REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #27

 

HENDERSON, MERCER AND WARREN COUNTIES

 

FINANCIAL AUDIT

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

For the Year Ended:

June 30, 2006

 

Summary of Findings:

 

Total this audit                          5

Total last audit                          5

Repeated from last audit           3

 

Release Date:

June 21, 2007

 

 

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

 

 

 

·        The Regional Office of Education #27 did not comply with certain statutory administrative requirements.

 

·        The Regional Office of Education #27 utilizes an accounting software package that does not provide the internal controls and reporting features required for proper fund accounting. 

 

·        The Regional Office of Education #27 did not have adequate controls over property and equipment.

 

·        The Regional Office of Education #27 did not record three bank accounts, with balances totaling $40,414, in the general ledger.

 

·        The Regional Office of Education #27 funds deposited at a financial institution exceeded the amount pledged as collateral by $74,768 at June 30, 2006. 

 

 

 

 

 

 

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


                                                                                   

                                              REGIONAL OFFICE OF EDUCATION #27

       HENDERSON, MERCER AND WARREN COUNTIES

 

                                                                FINANCIAL AUDIT

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

                                                       For The Year Ended June 30, 2006

 

 

 

 

FY 2006

FY 2005

TOTAL REVENUES

$1,732,354

$1,575,394

Local Sources

$607,068

$667,061

% of Total Revenues

35.04%

42.34%

State Sources

$834,696

$531,837

% of Total Revenues

48.18%

33.76%

Federal Sources

$290,590

$376,496

% of Total Revenues

16.77%

23.90%

 

TOTAL EXPENDITURES

$1,805,032

$1,570,144

Salaries and Benefits

$1,126,683

$990,616

% of Total Expenditures

62.42%

63.09%

Purchased Services

$333,679

$310,825

% of Total Expenditures

18.49%

19.80%

All Other Expenditures

$344,670

$268,703

% of Total Expenditures

19.10%

17.11%

 

 

 

TOTAL NET ASSETS

$242,946

$315,624

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$0

 

$0

 

 

Percentages may not add due to rounding.

 

 

REGIONAL SUPERINTENDENT 

During Audit Period: Honorable Glen W. Braden

Currently: Honorable Glen W. Braden

 

 


 

 

 

 

 

 

 


The Regional Office of Education #27 did not comply with certain statutory administrative requirements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional of Education #27 utilizes a software package that does not provide the internal controls and reporting features required for proper fund accounting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27 did not have adequate controls over property and equipment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #27 did not record three bank accounts, with balances totaling $40,414, in the general ledger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27 funds deposited at a financial institution exceeded the amount pledged as collateral by $74,768 at June 30, 2006. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.  For example, the Regional Superintendent signs off on the Annual Financial Reports from the school districts in his region.  In addition, the ROE receives a spreadsheet from the Illinois State Board of Education (ISBE) that outlines all of the school districts and their audit exceptions, if any.  The ROE follows up with school districts that have exceptions, documents the corrective action, and forwards it to ISBE.  This mandate has existed in its current form since at least 1953.

 

         The Illinois School Code (105 ILCS 5/3-5) also requires the Regional Superintendent to present under oath or affirmation to the county board at its meeting in September and as nearly quarterly thereafter as it may have regular or special meetings, a report of all his acts as county superintendent, including a list of all the schools visited with the dates of visitation.  This mandate has existed in its current form since at least 1953.

 

        The Regional Office did not present at the September county board meetings, and as nearly quarterly thereafter, a report of all his acts including a list of all the schools visited and the dates of visitation.  The Regional Office provides the county boards with its Report of Official Acts and Duties on an annual basis.  This report is not updated quarterly and does not contain all information required in the statute.  

 

        Finally, the Illinois School Code (105 ILCS 5/3-14.5) requires the Regional Superintendent to visit each public school in the county at least once a year, noting the methods of instruction, the branches taught, the textbooks used, and the discipline, government and general condition of the schools.  This mandate has existed in its current form since at least 1953.

 

        The Regional Superintendent annually visits each public school in his region to inspect the general condition of the school.  He also performs compliance inspections for each public school in his region on a rotational basis every three years instead of annually.  The Illinois Public School Accreditation Process Compliance Component document completed at these visits includes many of the items delineated in 105 ILCS 5/3-14.5, but does not include a review of the methods of instruction and the textbooks used in the district.  (Finding 06-1, pages 12-14) 

 

        The Regional Office accepted the recommendation to comply with the statutory requirements.  The Regional Office responded that with regards to compliance with 105 ILCS 5/3-14.11 and 105 ILCS 5/3-14.5, the Illinois Association of Regional Superintendents of Schools and the Illinois State Board of Education have agreed to seek legislation to remove duplicative and/or obsolete sections of the Illinois School Code.  Both parties believe that 105 ILCS 5/3-7 of the Illinois School Code and 23 Ill. Adm. Code 1.20, respectively, contain more current, thorough, and comprehensive requirements concerning a public school district’s financial transactions and visitation of public schools by the Regional Superintendent.  As a result, the two parties working together will seek legislation to repeal these two sections of the Illinois School Code.    

 

        With regards to 105 ILCS 5/3-5, the Regional Superintendent stated he would present to the county boards in September and quarterly thereafter a report of all his acts including a list of all the schools visited and dates of visitation as required by 105 ILCS 5/3-5.

 

INADEQUATE ACCOUNTING SOFTWARE AND INTERNAL CONTROLS

        

        The Regional Office of Education #27 utilizes an accounting software package which was not designed for governmental entities.  The package does not provide the internal controls and reporting features required for proper fund accounting.  The Regional Office maintains eleven different general ledger systems to account for the operations of the various programs it administers.

 

        With eleven general ledger systems, the ROE’s management cannot easily obtain entity-wide financial information necessary to make informed management decisions.  Also, without an accounting system with proper internal controls, errors or misappropriations may occur and not be detected by management.  In addition, financial statements in accordance with generally accepted accounting principles and the ROE Accounting Manual cannot be readily prepared from the current accounting system.

 

        The Regional Office of Education #27 is required by the Illinois State Board of Education to maintain their accounting system in accordance with the Regional Office of Education (ROE) Accounting Manual.  The Manual requires the ROE to maintain an accounting system on a fund basis.  (Finding 06-2, pages 15-16)

 

        The Regional Office of Education #27 agreed with the recommendation to implement an accounting software program that will provide the necessary controls and reporting features required for proper fund accounting.  This program will be installed both at the ROE’s main office and at the Progressive Alternative Secondary School.

 

 

INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT

 

        The Regional Office of Education #27 did not have adequate controls over fixed assets.  The fixed asset listing for the Progressive Alternative Secondary School (PASS) did not have complete information as to the function and activity; reference to the acquisition source document; acquisition date; acquisition cost; vendor; unit charged with custody; location; fund and account from which purchased; and method of acquisition.  Also, the property tags on the physical inventory selected for observation were not referenced to the fixed asset listing.  The fixed asset listing contained only a description of the item and the location. 

 

        The Regional Office of Education (ROE) Accounting Manual requires each ROE to maintain detailed fixed asset records for both accounting purposes as well as insurance purposes, for fixed assets costing $500 or more.  In addition, sound internal controls require that policies and procedures on fixed assets cover the acquisition and tagging, recording and reporting, depreciation (if applicable), transfers and dispositions, and physical inventory, and that they be formally documented and consistently applied. (Finding 06-3, pages 17-18)  This finding was first reported in 2003.

 

        The Regional Office of Education #27 agreed with the recommendation stating that they currently have fixed asset listings for both the ROE main office and the PASS location.  These listings will be reviewed and updated as appropriate with all available information for existing items.  All new items will be added to the listings with all required information.   (For previous Regional Office response, see Digest Footnote #1.)   

 

 

UNRECORDED BANK ACCOUNTS

 

        The Regional Office of Education #27 did not record three bank accounts, with balances totaling $40,414, in the general ledger.  Two of these accounts were time and savings accounts opened in prior years and one was a checking account opened in the current year.  The accounts have been included in the cash balances reported in the financial statements through adjusting entries. 

        

        Good business practices and sound internal controls require that accounting records accurately and completely record all transactions of the entity.  Failure to record bank accounts in the general ledger results in inaccurate financial reporting and increases the risk of undetected misappropriation of assets.  (Finding 06-4, page 19) This finding was first reported in 2003.

 

        The Regional Office of Education #27 accepted the recommendation, stating that it will add these bank accounts to the general ledger data.  (For previous Regional Office response, see Digest Footnote #2.) 

        

 
FAILURE TO FULLY INSURE AND COLLATERALIZE CASH BALANCES

      

        The Regional Office of Education #27 (ROE) funds deposited at a financial institution exceeded the amount pledged as collateral by $74,768 at June 30, 2006. 

As of June 30, 2006, the Regional Office had five cash accounts with balances totaling $234,444 at one financial institution.  The Federal Deposit Insurance Company (FDIC) covers up to a maximum of $100,000.  The financial institution pledged collateral with a market value at June 30, 2006 of $59,676 leaving $74,768 uncollateralized. 

 

        The ROE has an informal agreement with the financial institution to pledge securities as collateral for deposits that exceed the FDIC insurance limits; however, the amount pledged was insufficient to secure all deposits at June 30, 2006.  Failure to fully insure and collateralize the full amount of cash and investment balances may result in monetary losses to the ROE in the event of a bank failure.

 

        The Public Funds Deposit Act (30 ILCS 225/1) gives the Regional Office of Education #27 the authorization to request financial institutions to pledge collateral for deposits in excess of the federally insured limit.  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 06-5, page 20)

 

 

        The Regional Office of Education #27 agreed with the recommendation, stating that it will work with the

financial institution to ensure that all bank deposits in excess of FDIC insurance amounts are collateralized.   

              

AUDITORS’ OPINION

 

        Our auditors state the Regional Office of Education #27’s financial statements as of June 30, 2006 are fairly presented in all material respects.

 

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:KJM:ro

 

 

 

SPECIAL ASSISTANT AUDITORS

 

        Our special assistant auditors were Sulaski & Webb CPAs.

 

 

 

DIGEST FOOTNOTES

 

#1: INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT -  Previous Regional Office Response

 

In its prior response to the June 30, 2005 audit, the Regional Office of Education #27 accepted the recommendation stating that a sign-out sheet had been updated to allow for numerous sign-outs.  Staff had been informed of the importance of signing-out.  Inventory would be tested semi annually to increase control.  PASS would obtain permanent labels to be affixed to all equipment.  An inventory would be taken annually.  In addition, a spreadsheet would be created that includes item descriptions, ID number, funding source, cost, disposal date, reason for disposal and method item was disposed. 

 

 

 

#2 UNRECORDED AND UNRECONCILED BANK ACCOUNTS – Previous Regional Office Response

 

In its prior response to the June 30, 2005 audit, the Regional Office of Education #27 accepted the recommendation stating that the ROE would establish accounts for the accounts not currently set-up and recorded.  PASS will assign codes using the chart of accounts in the ROE Accounting Manual and track all income and expenses. 

 

 

Complete Regional Office responses to prior findings are available upon request from the Auditor General’s Office.