REPORT DIGEST
REGIONAL OFFICE OF EDUCATION #24: GRUNDY AND KENDALL
COUNTIES
FINANCIAL AUDIT (In Accordance with the Single Audit Act and
OMB Circular A-133)
For the Year Ended June 30, 2010
Release Date: July 14, 2011
Summary of Findings:
Total this audit: 2
Total last audit: 0
Repeated from last audit: 0
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
• The Regional Office of Education #24 did not have
sufficient internal controls over the financial reporting process.
• The Regional Office of Education #24 did not have
sufficient internal controls over the preparation of financial statements.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Regional Office of Education #24 is required to maintain
a system of controls over the financial reporting process to be able to
initiate, authorize, record, process, and report financial data reliably in
accordance with generally accepted accounting principles (GAAP).
The Regional Office did not have sufficient internal
controls over the financial reporting process.
Auditors noted the following deficiencies in internal control:
• There was a lack of segregation of duties in the cash
receipts process. The same person
receives the receipts, makes a listing of the receipts, and posts the receipts
to the general ledger. There was also no
independent review of the unopened bank statement prior to the bank
reconciliation being prepared.
• There were inadequate controls over cash
disbursements. The Regional Office had
four signature stamps and the individual responsible for printing checks had
access to these stamps.
• There were inadequate controls over payroll. There were no employment contracts issued for
the year ending June 30, 2010 for Education Service Network, Not for Profit,
Inc. (ESN) employees, which is a blended component unit of the Regional Office.
• The Regional Office maintains the general fund accounts in
a different accounting software program than what is used by ESN. Additionally, the accounting software program
used for the general fund accounts at the Regional Office is not being
maintained using separate accounts by fund and the general ledger is not being
closed at the end of the accounting period.
Management or employees in the normal course of performing
their assigned functions may not prevent or detect financial misstatements or
possible fraudulent activity in a timely manner. The Regional Office also may not be
incompliance with laws, regulations, and contract provisions. (Finding 10-1, pages 12a-12c)
The auditors noted that the Regional Office has attempted to
segregate some of the accounting responsibilities, but there are areas that
should be improved. The auditors
recommended:
• The Regional Office of Education #24 should have someone
receive the receipts who does not have access to the accounting software and
someone independent of the receipt and disbursement processes should receive
the bank statement unopened and review the statement before the bank
reconciliation is prepared.
• All signature stamps should be kept in a secure location
and only used by those who are independent of the cash disbursement process.
• All employees of the Regional Office should be issued new
employment contracts each year.
• The Regional Office should convert all accounting records
to the same accounting software system at ESN, since that software is better
equipped to handle fund accounting.
The Regional Office of Education #24 responded that in the
past, the Regional Office of Education attempted to keep roles separate from
the Education Service Network. Now when
receipts come in, the ROE secretary in Morris and the ROE secretary in
Yorkville stamp incoming receipts before they go to the bookkeepers. The Regional Superintendent in Morris and the
Assistant Regional Superintendent in Yorkville now open all bank statements,
review them, and initial them before they go to the bookkeepers.
The Regional Office also responded that only the bookkeepers
are now writing checks. The secretaries
keep the check stamps and do the check stamping. With only two people available, the Regional
Office noted it will do the best it can do in this area. The Regional Office has worked to create and
have contracts signed by all employees.
The plan is to have contracts prepared and signed in a timely
manner. Finally, the Regional Office
responded that the plan is to continue using both accounting software
systems. The bookkeeper has created a
separate file for each fund, as suggested, for both expenditures and
revenues. The ROE financial records will
be closed out for FY 10, and, if necessary, they may seek help from outside
consultants.
CONTROLS OVER FINANCIAL STATEMENT PREPARATION
The Regional Office of Education #24 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 #24 did not have sufficient
internal controls over the financial reporting process. While the Regional Office maintains controls
over the processing of some 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.
For example, auditors, in their review of the Regional
Office’s accounting records, noted the following:
• Numerous adjusting entries were required to present the
financial statements in accordance with generally accepted accounting
principles.
• In testing general disbursements, two checks for insurance
were found that had partial amounts that should have been recorded as prepaid
expenses for fiscal year 2011. The
entire amount of the check was expensed in fiscal year 2010.
• Two programs reported incorrect fund balances at June 30,
2009. These funds had to be adjusted to
correctly show fund balances as of June 30, 2010.
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 10-2, pages 12d-12e)
The auditors recommended that, as part of its internal control
over the preparation of its financial statements, including disclosures, the
Regional Office of Education #24 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 #24 responded that an
outside accounting firm has been engaged to review the FY 11 financial
statements for the Regional Office.
Bookkeeping has been corrected to reflect the insurance expense in the
year in which it is incurred.
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #24’s
financial statements as of June 30, 2010 are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
WGH:KJM
AUDITORS ASSIGNED: Kemper CPA Group, LLP were our special assistant auditors.