FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
CONTROLS OVER COMPLIANCE WITH LAWS AND
REGULATIONS
The Illinois School Code (105 ILCS
5/3-14.11) requires the Regional Superintendent to examine at least once each
year all books, accounts, and vouchers of every school treasurer in his
educational service region, and if he finds any irregularities in them, to
report them at once, as directed by the School Code.
The Regional Office did not examine at least once each year
all books, accounts, and vouchers of every school treasurer in the
educational service region. Regional
Office officials noted they believe the mandate is outdated and that they are
satisfying the intent of the statute by other reviews they undertake. This mandate has existed in its current
form since at least 1953. (Finding 05-1, page 12-13)
The Regional Office accepted the recommendation, noting it
will seek a legislative solution to this and other obsolete passages.
INADEQUATE CONTROLS OVER CASH
The Regional Office of Education #24
did not have adequate controls over cash receipts and disbursements. Daily cash receipts for local funds are
recorded into a weekly cash receipts log.
These logs are then grouped into deposit batches of which 19 were
tested. The following was noted
during testing:
·
3 of 19 deposit batches (16%) totaling $28,224 did
not match supporting documents totaling $28,349. The $125 shortage could not be accounted for.
·
4 of 19 deposit batches (21%) totaling $2,421 did not
have supporting documents to verify the nature, source, amount and date of
actual receipts.
·
1 of 19 deposit batches (5%) had a cash receipts log
amounting to $223 that was not dated and signed by the staff receiving the
items. The corresponding deposit slip
covering this receipt log reflected a total deposit of $228, with a $5
overage which was unaccounted for.
·
15 of 19 (79%) deposit batches for GED, miscellaneous
fees, and teacher certification fees totaling $16,696 were not deposited
timely.
·
Personal checks totaling $646 were issued to replace
cash items in 8 instances.
In addition, during expenditure testing
of local ROE funds, personal items totaling $90 were included in ROE
purchases in 2 instances. Personal
checks had been issued to cover these items, including a $25 check paid
directly to the vendor and another check for $65 issued to reimburse the
ROE. Further, checks were not used
sequentially and the issuance of pre-numbered blank checks was not formally
monitored.
Finally, during bank reconciliation
testing, a $10,000 certificate of deposit was identified that was not
recorded in the general ledger as of June 30, 2005.
Sound internal controls over cash
receipts require that receipts be adequately supported to identify the actual
date of receipt and the nature and source of the receipt in order to monitor
timeliness and accuracy of deposits as well as the accuracy of revenue
recording. Receipts should be
deposited intact and on a timely basis.
Expenditure vouchers must be reviewed to ensure that payments are made
only for items received by and services rendered to the ROE. (Finding 05-2, pages 14-19) This finding was first reported in
2003.
The Regional Office of Education #24 responded that all
bookkeeping records were lost when its computer system crashed in December
2005, which may have had an impact on some of the auditors’ findings. The records had to be rebuilt by the
bookkeeper.
The Regional Office also noted that it would make every
effort to carefully date, note and deposit all cash received. The Regional Superintendent stated that he
checks, approves, and initials bills and vouchers for payment in the main
office and the Assistant Regional Superintendent does the same in the
Yorkville office.
A new procedure has been implemented for the recording of
cash receipts to ensure that receipts are adequately supported to identify
the actual date of receipt and the nature and source of the receipt in order to
monitor timeliness of deposits and accuracy of revenue recording.
The ROE stated that the practice of covering cash with
personal checks has been discontinued as well as allowing staff to include
personal purchases with office purchases.
A control log and inventory has been implemented to monitor issuance
of blank checks.
In regard to the deposit of cash receipts, the ROE noted
that the lack of staff and distance between the two offices and the bank
would continue to be a problem. The
Regional Office also cited reasons why checks were not deposited timely (such
as incomplete paperwork being submitted for teacher/administrator
certifications). The Regional Office
would like the auditor to define “timely” as it would apply to the working
conditions incumbent on the ROE.
Also, the ROE feels serving its constituency in a practical and
efficient manner or adhering to recommended audit practice creates a dilemma
for the ROE. (For previous Regional
Office response, see Digest Footnote #1.)
Auditors commented
that the Regional Office should examine its deposit practices and develop the
requisite policies and procedures for staff to follow and set timelines for
the deposit of cash receipts. It was
also noted that the Regional Office has a fiduciary responsibility to its
constituency including the adequate control and safeguarding of
receipts. The auditors identified
several areas where controls need to be strengthened over cash receipts and
that inadequate controls can produce results that are inconsistent with the
public’s best interest.
INADEQUATE SEGREGATION OF DUTIES
The Regional Office of Education #24 did not have adequate segregation of duties
for accounting in the local and distributive funds. The bookkeeper for the local and distributive funds performs
the disbursement functions of invoice processing, check preparation,
custodian of blank checks, recording transactions, and bank
reconciliations. The bookkeeper also
performs the functions of collecting and depositing cash, and recording of
cash receipts.
Sound internal controls require adequate segregation of duties to
ensure that effective checks and balances are in place to minimize the risk
of loss. (Finding 05-3, page
20-22) This finding was first reported in 2003.
The Regional Office
of Education #24 responded that division of duties continues to be a problem
for the ROE. Since the 1978
consolidation of the two counties the student population has increased from
12,000 to 31,000, and additional unfunded duties are required to be performed
with less staff. The Regional
Superintendent also noted that after the last audit was finalized, he does
check, approve and initial bills and vouchers for payment at the main office
and the Assistant Regional Superintendent does the same at the Yorkville
office. The Regional Superintendent
stated he also periodically reviews cash receipts and the Assistant Regional
Superintendent reviews the bank reconciliations. The ROE stated that it would like the auditors to be specific
and show them what can be done to assist in allaying the concern of lack of
supervision. (For previous Regional Office response, see Digest Footnote #2.)
The auditor’s commented that the
recommendation details specific actions that the Regional Office can take to
help address the lack of segregation of duties. However, the responsibility for establishing an adequate system
of internal controls is the responsibility of management.
FAILURE TO FULLY SECURE AND COLLATERALIZE CASH
BALANCE IN EXCESS OF $100,000
The Regional Office of Education #24’s
amount of funds deposited at a financial institution exceeded the amount
pledged as collateral by approximately $48,982 at June 30, 2005.
The Public Funds Deposit Act (30 ILCS 225/1) gives the
authorization for deposits in excess of the federally insured limit to be
covered by pledged collateral held by the financial institutions’ trust
departments in the Regional Office of Education #24’s name. In addition, prudent business practice
requires that all cash and investments held by financial institutions for the
ROE be adequately covered by depository insurance or collateral. (Finding 05-4, pages 23-24)
The Regional Office of Education #24
agreed with the recommendation and will make a formal arrangement with the
banks to automatically pledge securities for any deposit amounts in excess of
the FDIC insured amount.
AUDITORS’ OPINION
Our auditors state the Regional Office of Education #24’s
financial statements as of June 30, 2005 are fairly stated in all material
respects.
_____________________________________
WILLIAM
G. HOLLAND, Auditor General
WGH:KJM:ro
SPECIAL ASSISTANT AUDITORS
Our special assistant
auditors were E.C. Ortiz & Co., LLP.
DIGEST
FOOTNOTES
#1: INSUFFICIENT
DOCUMENTATION FOR RECEIPTS AND DISBURSEMENTS -- Previous Regional Office Response
In
the prior response in 2004, the Regional Office of Education #24 accepted the
recommendation, responding that changes have already been implemented. Approvals for payment will be noted on
each invoice/supporting document.
Copies of the invoices/supporting documents submitted to the
county(ies) will be made and kept on file.
#2: INADEQUATE SEGREGATION
OF DUTIES -- Previous Regional Office Response
In the prior response in
2004, the Regional Office of Education #24 accepted the recommendation,
noting that the Regional Office has limited staff to provide for adequate
segregation of duties. However,
supervisory controls will be revised to include, where practical, the recommendations
of the auditors.
Complete
Regional Office responses to prior findings are available upon request from
the Auditor General’s Office.
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