS OVER FOOD COMMODITIES INVENTORY The Agency did not have adequate controls over its food commodities inventory, totaling $1.2 million at June 30, 2000. We noted the following:
The USDA Food Distribution Regulations (Title 7, Section 250.16(a)(1)) require accurate and complete records to be maintained. In addition, Section 250.24(c) requires a financial management system be maintained to ensure the fiscal integrity and accountability for all funds. (Finding 2, pages 18-19) We recommended the Agency implement strong internal controls over its food commodities inventory to ensure compliance with USDA Food Distribution Regulations. Agency personnel agreed with our recommendation and stated a request for proposal has been developed to obtain software to correct the system deficiencies and that it is expected that some of the Food Commodities system will be outsourced. INACCURATE COMPUTATION OF COMPENSATED ABSENCES The Agency did not compute compensated absence balances in an accurate manner. During our testing of GAAP Reporting Form (SCO 580) we noted the following:
Statewide Accounting Management System (SAMS) procedure 27.20.80 requires compensated absences to be calculated based on June 30 payroll and requires the number of sick days accrued prior to January 1, 1998 to be calculated as one-half of the employees June 30 hourly rate. In addition, internal policy requires the number of loaned sick days to be calculated at the full amount of the employees June 30 hourly rate. (Finding 3, pages 20-21) We recommended the Agency strengthen controls over compensated absence reporting and ensure appropriate SAMS procedures are followed. We also recommended the Agency implement policies and procedures requiring supervisory review of the compensated absence calculation to ensure financial reporting accuracy. Agency officials agreed with our recommendations and stated a review of the calculations and supervisory reviews are in place. SALARY PAYMENTS FROM IMPROPER FUND The Agency compensated regional office of education superintendents and assistant superintendents over $7 million from the General Revenue Fund. The School Code (105 ILCS 5/18-5) states the Agency shall request an appropriation payable from the Common School Fund to compensate the regional office of education superintendents and assistant superintendents. (Finding 8, page 28) We recommended the Agency specify the statutorily required fund from which its appropriation is to be expended. Agency officials agreed with our recommendation. SCHOOL TECHNOLOGY REVOLVING LOAN FUND The Agency did not properly monitor the School Technology Revolving Loan Fund. This fund provides affordable financing of school technology hardware improvements to eligible school districts. We noted the following weaknesses:
The use of these loan proceeds are specifically restricted by statute for certain purposes. Good business practices requires the Agency monitor its programs to ensure operations are conducted in an economical, efficient and effective manner and adhere to all statutory requirements. (Finding 7, pages 26-27) We recommended the Agency develop and implement a monitoring and/or review process to provide for fiscal accountability and consider amending the rules governing the application process to include submission of a copy of the Boards resolution approving the loan application. We also recommended the Agency consider the merit of including "right to audit" language in the promissory notes and include notices of loan programs in the Superintendents Bulletin or similar vehicle. Agency officials agreed with our recommendation. INADEQUATE CONTROLS OVER LOCAL AREA NETWORKS (LANS) The Agency did not establish adequate security controls over its local area networks (LANs). The Agency had approximately $22 million invested in computer hardware and processed critical applications on their LANs, including the Management Information Database Accounting System, the Financial Reimbursement Information System, and the Human Resources Management System. We noted a significant number of users were not required to change their passwords and there was no minimum number of days set for a user to change their password. Good internal controls require reasonable, cost effective procedures be implemented to ensure the integrity and security of information maintained on the Agencys LANs. (Finding 10, page 30) We recommended the Agency incorporate LAN security guidelines into its LAN security policies and procedures. In addition, we recommended changes in its LAN security practices to include requiring users to change their passwords at least every 35 days and setting the minimum password aging length greater than 35 days. Agency officials agreed with our recommendation and agreed to improve LAN security. OTHER FINDINGS The remaining findings and recommendations are less significant and are being given attention by the Agency. We will review progress towards the implementation of our recommendations during the Boards next compliance audit. The responses to our findings and recommendations were provided by Tammy J. Rust, Chief Internal Auditor. AUDITORS OPINION Our auditors state the financial statements of the Board as of June 30, 2000, and for the year then ended, are fairly presented in all material respects. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:JSC:pp SPECIAL ASSISTANT AUDITORS Pandolfi, Topolski, Weiss & Co., LTD. were our special assistant auditors for this audit. |