REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #48

PEORIA COUNTY

 

FINANCIAL AUDIT

(In Accordance with the

Single Audit Act and OMB Circular A-133)

 

For the Year Ended:

June 30, 2005

 

Summary of Findings:

 

Total this audit†††††††††††††             8

Total last audit†††††††††††††             3

Repeated from last audit†††††††††† 2

 

Release Date:

May 2, 2006

 

 

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.state.il.us/auditor

 

 

 

 

 

 

 

SYNOPSIS

 

        The Regional Office of Education #48 has inactive accounts with outstanding or deficit cash balances.

 

        The Regional Office of Education #48 recorded local support totaling $159,449 as reductions of expenditures instead of as revenues.

 

        The Regional Office of Education #48 prepares its financial reports on a cash basis of accounting instead of the accrual and modified accrual basis of accounting.

        The Regional Office of Education #48 did not appropriately allocate expenses among the ROE/ISC Operations and Local Workshops funds.

 

        The Regional Office of Education #48 did not comply with certain statutory administrative requirements.

 

        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 of Education #48 did not maintain an indirect cost allocation plan in accordance with OMB Circular A-87.

 

        The Regional Office of Education #48 did not properly monitor its sub-recipients for the Regional Educational Service Provider Program (RESPRO).

 

 

 

 

 

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

 


†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

REGIONAL OFFICE OF EDUCATION #48

PEORIA COUNTY

 

 

FINANCIAL AUDIT

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

For The Year Ended June 30, 2005

 

 

FY 2005

FY 2004

TOTAL REVENUES

$5,543,510

$4,964,500

Local Sources

$800,298

$767,139

% of Total Revenues

14.44%

15.45%

State Sources

$2,058,522

$1,299,780

% of Total Revenues

37.13%

26.18%

Federal Sources

$2,684,690

$2,897,581

% of Total Revenues

48.43%

58.37%

 

TOTAL EXPENDITURES

$5,426,213

$5,040,138

Salaries and Benefits

$1,543,425

$1,507,769

% of Total Expenditures

28.44%

29.92%

Purchased Services

$1,159,737

$1,106,851

% of Total Expenditures

21.37%

21.96%

All Other Expenditures

$2,723,051

$2,425,518

% of Total Expenditures

50.18%

48.12%

 

 

 

TOTAL NET ASSETS

$1,031,864

$865,023

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$187,550

 

$138,006

 

†††††† Percentages may not add due to rounding.

 

REGIONAL SUPERINTENDENT

During Audit Period: Honorable Gerald Brookhart

Currently:Honorable Gerald Brookhart


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #48 has inactive accounts with outstanding or deficit cash balances.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #48 recorded local support totaling $159,449 as reductions of expenditures instead of as revenues.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #48 prepares its financial reports on a cash basis of accounting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #48 did not appropriately allocate expenses among the ROE/ISC Operations and Local Workshops funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #48 did not comply with certain statutory administrative requirements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 of Education #48 did not maintain an indirect cost allocation plan in accordance with OMB Circular A-87.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #48 did not properly monitor its subrecipients for the Regional Educational Service Provider Program.

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 auditorsí 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 Fundís revenues and expenditures were understated by $71,341, and the Local Workshop Fundís 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 grantís 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 Officeís 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.

 

 

AUDITORSí OPINION

 

†††††††† Our auditors state the Regional Office of Education #48ís 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 Ė 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 Generalís Office.