REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #11

 

CLARK, COLES, CUMBERLAND, DOUGLAS, EDGAR, MOULTRIE AND SHELBY COUNTIES

 

FINANCIAL AND COMPLIANCE AUDIT

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

 

For the Year Ended:

June 30, 2003

 

Summary of Findings:

 

Total this audit                3

Total last audit                2

Repeated from last audit 2

 

Release Date:

January 28, 2004

 

 

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 TDD (217) 524-4646

 

 

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

SYNOPSIS

 
  • The Regional Office of Education #11 does not have proper segregation of duties in the accounting function.
  • The Regional Office of Education #11 prepares its financial statements on the cash basis of accounting. The ROE is not maintaining records of its accounts receivable, accounts payable, and deferred revenue in order to convert their financial statements from a cash basis to the modified accrual basis of accounting.
  • The Regional Office of Education #11 lacked documentation to support some expenditures. Invoices were not always canceled after payment, and documentation of proper authorization for purchases was missing for some purchases.

 

 

 

 

 

 

 

 

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

 

 

                        REGIONAL OFFICE OF EDUCATION #11

CLARK, COLES, CUMBERLAND, DOUGLAS, EDGAR, MOULTRIE AND

                                        SHELBY COUNTIES

 

                       FINANCIAL AND COMPLIANCE AUDIT

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

                            For The Year Ended June 30, 2003

 

 

FY 2003

FY 2002

TOTAL REVENUES

$3,201,050

$1,721,319

Local sources

$456,179

$529,862

% of Total Revenues

14.25%

30.78%

State Sources

$1,253,493

$1,091,665

% of Total Revenues

39.16%

63.42%

Federal Sources

$1,491,378

$99,792

% of Total Revenues

46.59%

5.80%

 

TOTAL EXPENDITURES

$3,206,071

$1,713,308

Salaries and Benefits

$1,191,135

$1,199,422

% of Total Expenditures

37.15%

70.01%

Purchased Services

$603,352

$295,986

% of Total Expenditures

18.82%

17.28%

All Other Expenditures

$1,411,584

$217,900

% of Total Expenditures

44.03%

12.72%

 

 

 

COST OF PROPERTY AND EQUIPMENT

$191,323

$366,206

 

* Percentages may not add due to rounding.

REGIONAL SUPERINTENDENT

During Audit Period: Honorable John McNary

Currently: Honorable John McNary

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #11 does not have proper segregation of duties in its accounting function.

 

 

 

 

 

 

 

 

The Regional Office of Education #11 prepares its financial statements on the cash basis of accounting.

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #11 did not have proper supporting documentation for some purchases.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

LACK OF SEGREGATION OF DUTIES

The Regional Office of Education #11 does not have proper segregation of duties in the accounting function. For example, the same person is preparing deposit slips, recording receipts, and reconciling the bank statements in the cash receipts function. In the disbursement function, the same person that records cash disbursements and reconciles the bank statements is also mailing the signed checks.

A proper segregation of duties is required in the accounting function to reduce the risk that errors or fraud in the financial statements are not detected by employees in the normal course of performing their assigned functions. (Finding 03-1, pages 12 and 13) This finding is repeated from our 2002 audit.

The Regional Office of Education #11 accepted the recommendation to ensure that two employees independent from the accounting function open the mail and prepare a listing of checks received. The cash or checks should be given to accounting and a list of receipts should be provided to program directors. The ROE also agreed that after posting and banking is complete, the two employees who open the mail should reconcile their list of receipts to the general ledger cash deposits. (For previous Regional Office response, see Digest Footnote #1.)

 

ACCOUNTING RECORDS MAINTAINED ON CASH BASIS

The Regional Office of Education #11 prepares its financial statements on the cash basis of accounting. The ROE is not maintaining records of its accounts receivable, accounts payable, and deferred revenue in order to convert their financial statements from a cash basis to the modified accrual basis of accounting. Revenue and expense account balances for transfers are being carried forward instead of being closed into fund balances at the end of each fiscal year.

Generally Accepted Accounting Principles require general-purpose financial statements to be prepared on the modified accrual basis of accounting. (Finding 03-2, page 14) This finding is repeated from our 2002 audit.

The Regional Office of Education #11 accepted the recommendation to maintain subsidiary records of accounts receivable, accounts payable, and deferred revenue balances. (For previous Regional Office response, see Digest Footnote #2.)

 

LACK OF PROPER SUPPORTING DOCUMENTATION

In the testing of purchases the following was noted:
  • In 29 of 104 items sampled, purchase orders did not contain supporting documentation for the expenditure or the Regional Office used copies of invoices as a substitute.
  • In 48 of 104 items sampled, invoices were not canceled after payment.
  • In 24 of 104 items sampled, documentation of proper authorization was missing.

The Regional Superintendent of Schools is responsible for establishing and maintaining an internal control system to prevent errors and irregularities. (Finding 03-3, page 15)

The Regional Office of Education #11 accepted the recommendation to ensure the program director and Superintendent or Assistant Superintendent sign purchase orders. The official signing the checks should examine all supporting documentation that accompanies the check to ensure it is complete. The ROE also agreed that expenditures should be paid based upon original invoice amounts with proper cancellation of the invoice to prevent duplicate payments.

 

AUDITORS’ OPINION

Our auditors state that the Regional Office of Education #11’s financial statements as of June 30, 2003 are fairly presented in all material respects.

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM:ro

 

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors were Kemper CPA Group, LLP.

 

DIGEST FOOTNOTES

#1: LACK OF SEGREGATION OF DUTIES – Previous Regional Office Response

In its prior response in 2002, the Regional Office stated that due to a limited number of staff available, it is not economically feasible to maintain a proper segregation of duties over the accounting function. The Regional Office stated they would continue to closely supervise monthly financial reports and transactions.

#2: ACCOUNTING RECORDS MAINTAINED ON CASH BASIS – Previous Regional Office Response

In its prior response in 2002, the Regional Office stated they would seek technical assistance from a Regional Financial Consultant. The Regional Office also stated they would seek training workshops sponsored by the Illinois State Board of Education on the use of the Regional Accounting Program to utilize the modified accrual system.

Complete Regional Office responses to prior findings are available upon request from the Auditor General’s Office.