REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #27

HENDERSON, MERCER AND WARREN COUNTIES

FINANCIAL AUDIT

For the Year Ended:

June 30, 2008

Summary of Findings:

Total this audit                       2

Total last audit                       6

Repeated from last audit        1

Release Date:

April 14, 2009

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 disburse to other funds some of the monies it received into the Distributive Fund.

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

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 disburse to other funds some of the monies it received into the Distributive Fund.

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, including disclosures, in accordance with generally accepted accounting principles (GAAP).  The ROE 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.  For example, auditors, in their review of the ROE’s accounting records, noted the following:

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

• The ROE did not maintain records of accounts receivable, accounts payable, or deferred revenues. 

• The ROE main office and Progressive Alternative Secondary School (PASS) maintain their own separate set 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.

• The ROE did not have adequate controls over the use and maintenance of distributive monies in accordance with the Regional Office of Education Accounting Manual. 

         According to ROE officials, they did not have adequate funding to hire and/or train their accounting personnel in order to maintain a system of internal control over the preparation of financial statements in accordance with GAAP. (Finding 08-1, 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 Education’s activities and operations.

         The Regional Office of Education #27 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in an organization of this size.  The Regional Office management is currently confident with the abilities of the accounting staff to prepare cash basis financial information as needed for reporting throughout the year.  Management will review year end reporting controls annually and investigate the cost of training staff to reach an appropriate level of expertise to do a comprehensive preparation and/or review of financial statements.  Management will pursue additional training when it is considered cost beneficial since training costs would take away from the funds available to provide educational services for the schools in the region.

INADEQUATE CONTROLS OVER THE DISTRIBUTIVE ACCOUNT

         The Regional Office of Education #27 did not disburse to other funds some of the monies it received into the Distributive Fund.  The ROE Accounting Manual states that distributive monies are those that flow from the Illinois State Board of Education (ISBE) to the ROE to be disbursed for use by other entities and/or ROE programs.  Distributed monies only include State and federal funds.  The Distributive Fund (an Agency Fund) is used to account for these transactions.  Local funds do not flow through the Distributive Fund.  Use of the Distributive Fund should be limited to accounting for the inflow and outflow of funds held in an agency capacity for other entities and/or funds.

         As of June 30, 2008, there was a total of $39,546 that had yet to be disbursed to the appropriate fund.  Of this total amount, $25,057 was originally received in fiscal year 2006 and $2,171 was originally received in 2007.  The remaining $12,318 represents amounts received in the current fiscal year.

         The ROE also disbursed monies out of the Distributive Fund for various purchased services expenses.  During the fiscal year ended June 30, 2008, the ROE disbursed $11,348 out of the Distributive Fund directly to local businesses or individuals.

         Adjustments were necessary to make the financial statements for fiscal year 2008 properly reflect the activity of the ROE.  Entries totaling $39,546 were required to reflect amounts due to other funds.  Also, entries totaling $11,348 were required to reflect additional purchased services expenses of the Regional Office. 

         The Regional Office lacked controls over the Distributive Fund and therefore funds that were received were not immediately disbursed.  In addition, the ROE staff was unaware that disbursements for purchased services should not be made directly out of the Distributive Fund. (Finding 08-2, pages 12-13)

         The auditors recommended that the Regional Office of Education #27 should develop internal control procedures to ensure that all monies received into the Distributive Fund are immediately disbursed to the appropriate entity or fund.  In addition, procedures should be developed to ensure that the disbursements for purchases are not made directly from the Distributive Fund. 

         The Regional Office of Education #27 responded that all funds have been distributed to the appropriate accounts at this time.  They noted that procedures have been modified to include an examination of the monthly statement of the Distributive Fund account to determine what monies have been electronically deposited into the account.  Then the checking account is reviewed to ensure that the funds have been distributed to either the appropriate ROE funds or to PASS.

AUDITORS’ OPINION

        Our auditors state the Regional Office of Education #27’s financial statements as of June 30, 2008 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.