FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
INADEQUATE SEGREGATION OF DUTIES
The Regional Office of Education #27 did 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 04-1, pages 12 - 14). This finding is repeated from our 2003
audit.
The Regional Office of Education #27 accepted the
recommendation to strengthen internal controls. Checks received will be date stamped and registered on the
bookkeeper’s check registry. The
Regional Superintendent will periodically check that deposits are made on a
weekly basis, or if needed, twice weekly.
The bank reconciliations and deposits are prepared and initialed by
the bookkeeper. The Superintendent
also initials each deposit and reconciliation report. Unused checks are kept in the
Superintendent’s office. (For
previous Regional Office response, see Digest Footnote #1.)
INADEQUATE CONTROLS OVER
CASH RECEIPTS
The Regional Office of Education #27
did not maintain a logbook of checks received. The receipts were recorded only when they were deposited. Checks received were not restrictively
endorsed. Twelve out of 60 (20%)
receipts tested were deposited from 10 to 112 days after the date of the
check.
Sound internal controls require that all checks
received should be deposited promptly and recorded immediately to the
appropriate accounts (Finding 04-2, pages 15-17). This finding is repeated from our 2003 audit.
The Regional Office of Education #27
accepted the recommendation stating that checks received will be date stamped
and stamped “for deposit only” and placed in the fire safe by the secretary. The bookkeeper will record the checks in a
register. Receipts will be prepared
for moneys received for the Institute Account and kept on file. The Regional Superintendent will review
the receipts periodically for timely deposits. Transfers between banks and accounts will be recorded properly
by the bookkeeper. (For previous Regional Office response, see Digest
Footnote #2.)
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 asset tag numbers are assigned to
the equipment items but the tags were not affixed to the corresponding
equipment item. A fixed asset listing did not have complete information as to
the function and activity; reference to the acquisition source document;
acquisition date; acquisition cost; vendor; unit charged with custody;
location; fund and account from which purchased; and method of
acquisition. Also, transfers of
equipment from one location to another were not formally documented.
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 04-3, pages 18-20). This finding is repeated from our 2003
audit.
The
Regional Office of Education #27 accepted the recommendation stating that
tags have been purchased and will be attached for each item on the inventory
list. A log will be maintained with
the item name, number, location, fund used for purchase and sign out area for
transportation to another location.
The log will also include a disposal date. The Regional Office will prepare a fixed asset policy and
determine a capital outlay threshold. (For previous Regional Office response,
see Digest Footnote #3.)
INSUFFICIENT CONTROLS OVER DISBURSEMENTS
The
Regional Office Education #27 did not have adequate controls over
disbursements and expenditures. For
example, the following was noted during testing of disbursements and
expenditures:
·
Invoices and
supporting documents were not stamped “PAID” or the check number was not
recorded on the invoice to indicate that payment had been made.
·
Eight of 60 (13%)
vouchers tested did not have supporting documents and 3 of 60 (5%) vouchers
tested had supporting documents that did not completely account for the
amount disbursed.
·
No receiving reports
were prepared to document receipt of items purchased nor was there any
acknowledgement of receipt of the items indicated in the invoices attached
for 11 of 60 (18%) vouchers tested.
·
Approval for the
disbursement was not evident on the invoices; 16 of 60 cancelled checks
tested were signed using a signature stamp.
Sound internal controls
over cash disbursements require all disbursements to be adequately supported,
approved by authorized personnel, and have supporting documents properly
canceled at time of signature to prevent duplicate payment (Finding 04-4,
pages 21-22). This finding is repeated from our 2003 audit.
The Regional Office of
Education #27 accepted the recommendation to ensure that all disbursements are
adequately supported stating that all disbursements will have the check stub
attached as well as stamped “PAID” on the invoices. The Superintendent will also initial all invoices for approval
of payment. When items are ordered,
the packing slip will also be attached upon arrival of the item and the date
of receipt will be indicated. These
will be attached to the check stub upon payment. (For previous Regional Office response, see Digest Footnote
#4.)
UNRECORDED AND UNRECONCILED BANK ACCOUNTS
The Regional Office of Education #27 did not record five
bank accounts, with balances totaling $247,904, in the general ledger. Two of
these accounts were recorded in the financial statements but the adjustments
were not recorded in the general ledger.
There were also two other bank accounts that had June 30 balances that
had not been reconciled to the Regional Office’s books.
Sound internal
controls require that accounting records accurately and completely record all
transactions of the entity. Balances
in the general ledger accounts should be reconciled with the statement of
accounts on a regular basis and adjustments recorded timely and correctly in
the book of accounts (Finding 04-5 pages, 23-24). This finding is repeated from our 2003 audit.
The Regional Office of
Education #27 accepted the recommendation to record these bank accounts in
the general ledger. The Regional
Office responded that the unreconciled differences in bank reconciliations
will be resolved. (For previous
Regional Office response, see Digest Footnote #5.)
INADEQUATE DOCUMENTATION OF SALARY RATES
The Regional Office of Education #27 did not have
employment contracts or formal documentation of rates of pay for several
salaried and hourly rate 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 04-6, pages 25-26). This
finding is repeated from our 2003 audit.
The Regional Office of Education #27
agreed with the recommendation stating that contracts will be prepared for
all employees. (For previous Regional Office response, see Digest Footnote
#6.)
INADEQUATE CHART OF ACCOUNTS
The system of accounts maintained by
the Regional Office of Education #27 does not correspond with the system of
accounts promulgated by the Illinois State Board of Education in the ROE
Accounting Manual. The Regional
Office maintains its system of accounts based on grants, awards and contracts
(programs) it administers. Programs
are not maintained in individual separate self-balancing funds. Instead, programs are set-up as cost
centers that track only revenues and expenditures by program. In addition, revenues are accounted for
using a single revenue code for each program, without regard to the source of
the revenue.
The Regional Superintendent of
Schools in each Regional Office of Education shall maintain accurate
financial records in accordance the Regional Office of Education Accounting
Manual. The Manual requires the
Regional Office of Education #27 to track funding sources as federal, State,
or local (Finding 04-7, pages 27-28).
The Regional Office of Education
#27 accepted the recommendation and stated that it will have all grants use
the same terminology and accounts set up in the ROE Accounting Manual.
NONCOMPLIANCE WITH STATE MANDATES
The Regional Office of Education #27 did not comply with certain
statutory administrative requirements.
For example, the Illinois School Code (105 ILCS 5/3-6) requires the
Regional Superintendent to report, in writing, to the county board on or
before January 1 of each year, stating:
(1) the balance on hand at the time of the last report, and all
receipts since that date, with the sources from which they were derived; (2)
the amount distributed to each of the school treasurers in his or her county;
and (3) any balance on hand.
The School Code (105 ILCS 5/3-12) also requires that on or before
January 1 of each year, the Regional Superintendent shall publish in a
newspaper of general circulation published in the region or shall post in
each school building under his/her jurisdiction, certain information
regarding the Office’s Institute Fund
(Finding 04-8, pages 29-30).
According to the Regional Office management, for these reports, they
use information contained in their audited financial statements, which were
not available as of January 1, 2004.
The Regional Office said they were unaware they could use financial
information from their accounting records instead of the audited financial
statements. The Regional Office planned to place the financial statements in
the December Newsletter that is distributed to all schools. The Regional Office also planned to send a
copy of the information to the three county boards as well.
The Regional Office of Education #27
accepted the recommendation to
submit the required information to the County by the deadline as well as
comply with the notification requirements of the statutes.
AUDITORS’ OPINION
Our auditors state the Regional Office
of Education #27’s financial statements as of June 30, 2004 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 to the June 30, 2003 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.
#2: INADEQUATE
CONTROLS OVER CASH RECEIPTS - Previous Regional Office Response
In
its prior response to the June 30, 2003 audit, 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.
#3: INADEQUATE
CONTROLS OVER PROPERTY AND EQUIPMENT -
Previous Regional Office Response
In
its prior response to the June 30, 2003 audit, 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 log of items that
are loaned out to individual school personnel will be kept. A Capital Outlay Fixed Asset Policy has
been created and signed by the Regional Superintendent.
#4: INSUFFICIENT DOCUMENTATION FOR DISBURSEMENTS – Previous Regional
Office Response
In
its prior response to the June 30, 2003 audit, the Regional Office of
Education #27 accepted the recommendation stating the bookkeeper will
continue to attach documents to the checks and check stubs for the Regional
Superintendent to sign. A packing
slip indicating the materials have been received will also be attached. A stamp “PAID” with check number and date
has been purchased to stamp the invoice copies. The Regional Superintendent, Grant Coordinator, or
Administrative Personnel will initial each invoice for payment. The Regional Superintendent will keep the
unused checks in his office.
#5 UNRECORDED AND UNRECONCILED BANK ACCOUNTS – Previous Regional
Office Response
In
its prior response to the June 30, 2003 audit, the Regional Office of
Education #27 accepted the recommendation stating the Regional Office is
currently working on several ways to include these funds in the Quick Books
system. It is still an ongoing
process. The bookkeeper will begin
reconciling the Illinois Funds statements with the Regional Superintendent
reviewing and signing them.
#6: INADEQUATE DOCUMENTATION OF SALARY RATES – Previous Regional
Office Response
In
its prior response to the June 30, 2003 audit, the Regional Office of
Education #27 accepted 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.
Complete Regional Office responses to
prior findings are available upon request from the Auditor General’s Office.
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