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REPORT DIGEST REGIONAL OFFICE OF EDUCATION #46 BROWN/CASS/MORGAN/ FINANCIAL AUDIT For the Year Ended: June 30, 2008 Summary of Findings: Total this audit 3 Total last audit 9 Repeated from last audit 2 Release Date: January 14, 2010
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
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SYNOPSIS
{Expenditures and Revenues are summarized on the reverse page.} |
REGIONAL OFFICE OF
EDUCATION #46
For The Year Ended June
30, 2008
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FY
2008
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FY
2007
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TOTAL REVENUES |
$1,493,300 |
$1,627,058 |
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Local Sources |
$222,331 |
$322,826 |
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% of Total Revenues |
14.89% |
19.84% |
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State Sources |
$1,212,249 |
$1,143,473 |
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% of Total Revenues |
81.18% |
70.28% |
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Federal Sources |
$58,720 |
$160,759 |
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% of Total Revenues |
3.93% |
9.88% |
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TOTAL EXPENDITURES |
$1,659,045 |
$1,569,559 |
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Salaries and Benefits |
$1,344,926 |
$1,151,462 |
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% of Total Expenditures |
81.07% |
73.36% |
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Purchased Services |
$194,864 |
$187,815 |
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% of Total Expenditures |
11.75% |
11.97% |
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All Other Expenditures |
$119,255 |
$230,282 |
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% of Total Expenditures |
7.19% |
14.67% |
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TOTAL NET ASSETS |
$757,759 |
$1,115,936 |
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INVESTMENT IN
CAPITAL ASSETS |
$32,684 |
$14,453 |
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Percentages
may not add due to rounding. |
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REGIONAL
SUPERINTENDENT |
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During Audit Period: Honorable Stephen Breese Currently: Honorable Stephen Breese |
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The Regional Office of Education #46 did not have sufficient internal controls over the financial
reporting process. The Regional Office of Education #46 did not have adequate
controls over fixed assets. The Regional Office of Education #46 did not remit interest
earned on grant funds to the granting agency.
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FINDINGS,
CONCLUSIONS AND RECOMMENDATIONS
Controls Over
Financial Statement Preparation The Brown, Cass, Morgan, and
Scott Counties Regional Office of
Education #46 is required to maintain a system of controls over the
preparation of financial statements in accordance with generally accepted
accounting principles (GAAP). Regional
Office internal controls over GAAP financial reporting should include
adequately trained personnel with the knowledge and expertise to prepare
and/or thoroughly review GAAP based financial statements to ensure that they
are free of material misstatements and include all disclosures as required by
the Governmental Accounting Standards Board (GASB). The Regional Office of Education #46 did not have sufficient internal controls over the financial reporting process. The Regional Office maintains their accounting records on the cash basis of accounting. While the Regional Office maintains controls over the processing of most accounting transactions, there are 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 financial statement misstatements and disclosure omissions in a timely manner. For example, auditors, in their review of the Regional Office’s accounting records noted the following:
According
to Regional Office officials, they did not have adequate funding to hire
and/or train their accounting personnel in order to comply with these
requirements. (Finding 08-1, pages 10-11) Auditors recommended that as part of its internal control over the preparation of its financial statements, including disclosures, the Regional Office of Education #46 should implement a comprehensive preparation and/or review procedure to ensure that the financial statements, including disclosures, are complete and accurate. Such procedures should be performed by a properly trained individual(s) possessing a thorough understanding of applicable generally accepted accounting principles, GASB pronouncements, and knowledge of the Regional Office of Education’s activities and operations. The Regional Office of Education #46
responded that the interest accruals had been recorded in the system, but because this was earned on a 12 month CD that fell into two fiscal years, it was not broken out to the appropriate fiscal year. The classification of revenues for federal, State, or local was partially due to the Regional Office’s role as a sub-contractor on some grants. Regional Office officials stated it was not clear to them what the source of funds were and that they are now aware of these situations and they are no longer an issue. ROE officials stated they will continue to work with outside support individuals to assist the bookkeeper in order to try and stay current with federal standards. While the ROE has had some difficulty with accounting practices, officials noted they have always used the funds they receive for the purposes they were intended. INADEQUATE CONTROLS
OVER PROPERTY AND EQUIPMENT The Regional Office of Education #46 did not have adequate controls over fixed assets. 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. Generally accepted accounting principles require that an inventory of all fixed assets and depreciation schedules for assets meeting the capitalization threshold for reporting be maintained. The ROE Accounting Manual also states that the fixed asset inventory records should include: the inventory control number (tag number); major asset class; function and activity; reference to the acquisition source document; acquisition date; vendor; a short description of the asset; unit charged with custody; location; fund and account from which purchased; method of acquisition; estimated useful life and method of depreciation; estimated salvage value; and date, method, and authorization of disposition. In addition, the Illinois State Board of Education’s State and Federal Grant Administration Policy and Fiscal Requirements and Procedures requires that property records must be maintained that include: · Description of the property; · Serial number or other identification number; · Source of property; · Who holds title; · Acquisition date and cost of property; · Percentage of State/federal participation in the cost of the property; · Location, use and condition of the property; and · Disposition date including the date of disposal and sale price of the property. Sound internal controls require that policies and procedures on fixed assets should cover acquisition and tagging, recording and reporting, depreciation (if applicable), transfers and dispositions, and annual physical inventory, and that they should be formally documented and consistently applied. The equipment listing provided by the Regional Office was inaccurate and incomplete. Many of items on the listing were missing the inventory control number, the unit charged with custody, and the asset’s location. None of the items on the listing included the required elements of major asset class, function and activity, acquisition date, percentage of State/federal participation, or fund and account from which the asset was purchased. In addition, auditors noted the following in tests of fixed assets: · Two of six items tested, which were included on the asset listing, could not be located. One of the items was a camera. ROE personnel produced a camera, but the serial number did not match to any camera on the listing. The second was an overhead projector. · In four instances, there were discrepancies in the amount recorded as expenditure of capital outlay between the general ledger and the capitalized fixed asset listing. · The Regional Office recycled several old computers and electronic equipment in October of 2007. Regional Office employees could not provide information about what equipment or how much equipment was picked up, and therefore, was unable to determine which disposed assets should have been removed from the property listing. · Because the ROE had not tracked assets by fund or funding source, it could not check with its granting agency before disposing of assets. · There were inconsistencies in the amount recorded as the purchase price of assets. For example, some asset costs appropriately included shipping and handling costs and others did not. The absence of a sound system of internal controls over fixed assets can result in inaccurate reporting of fixed assets and inadequate physical control for equipment items. An incomplete fixed asset listing does not provide an adequate basis for physical control and losses may occur without being detected. According to Regional Office management, there was a policy to track fixed asset inventory, however, steps had never been taken to assign specific responsibility for each step to individuals. Consequently, no one was aware of who was responsible for each step. (Finding 08-2, pages 12-15) Auditors recommended that the
Regional Office of Education #46 should adhere to the ROE Accounting
Manual fixed asset policy and
procedures to effectively and efficiently monitor property acquisitions,
transfers and disposals, and provide for accurate reporting of fixed asset
balances. The Regional Office of Education #46
responded that it has policies and procedures for dealing with its fixed assets and also the other supplies used within the programs it is responsible for. Although Regional Office officials agree with the exceptions noted in the finding, the fact that the audit process took almost 12 months created some confusion as to what corrective actions the ROE had taken and to which fiscal year they applied. The ROE does keep a record of what it has, but not to the specificity that is required. Regional Office officials stated that the ROE is a small office with little equipment and while they were aware of what was recycled, the ROE did not keep a serial number listing for each item. The ROE continues to update its processes in order to comply, but the ROE on occasion has something come up missing even though every effort is made to see that it does not. FAILURE TO REMIT
INTEREST EARNED The Regional Office of Education #46 did not remit interest earned on grant funds to the granting agency. This included interest for the federal program, Title I – Grants to Local Educational Agencies (System of Support). The Regional Office allocated interest to its various programs during fiscal year 2008 but did not remit it to the granting agencies in accordance with applicable laws and regulations. The ROE earned interest on both State and federal awards that should have been remitted at least quarterly to the granting agency in the following amounts: State grants $1,450 Federal awards $1,745 U.S. Department of Education regulations appear in 34 Code of Federal Regulations (CFR). Part 80.21 of 34 CFR is titled: “Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments.” It is also known as the “Common Rule” because most federal agencies have adopted it in their regulations. The “Common Rule” states that the annual interest earned in excess of $100 on advances of funds must be submitted promptly, at least quarterly, to the granting agency. Additionally, the Grant Funds Recovery Act (30 ILCS 705/1 et seq.) states that interest earned on grant funds becomes part of the grant principal and is treated accordingly for all purposes unless the grant agreement and/or the grant regulations provide otherwise. The Act further states that any grant funds not expended (or legally obligated) by the end of the grant period must be returned to the grantor. This applies to State and federal grants. The Regional Office was not in compliance with 34 Code of Federal Regulations or the Grant Funds Recovery Act. The total amount of State and federal interest which was not remitted to granting agency was $3,195. (Finding 08-3, pages 16-17) Auditors recommended that the Regional Office of Education #46 should follow the appropriate State and federal statutes and regulations and remit any interest earned back to the granting agency in accordance with the requirements of the Grant Funds Recovery Act and 34 Code of Federal Regulations. The Regional Office of Education #46 responded that at this time, with the assistance of an outside consultant, it has made restitution to all entities that were owed and has since set up a practice in its bookkeeping system to do this as per the requirements of Grant Funds Recovery Act and 34 Code of Federal Regulations. AUDITORS’ OPINION Our auditors state the Regional Office of Education #46’s financial statements as of June 30, 2008 are fairly presented in all material respects. _____________________________________ WILLIAM
G. HOLLAND, Auditor General WGH:KJM AUDITORS ASSIGNED This audit was performed by the Office of the Auditor General's staff. |
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