REPORT DIGEST

ILLINOIS STATE BOARD OF EDUCATION

FINANCIAL AND COMPLIANCE AUDIT

(In accordance with the Single Audit Act

and OMB Circular A-133)

For the One Year Ended:
June 30, 1999

Summary of Findings:

Total this audit 8
Total last audit 23
Repeated from last audit 2

Release Date:
March 2, 2000

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State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

 

 

 

 

SYNOPSIS

 

 

 

 

  • The Board did not prepare its fiscal year 1999 financial statements in a timely manner.
  • The Board did not properly reconcile its records of cash receipts to State Comptroller records.
  • The Board did not properly monitor the School Technology Revolving Loan Fund.
  • The Board did not have an adequate subrecipient monitoring system for tracking not-for-profit entities.

 

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the reverse page.}

STATE BOARD OF EDUCATION
FINANCIAL AND COMPLIANCE AUDIT
FOR THE YEAR ENDED JUNE 30, 1999

EXPENDITURE STATISTICS

FY 1999

FY 1998

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

$5,803,275,351
$225,690,747
3.89%
$33,269,472
14.74%
770
$5,896,793
2.61%
$5,635,029
2.50%
$180,889,453
80.10%

$4,379,133,147
75.46%

$1,198,451,457
20.65%
$27,012,063

$5,288,719,384
$157,264,154
2.97%
$32,955,477
20.96%
749
$5,458,611
3.47%
$6,533,925
4.15%
$112,316,141
71.42%

$3,996,499,594
75.57%

$1,134,955,636
21.46%
$22,141,273

SELECTED ACTIVITY MEASURES

FY 1999

FY 1998

Number of School Districts
Number of Schools
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

 

895
3,879
2,012
5.9
93.6
81.9
119,718
19.6
18.1
243.3
$3,990
$6,682

898
3,864
1,952
6.2
93.9
81.8
116,574
20
18.5
250.6
$3,747
$6,281

STATE SUPERINTENDENT OF EDUCATION

During Audit Period: Glenn W. "Max" McGee
Currently: Glenn W. "Max" McGee

 

 

 

Agency did not devote adequate time and resources to ensure timely completion of its financial statements

 

 

 

 

 

 

 

 

 

 

 

 

Receipts for $1,815,368 posted over 5 months late

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Improper monitoring of School Technology Revolving Loan Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inadequate subrecipient monitoring system

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FINANCIAL STATEMENTS NOT PREPARED TIMELY

The Illinois State Board of Education (Board) did not prepare its fiscal year 1999 financial statements in a timely manner to facilitate reporting to the Offices of the Auditor General and the State Comptroller. This finding has been repeated since 1996.

The Board did not devote adequate time and resources to ensure timely completion of its departmental GAAP financial statements. This process was adversely affected by delays in preparing the required reconciliations of Board accounting records to those of the State Comptroller.

The Board has the responsibility to prepare financial statements in accordance with the Federal Single Audit Act and to facilitate the preparation of statewide GAAP financial statements by the State Comptroller. (Finding 4, page 24)

Agency officials agreed with our recommendation to devote adequate time and resources to ensure future financial statements are prepared in a timely manner. (For previous Board responses see Digest Footnote #1.)

CASH RECEIPTS NOT PROPERLY RECONCILED TO STATE COMPTROLLER RECORDS

The Board did not reconcile cash receipts records to records maintained by the State Comptroller in a complete, accurate and timely manner.

During our testing, we noted a receipt in the amount of $1,815,368 posted by the State Comptroller on May 18, 1999 that was not posted by the Board until October 7, 1999. We also noted other transactions totaling $629,533 posted by the State Comptroller and not by the Board at June 30, 1999.

SAMS Procedure 25.40.20 requires the Board to perform monthly receipt reconciliations of fiscal year-to-date Comptroller amounts. Board personnel reconciled only the current monthly activity rather than fiscal year-to-date cash receipts to records maintained by the State Comptroller for the months July 1998 to January 1999. This practice could allow errors in prior month reconciling items to be ignored. In addition, we noted no indication of supervisory review to ensure the completeness, accuracy or timeliness of cash receipts reconciliations. (Finding 7, page 27)

We recommended the Board prepare complete, accurate, and timely reconciliations of year-to-date receipt records to those maintained by the State Comptroller. Further, the Board should establish procedures to ensure a review of all internally prepared reconciliations by supervisory personnel.

Board officials agreed to continue reconciling records to those of the State Comptroller. They also stated reviews have been current since January 1999 and supervisory reviews have been implemented.

SCHOOL TECHNOLOGY REVOLVING LOAN FUND

The Board did not properly monitor the School Technology Revolving Loan Fund. We noted several deficiencies as follows:

  • There was a lack of monitoring/review to ensure loan proceeds were in compliance with statutory requirements;
  • There was no "right to audit" clause in the language of the promissory note;
  • School Districts were not required to submit copies of local School Board resolutions/minutes approving district application for loans;
  • There was no reconciliation of the loan fund balance between all affected systems;
  • There was a lack of segregation of duties and a lack of control in the current system;
  • School districts were not informed that the Board reserves the right to hold districts accountable for compliance with the terms of the agreement about the use of the loan;
  • There was a lack of support for the receivables balance that must be included in the Board's financial statements.

The use of the loan process is specifically restricted by statute for certain purposes. As the oversight agency, the Board bears a responsibility to ensure these restricted loan funds are properly expended by the districts. In addition, good business practices require the Board be fiscally accountable, ensure adequate reconcilations are performed, and ensure an independent review of reconciliations and receivable balances is performed. (Finding 8, page 28)

We recommended the Board:

  1. Develop and implement a monitoring/review process to provide for fiscal accountability of the Loan Fund;
  2. Consider amending the rules governing the application process to include submission of a copy of the local Board resolution approving the loan application and the intended use of the proceeds;
  3. Allow fiscal services division to have access to the loan portfolio system for review, reconciliation, and review of accounts receivable.

The Board agreed to acquire documentation of the actual expenditures, include a signature line for school board approval of the application, integrate the reconciliation process with fiscal services and consider alternative notification processes.

SUBRECIPIENT MONITORING SYSTEM NOT ADEQUATELY TRACKING NOT-FOR-PROFIT ENTITIES

The Board did not have an adequate monitoring system to ensure all subrecipients of federal funds were audited in accordance with federal laws and regulations. The Board's current system does not adequately identify those not-for-profits receiving funds from the Board which require an A-133 audit.

In fiscal year 1999, the Board disbursed over $1 billion to subrecipients. Failure to identify all subrecipients could result in loss or restriction of federal funds involved. (Finding 2, page 21)

We recommended the Board continue to implement a subrecipient monitoring system in accordance with OMB Circular A-133 and modify its system to allow tracking of the not-for-profit institutions receiving funding. Further, the Board should develop a plan to track the subrecipients through the fiscal year to determine in advance which subrecipients need to file A-133 audit reports.

The Board agreed to review the current system to reaffirm that all subrecipients have been appropriately monitored.

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 Board’s 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 June 30, 1999 financial statements of the Board 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.

DIGEST FOOTNOTE

#1. FINANCIAL STATEMENTS NOT PREPARED TIMELY - Previous Board Responses

1998: Draft GAAP reports were submitted to the Comptroller's Office on August 15, 1998, the due date. Revisions/Adjustments were returned to us in September, October, and November by the Comptroller's Office. Financial Statements are completed after the Comptroller's review is complete. The Agency will work with the Comptroller's Office to improve this situation.

1996: The Agency agreed to implement the recommendation. The Agency will complete financial statements as required by CUSAS. There were a number of circumstances, such as employee illness, first time requirement that revenues and disbursements be recorded by CFDA codes, and adjustments by third parties, that contributed to the delay. Although the Agency committed what should have been adequate resources, additional contingency resources will be committed in the future.