Receipts were deposited into the wrong fund
Local funds were not adequately collateralized
Reporting and controls over accounts receivable
need improvement
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INTRODUCTION
The State Fiscal Year 1997 financial statements and
accompanying notes will be the last statements prepared
for the Illinois Department of Rehabilitation Services -
Illinois School for the Deaf (School). In July, 1996,
Governor Jim Edgar signed into law House Bill 2632
merging most of Illinois' human services functions into a
new Department of Human Services (DHS) effective July 1,
1997. The Department of Rehabilitation Services
transferred all of its rights, powers, duties and
functions to the DHS on July 1, 1997 as prescribed by
Public Act 89-507.
FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
IMPROPER DEPOSIT OF GRANT PROGRAM RECEIPTS
The School did not correctly deposit School Lunch and
Breakfast Program (Program) reimbursements from the
federal government and the State Board of Education. The
School deposited all reimbursements received during the
audit period, totaling $125,761, into the Rehabilitation
Services Elementary and Secondary Education Act Fund.
However, Program expenditures from the Rehabilitation
Services Elementary and Secondary Education Act Fund were
only $46,946, or $78,815 less than total reimbursements
deposited. The majority of the expenditures for the
Program were made from the General Revenue Fund for food
commodities.
Federal regulations require all program reimbursements
be used only for the operation or improvement of the food
services. (Finding 1, page 10)
We recommended the School and the Department enhance
their communication regarding Program requirements to
ensure receipts are properly deposited.
The School responded it has been depositing
reimbursements in the General Revenue Fund during FY98 to
adjust for FY97 Program expenditures. In addition, the
School stated that School Lunch and Breakfast Program
receipts will be properly allocated in the future.
INADEQUATE INTERNAL CONTROLS OVER LOCAL FUNDS
The School failed to maintain proper internal controls
over locally held funds. We noted the following:
- The total bank balance for the locally held
Special Revenue and Trust Funds exceeded the
amount of Federal Deposit Insurance Coverage by
$76,175 at June 30, 1997.
- The School did not adequately segregate local
fund processing, recording, custody, and
reconciliation functions.
- A theft of approximately $800 occurred as a
result of an employee's failure to comply with
School cash receipts policies. School officials
detected the theft and initiated disciplinary
action concerning the personnel involved.
We recommended the School comply with the State
Officers and Employees Money Disposition Act to ensure
locally held funds are properly collateralized. We also
recommended the School ensure that cash receipts policies
are followed and record keeping, custody, and
reconciliation functions are properly segregated.
(Finding 2, page 11)
The School responded that future bank deposits will be
fully collateralized and reconciliation responsibilities
will be separated from the duties of the local fund
custodian. The School also responded that the theft was
an isolated incident and corrective action was taken.
INADEQUATE REPORTING AND CONTROLS OVER ACCOUNTS
RECEIVABLE
The School failed to maintain proper controls over
accounts receivable. We noted the following:
- Quarterly accounts receivable reports were not
filed with the Office of the Comptroller. At June
30, 1997, the School's accounts receivable
totaled $77,090.
- An aging schedule of accounts receivable was not
maintained and quarterly aging reports were not
filed with the Office of the Comptroller.
- Locally held fund accounts receivable were not
properly reported in annual GAAP reporting
packages submitted to the Comptroller. Agency
Fund receivables totaling $1,566 were not
reported and Special Revenue Fund accounts
receivable were overstated $3,581.
- Policies and procedures for monitoring and
recording student loan repayments were not
formally documented. In addition, School records
were not sufficient to determine whether
conditions requiring loan repayment had been met
by loan recipients. As of June 30, 1997, loans
totaling $26,000 had been made.
We recommended the School comply with CUSAS and
properly report accounts receivable information to the
Office of the Comptroller. In addition, we recommended
the School adopt and formally document procedures for
monitoring, recording, and collecting accounts
receivable. (Finding 3, page 13)
The School responded that quarterly accounts
receivable reports will be filed as required and training
will be scheduled to ensure GAAP packages are properly
prepared. In addition, formal procedures are being
established for monitoring, recording, and collecting
accounts receivable and collection action has been taken
on outstanding student loans.
OTHER FINDINGS
The remaining findings are less significant and are
being given appropriate attention by the School. We will
review progress towards implementing these
recommendations in our next audit. Responses to the
recommendations were provided by Mr. James Donkin, Chief
Internal Auditor for the Department of Human Services.
AUDITORS' OPINION
We have stated the financial statements for the
Locally Held Funds of the Illinois Department of
Rehabilitation Services - Illinois School for the Deaf as
of and for the year ended June 30, 1997 are fairly
presented in all material respects.
____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:GSS:pp
AUDITORS ASSIGNED
This audit was performed by the Office of the Auditor
General's staff.
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