REPORT DIGEST

 

REGIONAL OFFICE OF EDUCATION # 21

 

FRANKLIN/WILLIAMSON COUNTIES

 

FINANCIAL AUDIT

(In accordance with the
Single Audit Act and OMB Circular A-133)

For the Year Ended:

June 30, 2007

 

Summary of Findings:

 

Total this audit                 5

Total last audit                 9

Repeated from last audit  3

 

Release Date:

June 19, 2008

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

 

 

 

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

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

http://www.auditor.illinois.gov

 

 

 

 

SYNOPSIS

 

 

·        The Regional Office of Education #21 did not maintain an adequate cost allocation plan.

 

·        The Regional Office of Education #21 did not comply with a statutory requirement to assure that audits are performed of school districts and submitted timely to the ROE.

 

·        The Regional Office of Education #21 did not allocate interest earned from its commingled bank account to each source of funds.

 

·         The Regional Office of Education #21 did not have adequate controls over the recording and reporting of fixed assets.

 

  • The Regional Office of Education #21 did not have sufficient internal controls over the financial reporting process. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                        {Expenditures and Revenues are summarized on the reverse page.}

 


 

REGIONAL OFFICE OF EDUCATION #21

FRANKLIN AND WILLIAMSON COUNTIES

 

FINANCIAL AUDIT

(In Accordance with the Single Audit Act and OMB Circular A-133)

For The Year Ended June 30, 2007

 

 

 

 

FY 2007

FY 2006

TOTAL REVENUES

$3,157,264

$3,496,356

Local Sources

$518,387

$423,374

% of Total Revenues

16.42%

12.11%

State Sources

$1,890,318

$1,813,291

% of Total Revenues

59.87%

51.86%

Federal Sources

$748,559

$1,259,691

% of Total Revenues

23.71%

36.03%

 

TOTAL EXPENDITURES

$3,024,461

$3,663,484

Salaries and Benefits

$1,813,786

$2,091,953

% of Total Expenditures

59.97%

57.10%

Purchased Services

$640,990

$819,851

% of Total Expenditures

21.19%

22.38%

All Other Expenditures

$569,685

$751,680

% of Total Expenditures

18.84%

20.52%

 

 

 

TOTAL NET ASSETS

$846,261

$713,458

 

 

 

INVESTMENT IN CAPITAL ASSETS

 

$113,566

 

$214,841

 

              Percentages may not add due to rounding.

 

 

REGIONAL SUPERINTENDENT 

During Audit Period:  Honorable Ronda Baker (effective June 1, 2006)

Currently:  Honorable R. Matthew Donkin (Effective July 1, 2007)


 

 

 

 

 

 

 


The Regional Office of Education #21 did not maintain an adequate cost allocation plan.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The Regional Office of Education #21 did not comply with a statutory requirement to assure that audits are performed of school districts and submitted timely to the ROE.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #21 did not allocate interest earned from its commingled bank account to each source of funds.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #21 did not have adequate controls over the recording and reporting of fixed assets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Regional Office of Education #21 did not have sufficient internal controls over the financial reporting process. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

 

 

ALLOCATION OF COSTS

 

         The Regional Office of Education #21 has not implemented a cost allocation plan or an approved indirect cost rate to allocate indirect costs in accordance with OMB Circular A-87.  The ROE invoices the various grants and programs it administers for central service activities, including support salaries and related benefits, accounting and secretarial services, and space rent based on the grants’ budgeted costs (rather than as part of a Cost Allocation Plan).  Such salaries and benefits are allowable expenditures under OMB Circular A-87.  However, where employees work on multiple activities or cost objectives, a distribution of their salaries or wages is required to be documented in accordance with the provisions of OMB Circular A-87 or be included in the ROE’s cost allocation plan.  Rent costs are also an allowable expenditure, subject to limitations included in OMB Circular A-87.

 

         Grants, cost reimbursement contracts, and other agreements with the federal government should bear their fair share of costs recognized under principles established by the federal Office of Management and Budget. 

 

         Auditors recommended that the Regional Office develop a cost allocation plan or establish an approved indirect cost rate in accordance with OMB Circular A-87 which addresses allowable costs to all applicable programs. (Finding 07-01, pages 14-15)  This finding was first reported in 2000.

 

         The Regional Office of Education #21 responded that the office has developed a cost allocation plan during FY 2007.  They noted that they had spent several months, after the development of the plan, tracking expenditures to determine proper allocations to respective programs.  They noted that the plan is being used to bill the first half of FY 2008 and is in place to bill each program its share of the costs from this point forward. (For previous Regional Office response, see Digest Footnote #1.)

 

 

CONTROLS OVER COMPLIANCE WITH LAWS AND REGULATIONS

 

         The Illinois School Code (105 ILCS 5/3-7) states that each school district shall, as of June 30 each year, cause an audit to be made of its accounts.  Each school district shall on or before October 15 of each year, submit an original and one copy of such audit to the Regional Superintendent.  If any school district fails to supply a copy of such audit report on or before October 15, or within such time extended by the Regional Superintendent from that date, not to exceed 60 days, then it shall be the responsibility of the Regional Superintendent to cause such audit to be made.

 

         The Regional Office of Education #21 was unable to supply evidence that 2 of the 16 school district financial statement audit reports were submitted to the ROE by October 15, 2006 or by the extension date.  One school district’s financial statement audit report was submitted 46 days after the allowable extension date of December 14, 2006.  The remaining school district’s financial statement audit report had not been submitted as of September 25, 2007. 

 

         The Regional Office implemented a log to evidence the receipt of the financial statements from the school districts and grants extensions when requested; however, the Regional Office granted an extension to the school district past the allowable 60 day period. 

 

         Auditors recommended that the Regional Office monitor the log evidencing the receipt of audits from the school districts and make additional requests to ensure that they are received in a timely manner, as required by 105 ILCS 5/3-7. (Finding 07-02, pages 16-17) 

 

         The Regional Office #21 responded that procedures are in place to track the information that the school districts send to the ROE and to insure that it is completed in a timely manner.  The Regional Office noted that the audit report for the school district is now on file.

 

 

FAILURE TO ALLOCATE INTEREST EARNED

 

         The Regional Office of Education #21 did not allocate interest earned from its commingled bank account to each source of funds.  The Regional Office of Education Accounting Manual states that if dollars from two or more sources of funds are combined in one bank account and/or fund, the ROE must allocate, no less than monthly, a portion of the interest earned on that bank account or fund to each source of funds.

 

         Auditors recommended that the Regional Office implement its plan to allocate interest earned on commingled funds to each source of funds and follow the appropriate State and federal statutes and regulations. (Finding 07-03, pages 18-20)  This finding was first reported in 2005.

 

         The Regional Office of Education #21 responded that it developed an interest earned allocation plan in September 2007.  The interest earned in FY 2007 was calculated using this plan.  They noted that the interest for each of their accounts for FY 2008 has been deposited into an “Interest Earned” Fund in their accounting system.  They noted that this fund breaks down interest among the accounts on file.  (For previous Regional Office response, see Digest Footnote #2.)

 

 

INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT

 

         The Regional Office of Education #21 did not have adequate controls over the recording and reporting of fixed assets.  The Regional Office did not have procedures in place to ensure that acquisitions over the established capitalization threshold were added to the Regional Office’s fixed asset records, resulting in the omission of five items totaling $3,369 that were inadvertently expensed.  Additionally, the Regional Office did not provide complete information as to the useful lives of the above acquisitions, as well as two additional items that were added to the fixed asset records during the fiscal year.

       

         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 required that an inventory of all fixed assets and depreciation schedules for assets meeting the capitalization threshold for reporting be maintained. 

        

         Due to turnover in a custodian position, the Regional Office of Education #21 had insufficient controls over recording and reporting fixed assets.  Auditors recommended that the Regional Office adhere to its fixed asset policy and procedures manual to effectively and efficiently monitor property acquisitions, transfers and disposals, and provide for accurate reporting of fixed asset balances. (Finding 07-04, pages 21-22)

        

         Regional Office of Education #21 responded that it is following its policy and procedures manual in regards to inventory of fixed assets.  The Office continues to evaluate its procedures to complete this task in a more efficient manner.

 

 

Controls Over Financial Statement Preparation

 

         The Regional Office of Education #21 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 #21 did not have sufficient internal controls over the financial reporting process.  The Regional Office maintains their accounting records on the cash basis of accounting. While the Regional Office maintains controls over the processing of most accounting transactions, 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 the following:

 

  • Numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles. 

  • The Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable and accounts payable.  Additionally, no entries were provided to reconcile the ROE’s grant activity, such as posting grant receivables and deferred revenue. 

 

         The auditors recommended that, as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #21 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. (Finding 07-05, pages 23-24)

 

         The Regional Office of Education #21 responded that it will continue to contract with a local auditing firm to assist them as they navigate through various issues resulting from past management problems.  The ROE noted that at the present time, the additional costs to the ROE of hiring and training additional staff to do this task outweigh the benefits.  The ROE noted that it will review, approve, and accept responsibility for the proposed audit adjustments and the financial statements and related notes.

 

 

 

AUDITORS’ OPINION

 

         Our auditors state the Regional Office of Education    #21’s financial statements as of June 30, 2007 are fairly stated in all material respects.

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM

 

 

 

SPECIAL ASSISTANT AUDITORS

 

         Our special assistant auditors were Sikich, LLP.

 

DIGEST FOOTNOTES

 

#1:  IMPROPER  ALLOCATION OF COSTS – Previous Regional Office Response

 

In its prior response in 2006, the Regional Office responded that it had a cost allocation plan which would enable the proper allocation of costs to grant funding sources.  This cost allocation plan outlined the methods to be used to allocate both direct and indirect costs to grants.  This cost allocation plan was to be applied to federal and State grants, as well as any other grants for which costs must be allocated.  Employees whose salaries are paid from multiple funding sources are required to complete time sheets.  Costs are determined and allocated based on formulas which ensure that only the actual cost of grant operation is charged to the grant.  The condition of grants being excessively charged has stopped.  The ROE has also received an approved indirect cost rate from the Illinois State Board of Education.

 

#2:  FAILURE TO ALLOCATE INTEREST EARNED – Previous Regional Office Response 

 

In its prior response in 2006, the Regional Office responded that an Interest Allocation Plan has been developed which ensures that interest earned from grant funds will be allocated back to the grant source and used as part of the program as approved in the original grant agreement.  This allocation was to be made monthly with a report going to the Superintendent and Program Director which should help ensure proper utilization.

 

Complete Regional Office responses to prior findings are available upon request from the Auditor General’s Office.