REPORT DIGEST

REGIONAL OFFICE OF EDUCATION # 21
FRANKLIN/WILLIAMSON COUNTIES
FINANCIAL AUDIT

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

For the Year Ended:
June 30, 2002

Summary of Findings:

Total this audit 17
Total last audit 8
Repeated from last audit 6

Release Date:
March 11, 2003

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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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703

(217)782-6046 or TDD (217) 524-4646
This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

 

SYNOPSIS

  • Regional Office of Education #21 (ROE #21) lacked adequate internal controls over vendor payments. Duplicate, unsupported, inaccurate and imprudent vendor payments resulted in questioned costs of $6,500.
  • ROE #21 lacked adequate internal controls over grants, resulting in questioned costs of $68,683. Grant expenditure reports did not reconcile to the ROE’s general ledger. Monies received for certain grants were posted to the wrong programs. Grant funds were not segregated by funding source as required by the State Board of Education. Grant monies were expended without support by proper documentation.
  • ROE #21 did not maintain adequate records to account for its general fixed assets, did not inventory assets annually, and lacked appropriate policies for accounting for fixed assets. As a result, the General Fixed Asset Account Group was omitted from the ROE’s financial statements in non-conformity with generally accepted accounting principles.
  • Employee salary payments exceeded underlying contracts and supporting documentation, resulting in questioned costs of $54,999.
  • Purchases of airline tickets for non-employees and undocumented food purchases resulted in questioned costs of $1,320.
  • The Regional Superintendent entered into contracts with related parties, including his spouse, son and stepson and another employee’s children. These contracts lacked adequate documentation of time and effort expended and services provided, resulting in questioned costs of $28,850.

 

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

 

REGIONAL OFFICE OF EDUCATION # 21
FRANKLIN AND WILLIAMSON COUNTIES
FINANCIAL AUDIT
For The Year Ended June 30, 2002

FY 2002

FY 2001

TOTAL REVENUES

1$5,141,628

$4,203,245

Local sources

$516,163

$349,500

% of Total Revenues

10.04%

8.32%

State Sources

1$1,731,877

$1,475,152

% of Total Revenues

33.68%

35.10%

Federal Sources

$2,893,588

$2,378,593

% of Total Revenues

56.28%

56.59%

TOTAL EXPENDITURES

1$4,991,086

$4,147,316

Salaries and Benefits

1$2,452,979

$1,859,931

% of Total Expenditures

49.15%

44.85%

Purchased Services

$1,293,615

$835,768

% of Total Expenditures

25.92%

20.15%

All Other Expenditures

$1,244,492

$1,451,617

% of Total Expenditures

24.93%

35.00%

COST OF PROPERTY AND EQUIPMENT

$ 2

$ 2

Note: Fiscal Year 2001 data was obtained from audits of ROEs conducted under the direction of the Illinois State Board of Education.
1Fiscal Year 2002 amounts include state on-behalf payments ($173,503). These on-behalf payments were not included in Fiscal Year 2001.
2 A schedule of general fixed assets was not maintained, therefore a qualified opinion was issued.
* Percentages may not add due to rounding.

REGIONAL SUPERINTENDENT
During Audit Period: Honorable Barry Kohl
Currently: Honorable Barry Kohl
 

 

 

 

Duplicate, unsupported, inaccurate and imprudent vendor payments resulted in questioned costs of $6,500.

 

 

 

 

 

 

 

 

 

 

Grant expenditure reports were inaccurate, grant monies were not segregated by source and were expended without proper support resulting in questioned costs of $68,683.

 

 

 

 

 

 

 

 

 

 

 

Fixed assets were not properly accounted for or inventoried and the General Fixed Asset Account Group was omitted from ROE #21’s financial statements.

 

 

 

 

 

 

Amounts paid in salary to employees differed from supporting contracts and other documentation resulting in questioned costs of $54,999.

 

 

 

 

 

 

 

Purchases for non-employees paid by the ROE or unsupported by documentation resulted in questioned costs of $1,320.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROE #21 entered into labor contracts with the superintendent’s spouse, son, stepson and a Program Director’s children. The contracts lacked adequate documentation of time and effort expended and services provided, resulting in questioned costs of $28,850.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

LACK OF CONTROL OVER VENDOR PAYMENTS

Regional Office of Education #21 lacked adequate internal controls over vendor payments. In separate findings, the auditors noted:

  • Duplicate payments of vendor invoices and posting of refunds to revenue rather than the expenditure account (Finding 02-2, page 15);
  • A lack of supporting documentation for credit card and meal purchases. Questioned costs: $3,859.55 (Finding 02-8, page 27);
  • Payment of finance charges, late payment fees and duplicate payment on credit card accounts. Questioned costs: $2,266.87 (Finding 02-10, page 30);
  • Payments in excess of the amount indicated as proper by supporting documentation. Questioned costs: $375.13 (Finding 02-11, page 33); and
  • Regional Office of Education #21 does not maintain a Policies and Procedures Manual or an Organizational Chart, as required by the State Board of Education. A Policies and Procedures Manual should set forth fiscal and administrative processes and help ensure consistency and adequacy in the Regional Office’s controls (Finding 02-9, page 29).

INADEQUATE CONTROL OVER GRANTS

Regional Office of Education #21 lacked adequate internal controls over grant reporting. The auditors noted:

  • Expenditure reports submitted to various grantor agencies, such as the State Board of Education and the Department of Human Services, were inaccurate and not supported by amounts shown in the ROE’s general ledger. Questioned costs: $8,100 (Finding 02-4, page 17);
  • Monies received from the State Board of Education were posted as revenue to incorrect programs (Finding 02-13, page 40);
  • Monies were not segregated by funding source as required by the State Board of Education. Twenty funds had revenue misclassifications prior to being corrected during audit procedures (Finding 02-14, page 41); and
  • Grant monies were expended without support by proper documentation or based on budgeted rather than actual costs. Questioned costs: $60,583 (Finding 02-16, page 45).

LACK OF PROCEDURES OVER FIXED ASSETS

Generally Accepted Accounting Principles require that entities maintain a General Fixed Asset Account Group. Regional Office of Education #21 did not maintain adequate records to account for its general fixed assets, did not inventory assets annually, and lacked appropriate policies for accounting for fixed assets. ROE #21 did not provide the auditors with a list of assets in a timely manner. As a result of the above conditions, the General Fixed Asset Account Group was omitted from the ROE’s financial statements. Inclusion of the General Fixed Asset Account Group is required for conformity with generally accepted accounting principles (Finding 02-5, page 20).

ROE #21 agreed with the auditor’s recommendation to develop procedures to prepare a complete accounting of fixed assets and indicated that it is currently in the process of training staff on new inventory software.

LACK OF SUPPORT FOR SALARY PAYMENTS

Employee contracts and other salary documentation did not support actual salaries paid to employees of Regional Office of Education #21. For instance:

  • A program director received $80,721 in gross pay but supporting contracts indicated a total salary of $56,120; and
  • Another employee received $73,289 in gross pay when her contract indicated a salary of $42,891.

In addition, employee contracts often were not signed by the employee or approved in writing by the superintendent. Questioned costs: $54,999 (Finding 02-6, page 21).

UNALLOWABLE GRANT EXPENDITURES FOR NON-EMPLOYEES

Grant provisions prohibit expenditures for non-employees from being paid by the ROE. The auditors noted airline tickets for spouses and children of employees being charged to the credit card statement paid by the ROE. In addition, food purchases were charged to the credit card on one trip without documentation to show for whom the food was purchased. Questioned costs: $1,320 (Finding 02-7, page 23).

The auditors recommended that ROE #21 employees reimburse the Regional Office for personal expenses and that ROE #21 establish and follow a policy that forbids personal expenditures by the Regional Office.

CONTRACTS WITH RELATED PARTIES

Regional Office of Education #21 entered into contracts with the Regional Superintendent’s spouse, son and stepson, and with a Program Director’s sons, for various services. The contracts were not supported with adequate documentation demonstrating the time and effort expended to accomplish the responsibilities (Finding 02-12, page 35). The auditors noted:

  • The Superintendent’s son and stepson were paid $4,000 each and a Program Director’s son was paid $3,000 to provide daily cleaning of a building and to install new blinds. The contracts did not indicate a specific rate of pay (e.g., hourly rate), number of days of service, or number of hours to be worked. During audit fieldwork, the auditors requested time and attendance records for these individuals but were told by ROE officials that none were maintained. Subsequently, time records were provided at the exit conference; however, these time records were not signed as required by a supervisor. Questioned costs: $11,000;
  • Additionally, the Superintendent’s son was paid $1,600 and a Program Director’s two sons were paid $3,700 and $2,550 respectively to perform janitorial, photocopying and similar services throughout the year. Questioned costs: $7,850; and
  • The Superintendent entered into a $10,000 contract with his spouse, who is a full-time employee of ROE #21, for services described only as "Education Labor Relations Board Study Group." The contract did not specify the details of the study or the time period the study was to take place. The ROE did not maintain documentation of the time and effort expended by the contractor for this study.

In response to our inquiry, the auditors were initially told that the contractor’s work product pursuant to this contract consisted of an "oral report." However, subsequently at the exit conference, ROE #21 officials did produce a work product for this contract.

State law prohibits an elected official from having a direct or indirect financial interest in certain contracts. Whether an official has such a prohibited interest in a contract with his spouse, child or other person is a factual determination that must be made on a case-by-case basis by an appropriate investigatory agency. Questioned costs: $10,000.

The auditors recommended that fees for contract labor with related parties should be set at the amount that would be charged if the ROE were contracting with an independent third party. The auditors further recommended that the ROE maintain detailed

documentation of the services to be provided and the time and effort expended to accomplish these services.

AUDITORS’ OPINION

Our auditors state the Regional Office of Education # 21’s financial statements as of June 30, 2002 are fairly stated in all material respects except for the effect of the omission of the General Fixed Asset Account Group. The General Fixed Asset Account Group should be included in order to conform with generally accepted accounting principles. The auditors’ report also contains an emphasis of matter paragraph due to contingent liabilities created by possible violation of restrictive provisions of grants.

 

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WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Our special assistant auditors were Kemper CPA Group, LLP.