REPORT DIGEST REGIONAL OFFICE OF EDUCATION #26 HANCOCK AND MCDONOUGH COUNTIES FINANCIAL AUDIT (In Accordance with the Single Audit Act and OMB Circular A-133) For the Year Ended: June 30, 2009 Summary of Findings: Total this audit 1 Total last audit 2 Repeated from last audit 1 Release Date: February 11, 2010 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 #26 did not have sufficient internal controls over the financial reporting process. {Expenditures and Revenues are summarized on the reverse page.}

REGIONAL OFFICE OF EDUCATION #26

HANCOCK AND MCDONOUGH COUNTIES

FINANCIAL AUDIT

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

For The Year Ended June 30, 2009

	FY 2009	FY 2008
TOTAL REVENUES	$4,409,786	$4,204,832
Local Sources	$1,405,839	$1,414,682
% of Total Revenues	31.88%	33.64%
State Sources	$2,007,642	$2,196,637
% of Total Revenues	45.53%	52.24%
Federal Sources	$996,305	$593,513
% of Total Revenues	22.59%	14.12%
TOTAL EXPENDITURES	$4,406,306	$4,279,200
Salaries and Benefits	$2,360,452	$2,240,143
% of Total Expenditures	53.57%	52.35%
Purchased Services	$800,475	$807,574
% of Total Expenditures	18.17%	18.87%
All Other Expenditures	$1,245,379	$1,231,483
% of Total Expenditures	28.26%	28.78%
TOTAL NET ASSETS	$585,586	$582,106
INVESTMENT IN CAPITAL ASSETS	$121,435	$129,122
Percentages may not add due to rounding.

REGIONAL SUPERINTENDENT

During Audit Period: Honorable Gary Eddington

Currently: Honorable John Meixner

The Regional Office of Education #26 did not have sufficient internal controls over the financial reporting process.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Controls Over Financial Statement Preparation The Hancock/McDonough Regional Office of Education #26 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 #26 did not have sufficient internal controls over the financial reporting process. The Regional Office maintains their accounting records on the accrual basis for disbursements and the cash basis for receipts. 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: The Regional Office did not have adequate controls over the maintenance of complete records of accounts receivable, accounts payable, and deferred revenues. The Regional Office did not maintain adequate internal controls over the processing of all financial transactions, and numerous adjustments were required to present financial statements in accordance with generally accepted accounting principles. 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 09-1, pages 15-16) This finding was first reported in 2007. The auditors recommended that, as part of its internal control over the preparation of its financial statements, including note disclosures, the Regional Office of Education #26 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 #26 responded that it understands the nature of this finding and realizes that this circumstance is not unusual in an organization of this size. The Regional Office accepts the degree of risk associated with this condition because the added expense of seeking additional expertise to prepare and/or review financial statements would take away from the funds available to provide educational services for the schools in the region. (For previous Regional Office response, see Digest Footnote #1.) AUDITORS’ OPINION Our auditors state the Regional Office of Education #26’s financial statements as of June 30, 2009 are fairly presented in all material respects. _____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KJM SPECIAL ASSISTANT AUDITORS Our special assistant auditors were Ginoli & Company Ltd. DIGEST FOOTNOTE #1: Controls Over Financial Statement Preparation – Previous Regional Office Response In its prior response in 2008, the Regional Office of Education #26 responded that understands the nature of this finding and realizes that this circumstance is not unusual in an organization of this size. The Regional Office accepts the degree of risk associated with this condition because the added expense of seeking additional expertise to prepare and/or review financial statements would take away from the funds available to provide educational services for the schools in the region.