REPORT DIGEST

CHICAGO STATE UNIVERSITY

FINANCIAL AUDIT

For the Year Ended:

June 30, 2007

Summary of Findings:

Total this year

            -Financial Audit        3

Total last year

            -Financial Audit        1

Repeated from last year

            -Financial Audit        1

Release Date:

April 10, 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 Full Report are also available on

the worldwide web at

http://www.auditor.illinois.gov

INTRODUCTION

      This report contains only findings pertaining to the Financial Statement Audit.  This audit contains three audit findings.  These findings pertain to significant deficiencies in internal control over financial reporting.

      Findings related to the State Compliance and federal Single Audit will be issued at a later date.

SYNOPSIS

(Financial Statement Findings)

·        The University did not properly perform reconciliations of certain grant receivables and revenues at the end of the accounting period.  Further, the University did not properly perform reconciliations of property control records.

·        The University did not properly interpret and apply generally accepted accounting principles related to Accounting and Financial Reporting for Nonexchange Transactions.

·        The University maintained deposits in uncollateralized bank accounts.  Further, they did not perform timely reconciliations for all the University bank accounts.

{Financial Information is summarized on the reverse page.}

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FY 2007

FY 2006

OPERATING REVENUES

    Student tuition and fees (net of scholarship allowances of $7,573,293 and $7,721,000)..............................................................................................

... Auxiliary enterprises (net of scholarship allowances of $13,664 and $35,336)

    Grants and contracts................................................................................

    Other......................................................................................................

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

OPERATING EXPENSES

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

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

    Public services.........................................................................................

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

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

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

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

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

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

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

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

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

Operating Loss.........................................................................................

NONOPERATING REVENUES (EXPENSES)

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

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

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

    Other nonoperating revenues....................................................................

         Total Nonoperating Revenues........................................................

Income (Loss) Before Other Revenues, Expenses, Gains or Losses....

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

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

INCREASE IN NET ASSETS..................................................................

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

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

$22,023,468

3,630,015

31,083,682

    3,023,784

$59,760,949

$38,298,566

5,405,867

7,359,554

7,118,467

13,468,500

8,903,062

6,701,614

5,346,202

15,176,756

3,902,710

      4,067,182

  $115,748,480

$(55,987,531)

$41,160,000

15,176,756

(1,350,769)

         54,044

 $55,040,031

  ($947,500)

16,916,913 

      (32,128)

$15,937,285

$112,189,557

$128,126,842

$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

13,402,670

4,278,278

      3,348,005

  $106,102,036

$(45,232,878)

$38,660,300

13,402,670

(1,472,091)

         57,071

 $50,647,950

$5,415,072

28,253,484 

      (37,802)

$33,630,754

$78,558,803

$112,189,557

SELECTED ACCOUNT BALANCES

JUNE 30, 2007

JUNE 30, 2006

Cash and cash equivalents............................................................................

Capital assets, net of accumulated depreciation..............................................

Revenue bonds payable................................................................................

Accrued compensated absences ..................................................................

$17,989,740

$145,793,617

$20,860,000

$6,832,668

$10,305,846

$136,396,279

$21,645,000

$7,294,400

UNIVERSITY PRESIDENT

During Audit Period and Current: Dr. Elnora Daniel

Significant errors

Accounts receivable overstated by $468,837

Accounts receivable overstated by $419,942

Property control records were overstated by $521,089

University agrees with auditors

$329,857 error

University agrees with auditors

$40,245 uncollateralized

Bank reconciliations performed late

University agrees with auditors

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

FINANCIAL STATEMENT ADJUSTMENTS REQUIRED

      The University did not properly perform reconciliations of certain grant receivables and revenues at the end of the accounting period.  They also did not properly perform reconciliations of property control records.

        The financial statements that were originally submitted by the University to the Office of the State Comptroller and to the auditors contained significant errors.  Some of the errors noted follow:

·        The accounts receivable for one state grant was overstated by $468,837.  This grant was from the Illinois State Board of Pharmacy.  A proposed auditor adjustment to the financial statements was made by the University to correct this error.

·        The accounts receivable for one federal contract was overstated by $419,942.  A proposed auditor adjustment to the financial statements was made by the University to correct this error.

·        An item was listed on the property control records a value of $521,089 greater than the original cost.  This resulted in an adjustment of $521,089 to assets, and $264,887 to depreciation expense.  A proposed auditor adjustment to the financial statements was made by the University to correct this error.  (Finding 1, Pages 41-42)

      We recommended that the University review its procedures and internal controls for accounting of grant revenues and receivables to ensure accurate financial reporting.  We also recommended that the property control records be reconciled to the financial statements for amounts above the capitalization threshold.

      University officials agreed with our recommendations and stated that they will adopt measures to review all journals to accrue grant revenue for accuracy and will reconcile grant receivables on a monthly basis.  University officials also stated that they will begin reconciling the property control records to the financial statements each quarter.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES NOT PROPERLY APPLIED TO VOLUNTARY NONEXCHANGE TRANSACTIONS

      The University did not properly interpret and apply Government Accounting Standards Board Statement No. 33 Accounting and Financial Reporting for Nonexchange Transactions.

      During our audit, we requested documentation to support the 6 grant revenue deferrals in excess of $30,000 and one other randomly selected deferral included in the University’s financial statements.  Upon review of the grant agreements provided along with the related documentation, we noted that 6 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 $329,857.  A proposed auditor adjustment to the originally submitted financial statements was made by the University to correct this error. (Finding 2, Page 43)

      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 our recommendation and stated that they will develop appropriate management reports to be submitted to the University’s Comptrollers’ Office for all grant agreements to properly identify and apply the appropriate revenue recognition criteria.

UNCOLLATERALIZED DEPOSIT ACCOUNTS AND UNTIMELY BANK RECONCILIATIONS

      The University maintained deposits ($40,245) in uncollateralized bank accounts.  Further they did not perform timely reconciliations for all bank accounts.

      We noted the following during our audit:

·        The University’s deposits (bank balances) at various financial institutions totaled $5,360,274 at June 30, 2007.  These deposits exceeded the collateral held by the pledging financial institution by $40,245.

·        Of the 236 bank reconciliations required to be performed during the fiscal year, the University performed 11 (5%) untimely.  These reconciliations were performed between 61 and 117 days after month end.  In addition, bank reconciliations for three of the University’s bank accounts could not be located for the first eleven months of the fiscal year and reconciliations for June 30, 2007 were performed 123 days after months end.  (Finding 3, Page 44)

      We recommended that the University adhere to their policy to obtain collateral for all bank accounts.  We further recommended that the University allocate adequate resources to ensure that all bank accounts are reconciled in a timely manner.

      University officials agreed with our recommendations and stated that they have hired an additional accountant to concentrate on reconciling the various bank accounts.

AUDITORS’ OPINION

      Our auditors state the financial statements of Chicago State 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:TLK:pp

SPECIAL ASSISTANT AUDITORS

      Our special assistant auditors for this audit were DeRaimo Hillger & Ripp.