REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #32

IROQUOIS/KANKAKEE COUNTIES

FINANCIAL AUDIT

(In Accordance with the
Single Audit Act and OMB Circular A-133)

For the Year Ended:

June 30, 2007

Summary of Findings:

Total this audit                  1

Total last audit                  2

Repeated from last audit   0

Release Date:

September 18, 2008

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

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Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TTY (888) 261-2887

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the worldwide web at

http://www.auditor.illinois.gov

SYNOPSIS

• The Regional Office of Education #32 did not prepare bank reconciliations properly and timely for its primary bank account.  In addition, a bank account was not recorded in the general ledger and no reconciliations were completed.

{Expenditures and Revenues are summarized on the reverse page.}

The Regional Office of Education #32 did not prepare bank reconciliations properly and timely for its primary bank account.  In addition, a bank account was not recorded in the general ledger and no reconciliations were completed.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER BANK RECONCILIATION PROCESS

         Effective internal control policies require complete and accurate accounting records of all transactions of the entity.  Sound internal control also requires bank reconciliations to be performed monthly to ensure that all transactions have been recorded.  Reconciling items should be investigated immediately and adjustments made to the general ledger. 

         The Iroquois-Kankakee Regional Office of Education #32 had cash and investment balances totaling $2,378,065 as of June 30, 2007.  During our review of the Regional Office’s monthly cash and bank reconciliations, we noted the following:

• Reconciliations were not completed in a timely manner for the Regional Office’s primary bank account.  The July 2006 reconciliation was prepared in October 2007 while the reconciliations for the months of August 2006 to June 2007 were completed in February and March 2008.  Average monthly receipts and disbursements for the primary bank account were approximately $1,063,124 and $1,039,235, respectively. 

• Bank reconciliations were not properly prepared which initially resulted in unreconciled monthly differences ranging from $159 to $2,590 in the primary bank account.  The differences were determined to be miscellaneous unrecorded transactions and were subsequently adjusted in the books.  In addition, monthly bank reconciliation statements did not have evidence of review or approval by Regional Office management.

         A bank account (Illinois Funds) with an ending balance of $30,706 as of June 30, 2007 was not recorded in the general ledger and, consequently, no reconciliations were completed for this account.  This bank account serves as a pass through account for monies received from the Illinois State Board of Education for distribution to other funds.  This account was opened in prior years and has been included in cash balances reported in the audited financial statements through adjusting entries.

         Failure to prepare bank reconciliations properly and on a timely basis may lead to loss or misuse of assets due to improper control and monitoring of bank accounts.  Also, failure to record a bank account in the general ledger results in inaccurate and incomplete financial reporting and increases the risk of unauthorized transactions not being detected timely or not being detected at all, which could result in misappropriation of assets.  (Finding 07-1, pages 12-14)

         According to Regional Office management, reconciliations of the primary bank account have not balanced starting July 2006 due to the migration to the new accounting system and an increase in the volume of transactions since the primary operating fund account was merged with the payroll account.  The unreconciled differences were due to staff not having sufficient time to investigate the differences.  Thus, this resulted to untimely completion of bank reconciliations. 

         The Illinois Funds bank account was established to serve as a clearing bank account until funds are transferred to other funds.  Regional Office of Education #32 did not deem it necessary to perform monthly bank reconciliations and maintain the account in the general ledger since deposits are transferred to the respective fund bank accounts on a regular basis.  According to Regional Office officials, the balance at any given time is a timing difference as a result of transfers pending receipt of transaction details. 

         Auditors recommended that Regional Office of Education #32 prepare monthly bank reconciliations accurately and on a timely basis.  Unreconciled differences should be promptly investigated and bank reconciliations should be properly reviewed by a person independent of the preparer.  Auditors also recommended that Regional Office of Education #32 immediately record the Illinois Funds bank account in the general ledger and properly account for all transactions of this account in the books.

         The Regional Office of Education #32 responded that it has trained an additional staff member to assist with the bank reconciliation duties.  This has begun and outside assistance from a software/bookkeeping consultant was enlisted to ensure proper training of the additional staff member and setup of the bank reconciliation procedure.  The Regional Office responded that the Regional Superintendent will once again review and initial all bank reconciliations on a monthly basis.

         The Regional Office also responded that the Illinois Funds account has been assigned a cash account number in the accounting system and those bank reconciliations are being done separately from the primary bank account, going back in the system and beginning with July of 2007.

AUDITORS’ OPINION

       Our auditors state the Regional Office of Education #32’s financial statements as of June 30, 2007 are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JRB

SPECIAL ASSISTANT AUDITORS

            Our special assistant auditors were E.C. Ortiz & Co., LLP.