REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #31:
KANE COUNTY


FINANCIAL AUDIT (In accordance with the Single Audit Act and OMB Circular A-133)

For the Year Ended June 30, 2010

 

Release Date: June 28, 2011

 

Summary of Findings:

Total this audit: 2

Total last audit: 0

Repeated from last audit: 0

 

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 www.auditor.illinois.gov

­­­­­­­­­­­____________________________

 

SYNOPSIS

 

• The Regional Office of Education #31 did not have sufficient internal controls over the financial reporting process.

 

• The Regional Office of Education #31 did not record revenues and expenditures in the correct fiscal period in accordance with generally accepted accounting principles. 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

CONTROLS OVER FINANCIAL STATEMENT PREPARATION

 

The Regional Office of Education #31 is required to maintain a system of controls over the preparation of financial statements, including disclosures, 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 #31 did not have sufficient internal controls over the financial reporting process.  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. 

 

Auditors, in their review of the Regional Office’s accounting records, noted numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles.  Management did not effectively detect all the material adjustments needed in order to present financial statements in accordance with GAAP.  (Finding 10-1, pages 12-13)

 

The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #31 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 #31 responded that, beginning with the FY 2011 Audit, it will begin preparing all financial statements in accordance with Generally Accepted Accounting Principles (GAAP) and using all GASB Pronouncements when required.  The ROE noted that additional training for the Director of Finance through seminars and webinars will be done as needed.

 

CONTROLS OVER RECORDING GRANT PROGRAMS

 

The Regional Office of Education #31 did not record revenues and expenditures in the correct fiscal period in accordance with generally accepted accounting principles (GAAP).  The Regional Office of Education Accounting Manual states that separate funds or separate source of fund codes should be used to account for resources of a program or activity that are restricted to spending of a specified type or for a specified purpose. 

 

The Regional Office uses its accounting system to record activity in its funds based on the grant period rather than the fiscal period.  The Regional Office posted grant activity to a single fiscal year regardless of when revenue or expenditures were actually incurred or recognized (grant period basis).  As a result, revenues or expenditures that should be posted to the current fiscal year, based on GAAP, were posted to a prior or subsequent year. 

 

The trial balance provided by the Regional Office of Education #31 was not in accordance with GAAP.  ROE management uses the accounting system to record activity for an entire grant period for some grants, as opposed to a fiscal period. (Finding 10-2, pages 14-15).

 

The auditors recommended that the Regional Office of Education #31 should ensure their accounting records are maintained in accordance with GAAP.  The Regional Office should ensure accounting records for the fiscal year include all appropriate revenues and expenditures and exclude revenues and expenditures that were incurred or recognized in a different fiscal year.  The Regional Office should establish an accounting system that will be able to reflect accurate activity for the fiscal year and also allow management to monitor grant activity.

 

The Regional Office of Education #31 responded that, beginning with the FY 2011 Audit, all accounting records will be maintained in accordance with GAAP (Generally Accepted Accounting Principles).  The ROE noted that all accruals for revenues and expenses received that is specific for the fiscal year ending June 30th will be recorded in that grant year with a reversing entry done in the next fiscal year.  The Regional Office noted that the trial balance used by the ROE is solely intended to help prepare the financial statements for each year’s audit.

 

AUDITORS’ OPINION

 

Our auditors state the Regional Office of Education #31’s financial statements as of June 30, 2010 are fairly presented in all material respects.

 

 

WILLIAM G. HOLLAND

Auditor General

 

WGH:KJM

 

 

AUDITORS ASSIGNED:  Winkel, Parker & Foster, CPA PC were our special assistant auditors.