The Regional Office of Education #48 did not have adequate controls over fixed assets. For example, there were no formal policies or procedures to monitor and control equipment and other fixed assets. Fixed asset listings had not been updated with acquisitions or disposals. Physical inventories were not consistently performed and reconciled with the fixed asset listing. The fixed asset listings did not include appropriate reference to the acquisition document and the acquisition date. Appropriate forms were not used to document disposal or retirement of assets. Disposal dates were also not indicated in any listing. Therefore there was no basis for verifying the reported current year disposals in the fixed assets reports. Finally, the balances in the General Fixed Asset Account Group were not recorded in the general ledger.

The Regional Office of Education 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. In addition, sound internal controls require that policies and procedures on fixed assets cover the acquisition and tagging, recording and reporting, depreciation (if applicable), transfers and dispositions, and physical inventory, and that they be formally documented and consistently applied (Finding 03-1, pages 11-13).

The Regional Office of Education #48 accepted the recommendation, responding that they have maintained a comprehensive documentation file regarding the acquisition and disposal of fixed assets. The Regional Office stated that logs of equipment, serial numbers, costs, physical location and disposition have been created and updated. The Regional Office also stated they will conduct meetings among the directors and accounting staff to develop uniform, formal policies to monitor and control fixed asset listings and to take other corrective action.

The Regional Office of Education #48 prepares its financial reports on the cash basis of accounting. The Regional Office of Education #48 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 of accounting to the modified accrual basis of accounting.

Generally Accepted Accounting Principles require general-purpose financial statements to be prepared on the modified accrual basis of accounting (Finding 03-2, page 14). This finding is repeated from our 2002 audit.

The Regional Office of Education #48 accepted the recommendation responding that they have historically prepared financial reports on a cash basis. The Regional Office stated they are transitioning into a modified accrual system through the use of vouchers. Each purchase for end of current fiscal year expenses will be done by voucher, making sure that any taxes, shipping or additional charges are included. The actual expense will be recorded in the current fiscal year, even if the actual check is issued the following year. ( For previous Regional Office response, see Digest Footnote #1.)

Our auditors state the Regional Office of Education #48’s financial statements as of June 30, 2003 are fairly stated in all material respects.

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WILLIAM G. HOLLAND, Auditor General

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Our special assistant auditors were Sulaski & Webb.

In its prior response in 2002, the Regional Office accepted the finding, noting that they were in the process of converting to the Regional Accounting Program (RAP) developed by the Illinois State Board of Education. The RAP system has a system to assist in maintaining subsidiary records of accounts receivable, accounts payable, and deferred revenue balances.