REPORT DIGEST

 

CHICAGO STATE UNIVERSITY

 

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

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

For the Year Ended:

June 30, 2005

 

Summary of Findings:

Total this audit                          9

Total last audit                          5

Repeated from last audit           3

 

Release Date:

March 1, 2006 

 

 

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 the Full Report are also available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

 

 

 

SYNOPSIS

 

 

 

¨      The University did not have supporting documentation and proper approvals for expenditures charged to federal programs and charged lodging and airfare costs in excess of standard travel costs to a federal program.

 

¨      The University failed to provide required matching funds for a Federal Award Program.

 

¨      The University had instances of inadequate controls over its property and equipment and related records.

 

¨      The University did not file all contracts with the Illinois Office of the Comptroller.

 

¨      The University did not require time sheets for all of its employees in compliance with the State Officials and Employees Ethics Act.

 

¨      The University’s employees submitted travel reimbursement requests for travel claims that were not in accordance with the Illinois Travel Regulation Council’s travel rules or University’s policy and procedures.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

{Financial Information is summarized on the reverse page.}

 

 


CHICAGO STATE UNIVERSITY

FINANCIAL AUDIT AND COMPLIANCE EXAMINATION

For The Year Ended June 30, 2005

 

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY 2005
FY 2004

OPERATING REVENUES

      Student tuition and fees (net of scholarship allowances of $7,073,108 and $6,853,040)

..... Auxiliary enterprises (net of scholarship allowances of $34,893 and $85,163)...............

      Grants and contracts...............................................................................................................

      Other..........................................................................................................................................

            Total Operating Revenues..............................................................................................

OPERATING EXPENSES

      Instruction...........................................................................................................................

      Research..............................................................................................................................

      Public services.........................................................................................................................

      Academic support...................................................................................................................

      Student services.................................................................................................................

      Institutional support..........................................................................................................

      Operation and maintenance of plant...............................................................................

      Scholarships and fellowships..........................................................................................

      On-behalf State fringe benefits........................................................................................

      Auxiliary enterprises..........................................................................................................

      Depreciation........................................................................................................................

            Total Operating Expenses..............................................................................................

Operating Loss.............................................................................................................................

NONOPERATING REVENUES (EXPENSES)

      State appropriations................................................................................................................

      State fringe benefits................................................................................................................

      Interest on capital asset – related debt................................................................................

      Other nonoperating revenues................................................................................................

            Total Nonoperating Revenues........................................................................................

Income Before Other Revenues, Expenses, Gains or Losses...............................................

Capital appropriations and grants..............................................................................................

Loss on disposal of capital assets.............................................................................................

INCREASE IN NET ASSETS.....................................................................................................

Net assets, beginning of the year...............................................................................................

Net assets, end of the year..........................................................................................................

 

    $19,572,632

        4,217,015

      24,568,607

        2,760,943

    $51,119,197

 

    $34,181,896

        2,340,702

        6,261,285

        6,220,476

        8,781,577

        8,270,646

        8,204,625

        5,086,431

      14,427,031

        3,781,413

        2,958,195

  $100,514,277

   $(49,395,080)

 

    $38,845,285

      14,427,031

       (1,283,383)

             33,727

    $52,022,660

      $2,627,580

      14,593,710 

            (20,257)

    $17,201,033

    $61,357,770

    $78,558,803

 

      $17,281,547

          4,178,436

        23,094,855

          1,963,385

      $46,518,223

 

      $35,018,616

          1,857,403

          6,126,927

          6,762,531

          8,261,910

          8,239,050

          4,526,624

          5,155,230

        35,524,783

          3,569,613

          2,809,722

    $117,852,409

    $(71,334,186)

 

      $39,624,015

        35,524,783

       (1,342,043)

               38,554

      $73,845,309

        $2,511,123

        18,140,013

             (50,073)

      $20,601,063

      $40,756,707

      $61,357,770

SELECTED ACCOUNT BALANCES

JUNE 30, 2005

JUNE 30, 2004

Cash and cash equivalents..........................................................................................................

Capital assets, net of accumulated depreciation......................................................................

Revenue bonds payable...............................................................................................................

Accrued compensated absences ...............................................................................................

$3,356,958

$103,457,913

$22,400,000

$7,815,732

$4,483,323

$87,395,902

$23,125,000

$7,397,137

SUPPLEMENTARY INFORMATION (Unaudited)

FY 2005

FY 2004

Employment Statistics

      Faculty/administrative............................................................................................................

      Student employees..................................................................................................................

            Total Employees................................................................................................................

Selected Activity Measures

Students (Spring Term)

     Undergraduate..........................................................................................................................

     Graduate.....................................................................................................................................

     Total Students..........................................................................................................................

Full-time equivalent cost per student........................................................................................

 

1,015

281

1,296

 

 

4,619

2,024

6,643

$5,543

 

1,047

158

1,205

 

 

4,563

2,074

6,637

$5,543

UNIVERSITY PRESIDENT

During Audit Period and Current: Dr. Elnora Daniel



 

 

 

 

 

 

 

 

 

 

 

 


Auditors question costs totaling $20,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


The University could not produce evidence of the match for the project year that ended August 31, 2004 in the amount of $10,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Records did not accurately reflect property and equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


None of the 19 contracts tested were filed with the State Comptroller’s Office

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Non compliance with State Officials and Employees Ethics Act

 

 

 

 

 

 

 

 

 

 

 

 

 

 


University officials do not concur

 

 

 


Auditor comment

 

 

 

 

 

 

 

 


State law requires employees to submit time sheets documenting time spent on official state business

 

 

 

 

 

 

 

 

 

 


Auditors believe positive time keeping system required by law

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES

 

      The University did not have supporting documentation and proper approvals for expenditures charged to federal programs and charged lodging and airfare costs in excess of customary standard travel costs to the program.  As a result, we questioned costs totaling $20,179.

 

      During our review of federal programs, we noted the following:

 

·        The University could not provide documentation for six of eighty expenditures tested totaling $13,255.

 

·        Two of forty expenditures totaling $4,324 were for prepayments of hotel and conference room accommodations, however the University did not reconcile the prepaid costs and actual invoice that was subsequently received.

 

·        One of forty expenditures totaling $1,050 was an advance payment of travel per-diem for student meals, however the University never followed up on the funds advanced and as a result the actual expenses were $240 less than the advance.  The $240 was never refunded to the University or credited to the grant account.

 

·        Five of forty payment packages did not include a vendor invoice to support the payment made, thus, timing and allowability of expenditure could not be verified.

 

·        Two of forty payment packages were for hotel accommodations, which were charged at lodging rates that were excessive ($329 and $199 per night).

 

·        Two of forty expenditures were for travel or services provided after or before the grant period (outside the period of availability).

 

·        Two of forty expenditures were not properly approved prior to services being provided or travel being taken.  (Finding 1, Pages 16-17) This finding was first reported in 2003.

 

      We recommended the University improve control procedures to ensure that payments are only made once a proper invoice with appropriate documentation and approval is received.  The University should maintain a filing system that allows them to locate supporting documentation, including documentation of the necessity for any non-standard travel costs, for all invoices paid.  Additionally, we recommended the University timely reconcile travel advances with actual invoices submitted by travelers and recoup any funds due to the University

 

      University officials agreed with our recommendation and stated that they will strengthen compliance with its established policies and procedures related to documentation, filing, approvals and appropriate documentation for non-standard travel costs. (For the previous University response, see Digest footnote #1.)

     

FAILURE TO PROVIDE MATCHING FUNDS FOR FEDERAL PROGRAM

 

      The University failed to provide required matching funds for a Federal Award Program.

 

      During our audit, we requested documentation of the match it had provided for the Federal Program.  The University did provide us with evidence of its matching contribution made for the project year that ended August 31, 2005, however the University could not provide documentation of the match that should have been for the project year that ended August 31, 2004.  That match should have been $10,074.

 

      University officials believe that the match was made however they were unable to identify the accounting transaction in the general ledger. (Finding 2, Page 18)

     

      We recommended the University improve its policy for monitoring its compliance with the terms of grant agreements.     

 

      University Officials agreed with our recommendation and stated that they will develop additional compensating controls for monitoring compliance with the terms of grant agreements.

 

INADEQUATE CONTROLS OVER EQUIPMENT AND RELATED RECORDS

 

      The University’s had instances of inadequate controls over its property and equipment and related records.

 

      Several different types of exceptions were noted during our testing of property and equipment.  The exceptions that occurred were in the recording, safeguarding and in locating items of property and equipment.

 

Strong internal controls dictate that the University update and maintain a permanent and accurate record of property and equipment.  Failure to maintain control over equipment could result in theft or misuse of equipment.  (Finding 4, pages 20-22).  This finding has been repeated since 1997.

 

We recommended the University adhere to its procedures to ensure that the property and equipment records are properly maintained and that equipment be adequately safeguarded.

 

University officials responded that they agree with the recommendation and stated they will ensure its policies and procedures related to property equipment records are observed and that University assets are safeguarded. (For the previous agency response, see Digest footnote #2.)

 

FAILURE TO FILE CONTRACTS WITH THE STATE COMPTROLLER

 

            The University did not file all contracts with the Illinois Office of the Comptroller.

 

            Our testing of 25 contractual service expenditures included 19 expenditures required to have written contracts.  None of the 19 contracts were filed with the State Comptroller’s Office. (Finding 5, page 23)

 

            We recommended the University implement procedures to ensure all contracts over $10,000 are filed with the Illinois Office of the Comptroller in accordance with State statutes and guidelines.

 

            The University agreed with the recommendation.  University officials stated that they began implementing this in September 2005.

 

      TIME SHEETS NOT MAINTAINED IN COMPLIANCE WITH THE STATE OFFICIALS AND EMPLOYEES ETHICS ACT

 

            The University did not require time sheets for all if its employees in compliance with the State Officials and Employees Ethics Act (Act).

 

            The Act requires the University (through policies adopted by the Illinois Board of Higher Education) to adopt personnel policies consistent with the Act.  The Act (5 ILCS 430/5-5(c) states, “the policies shall require State employees to periodically submit time sheets documenting the time spent each day on official State business to the nearest quarter hour.”

 

            Of the 25 employees’ time sheets that were examined, 7 (all faculty members) did not submit time sheets documenting the time spent each day on official State business to the nearest quarter hour.  (Finding 6, pages 24-25)

 

            We recommended that the University require all employees to maintain time sheets in compliance with the Act.

             

            The University disagreed with this finding.  University officials responded that the Office of the Executive Inspector General had stated that a system of absence reporting would be an appropriate.

 

            In an auditor comment we noted that the State Officials and Employees Ethics Act defines “State Agency” to include “public institutions of higher learning…” 5 ILCS 430/1-5. Chicago State University is defined as a public institution of “higher learning” in Section 2 of the Higher Education Cooperation Act…” 110 ILCS 220/2.  Further, the State Officials and Ethics Act defines “State employee” to be “any employee of a State agency.” 5 ILCS 430/1-5.

 

            As noted in the finding, the State Officials and Employees Ethics Act requires “State employees to periodically submit time sheets documenting the time spent each day on official State business to the nearest quarter hour…” 5 ILCS 430/5-5(c).  This timekeeping requirement went into effect March 1, 2004.  The negative timekeeping system used for University faculty requires those employees to report only time away from State business, not the time spent each day on State business.  Further it is logical to assume that, by adopting this language, the legislature meant to effect a change in the method used by State employees to record their time – that is, to adopt a positive timekeeping system.  Finally, the memorandum from the Office of the Executive Inspector General upon which the University relied in maintaining its customary negative timekeeping system for faculty employees clearly states that it “is not a legal opinion.”

 

            We continue to believe that a positive timekeeping system for State employees is required by the State Officials and Employees Ethics Act.  If the University disagrees with this conclusion, we further recommend that it seek a formal, written opinion from the Attorney General’s Office on the requirements of this statutory provision.

 

      NON-COMPLIANCE WITH TRAVEL REGULATIONS

 

            The University’s employees submitted travel reimbursement requests for travel claims that were not in accordance with the Illinois Travel Regulation Council’s travel rules or University’s policy and procedures.

 

      Several different types of exceptions were noted during our testing of travel reimbursements and the related invoices.  The exceptions that occurred were for lack of detailed receipts and/or inadequate documentation, lack of approval, duplicate charges and lodging rates in excess of those allowed by the Travel Control Board.

 

      Failure to properly adhere to the travel regulations may result in the University making an inappropriate payment of State funds. (Finding 8, pages 27-28)

 

      We recommended the University establish procedures to ensure travel expenditures are proper and comply with established regulations and policies.

 

      University officials agreed with the finding and have stated that they have assigned a veteran employee to handle travel expenditures to ensure that vouchers are processed properly and will conduct University-wide employee training on travel policies and procedures.

 

OTHER FINDINGS

 

      The remaining findings are reportedly being given attention by University officials.  We will review progress toward implementation of our recommendations in our next audit.

 

      University responses to the findings were provided by the Mr. Alan D. Robertson, in a letter dated February 7, 2006.

 

 

AUDITORS’ OPINION

 

      Our auditors state the financial statements of Chicago State University as of June 30, 2005 and for the year then ended are fairly presented in all material respects.

 

 

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:TLK:pp

 

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors for this audit were Nykiel Carlin & Co., LTD.

 

 

 

DIGEST FOOTNOTE

 

#1 INADEQUATE SUPPORTING DOCUMENTATION FOR FEDERAL EXPENDITURES - Previous University Response

The University agrees with the recommendation.  The University will strengthen compliance with its established policies and procedures related to documentation, filing, approvals and appropriate documentation for non-standard travel costs.  Additionally, the University believes that these were isolated incidents; however, the University will commit its resources to improve its controls to ensure the above conditions do not repeat in the future.  The University will also reconcile travel advances with actual vendor invoices in a timely manner and will properly document the necessity for any non-standard travel costs.

 

#2 FIXED ASSET REPORTING – Previous University Response    

The University agrees with the recommendation.  The University will ensure its policies and procedures related to property and equipment records are observed and that the University’s assets are safeguarded.

 

The University has adopted several measures to reduce the number of exceptions in the area of property control.  The following measures were taken during the year:

·         Conducted two (2) training sessions for the staff responsible for the property in their respective departments prior to the fiscal year 2004 annual physical inventory required by the Department of Central Management Services (DCMS).

·         Published the federal, State and the University’s rules, regulations, policies and procedures covering areas such as property additions, deletions, dispositions and transfers.

·         Provided detailed instructions to fill out various forms used while transferring or disposing of property to ensure Property Control System is updated immediately.

 

The sixteen (16) on campus incidents of theft were abnormally high in FY’04.  The University operates in a higher crime area, but the campus security and crime rates are excellent, overall.  The one incident occurred, involving eighteen (18) notebook computers, at a grant partner’s facility and the University is working with them for restitution. 

 

The property control staff will perform a mid-year inventory of departments with a large number of audit exceptions.  The University believes that the extra inventories and training will reduce the audit exceptions in property control.