REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #11

CLARK, COLES, CUMBERLAND, DOUGLAS, EDGAR, MOULTRIE AND SHELBY COUNTIES

FINANCIAL AUDIT

(In Accordance with the

Single Audit Act and

OMB Circular A-133)

For the Year Ended:

June 30, 2008

Summary of Findings:

Total this audit                    2

Total last audit                    3

Repeated from last audit     2

Release Date:

April 2, 2009

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) 82-6046 or TTY (888) 261-2887

This Report Digest and Full Report is also available on

the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

• The Regional Office of Education #11 had not established sufficient internal control procedures over disbursements and purchases. 

• The Regional Office of Education #11 did not have sufficient internal controls over the financial reporting process.

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

The Regional Office of Education #11 had not established sufficient internal control procedures over disbursements and purchases.

The Regional Office of Education #11 did not have sufficient internal controls over the financial reporting process.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

INADEQUATE INTERNAL CONTROL PROCEDURES

         The Regional Office of Education #11 did not have sufficient internal control procedures or was not following its established internal control procedures over disbursements and purchases.  The Regional Superintendent of Schools is responsible for establishing and maintaining an internal control system over disbursements and purchases to prevent errors and fraud.  During the audit, auditors noted the following: 

A.     An individual involved in the bookkeeping process had the Superintendent’s signature stamp.  This represents inadequate segregation of duties.

B.     Not all mail is opened under the dual controls established by the Regional Office.  One location receives and opens mail outside of these controls.

C.     An individual independent of the expenditure report preparation process does not review the expenditure reports prior to the final submission to the grantor.

         Errors or fraud that could be material to the financial statements may occur and not be detected in a timely manner by employees in the normal course of performing their assigned duties. 

         The Regional Office of Education #11 unintentionally overlooked the internal control weakness created over the opening of mail because the program changed locations and the mail was forwarded to the new location.  The signature stamp was provided as a convenience in case both the Superintendent and Assistant Superintendent were absent, and the internal controls over the review of expenditure reports were not consistently followed. (Finding 08-01, page 12a)

         Auditors recommended that:

A.     The Regional Office should not allow a bookkeeper to have access to a signature stamp. 

B.     The Regional Office should ensure all programs have their mail sent to the main office to be opened under the Regional Office’s existing controls.

C.     The Regional Office should ensure that an individual independent of the expenditure report process reviews and approves all expenditure reports for agreement with the general ledger detail prior to final submission.

         The Regional Superintendent agreed with this finding.

Controls Over Financial Statement Preparation

         The Regional Office of Education #11 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 #11 did not have sufficient internal controls over the financial reporting process.  While the Regional Office maintains controls over the processing of most accounting transactions, there are 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.

         Auditors noted that the Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable, accounts payable, or deferred revenues.  While the Regional Office did maintain records of accounts payable, accounts receivable, and deferred revenues, not all entries were made by the ROE to reconcile their grant activity, such as posting grant receivables and deferred revenues.  The Regional Office’s financial information required numerous adjusting entries to present the financial statements in accordance with generally accepted accounting principles.

         According to Regional Office officials, they did not have adequate funding to hire and/or train their accounting personnel in order to comply with these requirements. (Finding 08-02, pages 12b-12c)

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #11 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.

         The Regional Office of Education #11 responded that it understands the nature of this finding and believes that this circumstance is not unusual in an organization of its size.  The Regional Office accepts the degree of risk associated with the condition and believes that seeking additional accounting expertise in the form of another accounting firm or appropriately trained individual to prepare and/or review financial statements would reduce funds available to provide educational services for the schools in the region.  To help address the lack of “sufficient internal controls over the financial reporting process,” the Regional Office will seek appropriate training for its bookkeeping staff.

AUDITORS’ OPINION

          Our auditors state the Regional Office of Education #11’s financial statements as of June 30, 2008 are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM

SPECIAL ASSISTANT AUDITORS

      Our special assistant auditors were Kemper CPA Group, LLP.