REPORT DIGEST
REGIONAL OFFICE OF EDUCATION #33: KNOX COUNTY
FINANCIAL AUDIT
For the Year Ended June 30, 2010
Summary of Findings:
Total this audit: 2
Total last audit: 1
Repeated from last audit: 1
Release Date: June 9, 2011
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
(217) 782-6046 or TTY (888) 261-2887
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SYNOPSIS
• The Regional Office of Education #33 did not have
sufficient internal controls over the financial reporting process.
• The Regional Office of Education #33 did not have adequate
controls over property and equipment.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
CONTROLS OVER FINANCIAL STATEMENT PREPARATION
The Knox County Regional Office of Education #33 is required
to maintain a system of controls over the preparation of financial statements,
including disclosures, 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 #33 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. For
example, auditors, in their review of the ROE’s accounting records, noted the
following:
• The Regional Office did not maintain adequate controls
over the financial reporting process and adjustments were required to present
financial statements in accordance with generally accepted accounting
principles.
• The Regional Office did not maintain complete records of
accounts receivable, accounts payable, or deferred revenue.
According to Regional Office officials, they did not have
adequate funding to hire and/or train their accounting personnel in order to
maintain a system of internal over the preparation of financial statements in
accordance with GAAP. (Finding 10-1,
pages 10-11) 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 Knox County Regional Office of Education #33 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 #33 responded that it
understands the nature of this finding and realizes that this circumstance is
not unusual in an organization of this size.
The Regional Office noted that it is financially unable to employ
accounting personnel capable of maintaining an adequate system of internal
control over the preparation of financial statements since this cost would take
away from the funds available to provide educational services for the schools
in the region. The Regional Office noted
that if it has more stable financing in the future, it will try to hire and/or
train personnel to maintain an appropriate system of internal control over the
preparation of financial statements in accordance with generally accepted
accounting principles. (For previous
Regional Office response, see Digest Footnote #1.)
INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT
The Regional Office of Education (ROE) Accounting Manual
requires each ROE to maintain detailed fixed asset records for both accounting
purposes as well as insurance purposes, for fixed assets costing $500 or
more. Additionally, the ROE Accounting
Manual states that fixed assets should be recorded at historical cost or
estimated historical cost and contributions received by the ROE should be
recorded at fair market value on the date acquired.
The Regional Office of Education #33 did not have adequate
controls over fixed assets. Not all
items on the ROE’s property and equipment listing included a value. In addition, the items without an assigned
value were items that had been donated to the ROE. The absence of a sound system of internal
controls over fixed assets could result in inaccurate reporting of fixed assets
and inadequate physical control for equipment items. An incomplete fixed asset listing does not
provide an adequate basis for physical control and losses may occur without
being detected.
According to ROE personnel, they were unaware of the
requirement to obtain or assign a value to the items that had been donated to
them. (Finding 10-2, pages 12-13)
Auditors recommended that the Regional Office should adhere
to the ROE Accounting Manual to effectively monitor property acquisitions and
provide for accurate reporting of fixed asset balances. The fixed asset listing should include all
the details required by the ROE Accounting Manual, including a value for
donated items, and should be checked for accuracy and existence through an
annual physical inventory.
The Regional Office responded that it currently has fixed
asset listings for both the ROE office and Knox County Academy. The Regional Office noted that the listings
will be reviewed and updated as appropriate for existing items. The Regional Office also noted that all new
items, including those that are donated, will be added to the listings and
assigned a value.
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #33’s
financial statements as of June 30, 2010 are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
WGH:JRB
AUDITORS ASSIGNED:
Sulaski and Webb, CPAs were our special assistant auditors.
DIGEST FOOTNOTES
#1: Controls Over Financial Statement Preparation - Previous
Regional Office Response
In its prior response in 2009, the Regional Office of
Education #33 responded that it understands the nature of this finding relates
to
internal control over financial reporting and realizes that
this circumstance is not unusual in an organization of this size. The Regional Office accepts the degree of
risk associated with this condition because the added expense of seeking
additional accounting expertise to prepare and review financial statements
would considerably diminish the limited available funds for educational
services in the region. The Regional Office noted that it does maintain records
of receivables and payables but does not record them until received or paid.