REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #2: ALEXANDER,
JOHNSON, MASSAC, PULASKI, AND UNION COUNTIES

FINANCIAL AUDIT (In accordance with the Single
Audit Act and OMB Circular A-133)
For the Year Ended: June 30, 2013


Release Date:   May 15, 2014

Summary of Findings:
Total this audit: 1
Total last audit:  1
Repeated from last audit: 0

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 are also
available on the worldwide web at
www.auditor.illinois.gov

SYNOPSIS

• The Regional Office of Education #2 did not
have adequate monitoring of collateral on
deposits.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE MONITORING OF COLLATERAL ON DEPOSITS

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 #2’s name.  In addition,
prudent business practice requires that all cash
and investments held by financial institutions
for the Regional Office be adequately covered by
depository insurance or collateral.

As of June 30, 2013, cash account balances with
one bank exceeded Federal Deposit Insurance
Corporation (FDIC) coverage and pledged
collateral by $330,827.  Failure to secure full
collateral on cash and investment balances may
result in monetary losses to the Regional
Office.

The Regional Office of Education #2 personnel
stated the uninsured deposits at year-end were
the result of the Regional Office being unaware
of $348,844 in redemptions occurring on one of
the securities pledged to the Regional Office
that had an original par value of $600,000.

The auditors recommended that the Regional
Office of Education #2 should strengthen
controls to ensure that market value of amounts
pledged by the bank exceeds the amount not
covered by FDIC insurance.

The Regional Office of Education #2 responded
that it agrees with the finding.  The ROE noted
that this situation occurred because the bank
holding the securities did not notify the
Regional Office when the value of one of the
pledged securities was greatly reduced due to
early redemptions which resulted in the
uncollateralized cash balance.  The ROE stated
that to ensure this situation will not occur
again, it will be reducing its bank account
balances by opening more bank accounts of less
than $250,000, the FDIC insurance coverage
limit.  Procedures will then be in place to
ensure that no bank will have more than the
amount covered by FDIC insurance at any time.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #2’s financial statements as of June
30, 2013 are fairly presented in all material
respects.

WILLIAM G. HOLLAND
Auditor General

WGH:JRB

AUDITORS ASSIGNED:  Doehring, Winders, & Co. LLP
were our special assistant auditors.