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, 2011

Release Date:  May 17, 2012

Summary of Findings:
Total this audit: 1
Total last audit:  1
Repeated from last audit: 1

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

This Report Digest and Full Report are also available on the
worldwide web at www.auditor.illinois.gov

SYNOPSIS

• 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 revenue.

• 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 11-1, pages
15-16) This finding was first reported in 2007.

The auditors recommended that, as part of its internal control
over the preparation of financial statements, including
disclosures, the Regional Office of Education #26 should
implement a comprehensive preparation and/or review procedure to
ensure that the financial statements, including note 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
accounting 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, 2011 are fairly presented in
all material respects.

WILLIAM G. HOLLAND
Auditor General

WGH:KJM

AUDITORS ASSIGNED:  Ginoli & Company Ltd. were our special
assistant auditors.

DIGEST FOOTNOTE

#1: CONTROLS OVER FINANCIAL STATEMENT PREPARATION – Previous
Regional Office Response

In its prior response in 2010, 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.