REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #8

CARROLL, JO DAVIESS, AND STEPHENSON COUNTIES

FINANCIAL AUDIT

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

For the Year Ended:

June 30, 2007

Summary of Findings:

Total this audit                    2

Total last audit                    1

Repeated from last audit     0

Release Date:

May 8, 2008

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 complete report is also available on the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

·        The Regional Office of Education #8 did not have sufficient internal controls over the financial reporting process.

·        The Regional Office of Education #8 did not have adequate controls over approval of employee timesheets or control over approval and documentation of changes to employees’ contracted pay rates.

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

FY 2007

FY 2006

TOTAL REVENUES

$3,863,126

$3,415,537

Local Sources

$734,562

$733,688

% of Total Revenues

19.01%

21.48%

State Sources

$2,482,085

$2,049,866

% of Total Revenues

64.25%

60.02%

Federal Sources

$646,479

$631,983

% of Total Revenues

16.73%

18.50%

TOTAL EXPENDITURES

$3,898,924

$3,391,342

Salaries and Benefits

$1,655,940

$1,322,439

% of Total Expenditures

42.47%

38.99%

Purchased Services

$1,300,772

$989,413

% of Total Expenditures

33.36%

29.17%

All Other Expenditures

$942,212

$1,079,490

% of Total Expenditures

24.17%

31.83%

TOTAL NET ASSETS

$139,664

$175,462

INVESTMENT IN CAPITAL ASSETS

$14,416

$19,435

 
Percentages may not add due to rounding.

REGIONAL SUPERINTENDENT 

During Audit Period:  Honorable Marie Stiefel

Currently:  Honorable Marie Stiefel

The Regional Office of Education #8 did not have sufficient internal controls over the financial reporting process.

The Regional Office of Education #8 did not have adequate controls over approval of employee timesheets or control over approval and documentation of changes to employees’ contracted pay rates.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

Controls Over Financial Statement Preparation

         The Regional Office of Education #8 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 #8 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 sufficient 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 noted that the Regional Office did not maintain adequate internal controls over the processing of all financial transactions.  Consequently, numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles.

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #8 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. (Finding 07-1, pages 11-12)

         The Regional Office of Education #8 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in small organizations such as theirs.  They note that Regional Office staff are knowledgeable regarding accounting principles, however, and the Regional Office feels that there is minimal risk associated with this condition.  Nonetheless, they will look into the cost and feasibility of seeking additional accounting expertise or providing existing staff with additional training necessary to prepare and/or review financial statements.

Controls Over PAYROLL FUNCTION

         The Regional Office of Education #8 did not have adequate controls over approval of employee timesheets or control over approval and documentation of changes to employees’ contracted pay rates.  Regional Office of Education #8 requires timesheets to be signed by the appropriate supervisor and documentation of employees current pay rates to be kept in personnel files.

         Auditors noted that an employee’s time sheet was not signed by the appropriate supervisor for 3 of 25 pay checks examined.  Also, in 4 instances, amendments were made to employees’ original contracted pay rates without proper approval and documentation. 

         According to Regional Office officials, controls over timesheet approval and personnel file documentation had been implemented but did not function properly.  Regional Office personnel did not verify that employee personnel files included the required information.

         Auditors recommended that Regional Office of Education #8 work to ensure that controls over payroll are functioning properly.  Personnel should verify, before processing payroll, that all time sheets have been properly approved and that all pay rate documentation is current and present in personnel files.  (Finding 07-2, page 13)

         The Regional Office accepted the recommendation and has informed the bookkeeping staff that employee pay should not be adjusted until a signed amended contract has been received and placed in the employee’s personnel file.  In addition, bookkeepers have been instructed not to pay hourly employees for hours reported unless a supervisor has signed the time sheet to indicate approval.

AUDITORS’ OPINION

         Our auditors state the Regional Office of Education #8’s financial statements as of June 30, 2007 are fairly presented in all material respects.

___________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM

SPECIAL ASSISTANT AUDITORS

         Our special assistant auditors were Clifton Gunderson, LLP.