Chicago State University 2001 Audit

REPORT DIGEST

CHICAGO STATE UNIVERSITY

FINANCIAL AND COMPLIANCE AUDIT

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

For the Year Ended:
June 30, 2001

Summary of Findings:

Total this audit 7
Total last audit 7
Repeated from last audit 2

Release Date:
June 26, 2002

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
Attn: Records Manager
Iles Park Plaza
740 E. Ash Street
Springfield, IL 62703
(217)782-6046 or TDD (217) 524-4646

This Report Digest is also available on
the worldwide web at
http://www.state.il.us/auditor

SYNOPSIS

The University had 21 exceptions out of 95 tested over its control of equipment including untagged and unlocated items.

The University had 20 exceptions in federal grants with excessive drawdowns totaling $563,062.

{Financial Information is summarized on the reverse page.}

CHICAGO STATE UNIVERSITY
FINANCIAL AND COMPLIANCE AUDIT
For The Year Ended June 30, 2001

FINANCIAL OPERATIONS (CURRENT FUNDS)	FY 2001	FY 2000
REVENUES State appropriations State fringe benefits Student tuition Grants and contracts (principally Federal) Sales and auxiliary enterprises Other sources Total Revenues EXPENDITURES AND MANDATORY TRANSFERS Instruction Research Public service Academic support Student services Institutional support Operation and maintenance of plant Scholarships and fellowships Auxiliary enterprises Net mandatory transfers Total Expenditures	$41,405,830 10,733,974 18,458,414 18,995,707 3,522,763 2,302,860 $95,419,548 $39,601,851 1,204,804 4,132,784 7,375,101 7,793,009 9,680,139 9,302,988 11,052,108 3,783,623 2,536,836 $96,463,243	$39,288,270 9,304,026 18,919,820 19,720,340 3,241,890 2,427,407 $92,901,753 $37,719,952 1,215,884 4,189,865 6,311,785 7,883,406 9,292,216 7,564,744 12,644,312 3,478,714 2,819,467 $93,120,345
SELECTED ACCOUNT BALANCES (ALL FUNDS)	JUNE 30, 2001	JUNE 30, 2000
Cash and investments Investment in plant Accrued compensated absences Revenue bonds payable	$6,599,028 $130,256,954 $8,777,801 $25,150,000	$10,042,086 $122,755,373 $8,910,302 $25,650,000
SUPPLEMENTARY INFORMATION	FY 2001	FY 2000
Employees Faculty/administrative/civil service Students Total Employees Students (Fall Term) Undergraduate Graduate Total Students Instructional Cost per Student	967 375 1,342 5,060 1,854 6,914 $5,728	949 365 1,314 5,585 1,995 7,580 $4,976
UNIVERSITY PRESIDENT
During Audit Period: Dr. Elnora Daniel Currently: Dr. Elnora Daniel

Need to improve controls over property

Need to improve cash management procedures

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

PROBLEMS WITH PROPERTY CONTROL PROCEDURES

We noted instances of non-compliance with the State Property Control Act regarding the University's fixed asset records and reports. The State Property Control Act states "each responsible officer shall maintain a permanent record of all items of property under his jurisdictions and control."

The University has approximately 9,000 inventory items over $500. Our test of 95 items noted twenty-one (21) exceptions as follows:

Three (3) out of ninety-five (95) or three percent (3%) of equipment items tested were not tagged or recorded in the inventory records.

One (1) out of ninety-five (95) or one percent (1%) of equipment items tested was not recorded in the inventory records.

Seventeen (17) out of ninety-five (95) or eighteen percent (18%) of equipment items selected from the inventory records were not located within the University. The items were comprised of science and study equipment and aggregated approximately $4,000.

Strong internal controls dictate that the University update and maintain a permanent and accurate record of property and equipment. Failure to maintain control over equipment could result in theft or misuse of equipment. (Finding 6, pages 28-29) This finding has been repeated since 1997.

We recommended the University maintain accurate records of equipment in accordance with established internal control to ensure compliance with statutory requirements.

University officials responded they agree with the recommendation. The officials stated that the policy and procedures pertaining to equipment location transfers have been routed to all fiscal officers. Periodic equipment inventory by the staff of the Property Control Office have been expanded. The University will continue its efforts to maintain accurate records of equipment. See Digest Footnote #1 for previous agency responses.

PROBLEMS IN MONITORING FEDERAL GRANTS

The University's systems for compliance with the federal regulations for cash management and reporting need improvement. When an entity is funded on a reimbursement basis (drawdown), program costs must be paid by entity funds before a drawdown is requested from the federal government. Also, an entity that receives government assistance is responsible for ensuring that the entity complies with the laws and regulations applicable to its activities.

We noted the following exceptions:

Errors in recording account receivables and deferred revenue for five (5) grants resulted in an overstatement of receivables and an understatement of deferred revenue in the amount of $131,926 and $229,512, respectively.

The University's policies and procedures for the drawdown process are inadequate as they do not preclude drawdowns in excess of expenditures. We found twenty (20) instances of drawdowns in excess of the actual expenditures by a total of $563,062.

Failure to adequately monitor federal awards may result in a future loss of funds due to noncompliance with federal requirements. (Finding 3, pages 22-23).

We recommended the University strengthen its system for monitoring federal grant awards to ensure that grants receivable and deferred revenues are properly recorded, appropriate reconciliations are performed before a drawdown is processed, and federal programs are monitored at the program level to ensure compliance with all federal rules, laws and regulations.

University officials responded that they agree with the recommendation. The officials stated that the University has implemented the recommendations to strengthen its system for monitoring federal grants. The University has performed the appropriate reconciliations and then follows up to correct excess drawdowns.

OTHER FINDINGS

The remaining findings are reportedly being given attention by the University. We will review progress toward implementation of our recommendations in our next audit. University responses to the findings were provided by President Elnora D. Daniel in a letter dated May 1, 2002.

AUDITORS’ OPINION

Our auditors state the financial statements of Chicago State University and its Revenue Bonds as of June 30, 2001 and for the year then ended are fairly presented in all material respects.

___________________________________

WILLIAM G. HOLLAND, Auditor General

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SPECIAL ASSISTANT AUDITORS

Washington, Pittman & McKeever, LLC were our special assistant auditors for this audit.

DIGEST FOOTNOTE

#1 CONTROLS OVER FIXED ASSETS - Previous Agency Responses

2000: The University concurs with the recommendation. The actual locations of the twenty-three equipment items were identified during the physical inventory and the equipment records were updated accordingly. The twenty-two items not initially located were all subsequently found by University personnel. The University has updated the property records for the correct location of all property items as identified in the reconciliation of the physical count conducted. The University will continue its efforts to maintain accurate records of equipment and will implement appropriation policies and/or procedures to comply with the statutory requirements and internal control procedures. This finding should not repeat in fiscal year 2001.

1999: We agree. We are in the process of performing a comprehensive physical inventory of equipment. We will also be able to reconcile physical inventory to the property control records and general ledger. Any differences will be investigated and resolved. The University has a policy on equipment transfers, which we will enforce. We have also required that tag numbers accompany the supporting documentation in order to process an item for payment. This will assure that all new purchases are inventoried and tagged.

1998: We agree. The University will comply with SAMS classification guidelines for capital leases. Also, additional inventory testing for property and control will be performed.

1997: We agree.