REPORT DIGEST
REGIONAL OFFICE OF EDUCATION #1:
ADAMS AND PIKE COUNTIES
Financial Audit
For the Year Ended June 30, 2010
Summary of Findings:
Total this audit: 3
Total last audit: 3
Repeated from last audit: 3
Release Date: January 20, 2011
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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(217) 782-6046 or TTY (888) 261-2887
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SYNOPSIS
• During the past fiscal year, the Regional Office of
Education #1 recorded cash transactions of the West Central Regional System
#240 in its general ledger system.
• The Regional Office of Education #1 did not have
sufficient internal controls over the financial reporting process.
• A comparison of expenditure reports to the Regional Office
of Education #1’s general ledger revealed instances where the totals on the
final 2010 expenditure reports did not agree with the Regional Office of
Education #1’s general ledger.
FINDINGS,
CONCLUSIONS, AND RECOMMENDATIONS
TRANSACTIONS OF TWO ENTITIES ARE RECORDED IN ONE ACCOUNTING
SYSTEM
During the past fiscal year, the Regional Office of
Education #1 recorded cash transactions of the West Central Regional System
#240 (WCR) in its general ledger system.
The WCR administers vocational education services for the region, and Regional
Office of Education #1 acts as a fiscal agent for the WCR.
According to governmental accounting standards, transactions
of two separate primary government units should not be co-mingled in one
general ledger system. According to GASB
14, a special purpose government is a primary government if it has the
following three characteristics: a
separately elected governing board, fiscal independence, and status as a
separate legal entity. The WCR has a
separately elected board, is a legally separate entity, and is fiscally
independent.
The Regional Office of Education #1 attempted to maintain a
separate general ledger system for the WCR.
However, the ROE continued to record certain WCR transactions in the ROE
general ledger. (Finding 10-1, page 9) This finding was first reported in 2003.
Auditors recommended that Regional Office of Education #1
establish an entirely separate set of records in order to eliminate the
co-mingling of the Regional Office of Education #1 and the West Central
Regional System accounting activity.
Management of the Regional Office of Education #1 agreed
with the finding, noting that they will work to improve the general ledger
systems in order to properly separate transactions of the West Central Regional
System #240. (For previous Regional Office response, see Digest Footnote #1.)
CONTROLS OVER FINANCIAL STATEMENT PREPARATION
The Regional Office of Education #1 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 #1 did not have sufficient
internal controls over the financial reporting process. The Regional Office maintains its accounting
records on the cash basis of accounting.
While the Regional Office maintains controls over the processing of most
accounting transactions, there were not sufficient controls over the
preparation of the GAAP based financial statements 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. Proposed adjusting entries changed the
Regional Office’s net assets by $180,742.
• The Regional Office did not have adequate controls over
the maintenance of records of accounts receivable. Accounts receivable and grants receivable
balances were adjusted at June 30, 2010, by a net total of $21,706.
According to Regional Office officials, they did not have
adequate funding to hire or train their accounting personnel. (Finding 10-2, page 10) This finding was
first reported in 2007.
The auditors recommended that, as part of its internal
control over the preparation of its financial statements, including
disclosures, the Regional Office of Education #1 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.
Management of the Regional Office of Education #1 responded
that they agreed with the finding. The
Regional Office noted that it will employ accountants familiar with ROE
operations to prepare financial statements according to GAAP standards. (For
previous Regional Office response, see Digest Footnote #2.)
EXPENDITURE REPORTS DID NOT AGREE TO THE 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 2010 expenditure reports were not consistent with the Regional Office of
Education #1’s general ledger. While the
following amounts are small, given the number of inconsistencies and historical
nature of the finding we noted the following:
• The expenditure report submitted to the Illinois State
Board of Education for the ROE/ISC Operations program reported total
expenditures of $110,555, while the general ledger showed expenditures of
$110,342 (a $213 difference).
• The expenditure report submitted to the Illinois State
Board of Education for the Truants Alternative/Optional Education program
reported total expenditures of $72,694, while the general ledger showed
expenditures of $72,415 (a $279 difference).
• The expenditure report submitted to the Illinois
Department of Human Services for the Regional Office of Prevention
Effectiveness Services program reported total expenditures of $113,620, while
the general ledger showed expenditures of $113,341 (a $279 difference).
• The expenditure report submitted to the Illinois
Department of Human Services for the Special Education Grants Infants/Toddlers
program reported total expenditures of $461,955, while the general ledger
showed expenditures of $462,775 (an $820 difference).
Inaccurate expenditure reports were submitted, which could
lead to granting agencies requesting reimbursements or adjusting the fiscal
year 2011 grant amounts.
The Regional Office of Education #1 personnel responsible
for expenditure reports prepared the reports based on numbers that were not yet
fully adjusted at year end. (Finding 10-3, page 11) This finding was first
reported in 2005.
The auditors recommended that Regional Office of Education
#1 personnel responsible for preparing the expenditure reports should use
expenditures per the general ledger after all adjustments have been made.
Management of the
Regional Office of Education #1 agreed with the finding. They responded that accounting personnel will
not prepare reports to the Illinois State Board of Education or the Illinois
Department of Human Services until all year end adjustments have been made.
(For previous Regional Office response, see Digest Footnote #3.)
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #1’s
financial statements as of June 30, 2010 are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
WGH:JRB
AUDITORS ASSIGNED:
Fick, Eggemeyer & Williamson, CPA’s were our special assistant
auditors on this engagement.
DIGEST FOOTNOTES
#1: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING
SYSTEM—Previous Regional Office Response
In its prior response in 2009, management of the Regional
Office of Education #1 agreed with the finding, noting that they will work to
improve the general ledger systems in order to properly separate transactions
of the West Central Regional System #240.
#2: CONTROLS OVER
FINANCIAL STATEMENT PREPARATION—Previous Regional Office Response
In its prior response in 2009, the Regional Office of
Education #1 agreed with the finding and noted that it will employ accountants
familiar with ROE operations to prepare financial statements according to GAAP
standards.
#3: EXPENDITURE
REPORTS DID NOT AGREE TO GENERAL LEDGER—Previous Regional Office Response
In its prior response in 2009, the Regional Office of
Education #1 agreed with the finding.
They responded that accounting personnel will not prepare reports to the
Illinois State Board of Education or the Illinois Department of Human Services
until all year end adjustments have been made.