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REPORT DIGEST REGIONAL OFFICE OF EDUCATION #9 FINANCIAL AUDIT (In Accordance with the 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 Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL To obtain a copy of the
Report contact: Office of the Auditor
General
(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
FINANCIAL AUDIT
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 RECOMMENDATIONSControls
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:
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. |