REPORT DIGEST REGIONAL OFFICE OF EDUCATION #1 ADAMS AND PIKE COUNTIES FINANCIAL AUDIT (In Accordance with the For the Year Ended: June 30, 2004 Summary of Findings: Total this audit 5 Total last audit 6 Repeated from last audit 3 Release Date: March 16, 2005
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 is also
available on the worldwide web at http://www.state.il.us/auditor
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SYNOPSIS · The Regional Office of Education #1 had multiple programs with excess cash balances at June 30, 2004 that had not been obligated, and the balances were not refunded to the granting agencies by August 15, 2004. · During the past fiscal year, the Regional Office of Education #1 recorded all revenue and expense transactions of the West Central Regional System #240 in its general ledger system. The West Central Regional System #240 is a separate entity with its own governing board and should be accounted for separately. · Voucher testing identified checks being prepared without invoice or purchase order approval. · At Regional Office of Education #1, the same individual prepares checks, processes payroll, prepares bank reconciliations, records journal entries, and signs checks. · In April 2004, the server at the Regional Office failed and data on the hard drive was lost.
{Expenditures and Revenues are summarized on the reverse page.} |
REGIONAL
OFFICE OF EDUCATION #1
FINANCIAL
AUDIT
For
The Year Ended June 30, 2004
|
FY 2004 |
FY 2003 |
TOTAL REVENUES |
$1,537,856 |
$1,739,751 |
Local Sources |
$138,121 |
$108,393 |
% of Total Revenues |
8.98% |
6.23% |
State Sources |
$928,557 |
$1,231,529 |
% of Total Revenues |
60.38% |
70.79% |
Federal Sources |
$471,178 |
$399,829 |
% of Total Revenues |
30.64% |
22.98% |
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||
TOTAL EXPENDITURES |
$1,481,693 |
$1,744,532 |
Salaries and Benefits |
$785,149 |
$978,817 |
% of Total Expenditures |
52.99% |
56.11% |
Purchased Services |
$216,078 |
$255,788 |
% of Total Expenditures |
14.58% |
14.66% |
All Other Expenditures |
$480,466 |
$509,927 |
% of Total Expenditures |
32.43% |
29.23% |
|
|
|
TOTAL NET ASSETS1 |
$583,432 |
$527,269 |
|
|
|
INVESTMENT IN
CAPITAL ASSETS1 |
$39,688 |
$48,604 |
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1 In fiscal year 2004, Regional Offices of
Education implemented Government Accounting Standards Board (GASB) Statement
No. 34 which established a new financial reporting model for state and local
governments. Government-wide
financial statements are prepared using full accrual accounting that reports
Total Net Assets. The fiscal year 2003 ending general fixed assets have been
restated to reflect the changes required as part of the implementation of
GASB Statement No. 34. Percentages
may not add due to rounding |
REGIONAL
SUPERINTENDENT |
During Audit Period: Honorable Raymond Scheiter Currently: Honorable Raymond Scheiter |
The Regional Office
of Education #1 had multiple programs with excess cash balances at June 30,
2004 that had not been obligated, and the balances were not refunded to the
granting agencies by August 15, 2004.
During the past fiscal year, the Regional Office of Education #1 recorded all revenue and expense transactions of the West Central Regional System #240 (WCR) in its general ledger system.
Voucher testing identified checks being prepared without invoice or purchase order approval.
At Regional
Office of Education #1, the same individual prepares checks, processes
payroll, prepares bank reconciliations, records journal entries, and signs
checks.
In April 2004, the server at the Regional Office failed
and data on the hard drive was lost. |
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS DISBURSEMENT OF EXCESS GRANT FUNDS The Regional Office of Education #1 had multiple programs with excess cash balances at June 30, 2004 that had not been obligated, and the balances were not refunded to the granting agencies by August 15, 2004. The grant-funded programs with period-end cash balances in excess of $500 ranged from $542 for the Illinois Tobacco Prevention program to $25,618 for the Standards Aligned Classrooms program. The Illinois Grant Funds Recovery Act requires that all
grant funds that have not been expended or obligated by the end of the grant
period be returned to the granting agency within 45 days after the end of the
period (Finding 04-03, page 13). This
finding is repeated from our 2003 audit.
The Regional Office of Education #1 accepted the recommendation to prepare accurate reconciled reports at year-end for its grant programs and contact the granting agency to determine a proper means of disposition of any excess grant funds. (For previous Regional Office response, see Digest Footnote #1.) TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM
During the past fiscal year, the Regional Office of Education #1 recorded all revenue and expense transactions of the West Central Regional System #240 (WCR) in its general ledger system. The WCR has a separately elected board. It is a legally separate entity and is fiscally independent. The WCR administers vocational education services for the region, and Regional Office of Education #1 acts as a fiscal agent for the WCR.
The effect of including the WCR’s financial transactions
is to overstate the Regional Office of Education #1’s revenues, expenditures,
and cash balances. According to
governmental accounting standards, transactions of two separate primary
government units should not be co-mingled in one general ledger system
(Finding 04-01, page 11). This
finding is repeated from our 2003 audit. The Regional Office of Education #1 accepted the recommendation to create a separate set of records for the WCR’s accounting activity. The Regional Office plans to implement a new general ledger system for fiscal year 2005 in order to separately record transactions of the West Central Regional System #240. (For previous Regional Office response, see Digest Footnote #2.) APPROVAL
OF INVOICES PRIOR TO PAYMENT Voucher testing identified checks being prepared without
invoice or purchase order approval.
Also, in several instances, purchase orders or invoices were being
approved by program coordinators, rather than by the Regional Superintendent
or Assistant Regional Superintendent.
The lack of centralized approval increases the chance of fraudulent
payments passing through the system.
(Finding 04-02, page 12). This
finding is repeated from our 2003 audit. The Regional Office accepted the recommendation to institute a policy requiring all invoices or purchase orders to be approved by the Superintendent or Assistant Superintendent prior to the disbursement of the checks. (For previous Regional Office response, see Digest Footnote #3.) SEGREGATION OF DUTIES
At Regional Office of Education #1, the same individual prepares checks, processes payroll, prepares bank reconciliations, records journal entries, and signs checks. Furthermore, the individual is in possession of the Regional Superintendent’s signature stamp. Inadequate segregation of duties limits the effectiveness and efficiency of the internal control system and increases the risk that errors or irregularities may occur and not be detected promptly (Finding 04-04, page 14). The Regional Office of Education #1 agreed with the recommendation to improve the segregation of duties. The Regional Office plans to remove the check- signing authority from the individual who prepares checks and reconciles the bank account and reassign this duty. DATA BACKUP PROCEDURES
In April 2004, the server at the Regional Office failed and data on the hard drive was lost. The onsite backup did not function and there were no additional backups to provide data recovery. All Regional Office data was lost, except accounting and certification records, which were maintained on a server in Springfield, Illinois. Computer files lost included those pertaining to GED testing, bus driver training, teacher registration, correspondence, and the policy manual. Proper internal controls generally require backups of computer data to allow the restoration of critical data in the event of a failure that causes loss of data. The Regional Office was relying on a single tape in a tape backup device and the effectiveness of the tape backup had not been tested regularly (Finding 04-05, page 15). The Regional Office accepted the recommendation to strengthen its backup procedures. The Regional Office plans to modify its data backup system to include multiple recovery sources and backup of data on discs stored in a safe and/or taken home. AUDITORS’ OPINION Our auditors state the Regional Office of
Education #1’s financial statements as of June 30, 2004 are fairly presented
in all material respects. ____________________________________ WILLIAM
G. HOLLAND, Auditor General WGH:JRB SPECIAL ASSISTANT AUDITORS Our special assistant
auditors were Fick, Eggemeyer & Williamson, CPA’s.
DIGEST
FOOTNOTES
#1: DISBURSEMENT OF EXCESS GRANT FUNDS – Previous Regional Office Response In its prior response in 2003,
the Regional Office stated it planned to obtain from bookkeeping, accurate
reconciled reports, at least annually, which consider: beginning fiscal year cash balances,
current fiscal year grant income, current fiscal year program expenses,
current fiscal year interest allocated to programs, and year end cash
balances by program. Also, granting
agencies will be notified of any excess grant funds at period end. #2: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM– Previous
Regional Office Response In its prior response in 2003,
the Regional Office stated it plans to implement a new general ledger system
at the start of the next fiscal year in order to separately record
transactions of the West Central Regional System #240. #3: APPROVAL OF INVOICES PRIOR TO PAYMENT – Previous Regional Office Response In its prior response in 2003,
the Regional Office stated it plans to implement a disbursement approval
policy that requires at least initialization by the assistant superintendent
or the regional superintendent of all purchase orders or invoices prior to
check preparation. Complete Regional Office responses to prior findings are available upon request from the Auditor General’s Office. |