REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #27

 

HENDERSON, MERCER AND WARREN COUNTIES

 

FINANCIAL AUDIT

 

For the Year Ended:

June 30, 2007

 

Summary of Findings:

Total this audit†††††††††††     †† 6

Total last audit†††††††††††††      5

Repeated from last audit    4

 

Release Date:

June 24, 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 Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

 

 

SYNOPSIS

 

 

 

  • The Regional Office of Education #27 did not have sufficient internal controls over the financial reporting process.

 

        The Regional Office of Education #27 did not comply with statutory administrative requirements on reporting to county boards.

 

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

 

        The Regional Office of Education #27 did not record two bank accounts in the general ledger, with balances totaling $13,165.

 

        The Regional Office of Education #27ís funds deposited at a financial institution exceeded the amount pledged as collateral by $9,586 at June 30, 2007.

 

  • The Regional Office of Education #27 credit card was used to purchase personal items totaling $223, which were subsequently reimbursed.

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


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

REGIONAL OFFICE OF EDUCATION #27

HENDERSON, MERCER AND WARREN COUNTIES

 

FINANCIAL AUDIT

For The Year Ended June 30, 2007

 

 

 

FY 2007

FY 2006

TOTAL REVENUES

$1,999,910

$1,732,354

Local Sources

$431,573

$607,068

% of Total Revenues

21.58%

35.04%

State Sources

$1,441,607

$834,696

% of Total Revenues

72.08%

48.18%

Federal Sources

$126,730

$290,590

% of Total Revenues

6.34%

16.77%

 

TOTAL EXPENDITURES

$2,077,932

$1,805,032

Salaries and Benefits

$1,038,036

$1,126,683

% of Total Expenditures

49.96%

62.42%

Purchased Services

$293,589

$333,679

% of Total Expenditures

14.13%

18.49%

All Other Expenditures

$746,307

$344,670

% of Total Expenditures

35.92%

19.10%

 

 

 

TOTAL NET ASSETS

$164,924

$242,946

 

 

 

INVESTMENT IN CAPITAL ASSETS

$0

$0

 

 

Percentages may not add due to rounding.

 

 

REGIONAL SUPERINTENDENT

During Audit Period: Honorable Glen W. Braden(7/1/06 to 6/23/07)

Currently: Honorable Jodi L. Scott

 

 

 


 

 

 

 

 

 

 

 


The Regional Office of Education #27 did not have sufficient internal controls over the financial reporting process.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27 did not comply with statutory administrative requirements on reporting to county boards.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27 did not record two bank accounts in the general ledger, with balances totaling $13,165.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27ís funds deposited at a financial institution exceeded the amount pledged as collateral by $9,586 at June 30, 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #27 credit card was used to purchase personal items totaling $223, which were subsequently reimbursed.

††

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

Controls Over Financial Statement Preparation

 

†††††††† The Regional Office of Education #27 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 #27 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.

 

†††††††† In their review of the Regional Officeís accounting records, auditors noted the following:

 

  • Numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles.

  • The Regional Office did not maintain records of accounts receivable, accounts payable, or deferred revenue. Additionally, there were no reconciliations of the financial records to grant activity.

  • The Regional Office did not have adequate controls over the maintenance of accurate financial records.Two cash accounts were not recorded in the financial records, while two other cash accounts were duplicated.Accurate cash balances have been reported in the financial statements through adjusting entries.

  • The ROE main office and Progressive Alternative Secondary School (PASS) maintain their own separate sets of books and there is a lack of communication between the two locations.There is no combining of the two sets of books until fiscal year-end. (Finding 07-1, pages 10-11)

 

†††††††† The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #27 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 Educationís activities and operations.

 

†††††††† The Regional Office of Education #27 responded that to perform such a comprehensive preparation and review of financial records would be cost prohibitive.ROE officials noted that they are the smallest ROE in the state and feel the funds in their office would be better utilized to help provide quality services to their districts.They noted that they accept the risk associated with this finding.

 
 
CONTROLS OVER COMPLIANCE WITH LAWS AND REGULATIONS

 

†††††††† The Illinois School Code (105 ILCS 5/3-5) 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 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 of Education #27 did not comply with statutory administrative requirements on reporting to county boards.The Regional Office prepared and presented a report for the quarters ended September 2006 and December 2006 to the county boards in April 2007.A report of activities for the quarter ended March 2007 was noted as being prepared; however, there was no documentation to support that the report was filed with the county boards.There was no report prepared for the quarter ended June 2007. (Finding 07-2, page 12)

 

†††††††† ROE officials noted that changes in software and ROE personnel have delayed the accumulation of the data and the preparation of the reports.Auditors recommended that the Regional Office of Education #27 continue its efforts and present the report quarterly as required by 105 ILCS 5/3-5.

 

††††††† †The Regional Office responded that this has been corrected.Quarterly reports and receipts from the county boards are on file for the current fiscal year to date.

 

 

INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT

 

†††††† ††The Regional Office of Education #27 did not have adequate controls over property and equipment.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, most of the items auditors selected for testing had property tags, but these property tags 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, transfers and dispositions, and physical inventory, and that they be formally documented and consistently applied. (Finding 07-3, pages 13-14)This finding was first reported in 2003.

 

†††††††† Auditors recommended that the Regional Office of Education #27 adhere to the ROE Accounting Manual to effectively and efficiently monitor property acquisitions, transfers and disposals, and provide for accurate reporting of fixed asset balances.Auditors noted that the fixed asset listing should include all the details required by the ROE Accounting Manual and should be checked for accuracy and existence through an annual physical inventory.A reconciliation should be performed between the fixed asset listing and the recorded capital outlay expenditures for each year.

 

†††††† ††The Regional Office of Education #27 responded that the PASS Alternative School will work on matching the fixed asset listing to the listing of the fixed assets location list.An attempt will be made to research past records for the acquisition information before the end of FY08.(For previous Regional Office response, see Digest Footnote #1.)†††

 

 

UNRECORDED BANK ACCOUNTS

 

††††††† †The Regional Office of Education #27 did not record two bank accounts in the general ledger, with balances totaling $13,165. One of these was a checking account opened in the current year and the other was a certificate of deposit 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 assets and transactions of the entity.Failure to record bank accounts in the general ledger could result in inaccurate financial reporting and increases the risk of undetected misappropriation of assets.(Finding 07-4, page 15) This finding was first reported in 2003.

†††††††† Auditors recommended that the Regional Office immediately record these bank accounts in the general ledger and properly account for all transactions of these accounts.

 

††††††† †The Regional Office of Education #27 responded that they are currently implementing the STI accounting system to meet their financial needs. (For previous Regional Office response, see Digest Footnote #2.)

 

 

FAILURE TO FULLY INSURE AND COLLATERALIZE CASH BALANCES

 

†††††† ††The Regional Office of Education #27ís funds deposited at a financial institution exceeded the amount pledged as collateral by $9,586 at June 30, 2007.As of June 30, 2007, the Regional Office had a bank account with a balance totaling $109,586.The Federal Deposit Insurance Company (FDIC) covers up to a maximum of $100,000.The financial institution in this finding is different than the financial institution that was the subject of the prior year finding.

 

†††††† ††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 07-5, page 16)

 

†††††††† Auditors recommended that the Regional Office monitor collateral requirements for all its bank accounts.The Regional Office should also establish controls for confirming amounts pledged by the financial institutions and consider making a formal arrangement with the financial institution to automatically pledge securities for any deposit amounts in excess of the FDIC insurance amounts.

 

†††††† ††The Regional Office of Education #27 responded that this has been addressed for the current year.

 

 

PERSONAL USE OF REGIONAL OFFICE CREDIT CARD

 

†††††††† An employee of Regional Office of Education #27 used an ROE credit card on two occasions to purchase personal items totaling $223.The charges were marked as personal on the credit card statements and were reimbursed by the employee within two months of the purchase date.According to ROE management, the employee inadvertently used the wrong credit card when making a personal purchase.

 

†††††††† Good business practice requires that only business expenditures be purchased with ROE credit cards.In addition, Regional Office of Education #27 maintains a policy which prohibits employees from making personal purchases with ROE credit cards. Failure to restrict personal use of ROE credit cards results in noncompliance with ROE policy and could result in the misuse of ROE assets. (Finding 07-6, page 17)

 

†††††††† Auditors recommended that the Regional Office remind all employees of the credit card policy.

 

†††††††† The Regional Office of Education #27 responded that it has always been their policy to not use the office credit card for personal purchases.However, occasionally a mistake will be made.They noted that all charges have been reimbursed to the ROE.

 

 

AUDITORSí OPINION

 

††††††† Our auditors state the Regional Office of Education #27ís 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 Sulaski & Webb CPAs.

 

 

DIGEST FOOTNOTES

 

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

 

In its prior response to the June 30, 2006 audit, 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.

 

#2 UNRECORDED BANK ACCOUNTS Ė Previous Regional Office Response

 

In its prior response to the June 30, 2006 audit, the Regional Office of Education #27 accepted the recommendation, stating that it will add these bank accounts to the general ledger data.

 

 

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