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The Regional Office
of Education #47 did not comply with certain statutory administrative
requirements.
The Regional Office of Education
#47 is not maintaining records of its accounts receivable, accounts payable,
and deferred revenue in order to efficiently and effectively convert their
financial statements from a cash basis to the accrual basis and the modified
accrual basis of accounting.
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FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
CONTROLS OVER COMPLIANCE WITH LAWS AND REGULATIONS
The Illinois
School Code (105 ILCS 5/3-14.11) requires the Regional Superintendent to
examine at least once each year all books, accounts, and vouchers of every
school treasurer in her educational service region, and if she finds any
irregularities in them, to report them at once, as directed by the School
Code.
The Regional Office of Education #47 did not
examine at least once each year all books, accounts, and vouchers of every
school treasurer in the educational service region. Regional Office officials noted they
believe the mandate is outdated and that they are satisfying the intent of
the statute by other reviews they undertake.
This mandate has existed in its current form since at least 1953.
The Illinois School Code (105 ILCS
5/3-14.5) also requires the Regional Superintendent to visit each public
school in the county at least once a year, noting the methods of instruction,
the branches taught, the textbooks used, and the discipline, government and
general condition of the schools. This
mandate has existed in its current form since at least 1953.
The Regional
Office of Education #47 performs compliance inspections for each public
school in its region on a rotational basis every four years instead of
annually. The Illinois Public School
Accreditation Process Compliance Component document completed at these visits
includes many of the items delineated in 105 ILCS 5/3-14.5, but does not
include a review of the methods of instruction and the textbooks used in the
district. The Regional Office also
noted that coverage is obtained through the many different visits to every
school throughout the year by various ROE personnel and the various documents
and approvals that must be submitted to the ROE or submitted to ISBE and
reviewed by the ROE. (Finding 06-01,
pages 11-12)
The Regional
Office of Education #47 accepted the recommendation to comply with the
statutory requirements. The Regional
Office responded that with regards to compliance with 105 ILCS 5/3-14.11 and
105 ILCS 5/3-14.5, the Illinois Association of Regional Superintendents of
Schools and the Illinois State Board of Education have agreed to seek
legislation to remove duplicative and/or obsolete sections of the Illinois
School Code. Both parties believe that
105 ILCS 5/3-7 of the Illinois School Code and 23 Ill. Adm. Code 1.20,
respectively, contain more current, thorough, and comprehensive requirements
concerning a public school district’s financial transactions and visitation
of public schools by the Regional Superintendent. As a result, the two parties working
together will seek legislation to repeal these two sections of the Illinois
School Code.
PREPARATION
OF FINANCIAL STATEMENTS
Accounting
principles generally accepted in the United States of America require
government-wide financial statements to be prepared on the accrual basis of
accounting and the fund financial statements to be prepared on the modified
accrual basis of accounting.
The Regional
Office of Education #47 prepares its financial reports on the cash
basis. The ROE is not maintaining
records of its accounts receivable, accounts payable, and deferred revenue in
order to efficiently and effectively convert their financial statements from
a cash basis to the accrual basis and the modified accrual basis of
accounting. (Finding 06-02, page 13)
The Regional Office of Education #47 accepted
the recommendation and will maintain subsidiary records of accounts
receivable, accounts payable, deferred revenue, and fund balances sufficient
to allow for the preparation of accrual basis financial statements.
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The Regional Office of Education #47 did not have
a review function over the financial reporting throughout the year.
The Regional Office
of Education #47 did not have sufficient collateral in place to insure their
cash balances against possible loss.
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CONTROLS OVER FINANCIAL REPORTING
Strong internal
controls over financial reporting systems are required to prevent
inaccuracies in the financial statements.
The Regional Office of Education #47 did not have a review
function over the financial reporting throughout the year. As a result, the auditors identified and
proposed numerous adjustments to the preliminary financial statements. (Finding 06-03, page 14)
Regional Office officials noted that they were in the
process of converting recordkeeping activities to one system during fiscal
year 2006. The conversion consumed the
time of personnel assigned to recordkeeping functions. Financial statements were reviewed at the
end of the fiscal year.
The Regional
Office of Education #47 accepted the recommendation, responding that it has
fully converted all of its recordkeeping activities to one system for the
fiscal year 2007. Internal reporting
documents now show all revenues and expenditures by activity, program, and
fund resulting in a monthly summary statement of all accounts. These financial statements are currently
reviewed by the bookkeeper, Assistant Regional Superintendent and Regional
Superintendent.
UNDERCOLLATERALIZATION OF BANK ACCOUNTS
The Public
Funds Deposit Act (30 ILCS 225/1) gives the authorization for deposits in
excess of the federally insured limit to be covered by pledged collateral
held by the financial institutions’ trust departments in the Regional Office
of Education #47’s name. In addition,
prudent business practice requires that all cash and investments held by the
financial institutions for the ROE be adequately covered by depository
insurance or collateral.
The Regional
Office of Education #47 did not have sufficient collateral in place to insure
their cash balances against possible loss.
At year end, $535,404 of Regional Office of Education #47’s bank
balance of $642,836 was exposed to custodial credit risk.
The Regional
Office of Education #47 accepted the recommendation and has made formal
arrangements with the bank and all deposit amounts in excess of the FDIC
insured amount are collateralized.
AUDITORS’
OPINION
Our auditors state
the Regional Office of Education #47’s financial statements as of June 30, 2006 are fairly
presented in all material respects.
_____________________________________
WILLIAM G. HOLLAND,
Auditor General
WGH:JRB
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were
Prado & Renteria, Prof. Corp.
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