REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #1

 

ADAMS AND PIKE COUNTIES

 

FINANCIAL AUDIT

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

For the Year Ended:

June 30, 2006

 

Summary of Findings:

 

Total this audit                          5

Total last audit                          5

Repeated from last audit           5

 

Release Date:

March 29, 2007

 

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.auditor.illinois.gov

 

 

 

 

 

SYNOPSIS

 

 

·        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. 

 

·        The Regional Office of Education #1 had two programs with excess cash balances at June 30, 2006 that had not been obligated, and the balances were not refunded to the granting agencies by August 15, 2006.  In addition, the Regional Office of Education #1 had interest income earned from federal funding in excess of $100 that was due back to the grantor agency.

 

·        Eleven of the twelve monthly bank reconciliations (July 2005 through May 2006) for the projects account did not reconcile. 

 

·        The Regional Office of Education #1 did not comply with certain statutory administrative requirements.

 

·        A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2006 expenditure reports did not agree with the Regional Office of Education #1’s general ledger by $13,959, resulting in inaccurate expenditure reports.

 

 

 

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


                                                                                   

REGIONAL OFFICE OF EDUCATION #1

ADAMS AND PIKE COUNTIES

 

FINANCIAL AUDIT

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

For The Year Ended June 30, 2006

 

 

FY 2006

FY 2005

TOTAL REVENUES

$1,674,394

$1,593,652

Local Sources

$289,892

$216,193

% of Total Revenues

17.31%

13.57%

State Sources

$1,086,884

$853,296

% of Total Revenues

64.91%

53.54%

Federal Sources

$297,618

$524,163

% of Total Revenues

17.77%

32.89%

 

TOTAL EXPENDITURES

$1,645,713

$1,527,415

Salaries and Benefits

$851,575

$809,937

% of Total Expenditures

51.75%

53.03%

Purchased Services

$229,666

$227,932

% of Total Expenditures

13.96%

14.92%

All Other Expenditures

$564,472

$489,546

% of Total Expenditures

34.30%

32.05%

 

 

 

TOTAL NET ASSETS

$696,369

$667,688

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$43,120

 

$57,707

 

 

Percentages may not add due to rounding

 

REGIONAL SUPERINTENDENT 

During Audit Period: Honorable Raymond Scheiter

Currently:  Honorable Raymond Scheiter


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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 Regional Office of Education #1 had two programs with excess cash balances at June 30, 2006 that had not been obligated, and the balances were not refunded to the granting agencies by August 15, 2006.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Eleven of the twelve monthly bank reconciliations (July 2005 through May 2006) for the projects account did not reconcile. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #1 did not comply with certain statutory administrative requirements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2006 expenditure reports did not agree with the Regional Office of Education #1’s general ledger by $13,959, resulting in inaccurate expenditure reports. 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

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. 

 

At June 30, 2006 the Regional Office of Education #1 had errantly deposited $22,640 of its cash into the WCR bank account.  If the errant deposit had not been identified, the Regional Office may have failed to recoup $22,640 of funding.  (Finding 06-1, page 11).  This finding was first reported in 2003.

 

The Regional Office of Education #1 accepted the recommendation, noting it has implemented a new general ledger system for fiscal year 2007 in order to separately record transactions of the West Central Regional System #240.

 

Although each year the Regional Office has responded that corrective action will be taken, commingling of funds has continued to occur.  (For previous Regional Office response, see Digest Footnote #1.)

 

 

DISBURSEMENT OF EXCESS GRANT FUNDS

 

The Regional Office of Education #1 had two programs with excess cash balances at June 30, 2006 that had not been obligated, and the balances were not refunded to the granting agencies by August 15, 2006.  The two grant-funded programs had period-end cash balances totaling $41,217.  In addition, the Regional Office of Education #1 had interest income earned from federal funding in excess of $100 that was due back to the grantor agency.  The excess interest income earned totaled $2,163.

 

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.   In addition, the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments (34 Code of Federal Regulations Part 80.21) requires that interest earned on federal fund balances in excess of $100 be remitted back to the federal granting agency.  (Finding 06-2, pages 12, 13)  This finding was first reported in 2003. 

                

The Regional Office of Education #1 accepted the recommendation to prepare accurate reconciled reports at year-end for its grant programs and will notify the granting agencies of any excess grant funds at period end.  (For previous Regional Office response, see Digest Footnote #2.)

 

 

BANK ACCOUNTS WERE NOT PROPERLY RECONCILED FOR FISCAL YEAR 2006

 

Eleven of the twelve monthly bank reconciliations (July 2005 through May 2006) for the projects account did not reconcile.  For example, the March reconciliation discrepancy was $25,564, the April discrepancy was $23,704, and the May discrepancy was $18,037.  The bank account was reconciled for June 2006.

 

       The effect of not properly performing reconciliations was to carry an incorrect cash balance on the books of the ROE for nearly the entire fiscal year. 

 

Sound internal control requires bank reconciliations to be performed to ensure that all transactions have been recorded.  The bank reconciliation process should include identifying and correcting all discrepancies between the bank records and the books on a regular basis.  (Finding 06-3, page 14)  This finding was first reported in 2002.

 

The Regional Office of Education #1 accepted the recommendation to perform a monthly reconciliation of all bank accounts and correct any discovered discrepancies in a timely manner.  (For previous Regional Office response, see Digest Footnote #3.)

 

 
CONTROLS 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 of Education #1 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 5/3-14.5) also requires the Regional Superintendent to visit each public school in the county at least once a year, noting the methods of instruction, the branches taught, the textbooks used, and the discipline, government and general condition of the schools.  This mandate has existed in its current form since at least 1953.

 

The Regional Superintendent performs compliance inspections for each public school in his region annually. However, the Regional Office of Education #1 performed compliance inspections for the 2005/2006 school year in September 2006.  No compliance inspections were performed during the period July 2005 through June 2006.   The Illinois Public School Accreditation Process Compliance Component document completed at these visits includes many of the items delineated in 105 ILCS 5/3-14.5, but does not include a review of the methods of instruction and the textbooks used in the district. 

 

The Illinois School Code (105 ILCS 5/3-5) requires the Regional Superintendent to present under oath or affirmation to the county board at its meeting in September and as nearly quarterly thereafter as it may have regular or special meetings, a report of all his acts as county superintendent, including a list of all the schools visited with the dates of visitation.  This mandate has existed in its current form since at least 1953.

 

The Regional Office did not present at the September county board meeting, and as nearly quarterly thereafter, a report of all his acts including a list of all the schools visited and dates of visitation.  The Regional Superintendent did attend a September board meeting and issue a report to the board; however, the report did not include a list of all the schools visited and dates of visitation. 

 

The Illinois School Code (105 ILCS 5/3-14.17) 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 distributed by him to the school districts.

 

The Regional Office did not notify the presidents of the boards of trustees and the clerks and secretaries of school districts, on or before September 30, 2005, of the dates of distribution or amounts of money distributed by him to the school districts.

 

Finally, the Illinois School Code (105 ILCS 5/3-7) states that each school district shall, as of June 30 each year, cause an audit to be made of its accounts.  Each school district shall on or before October 15, or by extension date not to exceed 60 days of each year, submit an original and one copy of such audit to the Regional Superintendent of Schools.

 

The Regional Office was unable to supply evidence that 8 of the 10 district financial statement audit reports were submitted to the Regional Office of Education #1 by October 15, 2005 or by the extension date.  (Finding 06-4, pages 15-17)

 

The Regional Office of Education #1 accepted the recommendation to comply with the statutory requirements.  The Regional Office responded that with regards to compliance with 105 ILCS 5/3-14.11 and 105 ILCS 5/3-14.5, the Illinois Association of Regional Superintendents of Schools and the Illinois State Board of Education have agreed to seek legislation to remove duplicative and/or obsolete sections of the Illinois School Code.  Both parties believe that 105 ILCS 5/3-7 of the Illinois School Code and 23 Ill. Adm. Code 1.20, respectively, contain more current, thorough, and comprehensive requirements concerning a public school district’s financial transactions and visitation of public schools by the Regional Superintendent.  As a result, the two parties working together will seek legislation to repeal these two sections of the Illinois School Code.  

 

With regards to 105 ILCS 5/3-5, the Regional Superintendent plans to present, under affirmation to the county board, quarterly reports of all his acts as Regional Superintendent, including a list of all the schools visited with the dates of visitation.  As for 105 ILCS 5/3-14.17, the Regional Office intends to start sending the distribution report to every district each year by September.  Finally, regarding 105 ILCS 5/3-7, the Regional Office will begin logging evidence of receipt of the audits from the school districts and also implement a system for monitoring whether or not copies of audits are on hand.

 

 

EXPENDITURE REPORT FOR EDUCATION FUND DID NOT AGREE TO GENERAL LEDGER

 

A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2006 expenditure reports did not agree with the Regional Office of Education #1’s general ledger by $13,959, resulting in inaccurate expenditure reports. 

 

The Regional Office of Education #1 personnel responsible for expenditure report preparation used numbers that were not yet adjusted for bank reconciliation differences or accounts payable items.

 

Expenditure reports for education programs submitted to the Illinois State Board of Education and Illinois Department of Human Services should agree with the expenditures reported on the Regional Office of Education #1’s general ledger.  (Finding 06-5, page 18) 

 

        The Regional Office of Education #1 agreed with the recommendation to have personnel responsible for preparing the expenditure reports use expenditures per the general ledger accounts after all adjustments have been made and make necessary corrections to the final reports.

 

 

AUDITORS’ OPINION

 

Our auditors state the Regional Office of Education #1’s financial statements as of June 30, 2006 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: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING SYSTEM– Previous Regional Office Response

 

In its prior response in 2005, the Regional Office stated that at the beginning of fiscal year 2006 it implemented a new general ledger system in order to separately record transactions of the West Central Regional System #240.

 

 

#2: DISBURSEMENT OF EXCESS GRANT FUNDS – Previous Regional Office Response

 

In its prior response in 2005, 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.

 

 

#3:  BANK ACCOUNTS WERE NOT PROPERLY RECONCILED—Previous Regional Office Response

 

In its prior response in 2005, the Regional Office state it planned to perform a monthly reconciliation of all bank accounts and correct any discovered discrepancies in a timely manner.