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Duplicate, unsupported, inaccurate and imprudent vendor payments resulted in questioned
costs of $6,500.
Grant expenditure reports were inaccurate, grant monies were not segregated by source
and were expended without proper support resulting in questioned costs of $68,683.
Fixed assets were not properly accounted for or inventoried and the General Fixed Asset
Account Group was omitted from ROE #21’s financial statements.
Amounts paid in salary to employees differed from supporting contracts and other
documentation resulting in questioned costs of $54,999.
Purchases for non-employees paid by the ROE or unsupported by documentation resulted in
questioned costs of $1,320.
ROE #21 entered into labor contracts with the superintendent’s spouse, son,
stepson and a Program Director’s children. The contracts lacked adequate
documentation of time and effort expended and services provided, resulting in questioned
costs of $28,850.
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FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
LACK OF CONTROL OVER VENDOR PAYMENTS
Regional Office of Education #21 lacked adequate internal controls over vendor
payments. In separate findings, the auditors noted:
- Duplicate payments of vendor invoices and posting of refunds to revenue rather than the
expenditure account (Finding 02-2, page 15);
- A lack of supporting documentation for credit card and meal purchases. Questioned costs:
$3,859.55 (Finding 02-8, page 27);
- Payment of finance charges, late payment fees and duplicate payment on credit card
accounts. Questioned costs: $2,266.87 (Finding 02-10, page 30);
- Payments in excess of the amount indicated as proper by supporting documentation.
Questioned costs: $375.13 (Finding 02-11, page 33); and
- Regional Office of Education #21 does not maintain a Policies and Procedures Manual or
an Organizational Chart, as required by the State Board of Education. A Policies and
Procedures Manual should set forth fiscal and administrative processes and help ensure
consistency and adequacy in the Regional Office’s controls (Finding 02-9, page 29).
INADEQUATE CONTROL OVER GRANTS
Regional Office of Education #21 lacked adequate internal controls over grant
reporting. The auditors noted:
- Expenditure reports submitted to various grantor agencies, such as the State Board of
Education and the Department of Human Services, were inaccurate and not supported by
amounts shown in the ROE’s general ledger. Questioned costs: $8,100 (Finding 02-4,
page 17);
- Monies received from the State Board of Education were posted as revenue to incorrect
programs (Finding 02-13, page 40);
- Monies were not segregated by funding source as required by the State Board of
Education. Twenty funds had revenue misclassifications prior to being corrected during
audit procedures (Finding 02-14, page 41); and
- Grant monies were expended without support by proper documentation or based on budgeted
rather than actual costs. Questioned costs: $60,583 (Finding 02-16, page 45).
LACK OF PROCEDURES OVER FIXED ASSETS
Generally Accepted Accounting Principles require that entities maintain a General
Fixed Asset Account Group. Regional Office of Education #21 did not maintain adequate
records to account for its general fixed assets, did not inventory assets annually, and
lacked appropriate policies for accounting for fixed assets. ROE #21 did not provide the
auditors with a list of assets in a timely manner. As a result of the above conditions,
the General Fixed Asset Account Group was omitted from the ROE’s financial
statements. Inclusion of the General Fixed Asset Account Group is required for conformity
with generally accepted accounting principles (Finding 02-5, page 20).
ROE #21 agreed with the auditor’s recommendation to develop procedures to prepare
a complete accounting of fixed assets and indicated that it is currently in the process of
training staff on new inventory software.
LACK OF SUPPORT FOR SALARY PAYMENTS
Employee contracts and other salary documentation did not support actual salaries
paid to employees of Regional Office of Education #21. For instance:
- A program director received $80,721 in gross pay but supporting contracts indicated a
total salary of $56,120; and
- Another employee received $73,289 in gross pay when her contract indicated a salary of
$42,891.
In addition, employee contracts often were not signed by the employee or approved in
writing by the superintendent. Questioned costs: $54,999 (Finding 02-6, page 21).
UNALLOWABLE GRANT EXPENDITURES FOR NON-EMPLOYEES
Grant provisions prohibit expenditures for non-employees from being paid by the
ROE. The auditors noted airline tickets for spouses and children of employees being
charged to the credit card statement paid by the ROE. In addition, food purchases were
charged to the credit card on one trip without documentation to show for whom the food was
purchased. Questioned costs: $1,320 (Finding 02-7, page 23).
The auditors recommended that ROE #21 employees reimburse the Regional Office for
personal expenses and that ROE #21 establish and follow a policy that forbids personal
expenditures by the Regional Office.
CONTRACTS WITH RELATED PARTIES
Regional Office of Education #21 entered into contracts with the Regional
Superintendent’s spouse, son and stepson, and with a Program Director’s sons,
for various services. The contracts were not supported with adequate documentation
demonstrating the time and effort expended to accomplish the responsibilities (Finding
02-12, page 35). The auditors noted:
- The Superintendent’s son and stepson were paid $4,000 each and a Program
Director’s son was paid $3,000 to provide daily cleaning of a building and to install
new blinds. The contracts did not indicate a specific rate of pay (e.g., hourly rate),
number of days of service, or number of hours to be worked. During audit fieldwork, the
auditors requested time and attendance records for these individuals but were told by ROE
officials that none were maintained. Subsequently, time records were provided at the exit
conference; however, these time records were not signed as required by a supervisor.
Questioned costs: $11,000;
- Additionally, the Superintendent’s son was paid $1,600 and a Program
Director’s two sons were paid $3,700 and $2,550 respectively to perform janitorial,
photocopying and similar services throughout the year. Questioned costs: $7,850; and
- The Superintendent entered into a $10,000 contract with his spouse, who is a full-time
employee of ROE #21, for services described only as "Education Labor Relations Board
Study Group." The contract did not specify the details of the study or the time
period the study was to take place. The ROE did not maintain documentation of the time and
effort expended by the contractor for this study.
In response to our inquiry, the auditors were initially told that the contractor’s
work product pursuant to this contract consisted of an "oral report." However,
subsequently at the exit conference, ROE #21 officials did produce a work product for this
contract.
State law prohibits an elected official from having a direct or indirect financial
interest in certain contracts. Whether an official has such a prohibited interest in a
contract with his spouse, child or other person is a factual determination that must be
made on a case-by-case basis by an appropriate investigatory agency. Questioned costs:
$10,000.
The auditors recommended that fees for contract labor with related parties should be
set at the amount that would be charged if the ROE were contracting with an independent
third party. The auditors further recommended that the ROE maintain detailed
documentation of the services to be provided and the time and effort expended to
accomplish these services.
AUDITORS’ OPINION
Our auditors state the Regional Office of
Education # 21’s financial statements as of June 30, 2002 are fairly stated in all
material respects except for the effect of the omission of the General Fixed Asset Account
Group. The General Fixed Asset Account Group should be included in order to conform with
generally accepted accounting principles. The auditors’ report also contains an
emphasis of matter paragraph due to contingent liabilities created by possible violation
of restrictive provisions of grants.
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WILLIAM G. HOLLAND, Auditor General
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SPECIAL ASSISTANT AUDITORS
Our special assistant auditors were Kemper CPA Group, LLP.
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