The Regional Office of Education #19 did not have adequate controls over fixed assets. For example, there were no formal policies or procedures to monitor and control equipment and other fixed assets. An annual physical inventory of fixed assets is not performed and not all equipment is tagged. There is no policy as to retirements or disposal of assets. Reporting obsolete or lost equipment is not formally documented. Proper forms are not used to document disposal or retirement of assets. The detailed fixed asset listings were not reconciled with the balances reported in the General Fixed Asset Account Group. Finally, the inventory list does not include the information necessary to prepare the required Schedule of Changes in General Fixed Assets by Function and Activity as was reported in our Fiscal Year 2002 audit.

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. In addition, sound internal controls require that policies and procedures on fixed assets cover the acquisition and tagging, recording and reporting, depreciation (if applicable), transfers and dispositions, and physical inventory, and that they be formally documented and consistently applied (Finding 03-1, pages 12-14). This finding is repeated from our 2002 audit.

The Regional Office of Education #19 responded that they will develop formal fixed asset policies and procedures, that will include the recommendations of the auditors, to effectively and efficiently monitor fixed assets acquisition, disposals and transfers and provide accurate reporting of fixed asset balances. (For previous Regional Office responses, see Digest Footnote #1.)

The Regional Office of Education #19 has money due to other entities outstanding as of June 30, 2003 in its Making the Linc ($15,182), and State Drug Education Initiative ($4,482) programs.

All funds that are due to other entities should be dispersed by DuPage County Regional Office of Education #19 (Finding 03-2, page 15). This finding is repeated from our 2002 audit.

The Regional Office of Education #19 accepted the recommendation to obtain formal guidance from the Illinois State Board of Education as to the proper disposition of these funds and dispose of the funds according to the guidance. The Regional Office of Education #19 stated they have requested the assistance of the State Board in the disposition of these funds to the proper entities and will continue to work with the State Board to properly dispose of the funds no later than by the end of fiscal year 2004. (For previous Regional Office response, see Digest Footnote #2.)

The Regional Office did not have adequate segregation of duties for the accounting function in the local funds. The bookkeeper for local funds performs the disbursement functions of invoice processing, check preparation, custodian of blank checks, and bank reconciliation. The bookkeeper also performs the functions of depositing and recording of cash receipts.

Sound internal control requires adequate segregation of duties to ensure that effective checks and balances are in place to minimize the risk of loss (Finding 03-3, page 16).

The Regional Office of Education #19 accepted the recommendation, responding that an analysis of current job conditions and responsibilities will be performed and a job restructuring will be implemented to address the problem on segregation of duties. In addition, supervisory controls will be strengthened for a more effective and efficient system.

The Regional Office of Education #19 did not maintain adequate controls over deposits and the accounting of cash receipts for the Teachers Institute Fund. One staff person was responsible for the receipt and deposit function for this Fund. Testing of receipts and deposits in the Teachers Institute Fund noted the following:

Sound internal controls require that all checks received should be deposited promptly and recorded immediately. All collections should be deposited intact and the total amount of deposit should equal the total of the supporting documents. There should be adequate segregation of duties to ensure that effective checks and balances are in place to minimize the risk of loss (Finding 03-5, pages 18-19).

The Regional Office of Education #19 agreed with the recommendation to ensure that there is proper segregation of duties over the accounting function. The Regional Office responded that the cash receipts process has been changed. All receipts are now pre-numbered and the receiving person is responsible for them. Receipts are deposited in the bank within three days of receipt. The past practice of cashing checks from cash receipts has been eliminated. The Regional Office also stated they asked the previous bookkeeper to explain the discrepancies. After a review of the bank statements (deposits) and all of the cash receipts, the Regional Office stated it appears that all of the funds were deposited.

The remaining finding is reportedly being given attention by the Regional Office of Education #19. We will review progress toward the implementation of our recommendation during the next audit.

Our auditors state the Regional Office of Education #19’s financial statements as of June 30, 2003 are fairly presented in all material respects.

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WILLIAM G. HOLLAND, Auditor General

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Our special assistant auditors were E. C. Ortiz & Co., LLP.

In its prior responses in 2002, the Regional Office agreed with the finding, responding that they would review old fixed asset records and develop a system to identify and record grant purchases by function and activity by April 15, 2003.