REPORT DIGEST
REGIONAL OFFICE OF EDUCATION #1
ADAMS AND PIKE COUNTIES
FINANCIAL AUDIT
For the Year Ended: June 30, 2009
Summary of Findings:
Total this audit: 3
Total last audit : 4
Repeated from last audit: 3
Release Date: March
11, 2010
State of Illinois Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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SYNOPSIS
•During the past fiscal year, the Regional Office of
Education #1 recorded cash transactions of the West Central Regional System
#240 in its general ledger system.
•The Regional Office of Education #1 did not have sufficient
internal controls over the financial reporting process.
•A comparison of expenditure reports to the Regional Office of Education #1’s general ledger revealed instances where the totals on the final 2009 expenditure reports did not agree with the Regional Office of Education #1’s general ledger.
FINDINGS, CONCLUSIONS
AND RECOMMENDATIONS
TRANSACTIONS OF TWO
ENTITIES ARE RECORDED IN ONE ACCOUNTING SYSTEM
During the past fiscal year, the Regional Office of
Education #1 recorded cash transactions of the West Central Regional System
#240 (WCR) in its general ledger system. The WCR administers
vocational education services for the region, and Regional Office of Education
#1 acts as a fiscal agent for the WCR.
According to governmental accounting standards, transactions
of two separate primary government units should not be co-mingled in one
general ledger system. According to GASB
14, a special purpose government is a primary government if it has the
following three characteristics: a
separately elected governing board, fiscal independence, and status as a
separate legal entity. The WCR has a separately elected board, is a legally separate
entity, and is fiscally independent.
The Regional Office of Education #1 attempted to maintain a
separate general ledger system for the WCR. However, the ROE continued to maintain WCR cash accounts on the books and recorded certain WCR transactions in the ROE general ledger. (Finding 09-1,
page 9) This finding was first reported in 2003.
Auditors recommended that Regional Office of Education #1
establish an entirely separate set of records in order to eliminate the
co-mingling of the Regional Office of Education and the West Central Regional
System accounting activity.
Management of the Regional Office of Education #1 agreed
with the finding, noting that they will work to improve the general ledger
systems in order to properly separate transactions of the West Central Regional
System #240. (For previous Regional Office response, see Digest Footnote #1.)
CONTROLS OVER
FINANCIAL STATEMENT PREPARATION
The Regional Office of Education #1 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 #1 did not have sufficient
internal controls over the financial reporting process. The Regional Office maintains its 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:
•Numerous adjustments were required to present financial
statements in accordance with generally accepted accounting principles. Proposed adjusting entries changed the
Regional Office’s net assets by $40,098.
•The Regional Office did not have adequate controls over the maintenance of records of accounts receivable. Accounts receivable and grants receivable balances were adjusted at June 30, 2009, by a net total of $10,048.
According to Regional Office officials, they did not have
adequate funding to hire or train their accounting personnel. (Finding 09-2, page 10) 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 Regional Office of Education #1 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.
Management of the Regional Office of Education #1 responded
that they agreed with the finding. The
Regional Office noted that it will employ accountants familiar with ROE
operations to prepare financial statements according to GAAP standards. (For
previous Regional Office response, see Digest Footnote #2.)
EXPENDITURE REPORTS
DID NOT AGREE TO THE GENERAL LEDGER
A comparison of expenditure reports to the Regional Office
of Education #1’s general ledger revealed instances where the totals on the
final 2009 expenditure reports were not consistent with the Regional Office of
Education #1’s general ledger. While the
following amounts are small, given the number of inconsistencies and historical
nature of the finding, we noted the following:
•The expenditure report submitted to the Illinois State
Board of Education for the Regional Safe Schools reported total expenditures of
$130,101, while the general ledger showed expenditures of $130,119 (an $18
difference).
•The expenditure report submitted to the Illinois State
Board of Education for the ROE/ISC Operations program
reported total expenditures of $142,726, while the general ledger showed
expenditures of $142,608 (a $118 difference).
•The expenditure report submitted to the Illinois State
Board of Education for the English Language Learners program reported total
expenditures of $66,000, while the general ledger showed expenditures of
$66,649 (a $649 difference).
•The expenditure report submitted to the Illinois State
Board of Education for the Truants Alternative/ Optional Education program
reported total expenditures of $80,118, while the general ledger showed
expenditures of $80,184 (a $66 difference).
•The expenditure report submitted to the Illinois Department
of Human Services for the Regional Office of Prevention Effectiveness Services
program reported total expenditures of $117,120, while the general ledger
showed expenditures of $117,289 (a $169 difference).
•The expenditure report submitted to the Illinois Department
of Human Services for the Special Education Grants Infants/Toddlers program
reported total expenditures of $417,955, while the general ledger showed
expenditures of $417,677 (a $278 difference).
Expenditure reports submitted to the Illinois State Board of
Education and Illinois Department of Human Services should agree with the
expenditures reported on the Regional Office of Education #1’s general
ledger. Inaccurate expenditure reports
were submitted, which could lead to granting agencies requesting reimbursements
or adjusting the fiscal year 2010 grant amounts.
The Regional Office of Education #1 personnel responsible
for expenditure reports prepared the reports based on numbers that were not yet
adjusted for all year-end adjustments. (Finding 09-3, page 11) This finding was
first reported in 2005.
The auditors recommended that Regional Office of Education
#1 personnel responsible for preparing the expenditure reports should use
expenditures per the general ledger after all adjustments have been made.
Management of the Regional Office of Education #1 agreed
with the finding. They responded that
accounting personnel will not prepare reports to the Illinois State Board of
Education or the Illinois Department of Human Services until all year end
adjustments have been made. (For previous Regional Office response, see Digest
Footnote #3.)
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #1’s
financial statements as of June 30, 2009 are fairly presented in all material
respects.
WILLIAM G. HOLLAND, Auditor General
WGH:JRB
SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were Fick,
Eggemeyer & Williamson, CPA’s.
DIGEST FOOTNOTES
#1: TRANSACTIONS OF TWO ENTITIES ARE IN ONE ACCOUNTING
SYSTEM—Previous Regional Office Response
In its prior response in 2008, the Regional Office of
Education #1 agreed with the recommendation, noting that it will work to
improve the general ledger systems in order to properly separate transactions
of the West Central Regional System #240.
#2: CONTROLS OVER
FINANCIAL STATEMENT PREPARATION—Previous Regional Office Response
In its prior response in 2008, the Regional Office of
Education #1 agreed with the finding and noted that it will employ accountants
familiar with ROE operations to prepare financial statements according to GAAP
standards.
#3: EXPENDITURE
REPORTS DID NOT AGREE TO GENERAL LEDGER—Previous Regional Office Response
In its prior response in 2008, the Regional Office of
Education #1 agreed with the finding.
They responded that accounting personnel will not prepare reports to the
Illinois State Board of Education or the Illinois Department of Human Services
until all bank reconciliations are completed and all resulting adjustments have
been made.