FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
INACTIVE ACCOUNTS
The Regional Office of Education #48 has inactive accounts
with outstanding or deficit cash balances.
As of June 30, 2005, there were 19 accounts on the general ledger with
cash balances that had no activity in the current fiscal year. There were also 6 accounts on the general
ledger as of June 30, 2005, that had a deficit cash balance with no activity
in the current fiscal year. The total cash balances for all these accounts
totaled $84,578, ranging from an outstanding balance of $36,479 to a deficit
balance of $19,446.
Good accounting
practices require inactive accounts with outstanding or deficit cash balances
to be closed appropriately. In
addition, the Grant Funds Recovery Act (30 ILCS 705) requires grant funds to
be returned to the State within 45 days after the funds are no longer
available to be spent or obligated. The Act also requires interest earned on
grant funds be treated as part of the grant principal and, therefore, must
also be returned to the grantor agency if not obligated or spent by the end
of the grant period. (Finding 05-1, pages 12-13)
The Regional Office of
Education #48 accepted the auditors’ recommendation stating it would
investigate the cash balances and deficits remaining in accounts with no
activity to determine the appropriate action needed to close out these
accounts. In addition, the Regional Office will obtain adequate documentation
from granting agencies regarding the disposition of outstanding grant money.
NETTING
REVENUES AGAINST EXPENSES
The Regional Office of Education #48 recorded
local support totaling $159,449 as reductions of expenditures instead of as
revenues.
Generally accepted
accounting principles require governmental units to report all sources and
uses of revenues. The General Fund’s
revenues and expenditures were understated by $71,341, and the Local Workshop
Fund’s revenues and expenditures were understated by $88,108. (Finding 05-2,
page 14)
The Regional Office of
Education #48 accepted the recommendation stating it would record all
receipts as revenue and not net them against related expenditures. The Regional Office indicated this
corrective action would begin immediately with a review and correction of all
such entries that might have occurred beginning July 1, 2005, and will
continue with monthly monitoring of bookkeeping entries of revenues and
expenditures.
ACCOUNTING
RECORDS MAINTAINED ON A
CASH BASIS OF
ACCOUNTING
The Regional Office of Education #48
maintains its internal financial reports on the cash basis of
accounting. The Regional Office
attempted to maintain records of its accounts receivable, accounts payable,
and deferred revenue in order to efficiently and effectively convert their
financial statements from a cash basis of accounting to the accrual and
modified accrual basis of accounting.
However, a total of 41 adjusting entries had to be made to record the
proper amount of accounts receivable, accounts payable, and deferred revenue. The Regional Office recorded most of the
receivables and payables at the end of the current audit year; however, the
receivable and payable entries that were recorded for the fiscal year of 2004
were not reversed appropriately.
Accounting
principles generally accepted in the United States of America require
government-wide financial statements to be prepared on the accrual basis of
accounting and the fund financial statements to be prepared on the modified
accrual basis of accounting. (Finding 05-3, pages 15-16) This finding was first reported in 2001.
The Regional Office of Education #48
accepted the recommendation, stating it will provide immediate training for
accounting personal to begin accurately maintaining subsidiary records of
accounts receivable, accounts payable, and deferred revenue balances. Monitoring of this process will also be
provided at the end of each fiscal year. (For previous Regional Office
response, see Digest Footnote #1.)
COMMINGLING OF FUNDS
The
Regional Office of Education #48 used the ROE/ISC Operations fund and the
Local Workshops fund to record the payment of salaries and other expenses
without properly allocating those expenses between these funds. The Regional Office also recorded some
expenses related to Local Workshops within the Education Fund. In addition, the Regional Office made
numerous entries to transfer money between funds, but did not make the
correct entries needed to record the transactions appropriately.
Good business practices require the Regional Office of Education #48
to transfer cash or record an amount due to and from other funds when cash
from one fund is used to pay for expenses of another fund. (Finding 05-4, pages 17-18)
The
Regional Office of Education #48 accepted the recommendation stating it would
improve its internal control procedures and provide more training on cash
accounting procedures beginning no later than January 2006 to ensure that
transactions are accurately recorded among pooled cash funds. Specifically, procedures will be implemented
to ensure that revenues and expenditures to and from the ROE/ISC Operations
fund and Local Workshops fund are accounted for separately when using pooled
cash funds. Training will be provided
to ensure that proper fund accounting is used in these procedures.
CONTROL
OVER COMPLIANCE WITH LAWS
AND
REGULATIONS
The Illinois School Code (105
ILCS 5/3-14.11) requires the Regional Superintendent to examine at least once
each year all books, accounts, and vouchers of every school treasurer in his
educational service region, and if he finds any irregularities in them, to
report them at once, as directed by the School Code.
The Regional Office did not examine at
least once each year all books, accounts, and vouchers of every school treasurer
in the educational service region.
Regional Office officials noted they believe the mandate is outdated
and that they are satisfying the intent of the statute by other reviews they
undertake. This mandate has existed
in its current form since at least 1953.
The
Illinois School Code (105 ILCS 5/3-14.17) also requires the Regional
Superintendent to notify the presidents of the boards of trustees and the
clerks and secretaries of school districts, on or before September 30,
annually, of the amount of money and date distributed by him to the
school. The Regional Office did not
notify the presidents of boards of trustees or the clerks and secretaries of
the school districts of the amount of money distributed to the
districts. The only communication the
Regional Office sent was the checks to the school treasurers. Upon learning of the requirement, the
Regional Office sent the appropriate notifications on October 18, 2005, 18
days late. (Finding 05-5, pages 19-21)
The
Regional Office accepted the recommendation regarding 105 ILCS 5/3-14.11,
stating it will seek a legislative solution to this and other obsolete passages. The Regional Office
also responded that it intends to send the appropriate notifications of the
amount of money distributed to the districts for the prior fiscal year,
required by 105 ILCS 5/3-14.17, by September 30.
OVERPAYMENT TO VENDOR
The
Regional Office of Education #48 made an overpayment of $18,507 to a vendor
for the purchase of equipment for a State and federally funded grant
program. The Regional Office wrote
checks to a vendor totaling $116,997; however, invoices for the equipment
purchased totaled $98,490. One of the
checks was written for $25,900 and was paid from a price quotation rather
than an invoice. The vendor credited this check against
an unpaid invoice for $369 and an invoice with an unpaid balance of $7,024,
leaving a credit of $18,507. After
the auditors discovered this error, the Regional Office contacted the vendor
and verified the credit on their account.
Reasonable accounting practices require vendor invoices to be
reconciled before payments are made. (Finding 05-6, pages 22-23)
The
Regional Office of Education #48 accepted the recommendation stating that
beginning immediately an administrator in the Regional Office will verify
that vendor invoices are in hand for the proper amounts for services
performed or goods received before payments are made. The Regional Office has requested in
writing a refund from the vendor. In
addition, the Regional Office has contacted the Illinois State Board of
Education (ISBE) for instructions on the disposition of the refunded amount
and was told to refund that amount to ISBE.
LACK OF COST ALLOCATION PLAN
The
Regional Office of Education #48 does not maintain a cost allocation plan to
allocate the indirect costs in accordance with OMB Circular A-87. The Regional Office invoices the various
grants and programs it administers for central service activities, including
support services and related benefits, and accounting and secretarial
services based on the grant’s budgeted costs, rather than as part of a Cost
Allocation Plan. Such salaries and
benefits are allowable expenditures under OMB Circular A-87; however, where
employees work on multiple activities or cost objectives, a distribution of
their salaries or wages is required to be documented in accordance with the
provisions of OMB Circular A-87 or be included in the Regional Office’s cost
allocation plan.
Grants,
cost reimbursement contracts and other agreements with the federal government
should bear their fair share of costs recognized under principles established
by the federal Office of Management and Budget (OMB). Costs are allocable to Federal Awards if
the goods or services involved are chargeable or assignable to the award in
accordance with the relative benefits received. (Finding 05-7, pages 24-26)
The Regional Office of Education #48
accepted the recommendation stating it would immediately begin developing and
implementing a cost allocation plan in accordance with OMB Circular A-87 that
addresses allowable costs to all applicable programs, including salary
allocations.
INADEQUATE
MONITORING OF SUBRECIPIENTS
The
Regional Office of Education #48 was not performing effective monitoring of
its subrecipients for the Regional
Educational Service Provider Program (RESPRO) program.
The Regional Office of Education #48 received and distributed $358,480
in federal pass-through funds to other Regional Offices to perform monitoring
and consulting services. The Regional Office of Education #48 did not provide
the other Regional Offices adequate information regarding the CFDA numbers
and amounts that were distributed to them until it received inquiries from
the other Regional Offices and their auditors. The Regional Office of Education #48 also did not require the
other Regional Offices to submit annual expenditure reports until the
auditors brought it to their attention.
OMB
Circular A-110, Uniform Administrative Requirements for Grants and Agreements
with Institutions of Higher Education, Hospitals, and other Non-Profit
Organizations, states recipients of federal awards are responsible for
managing and monitoring sub-awards to ensure subrecipients are meeting audit
requirements. The failure to properly monitor subrecipients for the RESPRO
grant funds resulted in a qualified opinion on compliance for major federal
programs. (Finding 05-8, pages 27-28)
The
Regional Office of Education #48 accepted the recommendation stating that
correspondence has been sent to the Area III regional superintendents
explaining RESPRO fiscal reporting procedures for FY 06. The Regional Office has requested the
subrecipient Regional Offices submit both expenditure and budget summary
information to the Regional Office three times during the year. The Regional Office will communicate with
the Illinois State Board of Education to ensure it is familiar with all expectations
for the program and its reporting requirements.
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #48’s financial
statements as of June 30, 2005 are fairly stated in all material respects.
_____________________________________
WILLIAM G. HOLLAND, Auditor
General
WGH:KJM:ro
SPECIAL ASSISTANT AUDITORS
Our special assistant
auditors were Sulaski & Webb, CPAs.
DIGEST FOOTNOTES
#1: ACCOUNTING RECORDS MAINTAINED ON CASH BASIS – Previous Regional
Office Response
In its prior response in 2004, the Regional Office
accepted the finding, responding that
they will begin maintaining subsidiary records of accounts receivable,
accounts payable, and deferred revenue balances. As of July 1, 2005, all funds received by the Regional Office
that are marked for the prior fiscal year will be entered in the computerized
bookkeeping system as accounts receivable for that fiscal year. Using the same practice, all items ordered
before July 1, and not received prior to that date will be kept on a separate
list and entered into the computer system as accounts payable. Revenue received during the prior fiscal
year and not totally expended will be transferred from a revenue account to a
liability account, and a listing will be kept of these accounts.
Complete Regional Office responses to prior findings are available
upon request from the Auditor General’s Office.
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