REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #41

MADISON COUNTY

FINANCIAL AUDIT

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

For the Year Ended:

June 30, 2007

Summary of Findings:

Total this audit                   2

Total last audit                   4

Repeated from last audit    1

Release Date:

May 27, 2008

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) 782-6046 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 #41 does not have sufficient internal controls over the financial reporting process. 

• The Regional Office #41 had inactive accounts with outstanding cash balances. 

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

FY 2007

FY 2006

TOTAL REVENUES

$5,423,967

$5,319,022

Local Sources

$3,036,912

$2,857,687

% of Total Revenues

55.99%

53.73%

State Sources

$1,816,186

$1,489,843

% of Total Revenues

33.48%

28.01%

Federal Sources

$570,869

$971,492

% of Total Revenues

10.52%

18.26%

TOTAL EXPENDITURES

$5,403,926

$5,464,074

Salaries and Benefits

$4,146,475

$4,060,052

% of Total Expenditures

76.73%

74.30%

Purchased Services

$908,064

$750,456

% of Total Expenditures

16.80%

13.73%

All Other Expenditures

$349,387

$653,566

% of Total Expenditures

6.47%

11.96%

TOTAL NET ASSETS

$2,030,535

$2,010,494

INVESTMENT IN CAPITAL ASSETS

$228,781

$250,462

REGIONAL SUPERINTENDENT 

During Audit Period:  Honorable Robert Daiber (5/30/07 – 6/30/07)

                                    Honorable Cullen Cullen (4/26/07 – 5/30/07)

                                    Honorable Harry Briggs (7/1/06 – 3/30/07)

Currently:  Honorable Robert Daiber

The Regional Office of Education #41 does not have sufficient internal controls over the financial reporting process. 

The Regional Office #41 had inactive accounts with outstanding cash balances. 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

Controls Over Financial Statement Preparation

         The Regional Office of Education #41 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 #41 does 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 Regional Office’s accounting records, noted the following:

• The Regional Office did not have adequate controls over the maintenance of records of accounts receivable, accounts payable, or deferred revenue.

·        The Regional Office did not maintain adequate internal controls over the financial reporting process and numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles. 

(Finding 07-01, pages 12-13)  This finding was first reported in 2003.

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #41 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 #41 responded that it will implement a comprehensive preparation and review procedure to ensure the financial statements, including disclosures, are complete and accurate.  This will be accomplished during Fiscal Year 2008 by entering into a contract with a knowledgeable public accounting firm that has the appropriate expertise and understanding of the policies and procedures of the Regional Office of Education.  (For previous Regional Office response, see Digest Footnote #1.)

INACTIVE ACCOUNTS WITH EXCESS CASH BALANCES

         Good accounting practices require inactive accounts with outstanding or deficit cash balances to be closed appropriately.  The Illinois Grant Funds Recovery Act (30 ILCS 705/5) requires that all grant funds that have not been expended or obligated by the end of the grant period be returned to the granting agency within 45 days after the end of the period.  The Act (30 ILCS 705/10) also states that all interest earned on grant funds held by a grantee shall become part of the grant principal when earned and be treated accordingly for all purposes unless the grant agreement provides otherwise.  In addition, the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments (34 Code of Federal Regulations Part 80.21) requires that interest earned on federal fund balances in excess of $100 be remitted back to the federal granting agency.

         The Madison County Regional Office of Education #41 had inactive accounts with outstanding cash balances.  As of June 30, 2007, there were three accounts on the general ledger with cash balances that had not had any activity since 2005.  The three accounts were Title IV Community Service Grant, with a balance of $4,718; Scientific Literacy with a balance of $1,146; and State Substance Abuse and Violence Prevention with a balance of $7,521; for total inactive cash account balances of $13,385.

         In addition, the Regional Office had three funds that had unspent interest revenue from grant funds that were required to be returned to the grantor.  The three accounts with excess interest were Mathematics and Science Partnership with a balance of $509; Title I Reading First Technical Assistance with a balance of $178; and Title I Reading First Part B SEA with a balance of $111; for a total excess interest revenue of $798. (Finding 07-02, pages 14-15)

         The Regional Office of Education #41 concurred with the auditors’ recommendation to investigate interest earned and cash balances remaining in accounts without activities annually to determine appropriate action to close out accounts.  The Regional Office noted that the funds’ excess funds identified in the 2007 audit will be returned to the funding agency immediately. 

AUDITORS’ OPINION

         Our auditors state the Regional Office of Education #41’s financial statements as of June 30, 2007 are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JRB

SPECIAL ASSISTANT AUDITORS

         Our special assistant auditors were J.W. Boyle & Co., Ltd.

DIGEST FOOTNOTE

#1: CONTROLS OVER FINANCIAL STATEMENT PREPARATION -- Previous Regional Office Response

In its prior response in 2006, the Regional Office of Education #41 agreed with the recommendation, noting it had hired an outside consultant to help train responsible personnel to properly maintain its general ledger on a modified accrual basis of accounting.