REGIONAL OFFICE OF EDUCATION #30:
JACKSON AND PERRY COUNTIES
For the Year Ended June 30, 2010
Release Date: July 14, 2011
Summary of Findings:
Total this audit: 2
Total last audit: 1
Repeated from last audit: 1
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703
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• The Regional Office of Education #30 did not have sufficient internal controls over the financial reporting process.
• The Regional Office of Education #30 did not record a cash account on the books.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
CONTROLS OVER FINANCIAL STATEMENT PREPARATION
The Regional Office of Education #30 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 #30 did not have sufficient internal controls over the financial reporting process. The Regional Office maintains their accounting records on the cash basis of accounting. 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.
In their review of the Regional Office’s accounting records, auditors noted that the Regional Office did not have adequate controls over the maintenance of complete records of cash by fund, accounts receivable, accounts payable, or deferred revenue. While the Regional Office did maintain records to indicate the balances of cash, accounts receivable, accounts payable, and deferred revenue, there were no entries made by the ROE to reconcile their grant activity, such as posting grant receivables and deferred revenue. The Regional Office’s financial information required numerous adjusting entries to present the financial statements in accordance with generally accepted accounting principles. The Regional Office did not have adequate controls over the maintenance of complete records of capital assets.
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 10-01, pages 11-12) 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 #30 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 #30 responded that delayed, uncertain and untimely payments were devastating to the operations of the Office and made the financial review and preparation of the financial statements quite complicated. The Regional Office noted that the State is well beyond the 60 days required for booking funds as accounts receivable and the Office did not receive full payment until December 2010. The Regional Office noted that it completed preparation and review procedures with the best information at the time.
The Regional Office also noted that securing the services of its own certified public accountant was cost prohibitive. Therefore, it contracted with the Jackson County Board to use the services of the County Administrative Assistant who is a degreed accountant. The ROE noted that the individual will provide additional accounting expertise to prepare and/or review financial statements. The ROE noted that it is currently in a transition period for facilitating and implementing this consultation. The Regional Office noted that it is currently working on implementation of a new accounting software system which should ensure that the financial statements are complete and accurate. The Regional Office also noted that its financial staff will work closely with the County Administrative Assistant to correct the issues involved in the finding.
In addition, the Regional Office noted that in regard to fixed assets, it maintains a database that documents purchases and depreciation timeframes. The Regional Office noted that in order to correct the condition of the finding, it will begin using a database that will not only document purchases and depreciation timeframes but will also calculate the depreciation and value of capital assets.(For previous Regional Office response, see Digest Footnote #1.)
CASH ACCOUNT NOT RECORDED ON THE BOOKS
Good business practices and sound internal controls require that accounting records accurately and completely record all assets and transactions of the entity. During testing of cash accounts, auditors noted one bank account with a balance of $3,045 as of June 30, 2010 was not recorded in the general ledger. This account, and its activity for the year ended June 30, 2010, was included in the financial statements through adjusting journal entries proposed during the audit.
The Regional Office of Education #30’s assets and revenues were understated by $3,045. Failure to record bank accounts in the general ledger results in inaccurate financial reporting and increases the risk of misappropriation of assets.
The Regional Office has an office in Perry County which collects small amounts of local revenue for GED and other Regional Office programs. This revenue had not been recorded in the general ledger or transferred to the pooled cash account during the fiscal year.
The auditors recommended that the Regional Office should routinely record all bank accounts and their activity in the general ledger. The Regional Office responded that it understands the concerns of the auditors and plan to implement procedures to address the finding.
Our auditors state the Regional Office of Education #30’s financial statements as of June 30, 2010 are fairly presented in all material respects.
WILLIAM G. HOLLAND
AUDITORS ASSIGNED: West & Company, LLC, were our special assistant auditors.
#1: Controls Over Financial Statement Preparation - Previous Regional Office Response
In its prior response in 2009, the Regional Office of Education #30 responded that it has entered into an intergovernmental agreement
with the Jackson County Board to use the services of the County Administrative Assistant who is a degreed accountant. This individual will provide additional accounting expertise to prepare and/or review financial statements. In addition, the Regional Office noted that it is investigating accounting programs that will maintain
complete and accurate records and present the financial statements in accordance with generally accepted accounting principles. The Regional Office noted that an accounting software program will be chosen by January 1, 2010, with full implementation by July 1, 2010.