FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
LACK OF CONTROL OVER FIXED ASSETS
The Regional
Office of Education #21 did not have adequate controls over its fixed assets. The Regional Office of Education
(ROE) Accounting Manual requires each ROE to maintain detailed fixed asset
records for both accounting and insurance purposes. The Regional Office of Education #21 had not established formal
policies or procedures to monitor and control equipment and other fixed
assets, as of June 30, 2003. Physical
inventories were not consistently performed.
Fixed asset listings had not been maintained or updated with
acquisitions or disposals.
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 03-02, pages 15 – 17)
This finding is repeated from our 2002 audit.
The auditors recommended that the Regional Office of
Education #21 develop a formal fixed asset policy and procedures manual, as
well as maintain accurate fixed asset listings. The Regional Office of Education #21 responded that it is
following the auditors’ recommendation with regards to acquisitions,
transfers and disposals. On-site
inventory is being conducted on an annual basis. (For previous Regional Office response, see Digest Footnote
#1.)
LACK OF PAY-RATE AUTHORIZATIONS
The Regional Office of Education #21 increases some
employees’ salaries as additional funding becomes available; however, no
supporting documentation for the increases in employee compensation is
maintained. Annual pay raises are
also not supported by any documentation to justify the increase, such as an
employee evaluation. Employee
compensation not supported by approved documentation may result in incorrect
compensation for services provided.
The Regional Superintendent stated that pay rates change
based on funding availability and changes are discussed with employees. He also stated that informal job
performance evaluations are conducted as he deems necessary. (Finding 03-03,
pages 18 – 19) This finding is
repeated from our 2002 audit.
The auditors recommended that the Regional Office
maintain documentation for employees that establishes a pay rate commensurate
with the responsibilities assigned and that formal, documented job evaluations be conducted
annually. The Regional Office of
Education #21 responded that documentation for employee pay increases will be
documented and maintained, and annual performance evaluations will be
performed for Regional Office employees.
(For previous Regional Office response, see Digest Footnote #2.)
UNALLOWABLE EXPENDITURES
The Regional Superintendent used an American Express card
to pay for goods purchased for the Regional Office as well as travel expenses
for certain ROE employees. Each
month, the credit card statement was received by the Regional Office and the
Regional Office paid in full all the expenses on the statement.
During the period July 1, 2002 through June 30, 2003, at
least $1,127 in personal expenditures were charged by the Regional
Superintendent to the American Express card and paid by the Regional
Office. Of these expenditures,
$932.91 was reimbursed to the Regional Office. The reimbursement, however, occurred 8 to 9 months after
the expenses were incurred and billed on the American Express card.
The remaining $194.51 in personal expenses was not
reimbursed by the Regional Superintendent to the Regional Office. These expenses were generally for
out-of-state personal travel. Using
Regional Office funds for personal purposes is an inappropriate use of public
funds. (Finding 03-04, pages 20 – 21)
This finding is repeated from our 2002 audit.
The auditors recommended that the Regional Office of
Education # 21 establish and follow a policy that prohibits personal
expenditures to be paid with Regional Office funds. Furthermore, the auditors recommended that the Regional
Superintendent reimburse the Regional Office for all personal expenses paid
by the Regional Office in Fiscal Year 2003.
The
Regional Office of Education #21 responded that all personal expenses paid by
the Regional Office have been reimbursed.
Also, internal controls have been established to ensure that personal
expenses are not paid by the Regional Office. The auditors commented that the Regional Office had not
provided documentation showing that all personal expenses have been
reimbursed. (For previous Regional
Office response, see Digest Footnote #3.)
LACK OF SUPPORTING DOCUMENTATION
Expenditures or reimbursements for meals by Regional Office of
Education #21 should be supported by documentation showing how the meal
expense relates to a program. We
noted at least 37 reimbursements for meals, totaling $2,488.67, that were
billed on the American Express card for the 12 months ending June 30,
2003. In most instances, restaurant
receipts were attached to support the meal expenditure, which represents
corrective action taken by the Regional Office to partially address the prior
year’s audit finding.
However, there was no explanation or other
documentation attached to the American Express bill to indicate that the meal
expenditures incurred were Regional Office-related business expenses. (Finding 03-05, pages 22 – 23) This finding is repeated from our 2002
audit.
The auditors recommended that the Regional Office of
Education #21 should establish a policy which requires that each receipt for
a meal expenditure submitted for reconciliation to the credit card statements
should include documentation showing the purpose of the expenditure, to which
program it applies, and for whom the meal was purchased. The Regional Office responded that it now
requires meal reimbursements to be accompanied by a receipt and documentation
showing the purpose of the expenditure.
(For previous Regional Office response, see Digest Footnote #4.)
LACK OF DOCUMENTATION FOR
SOME PAYMENTS TO RELATED PARTIES
The Regional Office of Education #21
contracted with the Superintendent’s son and step-son, and employed the ECHO
Director’s sons to provide various reorganizing and cleaning services at
various times during the audit period.
The following exceptions were noted:
·
Timesheets for one of the ECHO Director’s sons
supported only $2,200 of the $2,530 paid to the son.
·
Timesheets to support the $6,600 paid to the ECHO
Director’s other son were provided and were signed by the supervisor but not
the employee.
·
Timesheets were provided to support $2,160 paid to
the Superintendent’s son, but were not signed by either the supervisor or the
employee.
·
A signed contract, but no timesheets, was provided to
support the $1,000 paid to the Superintendent’s step-son. (Finding 03-07, pages 27 – 28) This finding is repeated from our 2002
audit.
The
auditors recommended that the Regional Office of Education #21 require that
all payroll costs be supported by approved time and attendance records and
that the Regional Office seek reimbursement for unsupported payroll
expenditures. The Regional Office
responded that timesheets for related parties were kept and fees were set at
the amount that would be charged if the ROE was contracting with an
independent party. The auditors
commented that the Regional Office had not provided the missing time sheets
or documentation showing that
unsupported payroll amounts were repaid.
(For previous Regional Office response, see Digest Footnote #5.)
IMPROPER ALLOCATION
OF COSTS
Regional Office of Education #21
does not maintain a cost allocation plan or an approved indirect cost rate to
allocate indirect costs, in accordance with federal OMB Circular A-87. The Regional Office allocated indirect
costs to several programs. While
these costs were approved in the grants’ budget, without documentation of the
basis for, and rationale behind the allocations, the amounts over- or
under-charged to the program cannot be readily determined. (Finding 03-10, pages 36 – 37) This finding is repeated from our 2002
audit.
The auditors recommended that the Regional Office develop
a cost allocation plan. The Regional
Office responded that it is seeking assistance with developing a cost
allocation plan that more sufficiently meets requirements. (For previous Regional Office response,
see Digest Footnote #6.)
QUESTIONABLE TRAVEL
REIMBURSEMENTS
Auditors identified several issues
regarding travel reimbursements paid by Regional Office of Education
#21. These included:
·
In at least three instances, the traveler charged
meals to the credit card used by the Regional Office and received a
per diem reimbursement for the same trip. A total of $242 in meals were
charged to the credit card on these trips.
·
The Regional Office paid for two nights’ out-of-state
lodging ($407.60) for an employee when, based on conference documentation,
only one night’s lodging appeared to be related to Regional Office business.
·
On two trips there were inconsistencies among
information recorded on the travel voucher, credit card statement, and
follow-up information provided to the auditors by the Regional Office. For example, the traveler listed Rockford
as the destination on the travel voucher and received mileage reimbursement
to and from Rockford. However, in
response to an inquiry from auditors, the Regional Office reported the
purpose of the trip was for a meeting in Bloomington. Expenses were incurred on the credit card
in both cities. Based on the
documentation provided, it was not clear whether the expenses incurred in Rockford
were business related. (Finding 03-09, pages 32 – 35)
The auditors recommended that the
Regional Office of Education #21 strengthen internal controls over the
reimbursement of travel expenses and that employees should repay the Regional
Office for any excess or undocumented travel reimbursements received. In its response, the Regional Office
provided explanations for some of the questioned travel expenses, but no
additional documentation to support these explanations was provided. Also,
the Regional Office’s response did not address the corrective actions the
Regional Office will take to strengthen control over travel or any
reimbursements made to the Regional Office by employees for excess or
undocumented travel expenses.
OTHER INTERNAL
CONTROL FINDINGS
The audit report contained three
other findings related to deficiencies in the Regional Office’s internal
controls. These included:
·
The Regional Office did not maintain a fiscal
policies and procedures manual during the audit period. In addition, a fiscal policies and
procedures manual completed in August 2003 does not reflect the current
procedures of the Regional Office.
(Finding 03-06, pages 24 – 26)
This finding is repeated from our 2002 audit.
The auditors
recommended that the Regional Office develop a policies and procedures
manual. The Regional Office responded
that it has updated its manual. (For
previous Regional Office response, see Digest Footnote #7.)
·
The Regional Office does not have proper segregation
of duties in the accounting function and is not adequately safeguarding all
assets. For example, blank check
stock is stored in an unlocked file cabinet in an area accessible to the
public and staff. (Finding 03-08,
pages 29 – 31)
The auditors
recommended specific actions the Regional Office should take to strengthen
internal controls.
·
Forty-eight of 50 (96%) vendor invoices were not
properly cancelled after payment.
Invoices should be cancelled to prevent duplicate payment of an
invoice. (Finding 03-01, page
14) This finding is repeated from
our 2002 audit.
The auditors
recommended that the Regional Office properly cancel all vendor
invoices. The Regional Office
responded that staff members have begun stamping the actual invoice
PAID. (For previous Regional Office
response, see Digest Footnote #8.)
AUDITORS’ OPINION
Our auditors state the Regional
Office of Education # 21’s
financial statements as of June 30, 2003 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.
_____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:JRB:ro
SPECIAL
ASSISTANT AUDITORS
Our
special assistant auditors were Sikich Gardner & Co., LLP
DIGEST FOOTNOTES
#1: LACK OF CONTROL OVER
FIXED ASSETS – Previous
Regional
Office Response
In
its prior response in 2002, the Regional Office agreed with the finding, responding that they were in
the process of training staff on new inventory software.
#2: LACK OF PAY-RATE
AUTHORIZATIONS – Previous Regional Office Response
In
its prior response in 2002, the Regional Office agreed with the finding,
stating that employees’ salaries should be commensurate with the
responsibilities assigned.
#3: UNALLOWABLE
EXPENDITURES – Previous Regional Office Response
In
its prior response in 2002, the Regional Office did not concur with the
finding that the expenditures were unallowable.
#4: LACK OF SUPPORTING
DOCUMENTATION – Previous Regional Office Response
In
its prior response in 2002, the Regional Office agreed with the finding, stating
that supporting invoices, seminar documentation supporting travel needs, and
airline ticket receipts, should be attached to the credit card
statement.
#5: LACK OF DOCUMENTATION
FOR SOME PAYMENTS TO RELATED PARTIES – Previous Regional Office Response
In
its prior response in 2002, the Regional Office did not concur with the
finding that there was inadequate documentation of the responsibilities
undertaken and detailed documentation demonstrating the time and effort
expended by related parties to accomplish their assigned
responsibilities.
#6: IMPROPER ALLOCATION
OF COSTS – Previous Regional Office Response
In
its prior response in 2002, the Regional Office agreed with the finding
stating that payments made should be supported by proper documentation and
should be for actual costs incurred, not budgeted grant amounts.
#7: NO POLICIES AND
PROCEDURES MANUAL – Previous Regional Office Response
In
its prior response in 2002, the Regional Office agreed with the finding
stating that management will revise its current policies and procedures
manual to include the Regional Office of Education’s fiscal and
administrative procedures and recommendations.
#8: LACK OF
CANCELLATION OF INVOICE AFTER PAYMENT – Previous Regional Office Response
In
its prior response in 2002, the Regional Office agreed with the finding
stating that management is currently revising the receipting system to make
it clearer to the bookkeeper whether deposits are refunds or revenues.
Complete Regional Office responses to prior findings are
available upon request from the Auditor General’s Office.
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