REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #24

 

GRUNDY AND KENDALL COUNTIES

 

FINANCIAL AUDIT

(In Accordance with the

Single Audit Act and OMB Circular A-133)

 

For the Year Ended:

June 30, 2005

 

Summary of Findings:

 

Total this audit†††††††††††††             4

Total last audit†††††††††††††             3

Repeated from last audit†††††††††† 2

 

Release Date:

July 12, 2006 

 

 

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.state.il.us/auditor

 

 

 

 

 

 

 

SYNOPSIS

 

        The Regional Office of Education #24 did not examine at least once each year all books, accounts, and vouchers of every school treasurer in its educational service region.

 

        The Regional Office of Education #24 did not have adequate controls over cash receipts and disbursements.

 

         The Regional Office of Education #24 did not have adequate segregation of duties for accounting in the local and distributive funds.

 

         The Regional Office of Education #24ís funds deposited at a financial institution exceeded the amount pledged as collateral by approximately $48,982 at June 30, 2005.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


 

†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

REGIONAL OFFICE OF EDUCATION #24

GRUNDY AND KENDALL COUNTIES

 

FINANCIAL AUDIT

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

For The Year Ended June 30, 2005

 

 

 

FY 2005

FY 2004

TOTAL REVENUES

$4,064,567

$3,417,335

Local Sources

$112,295

$343,942

% of Total Revenues

2.76%

10.06%

State Sources

$2,709,606

$1,027,194

% of Total Revenues

66.66%

30.06%

Federal Sources

$1,242,666

$2,046,199

% of Total Revenues

30.57%

59.88%

 

TOTAL EXPENDITURES

$4,155,790

$3,220,280

Salaries and Benefits

$2,812,987

$2,168,173

% of Total Expenditures

67.69%

67.33%

Purchased Services

$812,022

$643,578

% of Total Expenditures

19.54%

19.99%

All Other Expenditures

$530,781

$408,529

% of Total Expenditures

12.77%

12.69%

 

 

 

TOTAL NET ASSETS

$254,244

$345,467

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$57,716

 

$43,862

 

Percentages may not add due to rounding.

 

REGIONAL SUPERINTENDENT

During Audit Period: Honorable Thomas J. Centowski

Currently:Honorable Thomas J. Centowski

 

 


 

 

 

 

 

 

 

 

The Regional Office of Education #24 did not examine at least once each year all books, accounts and vouchers of every school treasurer in its educational service region.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #24 did not have adequate controls over cash receipts and disbursements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #24 did not have adequate segregation of duties for accounting in the local and distributive funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #24ís funds deposited at a financial institution exceeded the amount pledged as collateral by approximately $48,982 at June 30, 2005.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

CONTROLS OVER COMPLIANCE WITH LAWS AND REGULATIONS

 

†††† 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 05-1, page 12-13)

 

†††† The Regional Office accepted the recommendation, noting it will seek a legislative solution to this and other obsolete passages.

 

 

INADEQUATE CONTROLS OVER CASH

 

†††† The Regional Office of Education #24 did not have adequate controls over cash receipts and disbursements.Daily cash receipts for local funds are recorded into a weekly cash receipts log.These logs are then grouped into deposit batches of which 19 were tested.The following was noted during testing:

        3 of 19 deposit batches (16%) totaling $28,224 did not match supporting documents totaling $28,349.The $125 shortage could not be accounted for.

        4 of 19 deposit batches (21%) totaling $2,421 did not have supporting documents to verify the nature, source, amount and date of actual receipts.

        1 of 19 deposit batches (5%) had a cash receipts log amounting to $223 that was not dated and signed by the staff receiving the items.The corresponding deposit slip covering this receipt log reflected a total deposit of $228, with a $5 overage which was unaccounted for.

        15 of 19 (79%) deposit batches for GED, miscellaneous fees, and teacher certification fees totaling $16,696 were not deposited timely.

        Personal checks totaling $646 were issued to replace cash items in 8 instances.

 

†††† In addition, during expenditure testing of local ROE funds, personal items totaling $90 were included in ROE purchases in 2 instances.Personal checks had been issued to cover these items, including a $25 check paid directly to the vendor and another check for $65 issued to reimburse the ROE.Further, checks were not used sequentially and the issuance of pre-numbered blank checks was not formally monitored.

 

†††† Finally, during bank reconciliation testing, a $10,000 certificate of deposit was identified that was not recorded in the general ledger as of June 30, 2005.

 

†††† Sound internal controls over cash receipts require that receipts be adequately supported to identify the actual date of receipt and the nature and source of the receipt in order to monitor timeliness and accuracy of deposits as well as the accuracy of revenue recording.Receipts should be deposited intact and on a timely basis.Expenditure vouchers must be reviewed to ensure that payments are made only for items received by and services rendered to the ROE.(Finding 05-2, pages 14-19)This finding was first reported in 2003.

 

†††† The Regional Office of Education #24 responded that all bookkeeping records were lost when its computer system crashed in December 2005, which may have had an impact on some of the auditorsí findings.The records had to be rebuilt by the bookkeeper.††

 

††††† The Regional Office also noted that it would make every effort to carefully date, note and deposit all cash received.The Regional Superintendent stated that he checks, approves, and initials bills and vouchers for payment in the main office and the Assistant Regional Superintendent does the same in the Yorkville office.

 

†††† A new procedure has been implemented for the recording of cash receipts to ensure that receipts are adequately supported to identify the actual date of receipt and the nature and source of the receipt in order to monitor timeliness of deposits and accuracy of revenue recording.††

 

†††† The ROE stated that the practice of covering cash with personal checks has been discontinued as well as allowing staff to include personal purchases with office purchases.A control log and inventory has been implemented to monitor issuance of blank checks.

 

†††† In regard to the deposit of cash receipts, the ROE noted that the lack of staff and distance between the two offices and the bank would continue to be a problem.The Regional Office also cited reasons why checks were not deposited timely (such as incomplete paperwork being submitted for teacher/administrator certifications).The Regional Office would like the auditor to define ďtimelyĒ as it would apply to the working conditions incumbent on the ROE.Also, the ROE feels serving its constituency in a practical and efficient manner or adhering to recommended audit practice creates a dilemma for the ROE.(For previous Regional Office response, see Digest Footnote #1.)

 

††† Auditors commented that the Regional Office should examine its deposit practices and develop the requisite policies and procedures for staff to follow and set timelines for the deposit of cash receipts.It was also noted that the Regional Office has a fiduciary responsibility to its constituency including the adequate control and safeguarding of receipts.The auditors identified several areas where controls need to be strengthened over cash receipts and that inadequate controls can produce results that are inconsistent with the publicís best interest.

 

 

INADEQUATE SEGREGATION OF DUTIES

 

†††† The Regional Office of Education #24 did not have adequate segregation of duties for accounting in the local and distributive funds.The bookkeeper for the local and distributive funds performs the disbursement functions of invoice processing, check preparation, custodian of blank checks, recording transactions, and bank reconciliations.The bookkeeper also performs the functions of collecting and depositing cash, and recording of cash receipts.

 

†††† Sound internal controls require adequate segregation of duties to ensure that effective checks and balances are in place to minimize the risk of loss.(Finding 05-3, page 20-22)This finding was first reported in 2003.

 

†††† The Regional Office of Education #24 responded that division of duties continues to be a problem for the ROE.Since the 1978 consolidation of the two counties the student population has increased from 12,000 to 31,000, and additional unfunded duties are required to be performed with less staff.The Regional Superintendent also noted that after the last audit was finalized, he does check, approve and initial bills and vouchers for payment at the main office and the Assistant Regional Superintendent does the same at the Yorkville office.The Regional Superintendent stated he also periodically reviews cash receipts and the Assistant Regional Superintendent reviews the bank reconciliations.The ROE stated that it would like the auditors to be specific and show them what can be done to assist in allaying the concern of lack of supervision. (For previous Regional Office response, see Digest Footnote #2.)

 

†††† The auditorís commented that the recommendation details specific actions that the Regional Office can take to help address the lack of segregation of duties.However, the responsibility for establishing an adequate system of internal controls is the responsibility of management.



 

 

FAILURE TO FULLY SECURE AND COLLATERALIZE CASH BALANCE IN EXCESS OF $100,000

 

†††† The Regional Office of Education #24ís amount of funds deposited at a financial institution exceeded the amount pledged as collateral by approximately $48,982 at June 30, 2005.

 

†††† The Public Funds Deposit Act (30 ILCS 225/1) gives the authorization for deposits in excess of the federally insured limit to be covered by pledged collateral held by the financial institutionsí trust departments in the Regional Office of Education #24ís name.In addition, prudent business practice requires that all cash and investments held by financial institutions for the ROE be adequately covered by depository insurance or collateral.(Finding 05-4, pages 23-24)

 

†††† The Regional Office of Education #24 agreed with the recommendation and will make a formal arrangement with the banks to automatically pledge securities for any deposit amounts in excess of the FDIC insured amount.

 

AUDITORSí OPINION

 

†††† Our auditors state the Regional Office of Education #24ís financial statements as of June 30, 2005 are fairly stated in all material respects.

 

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM:ro

 

 

SPECIAL ASSISTANT AUDITORS

 

††††††† Our special assistant auditors were E.C. Ortiz & Co., LLP.

 

DIGEST FOOTNOTES

 

#1: INSUFFICIENT DOCUMENTATION FOR RECEIPTS AND DISBURSEMENTS --Previous Regional Office Response

In the prior response in 2004, the Regional Office of Education #24 accepted the recommendation, responding that changes have already been implemented.Approvals for payment will be noted on each invoice/supporting document.Copies of the invoices/supporting documents submitted to the county(ies) will be made and kept on file.

 

#2: INADEQUATE SEGREGATION OF DUTIES -- Previous Regional Office Response

 

In the prior response in 2004, the Regional Office of Education #24 accepted the recommendation, noting that the Regional Office has limited staff to provide for adequate segregation of duties.However, supervisory controls will be revised to include, where practical, the recommendations of the auditors.

 

Complete Regional Office responses to prior findings are available upon request from the Auditor Generalís Office.