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REPORT DIGEST REGIONAL OFFICE OF EDUCATION #11 CLARK, COLES, CUMBERLAND,
DOUGLAS, EDGAR, MOULTRIE AND SHELBY COUNTIES FINANCIAL AUDIT (In Accordance with the For the Year Ended: June 30, 2007 Summary of Findings: Total this audit 3 Total last audit 2 Repeated from last audit 0 Release Date: May 8, 2008
State of Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
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SYNOPSIS
{Expenditures and Revenues are
summarized on the reverse page.} |
FINANCIAL AUDIT
For
The Year Ended June 30, 2007
|
|
FY 2007 |
FY 2006 |
TOTAL REVENUES |
$3,004,778 |
$2,951,868 |
|
Local Sources |
$508,466 |
$461,030 |
|
% of Total Revenues |
16.92% |
15.62% |
|
State Sources |
$1,341,008 |
$1,245,959 |
|
% of Total Revenues |
44.63% |
42.21% |
|
Federal Sources |
$1,155,304 |
$1,244,879 |
|
% of Total Revenues |
38.45% |
42.17% |
|
|
||
|
TOTAL EXPENDITURES |
$3,005,962 |
$2,885,464 |
|
Salaries and Benefits |
$1,313,245 |
$1,162,475 |
|
% of Total Expenditures |
43.69% |
40.29% |
|
Purchased Services |
$408,010 |
$331,867 |
|
% of Total Expenditures |
13.57% |
11.50% |
|
All Other Expenditures |
$1,284,707 |
$1,391,122 |
|
% of Total Expenditures |
42.74% |
48.21% |
|
|
|
|
|
TOTAL NET ASSETS |
$726,485 |
$727,669 |
|
|
|
|
|
INVESTMENT IN
CAPITAL ASSETS |
$7,083 |
$13,871 |
|
|
||
|
Percentages may not add due to
rounding. |
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REGIONAL
SUPERINTENDENT |
|
During Audit Period: Honorable John McNary Currently: Honorable John McNary |
|
The Regional Office
of Education #11 had not established sufficient internal control procedures
over receipts and disbursements.
The Regional Office of Education #11 used Institute Funds for a purpose not specified by the School Code (105 ILCS 5/3-12).
The Regional Office
of Education #11 did not have sufficient internal controls
over the financial reporting process. |
FINDINGS, CONCLUSIONS AND RECOMMENDATIONSINADEQUATE INTERNAL CONTROL PROCEDURES
The Regional Office of Education #11 did not have sufficient internal control procedures or was not following its established internal control procedures over receipts and disbursements. The Regional Superintendent of Schools is responsible for establishing and maintaining an internal control system over receipts and disbursements. In testing, auditors noted the following: · Of 65 transactions tested, there was: one instance where supporting documentation was missing ($32); four instances where there was no indication of approval on the ROE Order to Pay form ($2,028), and one instance where sales tax had been paid on a purchase ($10). · The Regional Office did not have formal disposal procedures to ensure that asset disposals are properly approved. · The individuals who prepare payroll disbursements for the ROE are also responsible for disbursing paychecks to employees. · The Regional Office did not have an individual independent of the expenditure report preparation process review the expenditure reports prior to the final submission to the grantor. This lack of review resulted in two incorrectly filed expenditure reports. · The Regional Office did not have an individual independent of the journal entry preparation process review the journal entries. Lack of effective internal control procedures could result in unintentional or intentional errors or misappropriations of assets, in which the errors or fraud could be material to the financial statements and may not be detected in a timely manner by employees in the normal course of performing their assigned duties. (Finding 07-01, pages 12a-12b) Auditors recommended that the Regional Office of Education #11: · Follow its established internal control procedures. · Develop formal disposal procedures for assets to ensure that all disposals are properly approved. · Have an individual independent of the payroll preparation process receive the payroll checks from the check signer and be responsible for disbursing the paychecks to employees. · Assure that an individual independent of the expenditure report preparation process reviews and approves expenditure reports prior to their final submission to ensure that the expenditure report agrees with the general ledger. · Assure that an individual independent of the journal entry preparation process periodically reviews the journal entries to ensure that they are appropriate and approved. The Regional Office of Education #11 responded that it agrees that some weaknesses were found, however none of them were attributed to the distribution of funds to ROE fiscal agents. Steps will be implemented to correct the identified weaknesses. COMPLIANCE WITH INSTITUTE FUND STATUTORY
REQUIREMENTS The Regional Office of Education #11 used Institute Funds for a purpose not specified by the School Code (105 ILCS 5/3-12). The Illinois School Code states that certificate registration fees shall be used by the Regional Superintendent to defray expenses associated with the work of the Regional Professional Development Review Committees, improving the technology necessary for the efficient processing of certificates, expenses incidental to teachers’ institutes, workshops, or meetings of a professional nature that are designed to promote the professional growth of teachers, or for expenses related to general or special meetings of teachers or school personnel of the region, which has been approved by the Regional Superintendent. The Regional Office of Education #11 transferred $3,569 from the Institute Fund to the Director’s Fund to pay for expenditures related to providing criminal background checks. The Regional Superintendent felt that this was an appropriate expenditure under the statute. (Finding 07-02, page 12c) Auditors recommended that the Regional Office of Education #11 comply with the requirements of 105 ILCS 5/3-12. The
Regional Office of Education #11 responded that while it feels that paying
for expenditures related to providing criminal background checks is an appropriate
expense for the Institute Fund since it is an expense “related to general or
special meetings of teachers,” the Regional Office will cease the practice.
The ROE notes that Controls
Over Financial Statement Preparation
The Regional Office of Education #11
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 #11
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 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, not all entries were 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 07-03, pages 12d-12e) The auditors recommended that, as
part of its internal control over the preparation of its financial
statements, including disclosures, the Regional Office of Education #11
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 #11
responded that it understands the nature of this finding and believes that
this circumstance is not unusual in an organization of its size. The Regional Office accepts the degree of
risk associated with the condition and believes that seeking additional
accounting expertise in the form of another accounting firm or appropriately
trained individual to prepare and/or review financial statements would reduce
funds available to provide educational services for the schools in the
region. To help address the lack of
“sufficient internal controls over the financial reporting process,” the
Regional Office will seek appropriate training for its bookkeeping staff. AUDITORS’ OPINION Our auditors state the Regional Office of Education #11’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. |