|
REPORT
DIGEST REGIONAL
OFFICE OF EDUCATION #14 FINANCIAL
AUDIT For the Year Ended: June 30, 2008 Summary
of Findings: Total this audit 12 Total last audit 3 Repeated from last
audit 3 Release Date: June 11, 2009
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 are also available
on the worldwide web at |
|
SYNOPSIS The
audit concluded that Regional Office of Education #14: ·
had inadequate internal control over disbursements. Because of
the overall lack of internal controls, questions as to the accuracy and
completeness of the general ledger, and problems noted in other findings
throughout this report, auditors terminated work before testing was completed
and issued a disclaimer of opinion
on the financial statements for the year ended June 30, 2008. ·
did not have sufficient internal controls over the financial
reporting process. ·
had
liabilities which exceeded its total net assets by $941,844. If the Regional Office continues to operate
at the current level without obtaining additional funding or decreasing
expenditures, ROE 14’s ability to continue as a going concern is questionable. ·
utilized an
accounting software package which was not designed for governmental entities
and did not provide the internal controls and reporting features required for
proper fund accounting. ·
did not complete 9 of 12 monthly reconciliations of its bank statements and pooled cash accounts for
fiscal year 2008. ·
had inadequate controls over property and equipment. ·
did not record payroll transactions in their general
ledger for 5 months in fiscal year
2008 after they hired an outside agency to prepare their payroll. ·
provided cash advances to two employees for
non-business related purposes. ·
paid a total of
$1,798 in finance charges, late fees and other miscellaneous service charges
on 6 credit cards. ·
did not have receipts to support 70 percent of
charges on the Regional Superintendent’s credit card. The
Regional Superintendent also made numerous personal purchases, took cash
advances, and paid for meals (both personal and for staff) on his credit card
without properly documenting the purchases and advances. ·
paid two
Assistant Regional Superintendents $12,000 and $9,400 each in addition to
their regular salaries for work completed during regular working hours. ·
used Institute Funds for unallowable expenditures under 105 ILCS 5/3-12.
{Expenditures and Revenues are
summarized on the reverse page.} |
REGIONAL OFFICE OF
EDUCATION #14
FINANCIAL AUDIT
For The Year Ended June
30, 2008
|
|
FY
2008
|
FY
2007
|
TOTAL REVENUES
|
$2,022,097 |
$2,061,913 |
|
Local Sources |
$753,160 |
$866,618 |
|
% of Total Revenues |
37.25% |
42.03% |
|
State Sources |
$1,188,813 |
$1,126,898 |
|
% of Total Revenues |
58.79% |
54.65% |
|
Federal Sources |
$80,124 |
$68,397 |
|
% of Total Revenues |
3.96% |
3.32% |
|
|
||
|
TOTAL EXPENDITURES |
$2,550,507 |
$2,216,159 |
|
Salaries and Benefits |
$1,200,555 |
$981,439 |
|
% of Total Expenditures |
47.07% |
44.29% |
|
Purchased Services |
$443,654 |
$504,106 |
|
% of Total Expenditures |
17.39% |
22.75% |
|
All Other Expenditures |
$906,298 |
$730,614 |
|
% of Total Expenditures |
35.53% |
32.97% |
|
|
||
|
TOTAL NET
ASSETS |
($941,844) |
($413,434) |
|
|
||
|
INVESTMENT IN CAPITAL ASSETS |
$21,089 |
$21,089 |
|
Percentages may not add due to rounding. |
||
|
REGIONAL SUPERINTENDENT |
|
During Audit Period:
Honorable Charles A. Flowers Currently: Honorable Charles A. Flowers |
|
The Regional Office of Education #14 did
not have adequate internal control over disbursements. Because of the overall
lack of internal controls, questions as
to the accuracy and completeness of the general ledger, and problems noted in
other findings throughout this report, auditors terminated work before
testing was completed and issued a disclaimer of opinion on the financial
statements for the year ended June 30, 2008. The Regional Office of Education #14 did
not have sufficient internal controls over the financial reporting process.
The Regional
Office of Education #14’s total liabilities exceeded its total net assets by
$941,844. If the Regional Office
continues to operate at the current level without obtaining additional funding
or decreasing expenditures, its ability to continue as a going concern is questionable.
The Regional
Office of Education #14’s response to the finding included plans to address the
going concern issue.
The Regional Office of Education #14 utilizes
an accounting software package which was not designed for governmental
entities and does not provide the internal controls and reporting features required
for proper fund accounting.
The Regional
Office of Education #14 did not complete 9 of 12 monthly reconciliations of
its bank statements and pooled cash accounts for fiscal year 2008.
The Regional
Office of Education #14 had inadequate internal controls over property and
equipment.
The Regional Office
of Education #14 did not record payroll transactions in its general ledger
for the 5 months in fiscal year 2008 after it hired an outside agency to
prepare its payroll.
The Regional Office
of Education #14 provided cash advances to two employees for non-business
purposes.
The Regional Office
of Education #14 paid a total of $1,798 in finance charges, late fees, and
other miscellaneous service charges on 6 credit cards. The Regional Office
also paid $133 in transfer fees on bank accounts and paid sales taxes on two
purchases.
The Regional Office
of Education #14 did not have receipts to support 70% of charges on the
Regional Superintendent’s credit card.
The Regional Superintendent also made numerous personal charges, took
cash advances and paid for meals (both personal and for staff) on his credit
card without properly documenting the purchases and advances.
The Regional Office
of Education #14 paid two Assistant Regional Superintendents $12,000 and
$9,400 each in addition to their regular salaries for work completed during
regular working hours.
The Regional Office
of Education #14 used Institute Funds for unallowable expenditures according
to the |
FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
INADEQUATE INTERNAL
CONTROL OVER DISBURSEMENTS The Regional Office of Education #14 did not have adequate internal control over disbursements. Auditors noted the following weaknesses in the Regional Office’s internal control system:
a)
In 10 of 50 transactions tested, there was
no invoice to support the expenditure.
b)
In 13 of 50 transactions tested, there was
not proper approval of expenditures before payment was made.
c)
In 2 of 50 transactions tested,
non-business-purpose advances were paid to employees. This
matter is covered by a subsequent finding in this report.
d) In 2 of 50 transactions tested, an
Assistant Regional Superintendent was being paid from grant funds for
consulting services. The Assistant
Regional Superintendent was also receiving salary
from State on-behalf payments.
This matter is covered by a
subsequent finding in this report.
e)
In 5 of 50 transactions tested, copies of
invoices, as opposed to original invoices, were used as supporting
documentation for expenditures. In
these cases, the Regional Office failed to maintain original copies of the
invoices from the vendors and as a result had to contact the vendor for
another copy.
f)
In 2 of 50 transactions tested, while there
was documentation to support the expenditure amount, there was no
documentation to prove that the expenditure related to Regional Office
activities.
g)
In 2 of 50 transactions tested, the amount
paid was incorrectly calculated. In
one instance, an employee’s hours were calculated improperly and the employee
was overpaid. This matter is covered by a subsequent finding in this report. The other instance related to a mileage
reimbursement that was incorrectly totaled on the reimbursement form and
subsequently paid without correction.
h)
In 1 of 50 transactions tested, the invoice
was not marked paid and did not reference a check number. This situation would allow for an invoice
to be inadvertently paid twice.
i)
In 2
of 50 transactions tested, the expenditure was not paid timely for
reimbursements.
j)
In 2
of 50 transactions tested, it was noted that sales taxes were paid. The Regional Office is exempt from the
payment of sales tax but did not provide documentation to the vendor to avoid
paying the sales tax.
k)
In 1
of 50 transactions tested, an expenditure was not recorded in the proper
period.
Because of the
overall lack of internal controls, which resulted in the problems listed
above, questions as to the accuracy and completeness of the general ledger, and
problems noted in other findings throughout this report, auditors terminated
work before testing was completed and issued a disclaimer of opinion on the
financial statements for the year ended June 30, 2008. The Regional Office of Education is responsible for establishing and maintaining an internal control system over disbursements and reimbursements to prevent errors and fraud. The internal control weaknesses noted above could result in unintentional or intentional errors or misappropriation of assets, where 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 08-4, pages 17-18) Auditors
recommended that the Regional Office of Education #14 assure that a system of
internal controls has been established and is maintained to control disbursements and prevent errors and
fraud. Regional Office officials responded to the recommendation that they have implemented the controls with segregation of duties. For instance, as of 1/5/09 the person who handles the books does not sign the checks, according to Regional Office officials. ROE officials also responded that the accounts payable files have been put in order. The ROE noted that they have instituted procedures, such as including all business receipts for any reimbursements. Controls
Over Financial Statement Preparation
The Regional Office
of Education #14 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 #14 did not have sufficient internal controls over the financial
reporting process. The Regional Office
maintains their accounting records on the cash basis of accounting. 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 following:
Due to the inadequate controls noted above, the Regional Office’s
trial balance was incomplete. The
following issues were noted:
According to Regional Office officials, they did not have adequate funding to hire and/or train their accounting personnel in order to comply with these requirements. There was also a lack of management oversight and review of financial information on a timely basis. (Finding 08-1, pages 10-11)
The auditors
recommended that, as part of its internal control over the preparation of its
financial statements, including disclosures, the Regional Office of Education
#14 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 #14 responded to the recommendation that an outside payroll service was added in 2008 and that this provides payroll controls when using an outside service. ROE officials noted the business manager was replaced with a CPA on 1/5/09. The Regional Office also responded that they are set to implement the new accounting software package, and received the initial training. CONTINUATION AS A GOING CONCERN
The Suburban Cook County Regional Office of Education #14’s liabilities exceeded its total net assets by $941,844 as of June 30, 2008. If the Regional Office continues to operate at the current level without obtaining additional funding or decreasing expenditures, its ability to continue as a going concern is questionable. Revenues decreased by $39,816 in fiscal year 2008 while expenditures increased by $334,348 in the same period. The deficiency of revenues over expenditures was $528,410 for the year ended June 30, 2008 as compared to $154,246 for the year ended June 30, 2007. Despite a finding in the prior two audits (fiscal years 2006 and 2007) regarding the Regional Office’s ability to continue as a going concern, Regional Office officials made significant new expenditures in fiscal year 2008. These included:
·
Payroll expenses increased by
approximately $146,000 from FY 07 levels.
·
At least 20 new computers at a
cost of $21,218.
·
During fiscal year 2008, a new
phone system was purchased at a cost of approximately $9,300. Based on review of the fixed asset listing
from the prior year, it was noted that a phone system for the Regional Office
was purchased in October 2006 at a cost of $8,900. In
addition, on June 17, 2008, the Regional Office obtained a loan from All audits conducted in accordance with generally accepted auditing standards require the auditor to evaluate the entity’s financial position and contemplate the continuation of the entity as a going concern. Regional
Office management undertook significant expenditures without the plans in
place to adequately fund such expenditures.
In addition, there were many questionable uses of Regional Office
funds, such as for payroll advances and payment of personal expenses, which
contributed to the financial problems of the Regional Office. These matters are covered by subsequent
findings in this report. Regional
Office officials stated that the Suburban Cook County Regional Office of
Education #14 is the only Regional Office of Education in the State of
Auditors recommended that the Suburban Cook County Regional Office of Education #14 attempt to streamline operations so that expenditures are lowered and/or continue to seek additional funding sources. The Regional Office of Education responded to the recommendation that with regard to expenses, it appears that expenses are overstated by $65,912 in capital asset purchases. Auditors commented that during the course of the audit, the Regional Office of Education was unable to provide auditors with a complete fixed asset listing to support the fiscal year 2008 additions and their associated depreciation. Consequently, for many of the asset expenses presented in the ROE’s responses, auditors did not have the necessary expense information to propose the appropriate adjustment to the ROE’s financial statements. The auditors commented further that even if the total expenses detailed in the ROE’s response, $65,912, were removed from the ROE’s expenses presented in the government-wide financial statements, the ROE’s liabilities would still exceed its net assets by $875,932 and would not obviate the auditor’s finding regarding the ROE’s ability to continue as a going concern. In its response to the going concern issue, the Regional Office responded that it had developed 5 plans:
1.
A strong
initiative in directory and web link advertisements.
2.
Secured an e-rate
grant to absorb 65% of telecommunication costs for the year ending 6/30/2010.
3.
Was in the
process of offering professional development classes to increase revenues.
4.
Was planning to
change the allocation of the ROE/ISC annual operations budget for year ending
6/30/2010. The Regional Office plans
to increase the amount appropriated to the operations of the Regional Office
and correspondingly decrease the amounts distributed to the ISC’s. The Regional Office responded that as of
6/30/07, the three Cook County ISC’s have accumulated net assets of
$2,610,373, $247,543 & $9,696,372 respectively. This is in contrast to the 6/30/07 deficit
of ($413,434) at ROE 14. Thus there is
a plan to balance the budget at ROE 14 with appropriate allocations
sufficient to satisfy certification salaries.
5.
All other regional offices in
INADEQUATE ACCOUNTING SOFTWARE AND INTERNAL
CONTROLS The Regional Office of Education #14 utilizes an accounting software package which was not designed for governmental entities and does not provide the internal controls and reporting features required for proper fund accounting. The software package allows for the revenues and expenses of the Regional Office’s programs to be accounted for separately, but combines all assets, liabilities, and fund balances. The Regional Office had purchased a new accounting system but had not placed it into service. The Regional Superintendent of Schools is responsible for establishing and maintaining an internal control system to prevent errors and irregularities. In addition, the Regional Office of Education is required by the Illinois State Board of Education to maintain an accounting system on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources together with all related liabilities and residual balances and changes therein. With its accounting software package, management could not easily obtain entity-wide financial information necessary to make informed management decisions. Without an accounting system with proper internal controls, errors or misappropriations may occur and not be detected by management. In addition, financial statements in accordance with generally accepted accounting principles and the Regional Office of Education Accounting Manual cannot be readily prepared from the accounting system. The Regional Office had not implemented a new accounting software package that allows the Regional Office to maintain an accounting system on a fund basis. (Finding 08-3, pages 15-16) Auditors recommended that the Suburban Cook County Regional Office of Education #14 implement an accounting software application that provides the necessary controls and reporting features required for proper fund accounting. An appropriate accounting system will support the multiple programs and funds administered by the Regional Office. The accounting system should have the capabilities necessary for the Regional Office to be in compliance with the Regional Office of Education Accounting Manual and provide the reporting detail necessary to prepare financial statements in accordance with generally accepted accounting principles. The Regional Office responded to the recommendation that the current software has a break down option for class. Each fund is currently broken down by class. Regional Office officials responded they plan to implement the new software with a better capacity for fund accounting for the period beginning 7/1/08-6/30/09 and that initial training for this software package is complete. RECONCILIATION OF BANK STATEMENTS AND POOLED CASH
ACCOUNTS The Suburban Cook County Regional Office of Education #14 maintains pooled cash accounts for many of their funds. The Regional Office did not complete the last 9 of 12 monthly reconciliations of its bank statements and pooled cash accounts for fiscal year ended June 30, 2008. These were completed in December 2008 after auditors brought the situation to the attention of management. The Regional Office was unable to locate original copies of the bank statements and had to contact their bank to request new copies. Inaccurate recording of program transactions could result without being discovered and corrected, causing incomplete and inaccurate financial information. (Finding 08-5, page 19) Auditors recommended that the Regional Office ensure all bank statements and pooled cash accounts are reconciled timely and not less than monthly. The Regional Office responded to the recommendation that it has implemented a running reconciliation for both bank accounts. This is adjusted at least every 2 days. The Regional Office responded that this has been effective to constantly monitor cash flow. INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT The Regional Office of Education #14 had inadequate controls over property and equipment. The Regional Office of Education (ROE) Accounting Manual requires each ROE to maintain detailed fixed asset records for both accounting purposes as well as insurance purposes, for fixed assets costing $500 or more. Generally accepted accounting principles require that an inventory of all fixed assets and depreciation schedules for assets meeting the capitalization threshold for reporting are maintained. In addition, sound internal controls require that policies and procedures on fixed assets should cover acquisition and tagging, recording and reporting, depreciation (if applicable), transfers and dispositions, and annual physical inventory, and that they should be formally documented and consistently applied. An updated fixed asset listing was not maintained by the Regional Office during the year. The Regional Office did not provide a listing to auditors until December 2008. The fixed asset listing that was provided was inaccurate and incomplete. Several items were missing from the asset listing. Many of the required details such as purchase date, cost, useful life, etc. were not provided. Also, depreciation was not calculated for a majority of the items on the listing. The information provided was unreliable, and auditors were unable to obtain information to accurately reflect fixed assets maintained by the Regional Office. The absence of a sound system of internal controls over fixed assets can result in inaccurate reporting of fixed assets and inadequate physical control for equipment items. An incomplete fixed asset listing does not provide an adequate basis for physical control and losses may occur without being detected. The fixed asset listing was not updated when asset purchases occurred and the depreciation section of the listing was incomplete for some of the assets. (Finding 08-6, pages 20-21) Auditors recommended that the Regional Office adhere to the ROE Accounting Manual and check the fixed asset listing for accuracy and existence through an annual physical inventory. Reconciliations should be performed between the fixed asset listing and the recorded capital outlay expenditures for the year. Finally, depreciation should be calculated and tracked on all fixed assets. The Regional Office responded to the recommendation that computers are tagged to support the material acquisitions and that the ROE is developing a system to record depreciation on these acquisitions, as well as the existing assets. RECORDING OF PAYROLL TRANSACTIONS The Suburban Cook County Regional Office of Education #14 hired an outside agency to prepare payroll beginning in February 2008. Beginning on this date, no payroll transactions were entered into the accounting records until December 2008. The Regional Office of Education is responsible for ensuring that all program transactions, including payroll, are recorded timely and accurately. Financial information maintained by the Regional Office was inaccurate and incomplete. This could result in inaccurate expenditure reports and account reconciliations. It also prevents management from using financial information to effectively make decisions and conclusions about the entity’s operations. Recording of payroll transactions was not completed timely. There were no reviews of financial information by management to ensure that program transactions were being recorded timely and accurately. (Finding 08-7, page 22) Auditors recommended that the Regional Office review financial information on a regular basis to ensure that all program transactions are properly presented. The Regional Office responded to the recommendation that it utilizes an outside payroll service and that currently it has developed a system to record the payroll transactions with each pay period. Also implemented is a system to reconcile the general ledger to the payroll tax returns. CASH ADVANCES TO EMPLOYEES The Regional Office of Education #14 provided cash advances to employees in 2 instances of 50 disbursements tested. In both instances, contracts were signed by the Regional Superintendent and stipulated terms for repayment through payroll check deductions. Neither of the contracts required collateral or security in the event that the employee ceased employment at the Regional Office.
·
The Regional Superintendent
approved a cash advance for $6,000 to an employee, who is also his family
relative, for purposes not related to Regional Office operations. Repayments were to occur each pay period
starting on April 4, 2008. The payroll
register does not show any repayments between this date and June 30, 2008.
·
The Regional Superintendent
approved a cash advance for $9,000 to an employee for purposes not related to
Regional Office operations. Repayments
were to occur each pay period starting on November 16, 2007. It was noted that during 10 pay periods
after the Regional Office began using an outside payroll vendor, there were 3
occasions where repayment was not made.
Prior to the use of the outside payroll vendor, the auditors could not
readily determine whether repayments had been made. Internal controls should ensure that expenses incurred by the Regional Office are adequately documented, incurred for a business purpose, and represent economical and effective use of Regional Office resources. Non-business purpose cash advances result in an improper use of Regional Office financial resources. According to Regional Office officials, the salary advances were made because the employees were experiencing financial difficulties. (Finding 08-8, pages 23-24) Auditors recommended that the Regional Office discontinue the practice of providing payroll advances to employees. For those payroll advances already granted, the Regional Office should seek repayment of those advances as expeditiously as possible. The Regional Office responded to the recommendation that the cash advances have been paid in full to date. Regional Office officials stated that going forward cash advances have been eliminated. PAYMENT OF FINANCE CHARGES, LATE FEES, TRANSFER
FEES, OTHER SERVICE CHARGES, AND SALES TAXES The Suburban Cook County Regional Office of Education #14 has 6 credit cards assigned to various employees. The Regional Office was only able to provide 41 of the 72 credit card statements for fiscal year 2008. Per review of these statements, it was noted that $946 was incurred for finance charges, $573 for late fees, and $279 in other miscellaneous service charges. Approximately $1,304 of the total $1,798 in charges was incurred on the Regional Superintendent’s credit card. Auditors noted during their review of bank statements that the Regional Office paid $133 during fiscal year 2008 for performing wire transfers from their operating bank account. In addition, in 2 of 50 transactions tested, sales taxes were paid on Regional Office purchases. Internal controls should exist to ensure that bills are paid in a timely fashion. In addition, controls should be in place to ensure that sales taxes are not paid by the Regional Office. Payment of finance charges, late fees, transfer fees, other service charges, and sales taxes results in an ineffective use of Regional Office financial resources. Regional Office staff indicated that credit card bills were not paid timely due to employees not turning in invoices timely and invoices lacking proper documentation. There was a lack of management oversight to ensure that credit payments were approved and made timely. (Finding 08-9, pages 25-26) Auditors recommended that the Regional Office strengthen its internal controls to ensure that credit card bills are paid in a timely manner, reduce or eliminate the amount of transfer fees and other service charges incurred, and ensure that sales taxes are not incurred on goods purchased by the Regional Office. The Regional Office responded to the recommendation that regarding the sales tax issue, new procedures have been implemented: a voucher cannot be approved with taxes, since the Regional Office is tax exempt. Officials noted that payments on credit cards are made on a monthly basis and are no longer late, as the ROE has hired a new business manager. Also, only superintendents & assistant superintendents and the office manager were afforded a business credit card. Currently, there are only 2 active credit cards, issued to the Regional and Deputy Superintendent. The Regional Office also responded that regarding the finance charges, it has eliminated a supplementary bank account to reduce fees. Ultimately, finance charges affect those with less cash. The Regional Office responded that its primary objective to secure new revenues will indirectly reduce finance costs. USE OF REGIONAL OFFICE CREDIT CARDS The Regional Office of Education #14 did not properly document charges on credit cards and also charged non-business expenses to credit cards. The
Suburban Cook County Regional Office of Education #14 has 6 credit cards
assigned to various employees. The Regional Office provided 41 of the 72 credit card statements for
fiscal year 2008 for review. Auditors
noted the following during a review of these credit card statements:
·
There was an overall lack of
documentation to support credit card purchases. Seventy percent (94 of 135) of purchases
made on the Regional Superintendent’s credit card were not supported by
receipts. The majority of credit card
statements did not have supporting receipts and documentation attached to the
payment vouchers and invoices.
·
Credit cards were used for personal
expenses. Of 40 purchases made with
the Regional Superintendent’s credit card that auditors selected for
follow-up, at least 16 were made for personal purchases. These included airline tickets to
·
Payments to the credit card
company were made directly from the Regional Office, as well as
“pay-by-phone” payments. The Regional
Superintendent’s credit card statement showed several “pay by phone”
payments, totaling $9,139. In
addition, “pay-by-phone” fees were incurred in the amount of $60. Regional Office officials indicated that
the “pay-by-phone” payments were made from the Regional Superintendent’s
personal accounts to cover his personal transactions. However, since payments were made from a
personal account, auditors were unable to obtain information to support this
claim. The “pay-by-phone” payment
amounts did not correlate directly with exact expenditure amounts. Auditors were unable to determine whether
all non-business-purpose expenditures, including cash advances, were repaid
from the Regional Superintendent’s personal accounts.
·
There were at least 46 meal or
food purchases totaling $3,198 on the Regional Superintendent’s credit
card. In most instances, there was not
adequate support as to the reason for the expenditure. Subsequent to our inquiry, some receipts
were provided. However, without
documenting the individuals for whom the meal expenses were incurred, either
on the meal receipt or a purchase voucher, prior to the time the credit card
payment is being made, it is difficult to determine: 1) whether all the meals
were of a business purpose; and 2) whether the meal charges were reasonable.
·
Eleven of the 40 purchases made
with the Regional Superintendent’s credit card on which auditors conducted
follow-up were purchases of meals or food.
Of the 11, 4 were purchases made for ROE staff: $736 for a holiday luncheon for staff, $200
for ROE Leadership meeting and plans for the Superintendent Breakfast, $133
for a luncheon for secretaries and administrative assistants, and $127 for
ROE Directors Luncheon Meeting. Five
of the 11 were personal purchases. For
two expenses classified as business by the Regional Superintendent, no
information was provided as to who received the meals. Internal controls should ensure that expenses incurred by the Regional Office are adequately documented, incurred for a business purpose, and represent economical and effective use of Regional Office resources. Lack of adequate controls increases the susceptibility of Regional Office funds being used for questionable activities or abuse. The condition was caused by inadequate controls over the reporting and review of credit card purchases. (Finding 08-10, pages 27-28) The auditors recommended the Regional Office ensure that appropriate documentation is provided for all credit card expenditures. Additionally, the Regional Office should establish a policy which prohibits the use of Regional Office credit cards for personal use. The policy should also require that each receipt for a meal expenditure submitted for reconciliation to the credit card statements include documentation showing the purpose of the expenditure, to which program it applies, and for whom the meal was purchased. The Regional Office should seek repayment of any personal expenses charged on Regional Office credit cards. The Regional Office responded to the recommendation that personal purchases were repaid and that the cards are to be utilized where there is a clear business purpose, thus no personal purpose; detail receipt back up is required. Officials responded there is a written credit card policy that has been put in place. QUESTIONABLE
PAYROLL PAYMENTS The Regional Office of Education #14 paid two Assistant Regional Superintendents compensation in addition to their regular salaries for work completed during regular working hours. In addition, the Regional Office paid one contractual employee for his lunch hour. Assistant
Regional Superintendents are paid by the State of In addition to these salary payments, these Assistant Regional Superintendents were paid monies by the Regional Office for consulting services related to State grants. The Assistant Regional Superintendents were paid approximately $12,000 and $9,400 in fiscal year 2008. Auditors questioned the Regional Superintendent as to whether these services were performed outside or in addition to normal working hours. The Regional Superintendent stated that these individuals worked on these grant activities during their normal working hours. Another payroll deficiency related to the overpayment of the Regional Superintendent’s nephew. Based on a review of one timesheet for this employee, auditors determined that the employee was being paid each day for his lunch hour. For example, the timesheet showed that he worked from 8:00 a.m. to 12:30 p.m., and then 1:30 p.m. to 5:00 p.m., for a total of 8 hours. However, when his payroll was calculated, his pay included the 1 hour for lunch, or 9 hours. The total paid was $865 (86.5 hours at $10 per hour); however, the timecard indicated that only 77 hours were actually worked. This resulted in an overpayment of $95 for the pay period. While the employee’s time sheet was signed by the Regional Office’s bookkeeper, it did not have an approval signature by a member of management. Auditors did not test additional timesheets for the employee to determine whether additional discrepancies occurred. The Regional Office of Education is responsible for ensuring its resources are efficiently used and that payroll payments are accurate. Regional Office resources are not being effectively used. If staff are being paid to work full-time for the Regional Office, it is questionable whether they should receive additional compensation for work performed during normal work hours. In addition, the payment of staff for hours not worked is a misuse of Regional Office funds. (Finding 08-11, pages 29-30) Auditors recommended the Regional Office not provide additional salary compensation to employees who are already receiving a full-time salary. In addition, employees’ timesheets should be reviewed and approved. The Regional Office should seek repayment of any amounts overpaid to employees. The Regional Office responded to the recommendation that regarding the payment of lunch hours, all employees at ROE #14 have been paid for lunch for at least the last ten years and that it is considered in their overall pay package.
Auditors commented that based on the Regional Office’s general ledger and payroll register, the nephew was a contractual employee until February 2008 and was paid an hourly rate based on timesheets submitted. No timesheet was submitted for the unworked lunch hour. Further, the Regional Office provided no policy to document that it has been a longstanding practice to pay hourly employees for an unworked lunch hour. Regarding the salaries paid from grants, the Regional Office responded that originally there was a planned obligation to pay the assistant superintendent a portion of the grant. However, Regional Office officials stated this will be discontinued going forward per this recommendation. RESTRICTED FUNDS
USED FOR UNAUTHORIZED PURPOSE The Regional Office of Education #14 used Institute Funds for unallowable expenditures according to the Illinois School Code (105 ILCS 5/3-12). The Regional Office’s activities consist primarily of the processing of teacher certifications and registrations. Because of this, a majority of the expenses of the Regional Office are recorded to the Institute Fund and may or may not be in accordance with Illinois School Code 105 ILCS 5/3-12.
For example, a review of the general ledger account detail indicated that the Regional Office paid approximately $340,345 in salaries and benefits to Regional Office employees out of the Institute Fund. Many of these employees have responsibilities that are outside of the Institute Fund activities and are not related to the purposes delineated in 105 ILCS 5/3-12 of the Illinois School Code. The Illinois School Code 105 ILCS 5/3-12 states that the Regional Superintendent shall use the Institute Fund to defray expenses incidental to teacher’s institutes, workshops or meetings of a professional nature that are designed to promote the professional growth of teachers or for the purpose of defraying the expense of any general or special meeting of teachers or school personnel of the Region. The
Regional Office was not in compliance with 105 ILCS 5/3-12. In most Regional Offices of Education,
salaries and benefits are paid out from the General Fund or from the
appropriate grant fund should an employee be associated with that
program. However, in the case of the Regional
Office of Education #14, most of the money it receives into its General Fund
from the State of Auditors recommended that
the Regional Office use Institute Funds only for purposes delineated
by 105 ILCS 5/3-12. The Regional
Office should also seek additional funding sources in order to fund the
operations of the office without being in violation of any State regulation. The
Regional Office responded to the recommendation that the Institute Fund does
not allow for payment of salaries for the certification processors, by
statute. Officials noted that the majority
of the 6/30/08 ROE/ISC grant has been disbursed to ISC’s. Thus, funds were not available from the
operations grant to support certification.
The Regional Office responded that unlike the other forty four
regional offices of education in
AUDITORS’ OPINION Our auditors expressed a disclaimer of opinion on the Suburban Cook County Regional Office of Education #14’s basic financial statements as of June 30, 2008. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KJM SPECIAL ASSISTANT
AUDITORS Our special assistant auditors were Clifton Gunderson, LLP. DIGEST
FOOTNOTES
#1: CONTINUATION AS A GOING CONCERN--Previous
Regional Office Response In
its prior response in 2007, the
Regional Office accepted the recommendation, stating that the new Regional
Superintendent has instituted decisive actions to reduce the $413,434 excess
spending. Closer monitoring and
reporting (including written work logs for each employee) has been instituted. Unlike the rest of |