The Regional Office of Education #31 did not have adequate controls over fixed assets. For example, there were no formal policies or procedures to monitor and control equipment and other fixed assets. Inventory lists did not contain all the information required by the ROE Accounting Manual, such as tag number or acquisition source document (such as check number). In the auditors’ physical inventory testing, not all items were tagged. Transfers of equipment from one location to another were not formally documented.

The Regional Office reported deletions of fixed assets totaling $536,060 for the year to adjust the equipment balances in the General Fixed Asset Account Group (GFAAG) to the balances in the fixed asset detailed inventory. Regional Office officials stated that items deleted were those that were county-owned equipment that should not be part of the GFAAG, items previously disposed of which had not been removed from fixed asset records, and items less than $500 that were included in prior GFAAG balances.

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 03-1, page 12 - 14).

The Regional Office of Education #31 accepted the recommendation, stating they have now developed formal fixed asset policies and procedures to effectively and efficiently monitor and maintain records of acquisition, transfer and disposal of fixed assets in order to provide an accurate reporting of fixed asset balances in the General Ledger.

Interest earned on the bank account for the year totaling $31,860.88 was all credited to the Regional Program Development Fund and was not allocated to the other sources of funds from which it was earned.

The Regional Office of Education (ROE) Accounting Manual Section XI states that if funds from two or more sources are combined in one bank account and/or fund, a portion of the interest earned on the bank account or funds should be allocated to each of those sources of funds. The Manual requires interest to be allocated at least monthly. The Grant Funds Recovery Act (30 ILCS 705/1 et seq.) states that interest earned on grant funds becomes part of the principal and is treated accordingly for all purposes unless the grant agreement and/or grant regulations provide otherwise. Federal requirements state that annual interest earned in excess of $100 on advances of funds must be submitted promptly to the granting agency (Finding 03-2, page 16 and 17).

The Regional Office of Education #31 accepted the recommendation to develop an interest allocation plan. The Regional Office stated that it implemented a cost allocation plan in December 2003 that computes interest monthly according to fund balances. Interest revenue for the fiscal year ended June 30, 2003 has already been allocated by month and source of fund and will be returned under the direction of the granting agencies.