REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #40

 

CALHOUN/GREENE/ JERSEY/MACOUPIN COUNTIES

 

FINANCIAL AUDIT

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

 

For the Year Ended:

June 30, 2007

 

Summary of Findings:

 

Total this audit                  4

Total last audit                  2

Repeated from last audit   0

 

Release Date:

June 26, 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 is also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

 

 

 

 

 

 

 

 

SYNOPSIS

 

 

·        The Regional Superintendent did not review and approve all general journal entries.

 

·        The Regional Office of Education #40 does not have sufficient internal controls over the financial reporting process. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

REGIONAL OFFICE OF EDUCATION #40

CALHOUN/GREENE/JERSEY/MACOUPIN COUNTIES

 

FINANCIAL AUDIT

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

For The Year Ended June 30, 2007

 

 

 

FY 2007

FY 2006

TOTAL REVENUES

$1,749,823

$1,667,653

Local Sources

$427,782

$378,564

% of Total Revenues

24.45%

22.70%

State Sources

$980,534

$940,571

% of Total Revenues

56.04%

56.40%

Federal Sources

$341,507

$348,518

% of Total Revenues

19.52%

20.90%

 

TOTAL EXPENDITURES

$1,731,217

$1,661,390

Salaries and Benefits

$1,066,198

$1,097,150

% of Total Expenditures

61.59%

66.04%

Purchased Services

$471,131

$399,549

% of Total Expenditures

27.21%

24.05%

All Other Expenditures

$193,888

$164,691

% of Total Expenditures

11.20%

9.91%

 

 

 

TOTAL NET ASSETS

$329,439

$310,833

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$98,545

 

$36,560

 

              Percentages may not add due to rounding.

 

REGIONAL SUPERINTENDENT 

During Audit Period: Honorable Larry D. Pfeiffer

Currently:  Honorable Larry D. Pfeiffer

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #40 classified capital outlays of $286 and $498 as purchased services and supplies, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A $406 deposit intended for a school district remained in a Regional Office bank account for over eight months. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Superintendent did not review and approve all of the general journal entries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #40 does not have sufficient internal controls over the financial reporting process. 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

MISCODING OF CAPITAL OUTLAYS

 

         The Regional Office of Education #40 classified capital outlays of $286 and $498 as purchased services and supplies, respectively.  In the first instance, the cost of a printer was not properly recorded as a capital outlay.  This resulted in the general ledger showing $286 as purchased services rather than as capital outlays.  In the second instance, a $498 expenditure for a laptop was recorded as supplies rather than as a capital outlay.

 

         The cost of the printer and laptop computer, which exceeded $500, was split between two funds.  Regional Office personnel thought that payments under $500 should not be recorded as capital outlay.  Although the cost in each fund was under $500, the amount should still be recorded as capital outlay since the equipment purchased cost over $500.  (Finding 07-01, pages 14-15)

 

         Auditors recommended that Regional Office of Education personnel responsible for coding expenditures should be made aware that any payments on equipment meeting the capitalization threshold of $500 should be recorded to capital outlay even if the cost is split between two separate funds.  The Regional Office personnel should also contact the Illinois State Board of Education to correct the final expenditure reports.

 

         The Regional Office of Education #40 responded that an amended expenditure report for the Math/Science Grant was submitted to the Illinois State Board of Education on October 11, 2007.  The Regional Office noted that the refund due on the Math/Science Grant was paid on November 12, 2007. 

 

         The Regional Office responded that in regard to the Truant Alternative Optional Education Grant, on February 14, 2008, the Regional Office contacted ISBE Funding and Disbursements and was informed that it would be contacted as to what needed to be done.  The Regional Office noted that an amended expenditure report for this grant was submitted on February 15, 2008, and that they were awaiting further contact.

 

 

FAILURE TO REVIEW AND RECONCILE A BANK ACCOUNT.

 

         Sound internal control requires bank reconciliations to be performed monthly to ensure that all transactions have been recorded.  The bank reconciliation process should include identifying and correcting all discrepancies between the bank’s records and the Regional Office’s books on a timely basis.

 

         The auditors’ review of the bank account determined that it had not been reconciled on a monthly basis.  Therefore, when $406 was received in December 2006 from the Illinois State Board of Education, which was intended to go to a school district and not the Regional Office, the amount remained in the Regional Office of Education #40’s account until discovered by auditors in August 2007. 

       

         The Regional Office of Education #40 personnel are supposed to receive faxes from the bank when any funding is transferred into the bank account.  Regional Office personnel then determine which grant the payment relates to and notify the bank to transfer the funding to the appropriate checking account.  However, this process was not followed after the Regional Office employee, who was in charge of the account, retired at the end of fiscal year 2006.  Since the bank statement was not reviewed and reconciled, the improper payment was not noticed when it was transferred into the account.  (Finding 07-02, pages 16-17)

 

         The auditors recommended that the Regional Office of Education #40 personnel review and reconcile all bank statements every month and correct any discovered discrepancies in a timely manner.

 

         The Regional Office responded that monthly bank statements are now reconciled by bookkeeping.  The Regional Office noted that the Illinois State Board of Education was notified and the $406 in question was transferred out of the account with Illinois Funds and into the proper account on September 5, 2007.

 

 

INADEQUATE REVIEW OF JOURNAL ENTRIES

 

         Regional Office program directors prepare “Debit and/or Credit Authorization” forms directing the bookkeeping staff to make general journal entries allocating expenditures between various programs.  The Regional Superintendent spot checked some general journal entries but did not review and approve all of them.  

 

         Adequate controls over compliance with laws, regulations, contracts, and grant agreements require supervisory review of expenditures charged to grant programs.  Unallowable costs could be charged to grant program expenditures or errors in calculating allocations could be made and not detected within a reasonable period of time.  (Finding 07-03, page 18)

 

         Auditors recommended that the Regional Superintendent review and approve all “Debit and/or Credit Authorization” forms along with supporting information documenting the allocation before the entries are posted to the accounting records.

 

         The Regional Office responded that training in journal entries has been completed internally and a transfer of funds form has been developed.  The Regional Office noted that the Regional Superintendent reviews and approves all grant directors’ requests for transfer of funds.

 

 

Controls Over Financial Statement Preparation

 

         The Regional Office of Education #40 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 #40 does 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 sufficient 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 Regional Office’s accounting records, noted the following:

 

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

  • The Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable, accounts payable, or deferred revenues.  Detailed testing of accounts payable and accounts receivable noted 27 items totaling $19,620 had not been recorded to accounts payable and one item totaling $1,447 had not been recorded to accounts receivable.  Additionally, no entries were provided to reconcile the Regional Office’s grant activity, such as posting grant receivables and deferred revenues.

 

         According to Regional Office officials, they did not have adequate funding to hire and/or train their accounting personnel in order to comply with these requirements.  (Finding 07-04, pages 19-20)

 

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #40 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 #40 responded that the Macoupin County Board Finance Committee has been made aware of the new audit requirement and the anticipated cost associated with contracting an accounting firm.  A meeting will be called with all County Board members to discuss this finding.  The Regional Office of Education noted that they will utilize the services of County audit firms within their region.

 

 

AUDITORS’ OPINION

 

         Our auditors state the Regional Office of Education #40’s financial statements as of June 30, 2007 are fairly presented in all material respects. 

 

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:JRB

 

 

SPECIAL ASSISTANT AUDITORS

 

         Our special assistant auditors were West & Company, LLC.