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The Regional Office
of Education #1 had multiple programs with excess cash balances at June 30,
2004 that had not been obligated, and the balances were not refunded to the
granting agencies by August 15, 2004.
During the past fiscal year, the Regional Office of
Education #1 recorded all revenue and expense transactions of the West
Central Regional System #240 (WCR) in its general ledger system.
Voucher testing identified checks being prepared
without invoice or purchase order approval.
At Regional
Office of Education #1, the same individual prepares checks, processes
payroll, prepares bank reconciliations, records journal entries, and signs
checks.
In April 2004, the server at the Regional Office failed
and data on the hard drive was lost.
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FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
DISBURSEMENT OF EXCESS GRANT FUNDS
The Regional Office of Education #1 had multiple programs
with excess cash balances at June 30, 2004 that had not been obligated, and
the balances were not refunded to the granting agencies by August 15,
2004. The grant-funded programs with
period-end cash balances in excess of $500 ranged from $542 for the Illinois
Tobacco Prevention program to $25,618 for the Standards Aligned Classrooms
program.
The Illinois Grant Funds Recovery Act requires that all
grant funds that have not been expended or obligated by the end of the grant
period be returned to the granting agency within 45 days after the end of the
period (Finding 04-03, page 13). This
finding is repeated from our 2003 audit.
The Regional Office of Education #1 accepted the
recommendation to prepare accurate reconciled reports at year-end for its
grant programs and contact the granting agency to determine a proper means of
disposition of any excess grant funds.
(For previous Regional Office response, see Digest Footnote #1.)
TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING
SYSTEM
During the past fiscal year, the Regional Office of
Education #1 recorded all revenue and expense transactions of the West
Central Regional System #240 (WCR) in its general ledger system. The WCR has a separately elected
board. It is a legally separate
entity and is fiscally independent.
The WCR administers vocational education services for the region, and
Regional Office of Education #1 acts as a fiscal agent for the WCR.
The effect of including the WCR’s financial transactions
is to overstate the Regional Office of Education #1’s revenues, expenditures,
and cash balances. According to
governmental accounting standards, transactions of two separate primary
government units should not be co-mingled in one general ledger system
(Finding 04-01, page 11). This
finding is repeated from our 2003 audit.
The Regional Office of Education #1 accepted the
recommendation to create a separate set of records for the WCR’s accounting
activity. The Regional Office plans
to implement a new general ledger system for fiscal year 2005 in order to
separately record transactions of the West Central Regional System #240. (For
previous Regional Office response, see Digest Footnote #2.)
APPROVAL
OF INVOICES PRIOR TO PAYMENT
Voucher testing identified checks being prepared without
invoice or purchase order approval.
Also, in several instances, purchase orders or invoices were being
approved by program coordinators, rather than by the Regional Superintendent
or Assistant Regional Superintendent.
The lack of centralized approval increases the chance of fraudulent
payments passing through the system.
(Finding 04-02, page 12). This
finding is repeated from our 2003 audit.
The Regional Office accepted the recommendation to
institute a policy requiring all invoices or purchase orders to be approved
by the Superintendent or Assistant Superintendent prior to the disbursement
of the checks. (For previous Regional
Office response, see Digest Footnote #3.)
SEGREGATION OF DUTIES
At Regional Office of Education #1, the same individual
prepares checks, processes payroll, prepares bank reconciliations, records
journal entries, and signs checks. Furthermore,
the individual is in possession of the Regional Superintendent’s signature
stamp. Inadequate segregation of
duties limits the effectiveness and efficiency of the internal control system
and increases the risk that errors or irregularities may occur and not be
detected promptly (Finding 04-04, page 14).
The Regional Office of Education #1 agreed with the
recommendation to improve the segregation of duties. The Regional Office plans to remove the
check- signing authority from the individual who prepares checks and
reconciles the bank account and reassign this duty.
DATA BACKUP PROCEDURES
In April 2004, the server at the Regional Office failed
and data on the hard drive was lost.
The onsite backup did not function and there were no additional
backups to provide data recovery. All
Regional Office data was lost, except accounting and certification records,
which were maintained on a server in Springfield, Illinois. Computer files lost included those
pertaining to GED testing, bus driver training, teacher registration,
correspondence, and the policy manual.
Proper internal controls generally require backups of
computer data to allow the restoration of critical data in the event of a
failure that causes loss of data. The
Regional Office was relying on a single tape in a tape backup device and the
effectiveness of the tape backup had not been tested regularly (Finding
04-05, page 15).
The Regional Office accepted the recommendation to
strengthen its backup procedures. The
Regional Office plans to modify its data backup system to include multiple
recovery sources and backup of data on discs stored in a safe and/or taken
home.
AUDITORS’
OPINION
Our auditors state the Regional Office of
Education #1’s financial statements as of June 30, 2004 are fairly presented
in all material respects.
____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:JRB
SPECIAL ASSISTANT AUDITORS
Our special assistant
auditors were Fick, Eggemeyer & Williamson, CPA’s.
DIGEST
FOOTNOTES
#1: DISBURSEMENT OF EXCESS GRANT FUNDS – Previous Regional Office Response
In its prior response in 2003,
the Regional Office stated it planned to obtain from bookkeeping, accurate
reconciled reports, at least annually, which consider: beginning fiscal year cash balances,
current fiscal year grant income, current fiscal year program expenses,
current fiscal year interest allocated to programs, and year end cash
balances by program. Also, granting
agencies will be notified of any excess grant funds at period end.
#2: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM– Previous
Regional Office Response
In its prior response in 2003,
the Regional Office stated it plans to implement a new general ledger system
at the start of the next fiscal year in order to separately record
transactions of the West Central Regional System #240.
#3: APPROVAL OF INVOICES PRIOR TO PAYMENT –
Previous Regional Office Response
In its prior response in 2003,
the Regional Office stated it plans to implement a disbursement approval
policy that requires at least initialization by the assistant superintendent
or the regional superintendent of all purchase orders or invoices prior to
check preparation.
Complete Regional Office responses to prior findings are available
upon request from the Auditor General’s Office.
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