REPORT DIGEST

 

UNIVERSITY OF ILLINOIS

 

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                         8

Total last audit                         8

Repeated from last audit          2

 

Release Date:

March 28, 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 available on

the worldwide web at

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

 

 

 

 

 

SYNOPSIS

 

 

¨      A class trip to China was not handled in accordance with various University policies and procedures.

 

¨       The University paid vouchers with inappropriate charges, inadequate documentation and duplicate billings to two faculty totaling $81,958.

 

¨      All contracts were not filled with the Office of the State Comptroller on a timely basis.

 

¨      The University did not require all employees to submit time sheets as required by the State Officials and Employees Ethics Act.

 

¨      University publications were not identified as being printed by the authority of the State of Illinois as required by the Illinois Procurement Code.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


UNIVERSITY OF ILLINOIS

FINANCIAL OPERATIONS

FY 2005

FY 2004

OPERATING REVENUES

 

 

        Tuition and fees, net..........................................................

                    $507,137,000

                    $448,476,000

        Federal grants, contracts and appropriations................

                      625,222,000

                      589,414,000

        State and private gifts, grants and contracts.................

                      152,325,000

                      138,176,000

        Hospital and medical activities.........................................

                      518,439,000

                      453,400,000

        Auxiliary enterprises, net...................................................

                      264,660,000

                      262,058,000

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

                      297,373,000

                      400,737,000

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

                 $2,365,156,000

                 $2,292,261,000

OPERATING EXPENSES

 

 

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

                    $677,928,000

                    $602,025,000

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

                      557,058,000

                      548,969,000

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

                      277,626,000

                      250,534,000

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

                      206,894,000

                      187,290,000

        Hospital and medical activities.........................................

                      394,122,000

                      353,861,000

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

                      207,825,000

                      213,740,000

        On behalf payments for fringe benefits...........................

                      347,232,000

                      937,354,000

        Operation of plant...............................................................

                      199,183,000

                      176,682,000

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

                      163,854,000

                      129,114,000

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

                      175,978,000

                      153,022,000

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

                      175,166,000

                      160,673,000

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

                        88,831,000

                        84,739,000

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

                 $3,471,697,000

                 $3,798,003,000

Operating Income (Loss)...........................................................

            $(1,106,541,000)

            $(1,505,742,000)

NONOPERATING REVENUES (EXPENSES)

 

 

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

                    $653,913,000

                    $639,227,000

        Capital appropriations, gifts and grants..........................

                      106,005,000

                      127,514,000

        Private gifts and endowments..........................................

                      108,534,000

                        98,592,000

        On behalf payments for fringe benefits...........................

                      286,597,000

                      765,951,000

        Other, net.............................................................................

                        (6,164,000)

                          8,967,000

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

                      $42,344,000

                    $134,509,000

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

                 $2,278,378,000

                 $2,143,869,000

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

                 $2,320,722,000

                 $2,278,378,000

SELECTED ACCOUNT BALANCES

June 30, 2005

June 30, 2004

Cash and Investments...............................................................

$999,310,000

$939,830,000

Capital Assets, net.....................................................................

$2,867,380,000

$2,746,524,000

Accrued Compensated Absences...........................................

$194,437,000

$171,533,000

Revenue Bonds Payable............................................................

$780,272,000

$695,300,000

SUPPLEMENTAL INFORMATION (Unaudited)

FY 2005

FY 2004

Employment Statistics

        Chicago................................................................................

 

13,266

 

13,321

        Springfield............................................................................

780

800

        Urbana-Champaign.............................................................

14,515

14,865

                                Total..............................................................

28,561

28,986

Enrollment Statistics

        Undergraduate --

                Chicago........................................................................

 

 

15,462

 

 

16,012

                Springfield....................................................................

2,507

2,569

                Urbana-Champaign.....................................................

29,632

29,226

                        Subtotal................................................................

47,601

47,807

        Graduate –

                Chicago........................................................................

 

9,403

 

9,752

                Springfield....................................................................

1,889

2,005

                Urbana-Champaign.....................................................

11,055

11,232

                        Subtotal................................................................

22,347

22,989

                                  Total............................................................

69,948

70,796

UNIVERSITY PRESIDENT

 

 

During Audit Period:  Dr. James Stukel, Dr. B. Joseph White (effective January 31, 2005)

Currently:  Dr. B. Joseph White

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lack of policy for class trips

 

 

 

 

 

 

 

 

 

 


Unauthorized collection of payments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Procedures not standardized

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Questionable charges totaled $81,958

 

 

 

 

 

 

 

 

 

 

 

 

Federal agencies were repaid $35,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State law requires filing contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

University policies do not require time sheets from all employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


University officials disagree

 

 

 

 

 

 

 

Auditors’ Comment

 

 

 

 

 

 

 

 

 

 

 

 

 


Requirement set forth in Illinois Procurement Code

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION

 

      Our 2005 audit and examination of the University of Illinois is presented in three reports.  The financial part consists of two reports which include the various financial statements of the University and other supplementary information.  The Compliance Examination report contains the compliance findings disclosed by our tests.

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

 

CLASS TRIP NOT IN COMPLIANCE WITH UNIVERSITY POLICIES AND PROCEDURES

 

      A trip to China taken by a University of Illinois at Springfield (UIS) class was not handled in accordance with various University policies and procedures.  We reviewed the procedures followed in connection with a 10 day class trip to China in January 2005 which was associated with the College of Business and Management.  There were 15 students enrolled in the class and the associated lab.  A UIS Dean personally paid for the travel costs of the trip totaling $48,429.  After the trip, the College of Business and Management billed and collected from the students $1,300 each, primarily for airfare.  We noted the following problems:

 

¨      No formal policy exists for approving class trips and establishing course fees at UIS.

 

¨      Reimbursement income was not properly offsetting the travel expense on the University accounting records in accordance with generally accepted accounting principles.

 

¨      The College of Business and Management (CBM) was not authorized to collect or receive money and all checks received should have been made payable to the University of Illinois not CBM.

 

¨      Checks were not deposited timely to the Bursar Office.

 

¨      A personal credit card and travel advance were used when University policies and procedures and prudent business practices call for use of direct billing or Procurement Card whenever possible so that any volume discounts, frequent flyer miles, or other such benefits accrue to the University.

 

¨      The expense reimbursement report was not submitted on a timely basis and an incorrect form was used.

 

University officials indicated that international class trips are a fairly new concept for this College and procedures had not been standardized.  They stated College personnel were not familiar with the University’s cash handling policies or the procedures used by the other campuses for this type of activity.

 

Failure to follow University policies and procedures could result in unnecessary costs associated with travel, loss or misuse of funds, forgone benefits, or other irregularities.  (Finding 1, pages 10-12)

 

University officials accepted our finding and stated UIS is in the process of developing a student trips policy.  Once the policy is developed they will provide training.

 

INAPPROPRIATE PAYMENTS MADE

 

      The University paid vouchers with inappropriate charges, inadequate documentation and duplicate billings.  University personnel became aware of questionable charges on vouchers and requested that the Office of University Audits conduct an internal audit of two co-investigators’ charges to federal awards.  The Office of University Audits examined charges from July 1999 through February 2005.  They noted vouchers which contained inappropriate charges (i.e. second hotel rooms for children, excessive per diems, transportation costs without justification, excessive charges for luxury items, and airfare not in compliance with policies), inadequate documentation, and duplicate billings totaling $24,948.  In addition, one person was paid $33,643 of housing reimbursement without adequate approval and support.  The other person was inappropriately paid a $5,000 lump sum, charged to a grant, and was overpaid $2,965 of sabbatical salary in April 2001.  The first person also was paid $15,402 in excess of the allowable sabbatical salary.  Of the total charges of $81,958 which were questionable, $35,054 was paid with federal grant funds.

 

      The cause of these inappropriate payments was an insufficient review and approval of vouchers and a lack of communication between three University departments when faculty members work on projects and there is more than one department involved.  There was no designation of one person or department to review and supervise the parties involved.

 

      One individual is now deceased and the other has terminated his employment with the University subsequent to the investigation.  Per discussion with the University, the departing employee agreed to a cash settlement and $12,804 was withheld from his final termination payment.  In addition, per the University all unallowable costs on sponsored projects have been transferred from grants and charged to unrestricted departmental funds.  In October 2005, the University repaid federal agencies for $35,024 in federal questioned costs.  (Finding 2, pages 13-15)

 

      We recommended the University emphasize the importance of the review and approval of vouchers to avoid inappropriate charges being paid.  In addition, the University should improve the communication between departments when faculty members are working on projects for more than one department.

 

      University officials accepted our recommendation and stated their departments have been reminded of their responsibility to comply with University policies and procedures as well as federal guidelines when reviewing and approving expenditures.

 

CONTRACTS NOT FILED TIMELY

 

      Our testing of twenty-six contracts revealed that ten were not filed with the Office of the Comptroller at all and fifteen were not filed timely.  The late filings ranged from twenty-one days to two hundred ninety-nine days late.

 

      The Illinois Procurement Code (30 ILCS 500/20-80(b)) and the Statewide Accounting Management System (Procedure 15.10.40) require State agencies to file contracts for professional and artistic services exceeding $5,000 and contracts for other goods and services exceeding  $10,000 with the State Comptroller within 15 calendar days after execution.  University personnel stated that three of the contracts were filed; however, the Office of the Comptroller does not have record of them.  University personnel also stated that they did not fully understand the requirements for filing contract amendments and contracts formed with purchase orders.  The University misinterpreted the timing required for filing and filed the contracts within the fiscal year of the contract rather than within 15 days of execution.  (Finding 4, page 17)

 

      University officials partially accepted our finding and stated that, based on a finding in FY 2004, they changed procedures for filing contracts in order to comply with State statutes and guidelines.  They responded that three purchase orders were not filed because they did not have separate contract agreements and the filing requirements for those are currently under review.

 

TIME SHEETS NOT REQUIRED

 

      The University did not require all employees to submit time sheets as required by the State Officials and Employees Ethics Act (Act).

 

      The Act required the Illinois Board of Higher Education (IBHE), with respect to State employees of public universities, to adopt and implement personnel policies.  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; contractual State employees may satisfy the time sheets requirement by complying with the terms of their contract, which shall provide for a means of compliance with this requirement.”  The IBHE adopted personnel policies for public universities on February 3, 2004 in accordance with the Act.  The University has not incorporated these policies into the Universities policies.

 

      We noted most of the University’s employees did not submit time sheets.  Employees classified as board members, faculty, and academic professionals generally track their time using a “negative” timekeeping system whereby the employee is assumed to be working unless noted otherwise.  The employees classified as civil service, academic hourly and graduates/students are documenting time worked to the nearest tenth of an hour.  (Finding 6, pages 20-23)

 

      We recommended the University amend its policies to require all employees to submit time sheets in compliance with the Act.

 

      University officials did not accept the recommendation for several reasons.  They stated the University relied on advice from the Office of the Executive Inspector General that a system of “absence reporting” would be an appropriate method of time keeping under the Act.  The University also stated that the auditors’ interpretation of the statute has ramifications under the federal Fair Labor Standards Act and could result in significant additional costs to the University.

 

      In an auditors’ comment, we pointed out that the memorandum from the Office of the Executive Inspector General, upon which the University relied, states it is not a legal opinion.  Further, the auditors continue to believe that a positive timekeeping system for State employees is required by the Act.  If the University continues to disagree with this conclusion, we further recommended that it seek a formal, written opinion from the Attorney General’s Office on the requirements of this statutory provision.

 

UNIVERSITY PUBLICATIONS

 

      The University did not include information required by the Illinois Procurement Code on publications printed for the University.  The Procurement Code (30 ILCS 500/20-105) requires that “all books, pamphlets, documents, and reports published through or by the State of Illinois or any State agency, board, or commission shall have printed thereon ‘Printed by authority of the State of Illinois,” the date of each publication, the number of copies printed, and the printing order number.’  We interpret this requirement as being applicable to State universities.  University personnel stated they believed this section of the statute does not apply to State Universities.  (Finding 8, pages 25-26)

 

      We recommended the University begin printing the information required by the Illinois Procurement Code on all publications or pursue a statutory change.

 

      University officials accepted our recommendation and provided examples of the problems they have with applying this requirement to University publications.  They said if necessary they will seek legislative clarification.

 

OTHER FINDINGS

 

      The remaining findings are reportedly being addressed by University management.  We will review the University’s progress toward the implementation of our recommendations in our next examination.  University responses were provided by Kathe Shinham, Assistant Vice President for Business and Finance at Urbana-Champaign.

 

AUDITORS’ OPINION

 

      The financial audit report contains four sets of financial statements in the Annual Financial Report; and the revenue bond financial statements of the Auxiliary Facilities System, the Willard Airport Facility, and the Health Services Facilities System.

 

      Our auditors state the June 30, 2005 financial statements are fairly presented in all material respects.

 

 

 

_____________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:KMA:pp

 

SPECIAL ASSISTANT AUDITORS

 

      Clifton Gunderson LLP were our special assistant auditors.