FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
INADEQUATE SEGREGATION OF DUTIES
The Regional Office of Education #27 does not have proper
segregation of duties. Each of the
ROE’s three bookkeepers has the primary responsibility for most of the
accounting and financial functions for the programs they individually
handle. The bookkeepers perform the
disbursement functions of invoice processing, check preparation,
custodianship of blank checks, recording, and bank reconciliation for those
programs. The bookkeepers also perform
the functions of receiving, depositing, and recording of cash receipts for
those programs. The ROE Operations
bookkeeper has custody of the signature stamp.
The Regional Superintendent of Schools is responsible for
establishing and maintaining an internal control system to prevent errors and
irregularities. Inadequate
segregation of duties limits the effectiveness and efficiency of the internal
control system and increases the risk that errors or irregularities may occur
and not be detected promptly.
(Finding 03-1, pages 12 - 14) This finding is repeated from our
2002 audit.
The Regional Office of Education #27 accepted the
recommendation to strengthen internal controls. The bookkeeper will record the checks on a register with the
date received. The Regional
Superintendent will periodically check that deposits are made on a weekly
basis, or if needed, twice weekly.
The bookkeeper will sign the bank reconciliations, which will in turn
be reviewed and signed by the Regional Superintendent. The Regional Superintendent’s signature
stamp will be in his possession until needed during his absences. (For
previous Regional Office response, see Digest Footnote #1.)
INADEQUATE CONTROLS OVER CASH RECEIPTS
The Regional Office of Education #27
does not maintain a logbook of checks received nor issue official receipts
for every transaction. The receipts
are recorded only when they are deposited.
Checks received are not restrictively endorsed. Twenty-seven out of 40 (68%) receipts
tested were deposited from 2 to 177 days after the date of the check.
Sound internal controls require that all checks
received should be deposited promptly and recorded immediately (Finding 03-2,
pages 15 – 16).
The Regional Office of Education #27
accepted the recommendation stating that checks received will be date stamped
when possible and stamped “for deposit only” by the secretary. The bookkeeper will record the checks in a
register listing the date received.
Checks will be placed in a fire safe until deposit. The Regional Superintendent will
periodically check to see if the checks have been deposited weekly or twice
weekly if needed.
INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT
The Regional Office of Education #27
did not have adequate controls over fixed assets. For example, no formal policies and procedures had been
established to monitor and control equipment and other fixed assets. Fixed assets were not tagged. A fixed asset listing was compiled only at
the time of the audit. The listings
were based on actual physical inventory performed at the time of compilation
and were not reconciled with equipment acquisition documents and with
balances in the General Fixed Asset Account Group (GFAAG).
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 03-3, pages 17 - 19).
The Regional Office of Education #27 accepted the
recommendation stating that the current fixed asset listing has been updated
to include the acquisition dates, funding source, vendor and location of the
asset. It will also show when an item
is disposed of and the purchase of new items. A tagging system and log is being developed. A Capital Outlay Fixed Asset Policy has
been created and signed by the Regional Superintendent.
INADEQUATE DOCUMENTATION OF SALARY RATES
The Regional Office of Education #27 did not have
employment contracts or formal documentation of rates of pay for all salaried
employees tested.
Sound internal controls require that payroll rates and
amounts be properly authorized and formally documented. Absence of an employee contract and salary
rate authorization may result in disputes over salary calculations and
inaccurate payroll computations
(Finding 03-6, pages 24 - 25).
The Regional Office of Education #27 agreed with the
recommendation stating that contracts are being prepared for all
employees. Job descriptions have been
updated and the Regional Superintendent will prepare statements of payroll
changes, such as increases in pay, benefit changes or changes in job
descriptions.
IMPROPER PAYROLL COST ALLOCATION
The Regional Office of Education #27 allocated and charged
salaries of non-hourly personnel assigned to multiple programs based on
budgets. No time allocation sheets or
time and effort reports are prepared to account for actual time charges by
federal program.
The Office of Management and Budget (OMB) Circular A-87, Cost
Principles for State, Local, and Indian Tribal Governments states that
typical direct costs chargeable to federal awards are compensation of
employees for the time devoted and identified specifically to the performance
of those awards (Finding 03-7, pages
26 – 28).
The Regional Office of Education #27 agreed with the
recommendation stating that time sheets are submitted and signed by the Grant
Coordinators, Administrative Personnel or the Regional Superintendent. The Education Consultant keeps a log of
her activities so as to document the allocation of grant funds for her salary
and mileage.
OTHER FINDINGS
The
remaining findings are reportedly being given attention by Regional Office of
Education #27. We will review
progress toward the implementation of our recommendations during the next
audit.
AUDITORS’ OPINION
Our auditors state the Regional Office
of Education # 27’s financial statements as of June 30, 2003 are fairly
presented in all material respects.
_____________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:KJM:ro
SPECIAL
ASSISTANT AUDITORS
Our
special assistant auditors were E.C. Ortiz & Company, LLP.
DIGEST FOOTNOTES
#1: INADEQUATE SEGREGATION OF DUTIES - Previous
Regional Office Response
In its prior response in 2002,
the Regional Office accepted the finding stating that the Regional
Superintendent will try to maintain additional control procedures to
counteract this condition but an adequate segregation of duties problem will
remain, due to the limited number of staff.
Complete Regional Office responses to
prior findings are available upon request from the Auditor General’s Office.
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