REPORT DIGEST

 

CHICAGO STATE UNIVERSITY

 

 COMPLIANCE EXAMINATION

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

For the Year Ended:

June 30, 2006

 

Summary of Findings:

Total this audit                        12

Total last audit                          9

Repeated from last audit           5

 

Release Date:

May 24, 2007

 

 

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 Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

 

 

SYNOPSIS

 

¨      The University did not properly interpret and apply generally accepted accounting principles in accounting and financial reporting for nonexchange transactions.

 

¨      The University did not properly account for compensated absences of employees due to inaccurate time reporting and untimely filing of time sheets.

 

¨      The University did not maintain promissory notes related to the Nursing Student Loan Program. Further, the University did not have supporting documentation and proper approvals for certain expenditures charged to Federal Programs.

 

¨      The University did not include scholarships received from other sources as part of student resources.  The condition caused an over-award of student financial aid.

 

¨      The University did not always follow travel policies of the Illinois Higher Education Travel Control Board and Property Control Rules of the Department of Central Management Services.

 

¨      The University did not always require travel reimbursement requests be submitted in accordance with the Illinois Travel Regulation Council’s travel rules or University’s policy and procedures.

 

¨      The University failed to add the working condition fringe benefits for personal use of a state vehicle to an employee’s federal and state taxable income. Further, the University did not calculate and report the taxable fringe benefits of family members traveling with the employee.

 

 

{Financial Information is summarized on the reverse page.}

 


 

 

CHICAGO STATE UNIVERSITY

COMPLIANCE EXAMINATION

For The Year Ended June 30, 2006

 

 

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY 2006
FY 2005

OPERATING REVENUES

        Student tuition (net of scholarship allowances of $7,721,000 and $7,073,108.............

        Auxiliary enterprises (net of scholarship allowances of $35,336 and $34,893.............

        Grants and contracts (principally federal).........................................................................

        Other sources........................................................................................................................

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

OPERATING EXPENSES

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

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

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

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

        Student services....................................................................................................................

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

        Operation and maintenance of plant..................................................................................

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

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

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

        On-behalf State fringe benefits...........................................................................................

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

OPERATING LOSS.......................................................................................................................

NONOPERATING REVENUES (EXPENSES)

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

        State fringe benefits..............................................................................................................

        Investment income................................................................................................................

        Interest on capital asset – related debt..............................................................................

               Net nonoperating revenues.........................................................................................

 

        Capital appropriations and grants......................................................................................

        Loss on disposal of capital assets.....................................................................................

               Total other revenues....................................................................................................

                          Increase in net assets.........................................................................................

NET ASSETS

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

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

 

     $22,437,090

         4,100,582

       31,181,924

         3,149,562

$60,869,158

 

$36,655,375

         3,863,448

         6,192,057

         6,491,124

       11,056,396

9,336,983

6,402,239

5,075,461

4,278,278

3,348,005

13,402,670

$106,102,036

$(45,232,878)

 

38,660,300

13,402,670

57,071

(1,472,091)

$50,647,950

$5,415,072

$28,253,484

(37,802)

$28,215,682

$33,630,754

        78,558,803

$112,189,557

 

$19,572,632

4,217,015

24,568,607

2,760,943

$51,119,197

 

$34,181,896

2,340,702

6,261,285

6,220,476

8,782,577

8,270,646

8,204,625

5,086,431

3,781,413

2,958,195

14,427,031

$100,514,031

$(49,395,080)

 

38,845,285

14,427,031

33,727

(1,283,383)

$52,022,660

$2,627,580

$14,593,710

(20,257)

$14,573,453

$17,201,033

 

61,357,770

$78,558,803

SUPPLEMENTARY INFORMATION (Unaudited)

FY 2006

FY 2005

Employment Statistics

    Faculty/administrative..............................................................................

    Student employees..................................................................................

         Total Employees..............................................................................

Selected Activity Measures

Students (Spring Term)

     Undergraduate.......................................................................................

     Graduate................................................................................................

     Total Students........................................................................................

 

950

298

1,248

 

 

4,790

1,864

6,654

 

1,015

281

1,296

 

 

4,619

2,024

6,643

UNIVERSITY PRESIDENT

During Audit Period and Current: Dr. Elnora Daniel


 

 

 


 

 

 

 

 

 

 

 

 

Revenue should have been recognized and not deferred

 

 

Actual error of $291,883

 

 

Projected error of $584,602

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Positive time reporting did not agree to the usage reported to the payroll department

 

 

 

 

 

 

Several positive time reporting cards could not be obtained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Promissory notes not maintained

 

 


Failure to maintain supporting documentation

 

 

 

 

 

 

 

Questioned costs totaling $43,689

 

 

 

 

 

Missing and incomplete supporting documentation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Questioned costs totaling $39,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

University did not always follow travel policies

 

 

Credit card charges were not always supported

 

 

 

 

 

 

 

Payment documentation did not identify any specific business purpose

 

 

 

 

 

No receipts were attached to the payment packages

 

 

 

 

 


Direct bill payments were not detailed on the travel voucher

 

Lack of receipts

 

 

 

 

Charges in excess of amounts allowed by the Higher Education Travel Control Board

 

 

 

 


Unallowable charges incurred during cruise

 

 

 

 

The University was charged for the most expensive room offered on the cruise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exceptions were not presented to the Travel Control Board

 

 

 

 

 

 

 

 

 

 

 

 

 

The University was charged for the most expensive room

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Fringe benefits were not properly reported on the employee’s W-2

 

 

 

 


Family member travel was not reported as a fringe benefit

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

 

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES NOT PROPERLY APPLIED

 

      The University did not properly interpret and apply generally accepted accounting principles in accounting and financial reporting for nonexchange transactions which are set forth in Governmental Accounting Standards Board Statement No. 33.

 

      We requested documentation to support the 6 largest grant revenue deferrals included in the University’s financial statements.  Upon review of the grant agreements provided along with the related documentation, we noted that 5 of these agreements did not stipulate an eligibility requirement.  Therefore, revenue should have been recognized and not deferred for these voluntary nonexchange transactions. The actual error identified was $291,883.  The auditors have recorded a passed adjustment of the projected error in the amount of $584,602. (Finding 1, Page 16)

 

      We recommended that the University improve its system for identifying eligibility requirements for voluntary nonexchange transactions and properly account for such transactions in accordance with generally accepted accounting principles.

 

      University officials agreed with the recommendation and stated that they will adopt measures to fully implement Government Accounting Standards Board Statement No.33.

 

INACCURATE REPORTING AND ACCOUNTING OF ACCRUED COMPENSATED ABSENCES

 

      The University did not properly account for compensated absences of employees of the University due to inaccurate time reporting and untimely filing of time sheets.

 

      We judgmentally selected 10 employees of the University and noted discrepancies with four (40%) of their submitted records related to compensated absences reporting.  We compared the days recorded on each employee’s positive time reporting cards required by the Ethics Act to the sick, vacation, and non-cumulative sick time cards submitted to payroll and noted the following discrepancies:

 

·        The accrued compensated absence usage reported on the positive time reporting did not agree to the usage reported to the payroll department on the sick, vacation, and non-cumulative sick time cards.  The usage of these days reported to payroll were understated by 10 days, 21 days, 12.5 days and 18 days respectively.  Therefore, the University’s compensated absence schedules do not accurately reflect usage for certain employees.

 

·        Several of the positive time reporting cards were not able to be obtained from the University.  Several of the positive time reporting cards were not turned in timely and some did not have a supervisor’s signature included on them. (Finding 2, Page 17)

 

      We recommended that the University implement a system of positive time reporting to be used for both payroll and Ethics Act purposes to ensure that time worked and compensated absences used are reported promptly and accurately.

 

      University officials agreed with the recommendation and stated they plan to automate the time reporting system to include posting of leave days earned and used on the leave records as payroll is processed.

 

 

INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES

 

      The University did not maintain promissory notes related to the Nursing Student Loan Program. Further, the University did not have supporting documentation and proper approvals for expenditures charged to federal programs. 

 

      The University charged lodging and per diem rates in excess of rates allowed by State travel regulations, and charged expenditures to the wrong federal program.  Further, certain equipment purchased with federal funds had not been properly recorded in University property control records.

 

      Some of the items noted during our review of federal programs follow:

 

·        The University could not provide student promissory notes for outstanding Nursing Student Loans. The University was unable to provide the notes for the 54 students totaling $43,689.

 

·        Three of forty expenditures totaling $43,382 were for furniture and vehicles which were not properly recorded or tracked in the University’s property control records.

 

·        Four of forty expenditures totaling $67,817, consisting primarily of travel prepayments, were missing the appropriate supporting documentation, final invoices, or were incomplete.

 

·        Three of forty expenditures totaling $5,282 were for prepaid per diem in excess of the state allowed per diem reimbursement. (Finding 3, Pages 18-20) This finding was first reported in 2003.

 

      We recommended the University improve control procedures to ensure that payments are only made once a proper invoice with appropriate documentation and approval is received.  The University should maintain a filing system that allows them to locate supporting documentation, including documentation of the necessity for any non-standard travel costs, for all invoices paid as well as student loan promissory notes.  Further, the University should timely reconcile travel advances with actual invoices submitted by travelers and follow up on any exceptions noted and recoup any funds due to the University.

 

      University officials agreed with our recommendation and stated that they will develop procedures to ensure compliance with travel guidelines.  The University also stated that they will reimburse the Department of Health and Human Services for these loans. (For the previous University response, see Digest footnote #1.)

     

 

OVERAWARD/OVERPAYMENT OF STUDENT FINANCIAL AID

 

      The University did not include scholarships received from other sources as part of student resources.  This caused an over-award of student financial aid.

 

      We selected a sample of 40 students that received scholarships from the University.  Of those 40 students, 31 were awarded Title IV student financial assistance by the University.  We then performed tests to determine if those scholarships were included in the University’s student needs analysis, and if not, did an overaward/overpayment of Title IV student financial assistance occur. We noted 11 students were overawarded/overpaid $39,048 of Title IV student financial assistance because the scholarships received from outside sources were not included in their calculation of financial need. (Finding 4, Page 21)

 

      We recommended that the University correct their procedures to ensure that all financial aid received from outside scholarships are considered when determining a student’s financial need.

 

      University officials agreed with the recommendation and stated they will develop proper procedures to ensure that all financial aid received from outside scholarships are considered when determining a student’s financial need.

 

NEED TO IMPROVE CONTROLS OVER EMPLOYEE TRAVEL AND USE OF UNIVERSITY CREDIT CARD

 

      The University did not always follow travel policies issued by the Illinois Higher Education Travel Control Board and Property Control Rules issued by the Department of Central Management Services. We also noted numerous charges to the University credit card that were not supported by appropriate receipts and documentation.

 

      During our testing of University credit card expenditures some of the items we found are as follows: 

 

 

·        A number of restaurant charges totaling $6,842 were identified as lunches or dinners of which only 1 receipt totaling $995 was included in the payment package.  The payment documentation did not identify any specific business purpose for these expenditures.  The employee was not on travel status when the charges were incurred.

·        Thirteen charges, totaling $3,932 were for tickets to various theatrical events.  Of these 13 charges, 8 of them had no receipts on the payment package except the credit card statement, and none of them listed the business purpose or participants for these expenditures. 

·        Eighteen charges, totaling $2,027, were for miscellaneous gifts and fees.  Of these items, 14 of them had no receipts attached to the payment packages except the credit card statement.

 

While testing travel expenditures some of the items we found are as follows:

 

·        Direct bill payments were not detailed on the employee’s travel vouchers.  Many items were directly charged to the University (airfare, hotel, meals, etc.) and were not detailed out on the travel voucher.

·        At least 18 charges on the University credit card were for hotels, airlines, or other travel accommodations (while on travel status).  These charges, however, did not have any receipts or invoices attached to the payment package.  All of these payments were made from the credit card statement invoice only, without supporting receipts.

·        For 10 charges, the rates for hotels were in excess of the amounts allowed by the Illinois Higher Education Travel Control Board (Board).  These charges were on the University credit card bills and there was no documentation identifying whether the hotels were conference hotels and if these accommodations were the least expensive room available.  In some instances, there were no receipts to determine if the rates charged were allowable.

·        There were instances where unallowable expenditures were being charged to the University.  These items include movies, gifts, alcohol, and supplemental charges related to a seminar aboard a cruise.  The total amount of these items could not be readily determined.

·        Some payments pertained to 2 leadership seminars conducted aboard cruises, where the University was charged for the most expensive room offered.  Also, included in these payments was a two night pre-cruise hotel/reception at a cost of $299 per person.  Total charges were $7,654.  This condition involves a different party than the situation described in Finding Number 8 related to a leadership seminar on a Caribbean cruise.  (Finding 5, Pages 22-24)

 

      We recommended that the University implement procedures to ensure compliance with the Acts and require all employees to adhere to regulations established by the Higher Education Travel Control Board and Travel Regulation Council.

 

      University officials agreed with the recommendation and stated that they will schedule staff training on voucher processing to ensure that University procedures and applicable State regulations are complied with.

 

      NON-COMPLIANCE WITH TRAVEL REGULATIONS

 

      The University’s did not always require travel reimbursement requests for travel claims be submitted in accordance with the Illinois Travel Regulation Council’s travel rules or University’s policy and procedures.

 

      Our examination of 26 travel reimbursements/invoices revealed several issues.  Some of the issues noted were as follows:

 

·        The University President did not timely approve one reimbursement request, totaling $13,751, for travel outside the 48 contiguous states.

·        Two invoices/reimbursement requests included lodging rates in excess of those allowed by the Travel Control Board.  The Travel Control Board allows $110 per night for all cities outside of Illinois.  The University allowed charges of $205 and $149 per night.  The University could not provide any evidence of these being conference hotels and the least costly rooms available.  Neither of these exceptions were presented to the Travel Control Board for approval of the exception.

·        Two invoices/reimbursement requests included payments for extended stays beyond the dates of the conferences.  There was no documentation on the requests indicating the reason additional time was spent at the hotel.  The payments for these extended periods were $214 and $170.

·        One expenditure was for a 9 day Leadership Seminar in conjunction with a 9 day cruise of the Caribbean.  We noted that this expenditure included room accommodations at the most expensive room rate available ($2,999) instead of the least expensive accommodations offered ($1,499).  The University did not provide any evidence of the extra cost being reimbursed by the employee.  No travel voucher was submitted by the employee for this trip.  This condition involves a different party than the situation described in Finding Number 5. (Finding 8, Pages 27-28)

 

      We recommended that the University improve its procedures that ensure travel expenditures are proper and comply with the established regulations and policies.

 

      University officials agreed with our recommendation and stated that they will schedule staff training on voucher processing to ensure that University procedures and applicable State regulations are complied with.

 

FAILURE TO INCLUDE TAXABLE FRINGE BENEFITS IN EMPLOYEE’S REPORTED INCOME

 

      The University calculated the amount of working condition fringe benefits from the personal use of a State vehicle but failed to add the fringe benefit to the employee’s federal and state taxable income reported on Form W-2.  In addition, the University did not calculate and report the fringe benefit of family members traveling with the employee.

 

      Our testing of taxable working condition fringe benefits reporting revealed that the University had calculated the amount of fringe benefits for the personal use of a State vehicle totaling $11,949.  The University, however, failed to add the fringe benefit amount to the employee’s federal and state taxable income on Form W-2.  The amount was correctly added to the Medicare wage, but was not reported as taxable wages on the employee’s W-2.

 

      Additionally, the employee’s employment contract provided for the University to pay up to $10,000 of travel expenses of the employee’s spouse, dependents, or other individuals.  Although provided for in the employment contract, this fringe benefit is still considered compensation by the Internal Revenue Service.  The taxable fringe benefit for the employee’s family members traveling with the employee (at the expense of the University) was not readily determinable for calendar year 2005, and none was reported. (Finding 10, Page 31)

 

      We recommended the University improve their procedures for calculating and reporting employee fringe benefits.

 

      University officials agreed with the recommendation and stated that they will obtain an Internal Revenue Service ruling and that they will comply with the determination.

 

 

OTHER FINDINGS

 

      The remaining findings are reportedly being given attention by University officials.  We will review progress toward implementation of our recommendations in our next audit.

 

 

AUDITORS’ OPINION

 

      Our auditors state the financial statements of Chicago State University as of June 30, 2006 and for the year then ended are fairly presented in all material respects.

 

___________________________________

WILLIAM G. HOLLAND, Auditor General

 

WGH:TLK:pp

 

 

SPECIAL ASSISTANT AUDITORS

 

      Our special assistant auditors for this audit were Nykiel Carlin & Co., LTD.

 

 

 

DIGEST FOOTNOTE

 

#1 INADEQUATE SUPPORTING DOCUMENTATION FOR FEDERAL EXPENDITURES - Previous University Response

The University agrees with the recommendation.  The University will strengthen compliance with its established policies and procedures related to documentation, filing, approvals and appropriate documentation for non-standard travel costs.  The University will commit its resources to improve its controls to ensure the above conditions do not repeat in the future.  The University will also reconcile travel advances with actual vendor invoices in a timely manner and will properly document the necessity for any non-standard travel costs.