MT. VERNON — The annual audit performed by the state Auditor General showed the Hamilton/Jefferson Regional Office of Education had 10 findings, with four repeated from the previous audit.
The audit covers the fiscal year which ended June 30, 2012.
“For the fiscal year ended June 30, 2012, auditors disclaimed an opinion of the financial statements of the Regional Office of Education 25,” the audit report summary states. “The Regional Office did not have sufficient internal controls over the processing of most accounting transactions.”
Specific findings included that the office did not have “sufficient internal controls over the financial reporting process; did not have adequate review of journal entries; had a cash account not recorded on the books; did not have adequate internal controls over cash, payroll, grant compliance cash disbursements; and had excess working cash in an internal service fund.”
The audit was released last week by Auditor General William Holland. The audit shows that in FY 2011-12, the ROE had $2.2 million in revenues from local sources compared to $3.9 million in the previous year; that total expenditures were $2.24 million, compared to $4 million the previous fiscal year.
In citing insufficient internal controls, the audit states the ROE had all new management and accounting personnel unfamiliar with ROE policies, procedures and necessary internal controls over financial reporting — an issue first found by the auditors in 2007.
“The Regional Office of Education 25 responded that it understands the nature of this finding and realizes that this circumstance is not unusual to an organization of its size,” the audit states. “The transition to the office without any prior knowledge of the office practices and a part-time bookkeeper for half of the year led to several mistakes. The (ROE) stated that now that a full time trained bookkeeper has been hired, the ROE is implementing procedures and controls that ensure all records are maintained and all assets and revenues are recorded in the general ledger, which includes all transactions, deposits, expenses, assets and liabilities.”
The audit found the ROE did not have good review of its journal entries,
“In 18 of 242 journal entries made, there was no supporting documentation other than the journal entry listing and approval by the regional superintendent was not documented,” the audit states. “In 12 of 32 journal entries tested, while the Regional Superintendent signed off on the journal entry snapshot, there was no documentation to support the purpose of the journal entry. ... In 13 of 32 journal entries tested, the purpose of the journal entry appeared to be to shift expenditures to match grants.”
The ROE answered the finding that now all journal entries are reviewed and approved by the superintendent or assistant superintendent
“The Regional Office noted that after the initial transition year, journal entries were minimal,” the audit states. “The bookkeeper will also continue to attend needed training opportunities to follow proper accounting procedures.”
A cash account not recorded was for its University Class fund, started in February, 2012.
“In order to transfer the amounts received from July 1, 2011, to Feb. 15, 2012, the (ROE) prepared checks made out to the new bank account totaling $57,130,” the audit states. “Instead of recording these checks as a transfer to another bank account within the general ledger, the Regional Office recorded the checks as a reduction in revenue.”
In addition, all receipts and disbursements to University Classes fund were put in the account instead of the general ledger.
“Failure to record bank accounts in the general ledger results in inaccurate financial reporting and increases the risk of misappropriation of assets,” the audit states. “According to (ROE officials), the bookkeeper believed that more than one bank account could not be entered into the general ledger.”
The ROE answered it separated obligated funds to separate bank accounts “so that cash balances would not appear inflated.”
“The ROE stated that it is working with support from the financial account system company and has moved all bank accounts and related activity into the general ledger.”
The audit also stated checks requiring two signatures did not create adequate controls over cash; the petty cash was not secured properly; debit cards did not have adequate internal controls on purchases; and two $2,000 checks were unaccounted for — with the bookkeeper saying they believed the checks may not have been sent from the check printer.
Payroll was also cited.
“In one of 25 employees tested, two different employment contracts with the same date were signed by the Regional Superintendent and maintained in the employee’s personnel file; in one of 25 employees tested, the pay rate schedule maintained by the bookkeeper differed from the contract by $1,148; for 24 of the 25 employees tested, the reasonableness of the amount paid could not be determined because the ROE did not maintain a listing of job titles, descriptions of job duties and responsibilities and related pay scale; in 17 of 40 individual payroll transactions tested, required time and effort sheets were not maintained; in seven of 25 employees tested, the amount paid to the employee differed from the approved contract amount; in 16 of 23 payroll periods tested, an approved payroll register was not maintained; in all 18 of the direct deposit payroll transactions tested, a preliminary payroll direct deposit draft was not approved ... in all 18 of the direct deposit transactions tested, a final direct deposit transmittal was not approved by either the Regional Superintendent or Assistant Regional Superintendent.”