REPORT DIGEST

 

CHICAGO STATE UNIVERSITY

COMPLIANCE EXAMINATION

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

For the Year Ended:

June 30, 2007

 

Summary of Findings:

Total this year            

    - Financial Audit         3*

    - Compliance Audit  14

                                        17

Total last year            

    - Financial Audit         2*

    - Compliance Audit  10

                                        12

Repeated from last year

    - Financial Audit        1*

    - Compliance Audit   7

                                         8

*Financial Audit Previously Released

Release Date:

May 15, 2008

 

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

 

INTRODUCTION

 

      The Financial Statement Audit for the year ended June 30, 2007 was previously released on April 10, 2008.  That audit contained three audit findings. Those findings pertained to significant deficiencies in internal control over financial reporting.

 

      This report addresses Federal and State Compliance findings pertaining to the Single Audit and State Compliance Examination.  In total, this document contains fourteen audit findings.

SYNOPSIS

 

¨       The University did not have supporting documentation and proper approvals for certain expenditures charged to Federal Programs.

 

¨       The University’s procurement policies have requirements for competitive bidding however no evidence of competitive bidding was noted during testing of Federal transactions.

 

¨       The University failed to comply with cash management requirements.

 

¨       The University did not have adequate controls over contracting procedures.

 

¨       The University did not follow the travel policies of the Higher Education Travel Control Board and the Department of Central Management Services Property Control Rules.  Additionally, numerous charges to the University credit card were not supported by receipts and documentation.

 

¨       The University did not have procedures in place to periodically monitor unclaimed monies to determine proper and timely disposition of the funds in compliance with the Unclaimed Property Act.

 

¨       The University did not perform timely reconciliations of University records to the Office of the State Comptroller records.

 

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

 

 

{Financial Information is summarized on the reverse page.}

 


 

 

CHICAGO STATE UNIVERSITY

COMPLIANCE EXAMINATION

For The Year Ended June 30, 2007

 

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY 2007
FY 2006

OPERATING REVENUES

        Student tuition (net of scholarship allowances of $7,573,293 and $7,721,000.............

        Auxiliary enterprises (net of scholarship allowances of $13,664 and $35,336.............

        Grants and contracts (principally federal).........................................................................

        Other sources........................................................................................................................

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

OPERATING EXPENSES

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

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

        Public service.........................................................................................................................

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

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

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

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

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

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

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

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

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

OPERATING LOSS.......................................................................................................................

NONOPERATING REVENUES (EXPENSES)

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

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

        Investment income................................................................................................................

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

                ....... Net nonoperating revenues.................................................................................

 

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

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

                ....... Total other revenues.............................................................................................

                          Increase in net assets.........................................................................................

NET ASSETS

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

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

 

$22,023,468

3,630,015

31,083,682

3,023,784

$59,760,949

 

$38,298,566

5,405,867

7,359,554

7,118,467

13,468,500

8,903,062

6,701,614

5,346,202

3,902,710

4,067,182

15,176,756

$115,748,480

$(55,987,531)

 

41,160,000

15,176,756

54,044

(1,350,769)

$55,040,031

($947,500)

$16,916,913

(32,128)

$16,884,785

$15,937,285

 

112,189,557

$128,126,842

 

 $22,437,090

4,100,582

31,181,924

3,149,562

$60,869,158

 

$36,655,375

3,863,448

6,192,057

6,491,124

11,056,396

9,336,983

6,402,239

5,075,461

4,278,278

3,348,005

13,402,670

$106,102,036

$(45,232,878)

 

38,660,300

13,402,670

57,071

(1,472,091)

$50,647,950

$5,415,072

$28,253,484

(37,802)

$28,215,682

     $33,630,754

 

78,558,803

$112,189,557

SUPPLEMENTARY INFORMATION (Unaudited)

FY 2007

FY 2006

Employment Statistics

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

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

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

Selected Activity Measures

Students (Spring Term)

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

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

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

 

902

299

1,201

 

 

4,775

1,773

6,548

 

950

298

1,248

 

 

4,790

1,864

6,654

UNIVERSITY PRESIDENT

During Audit Period and Current: Dr. Elnora Daniel



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Failure to maintain supporting documentation

 

 

Questioned costs totaling $13,702

 

 

 

Need to improve property control records

 

 

 

 

 

 

 

 

 

 

 

 

 


University agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$1,519,500 of expenditures contained no evidence of bidding

 

 


$58,359 of expenditures contained no evidence of bidding

 

 

 

 


$1,596,637 of expenditures contained no evidence of bidding

 

 

 

 


$1,309,692 of expenditures contained no evidence of bidding

 

 

 

 

 

 

 

 


University agrees with auditors

 

 

 

 

 

 

 

 

 

 


Competitive procurement regulations not followed

 

 

 

 

 

 

Cash draw-downs exceeded the quoted cost by $76,894

 

 

 

 

 

 

 

$39,650 cash drawn-down pertained to another program

 

 

 

 

 

 

 

 

 

 

 


University agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 


No evidence of competitive bids for 5 contracts totaling $679,927


One contract for $251,000 was with an employee of the University

 


18 of 26 contracts tested were executed after the date that services commenced

 

 

 


4 contracts exceeding $250,000 each were not approved by the Board of Trustees

 

 

 

 

 

 

 

 

 

 


University agrees with auditors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit card charges were not always supported

 


Payment documentation did not identify any specific business purpose

 

 

 

 

 

 

 

 

 


Lack of receipts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


University accepted the recommendation

 

 

 

 

 

 

 

 

 

 


Some outstanding checks were issued over 10 years ago

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

University agrees with auditors

 

 

 

 

 

 

 

 

 

 

 


Reconciliations  for the first 5 months were not performed until December 2006

 

 

 

 

 

 

 

 

 

University agrees with auditors

 

 

 

 

 

 

 

 


Inadequate controls over property and equipment records

 

 

 

 

 

 

 

 

 

 

 

Several items observed were not on the property list

 

 

 

 

 

 

 

 

 

 

 

 

 

Items could not be located

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Financial Statement adjustments needed as a result of auditor testing

 

 

 


Several items tested totaling $229,556 were missing on the DCMS list

 

 

 

 

 


Annual Certification of Inventory submitted 7 months late

 

 

 

 

 

 

 

 


University agrees with auditors

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES

 

      The University did not have supporting documentation and proper approvals for certain expenditures charged to Federal programs.  Specifically, the University charged lodging and per diem rates in excess of rates allowed by State travel regulations.  Further, certain equipment purchased with Federal funds had not been properly recorded in University property control records.

 

      Some of the items noted during our review of federal programs follow:

 

·        Eleven of seventy-seven (14%) expenditures ($48,966) tested for the U.S. Department of Education – Trio Cluster, were missing appropriate supporting documentation. 

·        One of forty-one (2%) expenditures ($29,598) tested for the U.S. Agency for International Development – Textbook and Learning Materials, included $13,702 of promotional items that were incorrectly charged to the program.

·        Three of forty-one (7%) expenditures ($366,943) tested for furniture and equipment were not properly recorded or tracked in the University’s property control records. (Finding 5, Pages 14-16) This finding was first reported in 2003.

 

      We recommended that the University improve control procedures to ensure that payments are only made once a proper invoice with appropriate documentation and approval is received.  In addition, we recommended that the University 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 and to ensure proper tracking and accounting of property expenditures.

 

      University officials accepted our recommendation and stated that they will develop policies and procedures to ensure that payments are made only when a proper invoice and appropriate documentation and approval is received.  (For the previous University response, see Digest footnote #1.)

 

GRANT EXPENDITURES NOT PROPERLY BID

 

      The University’s procurement policies have requirements for competitive bidding; however no evidence of competitive bidding was noted during testing of Federal transactions.

 

      During our audit of major federal programs in compliance with OMB Circular A-133 we noted the following:

 

·        In our expenditure testing of the U.S. Department of Health and Human Services – Head Start Program we tested 52 expenditures totaling $1,574,760.  We noted that 7 (13%) expenditures totaling $1,519,500 were over the small purchase threshold of $25,000 and contained no evidence of bidding.

·        In our expenditure testing of the U.S. Department of Education - Trio Cluster we tested 77 expenditures totaling $263,820. We noted that 2 (3%) expenditures totaling $58,359 were over the small purchase threshold of $25,000 and contained no evidence of bidding.

·        In our expenditure testing of the National Institutes of Health, National Science Foundation and the Department of Defense - Research Cluster we tested 67 expenditures totaling $1,742,176.  We noted that 11 (16%) expenditures totaling $1,596,637 were over the small purchase threshold of $25,000 and contained no evidence of bidding.

·         In our expenditure testing of the U.S. Agency for International Development – Textbook and Learning Materials Program we tested 41 expenditures totaling $1,513,680.  We noted that 17 (41%) expenditures totaling $1,309,692 were over the small purchase threshold of $25,000 and contained no evidence of bidding. accordance (Finding 6, Pages 17-18)

     

We recommended that the University improve its policies and procedures to ensure that purchases made with grant funds are competitively bid.

 

University officials agree with the recommendation and stated that they will provide training for fiscal officers and program directors to refresh their understanding of University bidding requirements, especially as those policies relate to grants.

 

FAILURE TO COMPLY WITH CASH MANAGEMENT REQUIREMENTS

 

The University failed to comply with cash management requirements.

 

During our testing of the U.S. Agency for International Development – Textbook and Learning Materials Program we noted that the University purchased equipment for this program and then subsequently determined that competitive procurement regulations were not followed and that the equipment could have been purchased for a lesser amount. 

 

As a result of a review of other vendor quotes, University officials determined that the acquisition cost exceeded the quoted cost by $76,894.  The University had drawn-down the funds at the time of purchase and then subsequently adjusted its Federal drawdown to reduce the equipment expenditures of the program.  However, this resulted in the University drawing down Federal funds in excess of a reasonable amount had the University competitively procured the purchase.

 

During our testing of the U.S. Department of Education – Federal Academic Competitiveness Grants we noted that the University had expenditures of $43,300 for this grant.  However, the University had cash draw-downs of $82,950 under this program for the year ended June 30, 2007.  The draw-downs exceeded expenditures as the University erroneously requested reimbursement for monies, in the amount of $39,650, spent under another grant program.  (Finding 8, Pages 21-22)

 

We recommended that the University establish policies and procedures to ensure that cash management requirements are met.

 

University officials accepted the recommendation and stated that they will establish an internal review process for grant billings in an effort to uncover any errors in the grant billing process.

 

NEED TO IMPROVE CONTROLS OVER CONTRACTING

 

The University did not have adequate controls over contracting procedures.

 

During the audit, we noted numerous deficiencies in our examination of 26 contracts.  Some of these significant deficiencies are as follows:

 

·        Five contract files for goods and services that exceeded professional and artistic procurement maximums ($20,000) and small purchase amounts ($30,500) did not contain evidence of attempts to request competitive bids.  These contracts totaled $679,927.  One of these contracts for $251,000 was with an employee of the University, who failed to disclose any conflict of interest.

·        Eighteen contracts tested, totaling $2,043,222, were dated and signed by a University official and the vendors however, the date of the signatures was after the date of the commencement of services for the contract.

·        Two of the contracts on file at the University did not contain vendor signatures.  These contracts were for services totaling $275,163.

·        Four contracts, each exceeding $250,000 for goods and services, were not approved by the University Board of Trustees.

·        One University employee was paid $12,000 on a consulting contract after he had become a full time faculty member. (Finding 9, Pages 23-24)

 

We recommended that the University establish internal controls to ensure compliance with the Illinois Procurement Code, SAMS Manual, University policies and procedures and to ensure that contracts are fully executed prior to commencement.

 

University officials agreed with the recommendation and stated that they now have annual training for all fiscal officers to review and explain the University’s procurement policies and to reinforce universal application of the policy to all areas of University’s operations.

 

 

NEED TO IMPROVE CONTROLS OVER EMPLOYEE TRAVEL AND USE OF UNIVERSITY CREDIT CARD

 

The University did not always follow travel policies issued by the Illinois Higher Education Travel Control Board and Property Control Rules issued by the Department of Central Management Services.  We also noted numerous charges to the University credit card that were not supported by appropriate receipts or documentation.

 

During our testing of University credit card expenditures and employee travel documents some of the items we found are as follows:

 

·        Five charges for meals and entertainment expenses totaling $1,095 were paid without documentation supporting the specific business purpose.

·        A number of restaurant charges totaling $538 were not supported by a receipt or documentation identifying any specific business purpose for the expenditure.  In addition, four airline ticket charges, totaling $1,489, were not documented by receipts or specific business purpose.

·        Six charges for gasoline, hotel and entertainment expenditures were paid by the University and should have been expenses reimbursed by the Chicago State University Foundation.  The total of these expenditures were $778.

·        A direct payment voucher in the amount of $34 was also paid on a credit card.  Therefore, the University paid twice for the same meal.

·        Four charges on the credit card totaling $207, for purchases for the President’s residence, were not documented by receipts and therefore the items purchased could not be determined.

 

After bringing these matters to the University’s attention, the University provided some of the meeting purposes and itineraries; however, this documentation was not presented with the charge card expenses submitted for payment by the University. (Finding 11, Pages 27-28)

 

We recommended that the University implement procedures to ensure compliance and require all employees to adhere to regulations established by the Higher Education Travel Control Board and Travel Regulation Council.  We further recommended that the University recoup the overpayments.

 

University officials accepted the recommendation and stated that they will instigate a second review process for credit card expenditures to monitor the completeness of the documentation for the expenditures.

 

FAILURE TO MONITOR COMPLIANCE WITH UNCLAIMED PROPERTY ACT

 

The University did not have procedures in place to periodically monitor unclaimed monies to determine proper and timely disposition of the funds in compliance with the Act.

 

During our audit we noted that the University had three accounts included in the accounts payable balance that solely contained stale checks.  There was no evidence that checks in these accounts had been periodically reviewed to determine the status or proper disposition.  Some of these checks were issued over ten years ago. 

 

The Uniform Disposition of Unclaimed Property Act (765 ILCS 1025/11(a)) states that every person holding funds or other property, tangible or intangible, presumed abandoned under this Act shall report and remit all abandoned property specified in the report to the State Treasurer with respect to the property as hereinafter provided. 

 

According to the Act (765 ILCS 102/8.1(a)), all tangible personal property or intangible personal property and all debts owed or entrusted funds or other property held by any federal, state or local government or governmental subdivision, agency, entity, officer or appointee thereof, shall be presumed abandoned if the property has remained unclaimed for 7 years. (Finding 12, Page 29)

 

We recommended that the University establish appropriate procedures for stale checks and comply with the Act.


University officials agreed with the recommendation and stated that they have created a task force to review outstanding stale checks and determine their proper disposition. 

 

UNTIMELY RECONCILIATION OF AGENCY’S RECORDS TO THE COMPTROLLER’S MONTHLY REPORTS

 

The University did not perform timely reconciliations of University’s records to the Office of the State Comptroller.

 

During our audit we noted that the reconciliations between the University’s expenditures and the Office of the State Comptroller’s Monthly Appropriation Status Report for the first five (42%) months of the fiscal year were not performed until December of 2006.  And the reconciliations for two (16%) of the remaining seven months were each performed one month late.  (Finding 14, Page 32)

 

We recommended that the University comply with SAMS and perform monthly reconciliations in a timely manner.

 

University officials agreed with the recommendation and stated that they will take the necessary steps to hire additional staff, which will facilitate the timely performance of reconciliations.

 

NEED TO IMPROVE CONTROLS OVER PROPERTY AND EQUIPMENT RECORDS

 

The University had inadequate controls over its property and equipment records.

 

We toured the University campus and judgmentally selected 25 items for review.  After confirming the existence of the item we tried to trace it to the property control list maintained by the University.  The list provided to us by the University is the same one the University provides to the Department of Central Management Services (DCMS) for property items with a cost of $500 or more.  Further, the University, pursuant to its capitalization threshold for financial statement reporting purposes, maintains a listing of property and equipment for items in excess of $5,000.

 

In performing our testing of University equipment, we found the following:


·        Of the 25 items that we observed, 14 items (56%) were not on the property control list.

·        Three items observed, with a total cost of $16,369 (two copiers and a computer) were not on the property listing as provided to the Department of Central Management Services, however these were included on the University’s property control records used for financial statement reporting purposes.

 

We judgmentally selected 50 items from the University’s property control listing and attempted to locate these items.  Some of the exceptions we noted are as follows:

 

·        One item (2%) on the property listing could not be located with a total cost of $1,832.  This item did not have a description.  In addition, another item (ceramic stirrer) (2%) on the property control listing did not have a cost and did not have a location code of the listing.

·        Six items (12%) were assigned tag number however they did not have tags affixed.  These items totaled $99,129.  In addition, 9 items (18%) totaling $16,217 did not have tags affixed and were not on the property listing.

·        One item (2%), a laptop costing $891, could not be located.  This had been loaned to a student however the University could not provide us with the documentation.

 

      Additionally, one item was listed on the property control records for financial reporting purposes for a value of $521,089 greater than on the property listing.  It was determined that the value of the records for financial reporting purposes was incorrect and resulted in an adjustment of $521,089 to assets, and $264,887 to depreciation expense. 

 

      As a result of the exceptions noted the auditors performed additional testing of the two different property control listings maintained by the University.  We judgmentally selected 25 items from the property control listing used for financial statement reporting purposes and tried to locate those items on the property control listing used for DCMS reporting purposes.  Ten items (40%) totaling $229,556 could not be found on the DCMS list.

 

                        The Annual Certification of Inventory submitted to the Department of Central Management Services for the period ended March 31, 2007 was submitted by the University on February 6, 2008.  This report was due on July 2, 2007.  The University had requested three extensions subsequent to July 2007, with the last requesting an extension until January 14, 2008.  (Finding 18, Pages 36-38) This finding was first reported in 1997.

 

                        We recommended that the University adhere to its procedures to ensure that the property and equipment records are properly maintained and accounted for.

 

                        University officials agreed with the recommendation and stated that they realize the need to continue to improve controls and procedures over equipment. (For the previous University response, see Digest footnote #2.)

 

 

OTHER FINDINGS

 

      The remaining findings are reportedly being given attention by University management.  We will review the University’s progress toward implementation of our recommendations in our next examination.

 

 

AUDITORS’ OPINION

 

      The financial audit report was previously released. Our auditors stated the June 30, 2007 financial statements were 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 DeRaimo Hillger & Ripp.

 

 

 

DIGEST FOOTNOTE

 

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

We agree with the recommendation.  The University had established control procedures to ensure that prepaid costs are subsequently compared to final actual invoices to ensure prepayments were proper.   The University will develop procedures to ensure compliance with travel guidelines and exceptions properly explained and submitted to the Travel Control Board, where necessary.  The vehicle was included on the schedule of Property and Equipment supporting the fixed assets reported on its financial statements.  The University will arrange to reimburse the Department of Health and Human Services for these loans.

 

#2 INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT RECORDS - Previous University Response

We agree with the recommendation.  The University continues its efforts to improve controls and procedures over equipment.  The item (a metal filing cabinet) was reported by the Fiscal Officer to Property Control as scrap and appropriately removed from the Property Module.  However, the item was retained by another department for storage until they purchased a replacement.  The University plans to appeal to the Illinois Comptroller’ Office to change its procedures pertaining to reporting of CDB transfers.  The current accounting systems utilized by the state agencies and universities allow recording such transfers in the quarter they belong.