REPORT DIGEST
WESTERN ILLINOIS
UNIVERSITY
FINANCIAL AUDIT AND COMPLIANCE EXAMINATION (In accordance with the
For the Year Ended
June 30, 2007 Summary of Findings: Total
this audit 6 Total
last audit 5 Repeated
from last audit 4 Release Date: March 11, 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 the
Full Report are also available on the worldwide web at |
SYNOPSIS
· The University did not properly record contract retainage liabilities in the financial statements. · The University’s Internal Audit Department did not fully comply with the Fiscal Control and Internal Auditing Act. · All employees were not required to submit time sheets to document the time spent on official State business as required by the State Officials and Employees Ethics Act. · The University failed to ensure adequate security over its computer systems and resources. {Financial Information is summarized on the reverse page.} |
WESTERN ILLINOIS UNIVERSITY
FINANCIAL AUDIT AND COMPLIANCE EXAMINATION
For the Year Ended June 30, 2007
FINANCIAL
OPERATIONS |
FY 2007 |
FY 2006 |
|
OPERATING REVENUES
Tuition and fees, net..........................................................
Auxiliary enterprises, net...................................................
Grants and contracts..........................................................
Other.....................................................................................
Total Operating Revenues........................................
OPERATING EXPENSES
Instruction...........................................................................
Research...............................................................................
Public service......................................................................
Academic support..............................................................
Student services.................................................................
Institutional support..........................................................
Operation and maintenance of plant................................
Student aid...........................................................................
Auxiliary enterprises..........................................................
Depreciation........................................................................
On-behalf payments...........................................................
Other.....................................................................................
Total Operating Expenses.........................................
Operating
Income (Loss)...........................................................
NONOPERATING REVENUES (EXPENSES)
State appropriations...........................................................
Capital appropriations........................................................
Gifts.......................................................................................
Interest on capital assets - related
debt..........................
Investment income.............................................................
Other net..............................................................................
INCREASE IN NET ASSETS...................................................
Net
assets, beginning of year...................................................
Net
assets, end of year.............................................................. |
$63,194,327
49,335,561
20,130,041
7,882,470
$140,542,399
$52,589,250
3,103,945
11,033,770
17,620,763
18,635,960
12,352,845
14,324,253
5,720,519
41,457,129
9,989,358
30,855,587
6,898,313
$224,581,692
$(84,039,293)
$88,078,972
2,417,967
309,244
(2,629,802)
3,960,265
(25,369)
$8,071,984
$104,916,390
$112,988,374 |
$56,901,766
48,131,654
20,043,910
7,244,230
$132,321,560
$50,065,412
4,199,667
10,211,092
16,251,212
17,518,386
11,215,194
13,609,700
5,297,383
41,334,877
9,926,247
27,624,162
5,441,032
$212,694,364
$(80,372,804)
$84,025,247
3,152,373
696,200
(2,359,443)
2,420,131
(122,109)
$7,439,595
$97,476,795
$104,916,390 |
|
SELECTED ACCOUNT BALANCES |
June 30, 2007 |
June 30, 2006 |
|
Cash
and Investments...............................................................
Capital
Assets, net of accumulated depreciation..................
Accrued
Compensated Absences...........................................
Revenue
Bonds Payable............................................................ |
$60,802,206
$135,028,693
$16,897,657
$46,466,197 |
$60,199,562
$128,939,107
$16,782,325
$49,512,640 |
|
SUPPLEMENTAL INFORMATION (unaudited) |
FY 2007 |
FY 2006 |
|
Employment Statistics |
|
|
|
Faculty and Administrative............................................... |
1,125 |
1,109 |
|
Civil Service......................................................................... |
844 |
832 |
|
Student Employees............................................................. |
297 |
303 |
|
Total Employees......................................................... |
2,266 |
2,244 |
|
Enrollment
Statistics |
|
|
|
Fall term enrollment - undergraduate............................... |
10,972 |
10,930 |
|
Fall term enrollment –graduate......................................... |
1,727 |
1,564 |
|
Fall term enrollment – extension....................................... |
903 |
910 |
|
Total.............................................................................. |
13,602 |
13,404 |
|
UNIVERSITY PRESIDENT |
|
|
|
During
Audit Period: Dr. Alvin Goldfarb
Currently: Dr. Alvin Goldfarb |
|
|
|
Construction retainage not recorded
Liability totaling $570,934 not recorded Internal audit plan not implemented No internal auditor for approximately 5 months
Negative time reporting is not adequate Administrative and professional employees to submit
time sheets in FY 2008 Inadequate password policies
Physical access not adequately restricted |
FINDINGS,
CONCLUSIONS, AND RECOMMENDATIONS
CONTRACT RETAINAGE LIABILITIES NOT RECORDED The University did not properly record contract retainage liabilities in the financial statements. Certain construction contracts require the University to withhold a percentage of each payment related to the total contract until the contractor has completed performance under the contract. Our review of the University’s existing construction contracts as of June 30,2007 disclosed that approximately 60% of the University’s construction contracts have retainage clauses and retainage balances were withheld from each progress payment. However, the University recorded only the net payment as construction in progress and did not set up the retainage liability totaling $570,934. GASB Statement No. 35, Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities, requires the financial statements to be presented using the full accrual method which recognizes the financial effect of events that impact the entity during the accounting period, regardless of whether cash has been received or spent. (Finding 1, pages 39-40 in Financial Audit Report) We recommended the University establish procedures to properly account for and record contract retainages as each payment is made to the contractors. University officials agreed and stated contract retainage liabilities have historically not been recorded since the amounts have been immaterial and were not due until the construction was complete and accepted by the University. They said beginning in fiscal year 2008, year end procedures will include the booking of retainage liabilities. NONCOMPLIANCE WITH THE FISCAL CONTROL AND INTERNAL AUDITING ACT The University’s Internal Auditing Department did not fully comply with the Fiscal Control and Internal Auditing Act (Act). During Fiscal Year 2007, there were seven specific compliance audits on the internal audit plan. Our review of completed audits disclosed that the audit plan was not implemented. Two audits were conducted but neither were on the original audit plan. In addition, no audits relating to internal and administrative controls for grants received or made by the University were completed during the last two years. The Act requires that the internal auditing program include audits of major systems of internal and administrative control conducted on a periodic basis so that all major systems are reviewed at least once every two years. The audits must include grants received or made to determine that the grants are monitored, administered, and accounted for in accordance with applicable laws and regulations. (Finding 2, pages 13-14 in Compliance Examination Report) We recommended the University complete internal audits of its major systems of internal accounting and administrative controls as required by the Act. University officials agreed with the finding and stated that with the position being vacant for approximately 5 months and the hiring and orientation of a new Internal Audit Director in December 2006, only limited activities could be completed. EMPLOYEE TIME SHEETS NOT ADEQUATE The University did not require all employees to submit time sheets as required by the State Officials and Employees Ethics Act. Administrative, professional and faculty employees are required to submit time reports. However, the employee’s time is reported using a negative reporting method. The negative reporting method assumes employees are working their contracted/required hours unless otherwise reported. The time report lists minimum contracted hours and the employee indicates time away from the office, for vacation, sick or other types of leave. The Act requires the University adopt personnel policies which require State employees to periodically submit time sheets documenting the time spent each day on official State business to the nearest quarter hour. University management stated they have implemented a system for all administrative and professional employees to submit time sheets starting in fiscal year 2008 but have not yet developed a system for faculty employees. (Finding 3, pages 15-16 in Compliance Examination Report) This finding was first reported in 2005. We recommended the University amend its policies to require all employees to submit time sheets. University officials agreed with our finding and stated they are still investigating a feasible, efficient reporting process for the unique requirements of faculty. (For the previous University response, see Digest Footnote #1) INADEQUATE COMPUTER SECURITY The University failed to ensure adequate security over its computer systems and resources. During our review, we noted the following: - Domain security settings being utilized often provided only a default level of access control and auditing. The University’s password policies do not always require a password change, minimum length and password history. - Access to the University’s Data Center was not adequately restricted. Access is restricted using a keypad system; however, the access code is shared by everyone having access to the computer room, which eliminated adequate accountability. - The number of personnel having powerful system-level access privileges was excessive. Without an adequately secured computer environment, the
University cannot ensure that access to critical applications, programs and
confidential data is appropriately restricted to authorized personnel and the
integrity of its computer systems and data is maintained. (Finding 4, pages 17-19 in Compliance
Examination Report) We recommended the University continue to evaluate its computer environment and data maintained to ensure adequate security controls, including adequate physical and logical access restrictions, have been established to safeguard its computer resources. University officials agreed with the finding. They stated they will soon install a proximity ID card based system that will allow the University to manage access as well as document access to computing facilities. The issue of password policy and security will be examined by the new Chief Technology Security Officer and the WIU Technology Security Committee. OTHER FINDINGS The remaining findings are reportedly being given attention by University management. We will review progress toward the implementation of our recommendations in our next examination. AUDITORS'
OPINION Our auditors state the financial statements of Western Illinois University as of June 30, 2007, and for the year then ended, are fairly presented in all material respects. ___________________________________ WILLIAM G. HOLLAND, Auditor General WGH:KMA:pp SPECIAL
ASSISTANT AUDITORS
E.C. Ortiz & Co., LLP were our special assistant auditors. DIGEST FOOTNOTES
#1: EMPLOYEE TIME SHEETS NOT ADEQUATE – Previous University Response The
University concurs with the finding that the University has not yet
established a procedure for administrative and professional employees to
submit positive timekeeping sheets.
The statutory requirement has been reviewed and implementation has
been delayed by two factors. The
first factor relates to the provisions of 430/15-35 which provides that the
rights provided for in collective bargaining agreements cannot be
diminished. For this reason, any
additional job related requirements placed on employees subject to collective
bargaining agreements have to be negotiated.
This is complicated by the fact that the University is still bound by
the terms of multi-year agreements which are currently in negotiation. The
second factor relates to the request for clarification on the requirements
and implementation of the law filed by the University of Illinois. Initially, Universities were advised by
the Executive Inspector General that “negative” timekeeping was
acceptable. This ruling has not been
addressed by her successor. To date,
no response to the request to the Attorney General has been received. The unique nature of teaching and
interacting with students for University faculty, while complying with the
requirements for Public Service and Professional Research, presents issues,
which cannot be addressed by traditional timekeeping methods. Upon
satisfactorily resolving these issues, the University will comply with the
applicable requirements of the law. |