REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #1

 

ADAMS AND PIKE COUNTIES

 

FINANCIAL AUDIT

(In Accordance with the
Single Audit Act and OMB Circular A-133)

 

For the Year Ended:

June 30, 2008

 

Summary of Findings:

 

Total this audit                   4

Total last audit                   9

Repeated from last audit    4

 

Release Date:

January 15, 2009

 

 

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

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

 

This Report Digest and Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

·        During the past fiscal year, the Regional Office of Education #1 recorded a portion of the revenue and expense transactions of the West Central Regional System #240 in its general ledger system. 

 

·        The Regional Office of Education #1 incurred unnecessary finance charges and paid unnecessary sales taxes.

 

·        The Regional Office of Education #1 did not have sufficient internal controls over the financial reporting process.

 

·        A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2008 expenditure reports did not agree with the Regional Office of Education #1’s general ledger. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Expenditures and Revenues are summarized on the reverse page.}

 

 

 

 

REGIONAL OFFICE OF EDUCATION #1

ADAMS AND PIKE COUNTIES

 

 

FINANCIAL AUDIT

(In Accordance with the Single Audit Act and OMB Circular A-133)

For The Year Ended June 30, 2008

 

 

 

FY 2008

FY 2007

TOTAL REVENUES

$1,871,078

$1,807,306

Local Sources

$343,358

$332,340

% of Total Revenues

18.35%

18.39%

State Sources

$1,364,572

$1,095,264

% of Total Revenues

72.93%

60.60%

Federal Sources

$163,148

$379,702

% of Total Revenues

8.72%

21.01%

 

TOTAL EXPENDITURES

$1,944,737

$1,839,880

Salaries and Benefits

$973,835

$870,523

% of Total Expenditures

50.08%

47.31%

Purchased Services

$225,608

$265,237

% of Total Expenditures

11.60%

14.42%

All Other Expenditures

$745,294

$704,120

% of Total Expenditures

38.32%

38.27%

 

TOTAL NET ASSETS

$590,136

$663,795

 

INVESTMENT IN CAPITAL ASSETS

$30,710

$49,975

 

Percentages may not add due to rounding

 

 

REGIONAL SUPERINTENDENT 

During Audit Period: Honorable Raymond Scheiter

Currently:  Honorable Raymond Scheiter

 

 

 

 

 

 

 

 

 

 

 

 

During the past fiscal year, the Regional Office of Education #1 recorded a portion of the revenue and expense transactions of the West Central Regional System #240 in its general ledger system.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #1 incurred unnecessary finance charges and paid unnecessary sales tax. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #1 did not have sufficient internal controls over the financial reporting process.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2008 expenditure reports did not agree with the Regional Office of Education #1’s general ledger. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

 

TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM

 

         During the past fiscal year, the Regional Office of Education #1 (ROE) recorded a portion of the revenue and expense transactions of the West Central Regional System #240 (WCR) in its general ledger system.  The WCR administers vocational education services for the region, and Regional Office of Education #1 acts as a fiscal agent for the WCR. 

 

         According to governmental accounting standards, transactions of two separate primary government units should not be co-mingled in one general ledger system.  According to GASB 14, a special purpose government is a primary government if it has the following three characteristics:  a separately elected governing board, fiscal independence, and status as a separate legal entity.  The WCR has a separately elected board, is a legally separate entity, is fiscally independent, and should be considered a separate primary government unit. 

 

         During fiscal year 2008, the Regional Office of Education #1 attempted to maintain a separate general ledger system for the WCR.  However, the ROE continued to maintain WCR cash accounts on the ROE books and recorded certain WCR transactions in the ROE general ledger. (Finding 08-1, page 9) This finding was first reported in 2003.

 

         Auditors recommended that Regional Office of Education #1 establish an entirely separate set of records in order to eliminate the co-mingling of the Regional Office of Education and the West Central Regional System accounting activity.

 

         The Regional Office of Education #1 agreed with the recommendation, noting that it will work to improve the general ledger systems in order to properly separate transactions of the West Central Regional System #240.

(For previous Regional Office response, see Digest Footnote #1.)

 

 

UNALLOWABLE FINANCE CHARGES AND SALES TAX

 

         The Regional Office of Education #1, which is not subject to sales tax, paid $126 in sales tax during fiscal year 2008.  The accounting department should have noted the erroneously charged sales tax and requested an invoice adjustment from the vendors.  Also, the Regional Office paid $214 in credit card finance charges and late fees during fiscal year 2008.  If the accounting department had made all the payments on time, the charges would not have been incurred. 

 

         Grant provisions require that funding be spent on allowable costs.  Internal controls should exist to prevent payment of unallowable credit card finance charges and improperly charged sales tax.  According to Regional Office officials, they lack sufficient funding to hire an adequate accounting staff. (Finding 08-2, page 10)

 

         Auditors recommended that the Regional Office implement internal controls to ensure that disbursements are paid in a timely manner to avoid finance charges, and errantly charged sales tax should be challenged and corrected by the vendors before payment is remitted to them.

 

         The Regional Office #1 responded that it agreed with the finding and intends to improve its payment procedures to avoid finance charges and improperly charged sales tax.

 

 

Controls Over Financial Statement Preparation

 

         The Regional Office of Education #1 is required to maintain a system of controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP).  Regional Office internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge and expertise to prepare and/or thoroughly review GAAP based financial statements to ensure that they are free of material misstatements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).

 

         The Regional Office of Education #1 did not have sufficient internal controls over the financial reporting process.  The Regional Office maintains their accounting records on the cash basis of accounting.  While the Regional Office maintains controls over the processing of most accounting transactions, there are not sufficient controls over the preparation of the GAAP based financial statements for management or employees in the normal course of performing their assigned functions to prevent or detect financial statement misstatements and disclosure omissions in a timely manner. For example, auditors, in their review of the Regional Office’s accounting records, noted the following:

 

  • Numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles.  Proposed adjusting entries changed the Regional Office’s net income by $369,752.  

  • The Regional Office did not have adequate controls over the maintenance of records of accounts payable.  The Regional Office had not recorded any accounts payable in the current year.  Accounts payable balances were adjusted at June 30, 2008, by $5,634.

 

         According to Regional Office officials, they did not have adequate funding to hire or train their accounting personnel.  (Finding 08-3, page 11)

 

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #1 should implement a comprehensive preparation and/or review procedure to ensure that the financial statements, including disclosures, are complete and accurate.  Such procedures should be performed by a properly trained individual(s) possessing a thorough understanding of applicable generally accepted accounting principles, GASB pronouncements, and knowledge of the Regional Office of Education’s activities and operations.

 

         The Regional Office of Education #1 responded that it agreed with the finding and noted that it will employ accountants familiar with ROE operations to prepare financial statements according to GAAP standards.

 

 

EXPENDITURE REPORTS DID NOT AGREE TO THE GENERAL LEDGER

 

         A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2008 expenditure reports were not consistent with the Regional Office of Education #1’s general ledger.  The expenditure report submitted to the Illinois State Board of Education for the ROE/ISC Operations program reported total expenditures of $143,878, while the general ledger showed expenditures of $140,670 (a $3,208 difference).  Also, the McKinney Education for Homeless Children Program reported expenditures of $17,206, while the general ledger showed expenditures of $12,482 (a $4,724 difference).  Inaccurate expenditure reports were submitted, which could lead to granting agencies requesting reimbursements or adjusting the fiscal year 2009 grant amounts.

 

         Expenditure reports for education programs submitted to the Illinois State Board of Education and Illinois Department of Human Services should agree with the expenditures reported on the Regional Office of Education #1’s general ledger. 

 

         The Regional Office of Education #1 personnel responsible for expenditure report preparation used numbers that were not yet adjusted for bank reconciliation differences. (Finding 08-4, page 12) This finding was first reported in 2005.

 

         The auditors recommended that Regional Office of Education #1 personnel responsible for preparing the expenditure reports should use expenditures per the general ledger after the bank reconciliations are done and all adjustments have been made.

 

         The Regional Office of Education #1 agreed with the finding.  They responded that accounting personnel will not prepare reports to the Illinois State Board of Education or the Illinois Department of Human Services until all bank reconciliations are completed and all resulting adjustments have been made. (For previous Regional Office response, see Digest Footnote #2.)

 

 

AUDITORS’ OPINION

 

         Our auditors state the Regional Office of Education #1’s financial statements as of June 30, 2008 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: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM—Previous Regional Office Response

 

In its prior response in 2007, the Regional Office of Education #1 agreed with the recommendation, noting it will work to improve the general ledger systems in order to properly separate transactions of the West Central Regional System #240.

 

#2:  EXPENDITURE REPORTS DID NOT AGREE TO GENERAL LEDGER—Previous Regional Office Response

 

In its prior response in 2007, the Regional Office of Education #1 agreed with the finding.  They responded that accounting personnel will not prepare reports to the Illinois State Board of Education or the Illinois Department of Human Services until all bank reconciliations are completed and all resulting adjustments have been made.