REPORT DIGEST

REGIONAL OFFICE OF EDUCATION #56

WILL COUNTY

FINANCIAL AUDIT

(In Accordance with the

Single Audit Act and

OMB Circular A-133)

For the Year Ended:

June 30, 2008

Summary of Findings:

Total this audit                     1

Total last audit                     1

Repeated from last audit      0

Release Date:

April 30, 2009

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

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

http://www.auditor.illinois.gov

SYNOPSIS

·         The Regional Office of Education #56 did not maintain adequate controls over purchased services expenditures for the McKinney Education for Homeless Children Program.

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

The Regional Office of Education #56 did not maintain adequate controls over purchased services expenditures for the McKinney Education for Homeless Children Program. 

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER PURCHASED SERVICES EXPENDITURES

         The Regional Office of Education #56 did not maintain adequate controls over purchased services expenditures for the McKinney Education for Homeless Children Program. 

         Office of Management and Budget (OMB) Circular A-87 Cost Principles for State, Local and Indian Tribal Governments, Attachment A – General Principles for Determining Allowable Costs, Section C. 1. (j) states that for costs to be allowable they must be adequately documented.  In addition, OMB Circular A-87 Attachment B – Selected Items of Cost, Section 32 (a) and (b. 8.) states that costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the organization, are allowable.  In determining allowability, certain factors such as the adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions) should be considered.

         Title 23 Illinois Administrative Code:  Education and Cultural Resources, Chapter I, Section 525.160, Fiscal Procedures requires the Regional Superintendent of Schools in each Regional Office of Education to maintain accurate financial records in accordance with 23 Illinois Administrative Code 110 Program Accounting Manual and Regional Office of Education (ROE) Accounting Manual (the Manual), as applicable.  The Manual defines “purchased services” expenditures as amounts paid for personal services rendered by personnel who are not on the payroll of the local education agency (LEA), and other services which the LEA may purchase.

         In FY 2008, the Will County Regional Office of Education #56 became the lead liaison of the McKinney-Vento Homeless Children and Youth Program for Area I Regional Offices of Education.  The auditors’ review of program expenditures disclosed the following weaknesses in controls over purchased services:

• For two of four program consultants, the ROE #56 failed to execute written contracts which properly documented the scope and description of services to be provided to the ROE.  The contracts also failed to include the schedule of fees to be paid.

• For the two consultants, payments made for their services were not supported by timesheets or other documentation of the work performed and the consultant hours billed.  Payments made in FY 2008 to the two consultants totaled $62,909.

• All FY 2008 fees paid to consultants were recorded as salaries instead of purchased services.  These fees totaled $116,066.  These consultants were classified by the Regional Office as independent contractors based on the relationship and degree of control exercised by the ROE over the work of the consultants.  The Regional Office financial statements were subsequently adjusted to reclassify consultant fees to purchased services expenditures.  The Regional Office also amended the budget and expenditure reports previously submitted to the grantor agency to reflect these adjustments. 

         Failure to execute contracts with independent contractors may result in services being provided that are inconsistent with program goals and activities, inadequate protection of the Regional Office’s interests, and incurring of unallowable costs.  In addition, inadequate supporting documents do not provide sufficient evidence for the validity and accuracy of the payments processed, thereby increasing the risk that unauthorized disbursements may be made.  Salaries and purchased services expenditures were overstated and understated respectively, by $116,066. 

         According to Regional Office of Education #56 management, they overlooked the requirement to execute a written contract with the independent consultants.  Management further stated that failure to require timesheets or time and effort reports from the consultants was due to an oversight.  In addition, the program budgeted services as salaries and thus, the payments were accounted for as salaries instead of purchased services.

(Finding 08-1, pages 13-15)

         Auditors recommended that the Will County Regional Office of Education #56 should ensure that all costs charged to the federal program are sufficiently documented and adequately supported.  The Regional Office should require all consultant contracts to be supported by a written contract with detailed scope of services and rates of compensation.  Auditors also recommended that all payments to consultants should be appropriately supported by documentation of actual services rendered or billed.

         Auditors also recommended that the Regional Office of Education #56 should establish procedures to ensure transactions are carefully reviewed for proper accounting and recognition as required by the Illinois Administrative Code and the ROE Accounting Manual.  Specifically, the Regional Office should ensure governmental fund expenditures are classified by object classes according to the types of items purchased or services obtained.

         The Regional Office of Education #56 agreed with the finding.  The ROE noted that the payments for the grant coordinator and assistants were inadvertently placed under salaries instead of purchased services.  The ROE noted that this was corrected immediately and an amended budget was sent to the Illinois State Board of Education.  In addition, the ROE noted that contracts were developed and timesheets are collected regularly.  

AUDITORS’ OPINION

         Our auditors state the Regional Office of Education #56’s financial statements as of June 30, 2008 are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:KJM

SPECIAL ASSISTANT AUDITORS

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