REPORT DIGEST UNIVERSITY OF ILLINOIS FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2017 Release Date: February 14, 2018 FINDINGS THIS AUDIT: 5 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 1 -- 3 -- 4 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 3 -- 5 FINDINGS LAST AUDIT: 3 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, 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 www.auditor.illinois.gov INTRODUCTION The University’s financial audit report consists of three sets of financial statements as follows – The financial statements of the University, and the revenue bond financial statements of the Auxiliary Facilities System and the Health Services Facilities System. This report contains only findings pertaining to the Financial Statement Audit. The State Compliance Examination and Federal Single Audit Reports will be issued at a later date. SYNOPSIS • (17-1) The University has not established adequate internal controls over accurately identifying and recording deferred expense transactions and reporting prepaid expenses at fiscal year-end for financial reporting purposes. • (17-3) The University has inadequate controls in place to monitor and maintain the accounts payable master vendor file. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE PROCEDURES OVER EXPENSE DEFERRALS AND OTHER CUT-OFF RELATED ISSUES The University has not established adequate internal controls over accurately identifying and recording deferred expense transactions and reporting prepaid expenses at fiscal year-end for financial reporting purposes. In relation to our test work over expense transactions, we reviewed 225 cash disbursement transactions (totaling $46,313,716), 60 P-Card expense transactions (totaling $316,272), and 60 T-Card expense transactions (totaling $428,908) recorded during the fiscal year. In relation to our test work over revenue transactions, we reviewed 60 cash receipt transactions recorded during the fiscal year (totaling $120,935,264). We also reviewed 34 cash disbursements occurring subsequent to year- end (totaling $72,993,712). Additionally, we separately reviewed 20 internal journal voucher transactions recorded during the fiscal year (totaling $36,022,969). During our review of these transactions, some of the items that were not recorded in the proper accounting period are as follows: • Two general expense cash disbursements (totaling $173,843) that were recorded as expenses for fiscal year ended June 30, 2017, should have been fully accrued as of June 30, 2016. • Two telecommunication expense cash disbursements (totaling $78,538) that were recorded as expenses for the fiscal year ended June 30, 2017, should have been partially deferred as of June 30, 2017 at an amount of $46,512, and then recognized as expenses for the fiscal year ending June 30, 2018. • One cash receipt (totaling $29,483) that was recorded as operating revenue for the fiscal year ended June 30, 2017, should have been fully deferred as of June 30, 2017, and then recognized as operating revenue for the fiscal year ending June 30, 2018. • Five general and service expenses charged on P-cards (totaling $14,388) that were recorded as expenses for the fiscal year ended June 30, 2017, should have been partially deferred as of June 30, 2017 at an amount of $8,953 and then recognized as expenses for the fiscal year ending June 30, 2018. (Finding 1, Pages 5-7) This finding has been repeated since 2009. We recommended the University continue to review its process to assess the existence of current period revenues and expenses and consider changes necessary to ensure they are accurately identified and recorded for presentation in the University’s financial statements. University officials agreed with the finding. (For the previous University response, see Digest Footnote #1.) INADEQUATE PROCEDURES OVER MAINTENANCE OF ACCOUNTS PAYABLE MASTER VENDOR FILE The University has inadequate controls over in place to monitor and maintain the accounts payable master vendor file. During our review of the University’s accounts payable master vendor file (with 55,152 total vendors), we noted there were 12 duplicate records representing 6 vendors. The vendors had the same name but were given different vendor identification numbers in the accounts payable system. In addition, we noted 2,742 vendors without a tax identification number (TIN) listed and 36,294 vendors with no activity within the 3 previous fiscal years. University policies state vendors should have a TIN on file when creating the vendor to ensure the vendor is not fraudulent and vendors with no recent activity should be inactivated to ensure no inappropriate payments are made to outdated vendors. (Finding 3, page 10) We recommended the University review and implement stronger internal controls in order to monitor and maintain the accounts payable master vendor file. University officials agreed with the finding. OTHER FINDINGS The remaining findings are reportedly being given attention by the University. We will review the University’s progress towards implementation of our recommendations in our next engagement. AUDITOR’S OPINION Our auditors stated the financial statements of the University, the Auxiliary Facilities System and the Health Services Facilities System as of June 30, 2017, and for the year then ended, are fairly stated in all material respects. This financial audit was conducted by CliftonLarsonAllen LLP. Jane Clark Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:TLK DIGEST FOOTNOTES #1 – Inadequate Procedures over Expense Deferrals and Other Cut-off Related Issues – Previous University Response 2016 Accepted. The University will continue to implement corrective actions to address the recommendation in this finding.