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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)
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.
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