FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
LACK OF PAY RATE AUTHORIZATIONS AND EMPLOYEE
EVALUATIONS
The
Regional Office of Education #21 made 130 non-routine/bonus payments to
selected employees during the year, which totaled $102,040. These 130 payments were made to 31
employees with 23 of the employees receiving more than one payment. Of this
amount, $50,653 was made during June 2005, which is the last month of a
considerable number of the ROE’s grant funded programs. Additionally, 14 of the 130 (11%) payments
were not supported by an approved Payroll Change Notice form. Many of the completed forms did not
document the reason for the additional compensation. ROE policy requires this Notice to be
signed by the Superintendent and on file with the bookkeeper before the
effective date of the payroll change in order to document the approval of the
rate change or additional compensation.
In the prior year, formal employee evaluations were not
performed. In fiscal year 2005, the Regional Superintendent and the Assistant
Regional Superintendent completed employee evaluations and put them in the
employees’ personnel files. However,
ROE personnel indicated that these evaluations were not given to them,
formally discussed with them, or signed by them. (Finding 05-01, pages
15-18) This finding was first
reported in 2002.
The auditors recommended that the Regional Office of
Education #21 maintain documentation for employees that establishes a pay
rate commensurate with the responsibilities assigned. Pay rate authorization forms should be
completed as required by ROE policy.
In addition, formal job evaluations should be reviewed with employees
and signed by the employees. The ROE
responded that formal job evaluations will be reviewed with and signed by
employees. The ROE also provided
explanations for the services that were paid the extra compensation and
stated that non-routine payments cannot be avoided due to certain circumstances. The ROE noted that the “bonus” payments in
June were salary payments for employees who worked Project ECHO’s 4-week
summer school course. The ROE stated
it would provide better explanation and documentation for the payments in the
future.
The auditors commented that the ROE did not provide
adequate documentation during fieldwork to explain the additional
payments. Also, while many payments
made to employees in June 2005 were for the ECHO program, over $9,000 of the
June 2005 payments were made for other grant programs. (For previous Regional Office response,
see Digest Footnote #1.)
UNALLOWABLE EXPENDITURES
The former Regional Superintendent submitted travel vouchers
for mileage and meal expenses for himself and other employees that were
reimbursed by the ROE that have been alleged to be materially false in
indictments released on August 19, 2004.
The former Regional Superintendent and three ROE employees have been
indicted for allegations ranging from theft and forgery to official
misconduct, conspiracy, and/or perjury.
The indictments allege, in part, the following:
-
A travel voucher submitted for
reimbursement included mileage of 1,000 miles to Livingston, Alabama
that was not incurred on business of the ROE.
-
A travel voucher submitted for
reimbursement included mileage of 800 miles to Philadelphia, Mississippi
that was not incurred on business of the ROE.
-
A travel
voucher submitted for lodging expense for $284.99 was not incurred on
business of the ROE.
The former Regional Superintendent reimbursed the ROE
$2,625.70 for some personal expenditures incurred. However, it is unclear which specific charges were being
reimbursed or whether any of these reimbursements related to matters that
were the subject of the indictments.
These issues, which were noted in the prior audit, remain in
question as no trial or settlement had occurred as of the report date. (Finding 05-02, pages 19-21) This finding was first reported in
2002.
The auditors recommended that the Regional Office establish
and follow a policy that prohibits personal expenditures from being paid with
ROE funds. Internal controls should
be established to ensure that personal expenses are not paid by the Regional
Office. The auditors also recommended
that the former Regional Superintendent reimburse the ROE for all personal
expenses paid by the ROE that have not already been reimbursed.
The ROE responded that it is the ROE’s policy that personal
expenses are paid by the employee, not the ROE, and that internal controls
have been established to ensure the Regional Office does not pay personal
expenses. The ROE response also
included a response from the former Regional Superintendent: “I object to the
findings on the cell phone usage and meal and mileage compensation. These
findings are inaccurate and not based on actual facts.” Auditors commented that the former
Regional Superintendent did not provide any documentation to support his
claims. (For previous Regional Office response, see Digest Footnote #2.)
LACK OF SUPPORTING DOCUMENTATION
In 3 of 25 (12%) expenditures tested
the ROE failed to maintain adequate documentation for the expense. In all three instances, employee expense
reports were completed but no receipts or other supporting documentation was
obtained to support the purchase.
Additionally, 15 of 40 (38%) cell phone
expenditures tested, totaling $2,951, were not properly supported. Either only the summary page of the cell
phone bill was submitted as supporting documentation or there was not
supporting documentation at all.
Monthly cell phone invoices submitted ranged from $11.60 to
$745.23. (Finding 05-03, pages 22 -
23) This finding was first
reported in 2002.
The auditors recommended that the Regional Office adhere to
its policy, which requires that each meal reimbursement submitted be
accompanied by a receipt. In
addition, all requests for reimbursement should include receipts and
documentation showing the purpose of the expenditure. The auditors also recommended the ROE
require that the detail of all cell phone invoices be provided and reviewed
to determine that only business related calls are being reimbursed.
The Regional Office of Education #21 responded that the
ROE’s current policy requires employees to provide a receipt and
documentation showing the purpose of the expenditure. (For previous Regional
Office response, see Digest Footnote #3.)
UNALLOWABLE CELL PHONE CHARGES
The
former Regional Superintendent submitted a monthly cell phone bill, which
included three individual cell phone lines.
He indicated that two cell phones were his and the third cell phone
was for the Assistant Regional Superintendent. However, auditors called the cell phone number that the former
Regional Superintendent identified as the one assigned to the Assistant
Regional Superintendent. The call was
answered by the former Regional Superintendent’s son who is not an employee
of the ROE. The former Regional
Superintendent’s son indicated that this particular cell phone did not belong
to the Assistant Regional Superintendent, but was in fact his. Total reimbursement claims submitted by
the former Regional Superintendent for all three cell phones during the fiscal
year were $4,311.75. (Finding 05-04,
pages 24 – 25)
The auditors recommended that the ROE establish and follow a
policy that prohibits personal expenditures from being paid with ROE
funds. Internal controls should be
established to ensure that personal expenses are not paid by the Regional
Office. The auditors also recommended that the former Regional Superintendent
justify his need for two cell phones and reimburse the ROE for all personal
expenses paid by the Regional Office for personal cell phone use.
The Regional Office responded that employee cell phone
charges are reimbursed for legitimate business activities incurred by ROE
employees. The ROE response also included a response from the former Regional
Superintendent: “I object to the findings on the cell phone usage and meal
and mileage compensation. These findings are inaccurate and not based on
actual facts.” Auditors commented
that the former Regional Superintendent did not provide any documentation to
support his claims.
IMPROPER ALLOCATION OF COSTS
The Regional Office of Education #21 has not implemented a cost allocation plan or an approved
indirect cost rate to allocate indirect costs in accordance with OMB Circular
A-87. The ROE invoices the various
grants and programs it administers for central service activities, including
support salaries and related benefits, accounting and secretarial services,
and space rent based on the grants’ budgeted costs (rather than as part of a
Cost Allocation Plan). Such salaries
and benefits are allowable expenditures under OMB Circular A-87, however,
where employees work on multiple activities or cost objectives, a
distribution of their salaries or wages is required to be documented in
accordance with the provisions of OMB Circular A-87 or be included in the ROE’s
cost allocation plan. (Finding
05-05, pages 26 - 27) This
finding was first reported in 2002.
The
auditors recommended that the Regional Office of Education #21 develop a cost
allocation plan or establish an approved indirect cost rate in accordance
with OMB Circular A-87 which addresses allowable costs to all applicable
programs. The Regional Office
responded that a cost allocation plan has not been developed that addresses
the distribution of salaries of employees who work on multiple activities.
(For previous Regional Office response, see Digest Footnote #4.)
CONTROLS OVER
COMPLIANCE WITH LAWS AND REGULATIONS
The Regional Office of Education #21 did not comply with certain
statutory administrative requirements.
For example, the Illinois School Code (105 ILCS 5/3-6) requires the
Regional Superintendent to report, in writing, to the county board on or
before January 1 of each year, stating:
(1) the balance on hand at the time of the last report, and all
receipts since that date, with the sources from which they were derived; (2)
the amount distributed to each of the school treasurers in his county; and
(3) any balance on hand.
The School Code (105 ILCS 5/3-12) also requires that on or before
January 1 of each year, the Regional Superintendent shall publish in a
newspaper of general circulation published in the region or shall post in
each school building under his jurisdiction, certain information regarding
the Office’s Institute Fund. ROE officials stated they were unaware
of these requirements.
In
addition, the Illinois School Code (105 ILCS 5/3-14.17) requires the Regional
Superintendent to notify the board of trustees and the clerks and secretaries
of school districts, on or before September 30, annually, of the amount of
money distributed by him to the school treasurer. The Regional Office did not notify the board of trustees or the
clerks and secretaries of the school districts of the amount of money
distributed to the districts.
Finally, the
Illinois School Code (105 ILCS 5/3-14.11) requires the Regional
Superintendent to examine at least once each year all books, accounts, and
vouchers of every school treasurer in his educational service region, and if
he finds any irregularities in them, to report them at once, as directed by
the School Code.
The Regional Office did not examine at
least once each year all books, accounts, and vouchers of every school
treasurer in the educational service region.
Regional Office officials noted they believe the mandate is outdated
and that they are satisfying the intent of the statute by other reviews they
undertake. This mandate has existed
in its current form since at least 1953.
(Finding 05-06, pages 28 – 31)
The auditors recommended that the Regional Office ensure it
complies with all applicable Illinois Compiled Statutes. The Regional Office responded that it was
unaware of the requirements of the various statutes. With regards to 105 ILCS 5/3-14.11 the
Regional Office noted it would seek a legislative solution to this and other
obsolete passages.
LACK OF AND/OR
INCONSISTENCIES IN PAYMENT AUTHORIZATIONS
In a
review of 140 expenditures and related vendor invoices, auditors noted that 5
invoices (4%) were not properly approved for payment by the former
Superintendent or Program Coordinator.
Additionally, in 16 of the 140 (11%) expenditures examined, it
appeared that someone other than the former Regional Superintendent initialed
the “Authorization for Payment” forms in the space designated for the
Superintendent’s approval. (Finding
05-07, page 32)
The auditors recommended that the
Regional Superintendent ensure that all vendor invoices and employee
reimbursements are properly authorized before payment. The Regional Office responded that the ROE
agreed with the finding.
FAILURE TO ALLOCATE
INTEREST EARNED
The Regional
Office of Education #21 did not allocate interest earned from their
commingled bank account to each source of funds.
The Regional Office of Education Accounting Manual
states that if dollars from two or more sources of funds are combined in
one bank account and/or fund, the ROE must allocate, no less than monthly, a
portion of the interest earned on that bank account or fund to each source of
funds. (Finding 05-08, pages 33 - 35)
The auditors recommended that the
Regional Office develop a plan to allocate interest earned on commingled
funds to each source of funds and
follow the appropriate State and federal statutes and regulations. The
Regional Office responded that it was unaware of the requirement to allocate
interest earned on commingled cash accounts to each source of funds.
AUDITORS’ OPINION
Our auditors state the Regional Office
of Education #21’s financial
statements as of June 30, 2005 are fairly stated in all material respects.
The auditors’ report contains an emphasis of matter paragraph due to
contingent liabilities created by possible violation of restrictive
provisions of grants.
_____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:KJM:ro
SPECIAL
ASSISTANT AUDITORS
Our
special assistant auditors were Sikich, LLP.
DIGEST FOOTNOTES
#1: LACK OF PAY RATE
AUTHORIZATIONS AND EMPLOYEE EVALUATIONS – Previous
Regional Office Response
In
its prior response in 2004, the Regional Office responded that evaluations
had been performed for this fiscal year.
They also responded by providing an example of how the funds used for
the extra compensation were received and distributed. The auditors commented they would
follow-up in the audit for the fiscal year ended June 30, 2005 to determine
whether evaluations were performed and pay rate authorizations were
appropriately documented.
#2: UNALLOWABLE
EXPENDITURES– Previous Regional Office Response
In
its prior response in 2004, the Regional Office stated that the procedure had
been changed for fiscal year ending 6-30-05 as of 1-1-05.
#3: LACK OF SUPPORTING
DOCUMENTATION – Previous Regional Office Response
In
its prior response in 2004, the Regional Office stated they changed the
credit card procedure in December 2003 and that the cell phones were work
related.
Auditors
commented they would follow-up to determine whether detailed billings are
being received and adequately reviewed by the Regional Superintendent.
#4: IMPROPER ALLOCATION OF COSTS – Previous Regional
Office Response
In
its prior response in 2004, the Regional Office stated that a cost allocation
plan was in place.
The
auditors commented that the Regional Office had not implemented a methodology
to allocate administrative salaries to its various programs to ensure each
program is only charged its fair share.
The ROE maintains a cost allocation plan in form only that was modeled
from another ROE. The plan is not
followed.
Complete Regional Office responses to prior findings are
available upon request from the Auditor General’s Office.
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