REPORT DIGEST

EASTERN ILLINOIS UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT
(In Accordance with the Single Audit Act of 1984 and OMB Circular A-133)
For the Year Ended:
June 30, 1996

Summary of Findings:

Release Date:
May 15, 1997

State of Illinois
Office of the Auditor General

WILLIAM G. HOLLAND
AUDITOR GENERAL

Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217) 782-6046

SYNOPSIS

• The University lacked adequate documentation to support its allocation of expenditures among State-appropriated funds, revenue bond funds and local funds. Since activities of the revenue bond fund entities are intended to be self-sufficient, subsidies may have occurred without legislative approval. This finding has been repeated since 1991.

{Expenditures and Activity Measures are summarized on the next page.}

FY 1996

FY 1995

$37,500,400
27,947,393
10,624,778
3,681,172
19,542,037
12,528,594
$111,824,374

$41,456,044
333,920
7,059,592
8,076,301
10,105,674
10,143,525
7,546,985
4,035,375
22,700,305
2,337,975
$113,795,696

$38,022,346
27,306,314
8,685,907
13,072,496
19,165,274
2,880,763
$109,133,100

$34,494,822
306,534
6,711,586
6,511,471
8,868,637
18,243,158
6,721,851
3,720,898
22,495,810
476,763
$108,551,530

JUNE 30, 1996

JUNE 30, 1995

$15,486,446
160,219,509
14,659,665
34,388,190

(12,374,071)
1,212,680
4,297,419
373,785
128,378,569

$19,951,954
150,253,295
13,575,818
36,326,555

(10,408,221)
1,218,152
4,038,611
372,785
124,760,809

FY 1996

FY 1995

800
922
302
2,024

9,979
$6,924
63%

779
917
302
1,998

10,003
$5,828
63%

Cost allocations were not supported in the business office wages, the payroll section, and the human resources department

INTRODUCTION

This Digest summarizes information contained in the University's Compliance Audit (In Accordance with the Single Audit Act of 1984 and OMB Circular A-133) and Financial Audit.

FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

Our audit presents one finding regarding noncompliance with the 1982 University Guidelines. The University Guidelines were adopted jointly in 1982 by the Legislative Audit Commission and the State university governing boards. The Guidelines were intended to codify and improve the fiscal practices at State universities.

CERTAIN COSTS ALLOCATED TO STATE-APPROPRIATED FUNDS WERE NOT SUPPORTED

The University lacked adequate documentation to support its allocation of expenditures among State-appropriated funds, revenue bond funds, and local funds. This finding has been repeated since 1991. Cost allocations were not supported in the following areas:

• the business office wages, where appropriated funds paid 60 percent of the $839,587 in total wages in 1996, but paid 55 percent in 1995,

• the payroll section, where appropriated funds paid 51 percent of the $137,927 in total wages in 1996, and

• the human resources department, where appropriated funds paid 80 percent of the $378,784 in total wages in 1996.

We first reported this finding in 1991. Since that time, allocations in these areas have fluctuated from 50 percent to 100 percent, depending upon the area. The University has not justified its allocations of these expenses with supporting documentation, nor have they determined the extent, if any, of subsidies provided to revenue bond funds or local funds by the appropriated funds.

Subsidies are not permitted by the 1982 University Guidelines. Activities of revenue bond fund entities are intended to be self-sufficient, using bond proceeds. The above conditions indicate that subsidies may have occurred without legislative approval. (Finding 1, page 11)

University management accepted and have partially implemented our recommendation to eliminate subsidies and implement cost allocation plans which fairly distribute expenses among State-appropriated, revenue bond, and local funds. According to their response, a cost allocation plan has been developed to address this finding. Officials expect this plan to be implemented in fiscal year 1997. (For previous agency responses, see Digest Footnote 1.)

OTHER FINDINGS

The remaining findings and recommendations were less significant and have been given appropriate attention by the University management. We will review progress toward implementation of our recommendations during our next audit. Responses were provided by Dr. Morgan Olsen, Vice President for Business Affairs.

AUDITORS' OPINION

Our auditors stated the June 30, 1996 financial statements of the University are fairly presented.

___________________________________
WILLIAM G. HOLLAND, Auditor General

WGH:JHL:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors on this engagement were Kerber, Eck & Braeckel LLP.

DIGEST FOOTNOTES

#1: STATE APPROPRIATED FUNDS COSTS NOT SUPPORTED - Previous Agency Responses.

1995: "The University has developed a plan and further analysis is being done on how to distribute University expenditures fairly and accurately among State-appropriated, revenue bond and other funding sources. The plan should be implemented in FY 1997 as part of the budgeting process."

1994: "In fiscal year 1995, the University allocated fire protection costs between appropriated and revenue bond funds. The University also filled a position that will concentrate on the allocation of expenditures among all funding sources. When a cost study is completed, an appropriate cost allocation plan will be developed."

1993: "The University concurs with the recommendation. However, development of an equitable cost allocation system requires a great deal of effort.

The University will develop a plan to identify any subsidies, to eliminate or offset subsidies, and to establish procedures for keeping and correcting any changes that could affect subsidies between entities."

1991: "The University will develop documentation to support the reasonableness of the allocations to appropriated funds and revenue bond for Business Office salaries."