REPORT DIGEST REGIONAL OFFICE OF EDUCATION #27 FINANCIAL AUDIT (In Accordance with the Single Audit Act
and OMB Circular A-133) For the Year Ended: June 30, 2006 Summary of Findings: Total this audit 5 Total last audit 5 Repeated from last audit 3 Release Date: June 21, 2007
State of
Office of the Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL To obtain a copy of the
Report contact: Office of the Auditor
General
(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 #27 did not comply with certain statutory administrative requirements.
· The Regional Office of Education #27 utilizes an accounting software package that does not provide the internal controls and reporting features required for proper fund accounting. · The Regional Office of Education #27 did not have adequate controls over property and equipment. · The Regional Office of Education #27 did not record three bank accounts, with balances totaling $40,414, in the general ledger. · The Regional Office of Education #27 funds deposited at a financial institution exceeded the amount pledged as collateral by $74,768 at June 30, 2006. {Expenditures and Revenues are
summarized on the reverse page.} |
REGIONAL
OFFICE OF EDUCATION #27
FINANCIAL AUDIT
For
The Year Ended June 30, 2006
|
FY 2006 |
FY 2005 |
TOTAL REVENUES |
$1,732,354 |
$1,575,394 |
Local Sources |
$607,068 |
$667,061 |
% of Total Revenues |
35.04% |
42.34% |
State Sources |
$834,696 |
$531,837 |
% of Total Revenues |
48.18% |
33.76% |
Federal Sources |
$290,590 |
$376,496 |
% of Total Revenues |
16.77% |
23.90% |
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||
TOTAL EXPENDITURES |
$1,805,032 |
$1,570,144 |
Salaries and Benefits |
$1,126,683 |
$990,616 |
% of Total Expenditures |
62.42% |
63.09% |
Purchased Services |
$333,679 |
$310,825 |
% of Total Expenditures |
18.49% |
19.80% |
All Other Expenditures |
$344,670 |
$268,703 |
% of Total Expenditures |
19.10% |
17.11% |
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|
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TOTAL NET ASSETS |
$242,946 |
$315,624 |
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|
|
INVESTMENT IN
CAPITAL ASSETS |
$0 |
$0 |
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Percentages may not add due to rounding. |
REGIONAL
SUPERINTENDENT |
During Audit Period: Honorable Glen W. Braden Currently: Honorable Glen W. Braden |
The Regional Office
of Education #27 did not comply with certain statutory administrative
requirements.
The Regional of Education #27 utilizes a software
package that does not provide the internal controls and reporting features
required for proper fund accounting.
The Regional Office
of Education #27 did not have adequate controls over property and equipment.
The Regional Office of Education #27 did not record three
bank accounts, with balances totaling $40,414, in the general ledger.
The Regional Office
of Education #27 funds deposited at a financial institution exceeded the
amount pledged as collateral by $74,768 at June 30, 2006. |
FINDINGS, CONCLUSIONS AND RECOMMENDATIONSCONTROLS 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.
For example, the Regional Superintendent signs off on the Annual
Financial Reports from the school districts in his region. In addition, the ROE receives a spreadsheet
from the Illinois State Board of Education (ISBE) that outlines all of the
school districts and their audit exceptions, if any. The ROE follows up with school districts
that have exceptions, documents the corrective action, and forwards it to
ISBE. This mandate has existed in its
current form since at least 1953.
The Illinois School Code (105 ILCS 5/3-5) also requires
the Regional Superintendent to present under oath or affirmation to the
county board at its meeting in September and as nearly quarterly thereafter
as it may have regular or special meetings, a report of all his acts as
county superintendent, including a list of all the schools visited with the
dates of visitation. This mandate has
existed in its current form since at least 1953. The Regional Office did not present
at the September county board meetings, and as nearly quarterly thereafter, a
report of all his acts including a list of all the schools visited and the dates
of visitation. The Regional Office
provides the county boards with its Report of Official Acts and Duties on an
annual basis. This report is not
updated quarterly and does not contain all information required in the
statute. Finally, the Illinois School Code
(105 ILCS 5/3-14.5) requires the Regional Superintendent to visit each public
school in the county at least once a year, noting the methods of instruction,
the branches taught, the textbooks used, and the discipline, government and
general condition of the schools. This
mandate has existed in its current form since at least 1953. The Regional Superintendent annually
visits each public school in his region to inspect the general condition of
the school. He also performs
compliance inspections for each public school in his region on a rotational
basis every three years instead of annually.
The Illinois Public School Accreditation Process Compliance Component
document completed at these visits includes many of the items delineated in
105 ILCS 5/3-14.5, but does not include a review of the methods of
instruction and the textbooks used in the district. (Finding 06-1, pages 12-14) The Regional Office accepted the recommendation to comply with the
statutory requirements. The Regional
Office responded that with regards to compliance with 105 ILCS 5/3-14.11 and
105 ILCS 5/3-14.5, the Illinois Association of Regional Superintendents of
Schools and the Illinois State Board of Education have agreed to seek
legislation to remove duplicative and/or obsolete sections of the Illinois
School Code. Both parties believe that
105 ILCS 5/3-7 of the Illinois School Code and 23 Ill. Adm. Code 1.20,
respectively, contain more current, thorough, and comprehensive requirements
concerning a public school district’s financial transactions and visitation
of public schools by the Regional Superintendent. As a result, the two parties working
together will seek legislation to repeal these two sections of the Illinois
School Code.
With regards to 105 ILCS 5/3-5, the Regional Superintendent stated he
would present to the county boards in September and quarterly thereafter a
report of all his acts including a list of all the schools visited and dates
of visitation as required by 105 ILCS 5/3-5. INADEQUATE ACCOUNTING SOFTWARE AND INTERNAL CONTROLS
The Regional
Office of Education #27 utilizes an accounting software package which was not
designed for governmental entities.
The package does not provide the internal controls and reporting
features required for proper fund accounting.
The Regional Office maintains eleven different general ledger systems
to account for the operations of the various programs it administers. With eleven general
ledger systems, the ROE’s management cannot easily obtain entity-wide
financial information necessary to make informed management decisions. Also, without an accounting system with
proper internal controls, errors or misappropriations may occur and not be
detected by management. In addition,
financial statements in accordance with generally accepted accounting
principles and the ROE Accounting Manual cannot be readily prepared from the
current accounting system. The Regional Office of Education #27 is required by the Illinois State Board of Education to maintain their accounting system in accordance with the Regional Office of Education (ROE) Accounting Manual. The Manual requires the ROE to maintain an accounting system on a fund basis. (Finding 06-2, pages 15-16) The Regional Office of Education #27 agreed
with the recommendation to implement an accounting software program that will
provide the necessary controls and reporting features required for proper
fund accounting. This program will be
installed both at the ROE’s main office and at the INADEQUATE CONTROLS OVER
PROPERTY AND EQUIPMENT The Regional Office of Education #27 did not
have adequate controls over fixed assets.
The fixed asset listing for the Progressive Alternative Secondary
School (PASS) 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, the property tags on the physical
inventory selected for observation were not referenced to the fixed asset
listing. The fixed asset listing
contained only a description of the item and the location. 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 06-3, pages 17-18) This finding was first reported in 2003. The Regional Office of Education #27 agreed
with the recommendation stating that they currently have fixed asset listings
for both the ROE main office and the PASS location. These listings will be reviewed and updated
as appropriate with all available information for existing items. All new items will be added to the listings
with all required information. (For previous Regional Office response, see
Digest Footnote #1.) UNRECORDED BANK ACCOUNTS The Regional Office of
Education #27 did not record three bank accounts, with balances totaling
$40,414, in the general ledger. Two of
these accounts were time and savings accounts opened in prior years and one
was a checking account opened in the current year. The accounts have been included in the cash
balances reported in the financial statements through adjusting entries. Good business practices and sound internal controls require that accounting records accurately and completely record all transactions of the entity. Failure to record bank accounts in the general ledger results in inaccurate financial reporting and increases the risk of undetected misappropriation of assets. (Finding 06-4, page 19) This finding was first reported in 2003. The
Regional Office of Education #27 accepted the recommendation, stating that it
will add these bank accounts to the general ledger data. (For previous Regional Office response, see
Digest Footnote #2.) FAILURE TO FULLY INSURE AND COLLATERALIZE CASH BALANCES
The Regional Office of Education #27 (ROE) funds deposited at a financial institution exceeded the amount pledged as collateral by $74,768 at June 30, 2006. As of June 30, 2006, the Regional Office had five cash accounts with balances totaling $234,444 at one financial institution. The Federal Deposit Insurance Company (FDIC) covers up to a maximum of $100,000. The financial institution pledged collateral with a market value at June 30, 2006 of $59,676 leaving $74,768 uncollateralized. The ROE has an informal agreement with the financial institution to pledge securities as collateral for deposits that exceed the FDIC insurance limits; however, the amount pledged was insufficient to secure all deposits at June 30, 2006. Failure to fully insure and collateralize the full amount of cash and investment balances may result in monetary losses to the ROE in the event of a bank failure. The Public Funds Deposit Act (30 ILCS 225/1) gives the Regional Office of Education #27 the authorization to request financial institutions to pledge collateral for deposits in excess of the federally insured limit. 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 06-5, page 20) The Regional Office of Education #27 agreed with the recommendation, stating that it will work with the financial institution to ensure that all bank deposits in excess of FDIC insurance amounts are collateralized. AUDITORS’ OPINION Our auditors state the Regional
Office of Education #27’s financial statements as of June 30, 2006 are fairly
presented in all material respects. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KJM:ro SPECIAL
ASSISTANT AUDITORS Our special assistant auditors were Sulaski
& Webb CPAs. DIGEST FOOTNOTES
#1: INADEQUATE
CONTROLS OVER PROPERTY AND EQUIPMENT -
Previous Regional Office Response In
its prior response to the June 30, 2005 audit, the Regional Office of Education
#27 accepted the recommendation stating that a sign-out sheet had been
updated to allow for numerous sign-outs.
Staff had been informed of the importance of signing-out. Inventory would be tested semi annually to
increase control. PASS would obtain permanent
labels to be affixed to all equipment.
An inventory would be taken annually. In addition, a spreadsheet would be created
that includes item descriptions, ID number, funding source, cost, disposal
date, reason for disposal and method item was disposed. #2 UNRECORDED AND UNRECONCILED BANK ACCOUNTS – Previous Regional
Office Response In
its prior response to the June 30, 2005 audit, the Regional Office of
Education #27 accepted the recommendation stating that the ROE would
establish accounts for the accounts not currently set-up and recorded. PASS will assign codes using the chart of
accounts in the ROE Accounting Manual and track all income and expenses. Complete Regional Office responses to prior findings are available upon request from the Auditor General’s Office. |
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