REPORT DIGEST REGIONAL OFFICE OF EDUCATION #27 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 Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
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SYNOPSIS
· 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 #27’s funds deposited at a financial institution exceeded the amount pledged as collateral by $9,586 at June 30, 2007.
{Expenditures and Revenues are
summarized on the reverse page.} |
REGIONAL OFFICE OF
EDUCATION #27
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 #27’s 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 RECOMMENDATIONSControls
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
Office’s accounting records, auditors noted the following:
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 Education’s
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 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 BALANCESThe Regional Office of Education #27’s 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. AUDITORS’ OPINION
Our auditors state the Regional
Office of Education #27’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 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 – 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 General’s Office. |