REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #11
CLARK, COLES, CUMBERLAND, DOUGLAS, EDGAR,
MOULTRIE AND
SHELBY COUNTIES

FINANCIAL AUDIT
For the Year Ended: June 30, 2013


Release Date:   March 12, 2014

Summary of Findings:
Total this audit: 2
Total last audit:  1
Repeated from last audit: 1

State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL

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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 #11 did not
have sufficient internal controls over the
financial reporting process.

• The Regional Office of Education #11 did not
have adequate internal control over cash.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

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, skills and experience to prepare GAAP
based financial statements 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 its accounting records on cash
basis accounting during the fiscal year and
posts year-end accrual entries for financial
statement purposes. While the Regional Office
maintains controls over the processing of most
accounting transactions, and attempts to prepare
the basic financial statements, 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.

During review of the Regional Office of
Education #11’s financial statements prepared by
the Regional Office of Education #11, auditors
noted the following:

• The Regional Office’s financial information
required material adjusting entries related to
the conversion of its financial statements from
cash to accrual basis of accounting based on
documentation provided by the Regional Office in
order to present its financial statements in
accordance with generally accepted accounting
principles.  Proposed adjusting entries were
approved and accepted by Regional Office
management.

• In fiscal year 2013, the Regional Office was
able to prepare the individual funds financial
statements as well as the notes to the financial
statements.  However, the government-wide
financial statements which include the Statement
of Net Position, Statement of Activities,
Governmental Funds Balance Sheet, Governmental
Funds Statement of Revenues, Expenditures and
Changes in Fund Balances and the Proprietary
Fund Statement of Cash Flows, were not properly
prepared.

According to the Regional Office of Education
#11 management, this was the Regional Office’s
second time preparing financial statements.
Some additional experience is needed to address
all disclosure issues. (Finding 2013-001, pages
9-10) This finding was first reported in 2007.

The auditors recommended that, as part of
internal control over the preparation of
financial statements, including disclosures, the
Regional Office of Education #11 should continue
to implement comprehensive preparation and/or
review procedures to ensure that the financial
statements are complete and accurate.  These
procedures should be performed by a properly
trained individual possessing a thorough
understanding of the applicable GAAP, GASB
pronouncements, and knowledge of the Regional
Office of Education #11’s activities and
operations.

The Regional Office of Education #11 responded
that it understands the nature of the
deficiency.  The Regional Office noted that it
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
the funds available to provide the educational
services for the schools in the region.  The
Regional Office also noted that it will continue
to prepare the financial statements internally
and continue to seek additional knowledge and
training for staff members to ensure that all
financial statements, including disclosures, are
complete and accurate.  The Regional Office
responded that it accepts the degree of risk
associated with this condition. (For previous
Regional Office response, see Digest Footnote
#1.)

INTERNAL CONTROL OVER CASH

The Regional Office of Education #11 is
responsible for establishing and maintaining a
system of internal controls over cash to prevent
errors and fraud.

During review of the Regional Office of
Education #11’s cash records, auditors noted the
following:

• Although it appears that a review of the
monthly bank reconciliations are being
performed, insufficient detail of outstanding
deposits and checks was noted in the
reconciliation that would enable replication of
such review.

• During review of the year-end bank
reconciliation, we noted 3 checks in the total
amount of $232 that were issued after year-end
but posted to fiscal year 2013 activity.
• Bank reconciliations after year-end are not
being performed until the fiscal year being
audited is closed in the Regional Office of
Education #11’s accounting software, which is
near the completion of the audit.  The bank
reconciliations for July 2012 through December
2012 were prepared in January 2013.  In
addition, the February 2013 bank reconciliation
was not prepared until April 2013, the March
2013 bank reconciliation was not prepared until
May 2013, and the May 2013 bank reconciliation
was not prepared until July 2013.  Although the
original bank reconciliation for June 2013 was
prepared in July 2013, the printed
reconciliation in the file did not reconcile to
the bank balance by $232.

According to the Regional Office of Education
#11 management, they were unable to complete the
reconciliations for July 2012 through December
2012 because the accounting records were not
closed due to the ongoing audit.  The other bank
reconciliations that were not prepared timely
were due to management oversight.  (Finding
2013-002, pages 11-12)

The auditors recommended that as part of
internal control over cash, the Regional Office
of Education #11 should prepare monthly bank
reconciliations when bank statements are
received.  The supporting documentation for the
bank reconciliations should include an
outstanding check and deposit list that agrees
to the bank reconciliation.

The Regional Office of Education #11 responded
that it recognizes the need for changes to
controls over cash.  The Regional Office will
implement additional controls so that the
instances noted in the finding do not occur in
the future.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #11’s financial statements as of June
30, 2013 are fairly presented in all material
respects.

WILLIAM G. HOLLAND
Auditor General

WGH:KJM

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

DIGEST FOOTNOTE

#1: Controls Over Financial Statement
Preparation - Previous Regional Office Response

In its prior response in 2012, the Regional
Office of Education #11 responded that it
understands the nature of the deficiency.  The
Regional Office noted that it 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 the funds
available to provide the educational services
for the schools in the region.  The Regional
Office also noted that it will continue to
prepare the financial statements internally and
continue to seek additional knowledge and
training for staff members to ensure that all
financial statements, including disclosures, are
complete and accurate.  The Regional Office
responded that it accepts the degree of risk
associated with this condition.