REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #31: KANE
COUNTY

FINANCIAL AUDIT
For the Year Ended: June 30, 2015

Release Date:  April 21, 2016

FINDINGS THIS AUDIT:  2

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  0 -- 0 -- 0
Category 2:  1 -- 1 -- 2
Category 3:  0 -- 0 -- 0
TOTAL:  1 -- 1 -- 2

FINDINGS LAST AUDIT: 1

Category 1:	Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State
laws and regulations (material
noncompliance).
Category 2:	Findings that are
significant deficiencies in internal
control and noncompliance with State laws
and regulations.
Category 3:	Findings that have no
internal control issues but are in
noncompliance with State laws and
regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are
also available on the worldwide web at
www.auditor.illinois.gov

SYNOPSIS

• (15-1) The Regional Office of Education
#31 did not have sufficient internal
controls over the financial reporting
process.

• (15-2) The Regional Office of Education
#31 did not have adequate controls in
place over procurement card purchases.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

CONTROLS OVER FINANCIAL STATEMENT
PREPARATION

The Regional Office of Education #31 is
required to maintain a system of controls
over the preparation of financial
statements in accordance with generally
accepted accounting principles (GAAP).
The Regional Office’s internal controls
over GAAP financial reporting should
include adequately trained personnel with
the knowledge, skills, and experience to
prepare GAAP based financial statements
and include all disclosures as required by
the Governmental Accounting Standards
Board (GASB).

The Regional Office of Education #31 did
not have sufficient internal controls over
the financial reporting process.  While
the Regional Office maintains controls
over the processing of most accounting
transactions, there were not sufficient
controls over the preparation of the GAAP
based financial statements for management
or employees in the normal course of
performing their assigned functions to
prevent or detect and correct financial
statement misstatements and disclosure
omissions in a timely manner.

During review of the Regional Office of
Education #31’s financial information
prepared by the Regional Office, auditors
noted that the Regional Office did not
have adequate controls over the
maintenance of records of accounts
receivable, due from other governments,
due to other governments and unavailable
revenue.  While the Regional Office did
maintain records to indicate the balances
of accounts receivable, due from other
governments, due to other governments, and
unavailable revenue, audit adjustments
were proposed in order to ensure financial
statement balances were accurate.

Regional Office of Education #31
management did not effectively detect all
of the adjustments needed in order to
present financial statements in accordance
with GAAP in a timely manner.  (Finding
2015-001, pages 11-12) This finding was
first reported in 2010.

The auditors recommended that as part of
internal control over the preparation of
financial statements, including
disclosures, the Regional Office of
Education #31 should implement a
comprehensive preparation and/or review
procedure to ensure that the financial
statements, including disclosures, are
complete and accurate.  These procedures
should be performed by a properly trained
individual possessing a thorough
understanding of applicable generally
accepted accounting principles, GASB
pronouncements, and knowledge of the
Regional Office’s activities and
operations.

The Regional Office of Education #31
responded that the Business Office will
provide to the Superintendent regular and
timely financial reports which include but
are not limited to grant reporting, bank
reconciliations, monthly financial
reporting, and any other report needed for
discussion of the Regional Office’s
financial well-being.  (For previous
Regional Office response, see Digest
Footnote #1 shown at the end of the
digest.)

CONTROLS OVER PROCUREMENT CARDS

The Regional Office of Education No. 31
provides procurement cards for use to
various Regional Office employees.  The
procurement cards operate like a credit
card; however, they do not carry a
revolving line of credit and must be paid
in full each month.  Additionally, the use
of procurement cards allows the Regional
Office to customize purchase authority and
spending levels.  Adequate internal
controls should ensure that expenses
incurred by the Regional Office of
Education No. 31 are adequately
documented, approved by management,
incurred for a business purpose and
represent economical and effective use of
Regional Office No. 31’s resources.  The
Regional Office has established a formal
procurement card policy, an individual
procurement card user agreement, and
procurement card guidelines.  These
documents clearly indicate personal
purchases are not allowed and require
employees to provide supporting documents
for procurement card purchases within five
business days following the receipt of the
monthly procurement card statement.

The Regional Office of Education No. 31
did not have adequate controls in place
over procurement card purchases.  An
employee of the Regional Office made
personal purchases totaling $8,670 on a
procurement card during the months of July
through December of 2014.  The Regional
Office of Education No. 31 subsequently
reviewed those purchases, requested
supporting documentation, tabulated a list
of personal purchases and invoiced the
employee in January of 2015.  Although the
employee repaid personal purchase as
invoiced by the Regional Office, adequate
controls were not in place to ensure
supporting documentation was collected in
accordance with the Regional Office’s
policy and to ensure personal purchases
were not made on the procurement card.

Although the Regional Office of
Education’s policy is for employees to
provide supporting documents for
procurement card purchases within five
business days following the receipt of the
monthly procurement card statement, the
Regional Office of Education No. 31 was
not promptly provided with supporting
documents for procurement card purchases
and personal purchases were incurred
during a six month period.  (Finding
2015-002, pages 13-14)

The auditor recommended that the Regional
Office of Education No. 31 should ensure
timely review of procurement card
purchases, including review to ensure that
each transaction has adequate
documentation, management approval, and
indication of the business purpose.  The
Regional Office should consider suspending
or cancelling cardholder privileges if
appropriate documentation is not received
in accordance with Regional Office of
Education No. 31’s policy to ensure
improper purchases are not occurring over
a significant time period.

The Regional Office of Education No. 31
responded that the policy does require
timely submission of procurement card
purchases, and reviews said submissions to
ensure that each transaction has provided
documentation and indication of the
business purpose for adequate management
approval.  The Regional Office will
consider suspending cardholder privileges
if warranted to ensure improper purchases
are not occurring over a significant time
period.

AUDITORS’ OPINION

Our auditors state the Regional Office of
Education #31’s financial statements as of
June 30, 2015 are fairly presented in all
material respects.

FRANK J. MAUTINO
Auditor General

FJM:KJM

AUDITORS ASSIGNED:  Winkel, Parker &
Foster, CPA PC were our special assistant
auditors.

DIGEST FOOTNOTE

#1: Controls Over Financial Statement
Preparation - Previous Regional Office
Response

In its prior response in 2014, the
Regional Office of Education #31 responded
that the Business Office will provide to
the Superintendent and Cabinet members
regular and timely financial reports.
These reports include but are not limited
to grant reporting, bank reconciliations,
monthly financial reporting, expense
comparisons, and any other report needed
for discussion of the Regional Office’s
financial well-being.