REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION #9

 

CHAMPAIGN AND FORD COUNTIES

 

FINANCIAL AUDIT

(In Accordance with the
Single Audit Act and OMB Circular A-133)

 

For the Year Ended:

June 30, 2007

 

Summary of Findings:

 

Total this audit                   4

Total last audit                   3

Repeated from last audit    0

 

Release Date:

May 1, 2008

 

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 is also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

 

 

 

 

 

SYNOPSIS

 

·        The Regional Office of Education #9 did not have sufficient internal controls over the financial reporting process.

·        The Regional Office of Education #9 maintains its County revenue fund on the County’s fiscal year end of November 30th rather than the ROE’s fiscal year end of June 30th.

·        The Regional Office of Education #9 maintained an excess working cash reserve in its Internal Service Fund.

·        The Regional Office of Education #9’s funds deposited at a financial institution exceeded the amount pledged as collateral by $28,034 at June 30, 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

             {Expenditures and Revenues are summarized on the reverse page.}

 

                                                                                   

 

 

 

 

REGIONAL OFFICE OF EDUCATION #9

CHAMPAIGN AND FORD COUNTIES

FINANCIAL AUDIT

(In Accordance with the Single Audit Act and OMB Circular A-133)

For The Year Ended June 30, 2007

 

 

FY 2007

FY 2006

TOTAL REVENUES

$4,491,351

$4,341,261

Local Sources

$1,828,319

$1,927,689

% of Total Revenues

40.71%

44.40%

State Sources

$1,852,468

$1,865,357

% of Total Revenues

41.25%

42.97%

Federal Sources

$810,564

$548,215

% of Total Revenues

18.05%

12.63%

 

TOTAL EXPENDITURES

$4,271,673

$3,865,935

Salaries and Benefits

$2,648,752

$2,488,773

% of Total Expenditures

62.01%

64.38%

Purchased Services

$1,065,359

$957,971

% of Total Expenditures

24.94%

24.78%

All Other Expenditures

$557,562

$419,191

% of Total Expenditures

13.05%

10.84%

 

 

 

TOTAL NET ASSETS

$1,826,804

$1,607,126

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$198,866

 

$218,170

 

 

   Percentages may not add due to rounding.

 

REGIONAL SUPERINTENDENT 

During Audit Period:  Honorable Judith Pacey

Currently:  Honorable Jane Quinlan


 

 

 

 

 

 

 


The Regional Office of Education #9 did not have sufficient internal controls over the financial reporting process.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #9 maintains its County revenue fund on the County’s fiscal year end of November 30th rather than the ROE’s fiscal year end of June 30th.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #9 maintained an excess working cash reserve in its Internal Service Fund.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #9’s funds deposited at a financial institution exceeded the amount pledged as collateral by $28,034 at June 30, 2007.

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

Controls Over Financial Statement Preparation

 

         The Regional Office of Education #9 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 #9 did not have sufficient internal controls over the financial reporting process.  The Regional Office maintains their 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 sufficient 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.  

 

         In their review of the Regional Office’s accounting records, auditors noted that the Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable, accounts payable, or deferred revenues.  While the Regional Office did maintain records to indicate the balances of accounts payable, accounts receivable, and deferred revenues, there were no entries made by the ROE to reconcile their grant activity, such as posting grant receivables and deferred revenues.  The Regional Office’s financial information required numerous adjusting entries to present the financial statements in accordance with generally accepted accounting principles. (Finding 07-1, pages 12a-12b)

        

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #9 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.

 

         The Regional Office of Education #9 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in an organization of its size.  The Regional Office noted that its staff has reasonable understanding of the financial statements and can determine that the information in the financial statements is accurate.  The Regional Office noted that its staff lacks the ability to prepare the notes to the financial statements.

 

         The Regional Office of Education #9 noted that it accepts the degree of risk associated with the condition because the additional expense to seek outside accounting expertise to prepare and/or review financial statements would take away from the funds available to provide educational services for the schools in the region.  The Regional Office noted that it will continue to review, approve, and accept responsibility for the audit adjustments, financial statements and related notes provided by the auditors.

 

 

MAINTAINING INCORRECT FISCAL YEAR FOR GENERAL FUND

 
         The Regional Office of Education #9 maintains its County revenue (general fund) on the County’s fiscal year end of November 30th rather than the ROE’s fiscal year end of June 30th.

 

         Generally accepted accounting principles require that the Regional Office of Education #9 maintain all funds on their established fiscal year end to give an accurate presentation of revenues and expenditures. 

 

         The auditors’ review found that the fund balance for the general fund was off by approximately $31,000; revenues were understated by $68,000; and expenditures were understated by $99,000. (Finding 07-2, page 12c)
 
         The auditors recommended that the Regional Office of Education #9 maintain its County revenue (general fund) on the ROE’s fiscal year, rather than the County’s fiscal year.

 

         The Regional Office of Education #9 responded that it has corrected this situation and will maintain County revenue on the ROE’s fiscal year, July 1 through June 30.
 
 

EXCESS WORKING CASH IN INTERNAL SERVICE FUND

 

         The Regional Office of Education #9 maintained an excess working cash reserve in its Internal Service Fund that would cover 138 days of average expenditures when a 60 day cash reserve is considered reasonable. 

 

         The auditors review of the Internal Service Fund identified that:

 

  • Over the last two years, average expenses within the administrative Internal Service Fund were $124,179.  Cash on hand in the administrative Internal Service Fund at June 30, 2007 totaled $46,970, representing approximately 138 days of average expenses.  In comparison, at June 30, 2006, the Internal Service Fund’s working cash totaled $41,375 representing 122 days of average expenses. 

 

  • The Internal Service Fund showed a profit of $7,282 for fiscal year 2007 due to billings in excess of actual costs.

 

         The Regional Office of Education #9’s indirect cost rate is too high.  The ROE had decreased the indirect cost rate to account for lower expenses, but the rate decrease was not sufficient. (Finding 07-3, pages 12d-12e)

 

         The auditors recommended that Regional Office of Education #9 lower its indirect cost rate and that the ROE reimburse $7,282 to the individual programs.

 

         The Regional Office of Education #9 responded that it will closely monitor the Internal Service Fund to ensure that the cash balance doesn’t exceed 60 days and will adjust the indirect cost rate as necessary.  In addition, the Regional Office of Education #9 is currently evaluating the Regional Office’s overall cost allocation plan.

 

         The Regional Office of Education #9 noted that it had put together a committee of individuals representing ROE programs to investigate purchasing presentation equipment for training and meeting purposes during spring 2007.  Bids for the equipment ranged from $6,566 to $10,645.  The Regional Office of Education #9 was holding these funds to purchase presentation equipment that will benefit all programs.  Therefore, rather than reimbursing the $7,282 to the individual programs, the Regional Office will use the funds to purchase the presentation equipment mentioned above.

 

 

INADEQUATE MONITORING OF COLLATERAL ON DEPOSITS

 

         The Regional Office of Education #9’s funds deposited at a financial institution exceeded the amount pledged as collateral by $28,034 at June 30, 2007.  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 #9’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, 2007, cash account balances with one bank totaled $304,443.  The Federal Deposit Insurance Corporation (FDIC) covers up to a maximum of $100,000.  Additional collateral totaling $176,409 was received as of June 30, 2007.  The Regional Office had made a formal arrangement with the bank to automatically provide additional collateral for balances exceeding the FDIC coverage.  However, additional collateral was not obtained for the balance of $28,034.

 

         According to Regional Office of Education #9 management, the lack of required additional collateral for deposits was due to the bank insufficiently monitoring account balances when assigning collateral.  (Finding 07-4, page 12f)

 

         Auditors recommended that Regional Office of Education #9 monitor collateral held for its bank accounts.  The ROE should also establish controls for confirming amounts pledged by the bank on a regular basis, especially when the cash balances exceed the FDIC levels.

 

         The Regional Office of Education #9 responded that it agrees with the finding and will meet with bank personnel to review the agreement about additional collateral for the Regional Office of Education and to request a regular statement showing the amounts that have been pledged.  Management noted that Regional Office staff will more closely monitor collateral pledged on bank account balances.

 

AUDITORS’ OPINION

 

         Our auditors state the Regional Office of Education #9’s financial statements as of June 30, 2007 are fairly presented in all material respects.

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:KJM

 

 

SPECIAL ASSISTANT AUDITORS

 

         Our special assistant auditors were Kemper CPA Group, LLP.