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Reconciliations
were not performed
Failure to include
$3,500,000 in accounts receivable
Failure to move
$14,389,634 from construction in progress to building and building
improvements
Beginning Net
Assets were restated by $1,903,128
Failure to account for
$227,014 in construction in progress
University agrees
with auditors
Problems
interpreting and applying generally accepted accounting principles
Lack of
documentation to support the deferred revenue amount
Improper coding
resulted in an adjustment of $173,727
University agrees
with auditors
Problems preparing
the Statement of Cash Flows
Operating
activities had a difference of $6,797,002
Financing
activities had a difference of $6,734,117
University agrees
with auditors
Information was not
properly compiled
Prior period
amounts did not agree to those presented in previous financial statements
University agrees
with auditors
Failure to maintain
supporting documentation
University agrees
with auditors
Failure to obtain
the correct master promissory notes
Most of the students sampled by the auditors
had signed an outdated master promissory note University agrees
with the auditors
Reconciliations not
performed on a monthly basis
Expenditure records
for the preparation of financial statements were $82,886 greater than program
award records
The University
received $11,627 cash in excess of expenditures for the ACG program
University agrees
with auditors
Contracts were
executed after the commencement date
Some contracts exceeding
$100,000 were not approved by the Board of Trustees
University agrees
with auditors
Reconciliations
were performed late
University agrees
with auditors
Reports were
inaccurate
University agrees
with auditors |
FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS NEED FOR FINANCIAL STATEMENT ADJUSTMENTS
The University did not perform reconciliations
of grants receivables, revenues and capital assets at the end of the
accounting period. The University also
did not properly reflect prior period adjustments in its financial reporting. Some
of the items we noted during the audit of the financial statements are as
follows:
·
A grant
agreement between the University and the Department of Commerce and Economic
Opportunity for $3,500,000 for the Chicagoland Regional College Program was
awarded for costs incurred from July 1, 2007 through December 31, 2008. The program incurred costs in excess of $3,500,000
from July 1, 2007 through June 30, 2008.
However, the University did not include the $3,500,000 in the accounts
receivable balance at June 30, 2008.
This amount should have also been recorded in grant revenues, grant
expenditures and accounts payable as of June 30, 2008. The University corrected the financial
statements after the auditors brought the matter to their attention.
·
The
University did not have an effective system to identify completed
construction projects that should be moved from construction in progress to
depreciable buildings and building improvements. There were items in the construction in
progress listing and included in the construction in progress balance for
financial reporting that were completed and in use. At June 30, 2008, these amounts totaled
$14,389,634. Since these projects were
completed in prior years, they should have been depreciated. The University initially recorded an entry
of $1,903,128 to depreciation expense which essentially recognized the prior
period adjustment in the current year.
The University subsequently corrected the financial statements by
restating the beginning of the year Net Assets after the auditors brought the
matter to their attention.
·
Several
construction contracts entered into for professional costs of $227,014 for
the renovation of campus buildings were not accounted for in Construction in
Progress at June 30, 2008. The
addition of these items resulted in an increase to Construction in Progress
of $227,014 and a decrease in professional expenditures of $227,014. The University corrected the financial
statements after the auditors brought the matter to their attention. (Finding
1, pages 18-20) We
recommended that the University improve its system for the reconciliation of
records and preparation of financial statements in accordance with accounting
principles generally accepted in the University
officials agreed with the recommendation and stated that recently hired
accountants have reconciled all prior Capital Asset records and other subsidiary
ledgers and that the year-end review of financial records will be completed
during the lapse period and will be subsequently reviewed by a CPA firm
resulting in improved financial statements. NEED TO COMPLY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The
University did not properly interpret and apply Government Accounting
Standards Board (GASB) Statement No. 33 Accounting and Financial Reporting
for Nonexchange Transactions. During
our audit, we requested documentation to support 12 revenue deferrals in
excess of $25,000. Upon review of the
grant agreements provided and other documentation, we noted that 6 of the
agreements did not stipulate eligibility requirements. Therefore, revenue should have been
recognized and not deferred for these voluntary nonexchange
transactions. The actual error
identified related to these grant agreements was $96,733.
·
Four of
the revenue deferral amounts tested had not changed in one or more fiscal
years and no documentation or explanation could be provided. These deferrals totaled $41,459.
·
Two
revenue deferral amounts tested were not properly coded. These amounts as presented in the financial
statement totaled $173,727.
·
A debit
balance of ($30,367) relating to a University program was included in the
deferred revenue account. This
appeared to be the result of an adjusting entry posted twice. (Finding 2,
Pages 21-22) This finding was first reported in 2006. A
proposed audit adjustment to the originally submitted financial statement of
$281,552 was made by the University to correct these errors. We
recommended that the University improve its system for identifying
eligibility requirements for voluntary nonexchange transactions and improve
its system for reconciling and tracking deferred revenue in accordance with
Generally Accepted Accounting Principles (GAAP). University
officials agreed with our recommendation and stated that the interface
between grant accountants and the accounting staff requires continual review
and reconciliation. Fiscal year 2009
grant agreements and related documentation have been tracked and reviewed on
a timely basis and applicable accounting records comply with the GAAP
requirements. (For the previous University response, see Digest footnote #1.) INACCURATE STATEMENT OF CASH FLOW The
University did not prepare an accurate Statement of Cash Flows. During
our review of the Statement of Cash Flows we noted certain inaccuracies in
the preparation of the Statement.
These inaccuracies were brought to the attention of University
personnel so they could be corrected.
The University was able to correct the Statement with our guidance. Some
of the errors we noted are as follows:
·
Net cash
used in operating activities was originally reported as $36,954,014, however,
the actual amount totaled $43,751,016 resulting in a difference in operating
activities of $6,797,002.
·
Purchases
of capital assets were originally reported as $19,941,259, and capital grants
were originally reported as $12,556,400, however, the actual amounts totaled
$650,742 and $0. These amounts, in
addition to incorrect reporting for proceeds on disposal of equipment and
principal paid on capital leases, resulted in a difference in financing
activities of $6,734,117. (Finding 5, Pages 26-27) We
recommended the University prepare an accurate Statement of Cash Flows in
accordance with accounting principles generally accepted in the University
officials agreed with our recommendation and stated that all financial
statements will be reviewed for complete and comparable data before
submission to the external auditors. MANAGEMENT’S DISCUSSION AND ANALYSIS NOT PROPERLY PREPARED The
University did not properly compile information for presentation of
Management’s Discussion and Analysis. Per
our review of the Management’s Discussion and Analysis presented to the
auditors for inclusion in the financial statements of the University, it was
noted that prior period amounts did not agree to those presented on previous
financial statements, resulting in the calculation of inaccurate variances,
percentages and incorrect explanations.
The management’s discussion and analysis was rewritten after the
auditors brought the inaccuracies to the attention of University personnel.
(Finding 6, Pages 28-29) We
recommended that the University prepare an accurate Management’s Discussion
and Analysis in accordance with accounting principles generally accepted in
the University
officials agreed with the recommendation and stated that all financial
statements will be reviewed for complete and comparable data before
submission to the external auditors. INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES
The University did
not have supporting documentation and proper approvals for certain
expenditures charged to Federal programs.
During our audit of major federal programs
in compliance with OMB Circular A-133 we noted the following:
·
One of
seventy-four (1%) expenditures ($278) tested for the U.S. Department of
Education – Trio Cluster, was missing appropriate supporting
documentation.
·
One of
seventy-four (1%) expenditures tested for the U.S. Department of Education –
Trio Cluster, related to the purchase of 10 laptops ($12,909) was charged to
the wrong fiscal year.
·
Nine of
fifty-six (16%) expenditures ($33,118) tested for the National Institutes of
Health, National Science Foundation, and Department of Defense were missing
the appropriate supporting documentation.
·
Two of
forty-eight (5%) expenditures ($5,100) tested for the U.S. Agency for
International Development – Textbook and Learning Materials, were missing the
appropriate supporting documentation. (Finding 9, Pages 34-35) This
finding was first reported in 2003. We recommended that the University
improve control procedures to ensure that payments are only made once a
proper invoice with appropriate documentation is received and to 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 and to ensure proper tracking and reporting of expenditures in
the correct fiscal year. University
officials accepted our recommendation and stated that all federal program
expenditures will be reviewed for proper approval, supporting documentation
and prompt payment. (For the previous University response, see Digest
footnote #2.) NEED TO IMPROVE OPERATIONS RELATED TO PROMISSORY NOTES FOR FEDERAL
PERKINS LOANS
The University did
not obtain the correct master promissory notes from those students who
received a Federal Perkins Loan. The
University also did not notify borrowers of the new Military Deferment. Of the 25 students tested, 23 (92%) had
signed the master promissory note that expired June 30, 2006. Additionally, no information was sent out
to borrowers who received Perkins Loans on or after July 1, 2001 informing
them of the new Military Deferment option. (Finding 11, Page 37) We
recommended that the University obtain the current master promissory notes
and inform students of the new deferment option in accordance with Department
of Education guidance. University
officials agreed with the recommendation and stated that the Accounting
Director will subscribe to the applicable federal web link so that current
Perkins Loan Promissory Note requirements are adhered to. STUDENT FINANCIAL AID NOT
RECONCILED ON A MONTHLY BASIS The University did not reconcile its
Student Financial Aid awards/expenditure records/draw downs on a monthly
basis. During the audit we noted several
instances where reconciliations were not being performed. Some of the instances we noted are as
follows:
·
During testing, it was noted that reconciliations of the Pell Grants
recorded on the University’s general ledger expenditures and program award
records were not performed. Amounts
recorded for each of these items were different. Expenditure records used for preparation of
the University’s financial statements recorded expenditures of $82,886
greater than program award records.
·
During testing, it was noted that reconciliations of Federal Work Study
Program expenditures recorded on the University’s general ledger and program
award records were not performed.
Amounts recorded for each of these items were different. Expenditure records used for preparation of
the University’s financial statements recorded expenditures of $17,487 less
than program award records. Also, one
of the general ledger accounts for the Federal Work Study Program had a
negative expenditures number of ($7,942) at June 30, 2008.
·
During testing, it was noted that reconciliations of expenditures, as
recorded for program award records, and cash drawdown records for the Federal
Academic Competitiveness Grant (ACG) and the National Science and Mathematics
Access to Retain Talent Grant (SMART) were not being performed. Expenditure records used for the
preparation of the University’s financial statements recorded expenditures of
$24,702 less than program award records for SMART and $27,952 greater than
program award records for ACG. In addition, the University received $11,627
cash in excess of expenditures for the ACG program according to program
records. However, the University
received drawdowns of $53,627 less than they spent on the SMART grant
program. (Finding 12, Pages 38-40) We recommended that
the University properly reconcile
all student financial aid program and fiscal records. University officials agreed with the recommendation and stated that a
monthly reconciliation of federal student financial aid records to financial
reporting records will be completed. INADEQUATE CONTROLS OVER
CONTRACTING PROCEDURES The University did not have adequate controls over contracting
procedures. Some of the items noted in our review of 28 contracts follow:
·
Six of the contracts tested, totaling $3,978,767, were dated and signed
by a University official and the vendors after the date of the commencement
of services per the contract. The
total amount of services provided prior to the approval date was not
determinable. One of these contracts
was related to a grant agreement for $3,500,000.
·
One contract exceeding $250,000 was not signed by the chief legal
counsel. This contract was for
expenditures of $930,526.
·
Three contracts, each exceeding $100,000 for professional services were
not approved by the University Board of Trustees. These contracts totaled $786,400.
·
All twenty-eight contracts tested did not contain certain minimum
requirements for written contracts.
Specifically, the required ethical certifications were not present. The Discriminatory Clubs, International
Boycott, Non Compliance with Environmental Protection Act and Procurement of
Domestic Products Act certifications were not noted on the standard contract
form prepared by the University and signed by the contractor. (Finding 13, Pages 41-43) This finding
was first reported in 2006. We recommended that the University establish internal controls to
ensure compliance with the Illinois Procurement Code, SAMS Manual, University
policies and procedures, and to ensure that contracts are fully executed
prior to commencement. University officials agreed with the recommendation and stated that
they will enhance the processing system to satisfy compliance with
procurement code and contractual service requirements. (For the previous University response, see
Digest footnote #3.) UNTIMELY
RECONCILIATION OF AGENCY’S RECORDS TO THE COMPTROLLER’S MONTHLY REPORTS The University did not perform timely reconciliations of University’s
records to the Office of the State Comptroller records.
We recommended that the University comply with SAMS and perform monthly
reconciliations in a timely manner. University officials agreed with the recommendation and stated that the
Accounting Director is reviewing and approving monthly reconciliations of the
Comptroller reports to the University financial records in a timely manner.
INACCURATE AGENCY REPORT OF STATE PROPERTYThe University did not timely file accurate Agency Reports of State Property (Form C-15) with the Office of the State Comptroller. · The Agency Report of State Property for all four quarters of fiscal year 2008 did not reflect accurate beginning balances for agency amounts. Reported amounts differed by $287,594, $1,444,137, $543,774, and $233,420, respectively . · The transfers in from the Capital Development Board reported for each of the four quarters were not accurately reflected in the net transfers column for the following quarter. · Capital lease equipment assets were not accurately reflected on the third and fourth quarter C-15 reports. (Finding 19, Page 51) We recommended that the University review its policies and procedures to ensure accurate reporting of property and capital leases in compliance with SAMS Procedures. University officials agreed with the recommendation and stated that they have revised their procedures to ensure accurate reporting of property and capital leases. OTHER FINDINGS
The remaining
findings are reportedly being given attention by University management. We will review the University’s progress
toward implementation of our recommendations in our next examination. AUDITORS’ OPINION Our
auditors stated the University’s financial statements at June 30, 2008 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 & Associates. DIGEST FOOTNOTE #1 GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP) NOT PROPERLY APPLIED TO VOLUNTARY
NONEXCHANGE TRANSACTIONS - Previous University Response We agree with the recommendation. The University will develop appropriate management reports to be submitted to the University’s Comptroller’s Office for all grant agreements to properly identify and apply the appropriate revenue recognition criteria per GASB 33. The University believes that with this additional level of review, the situation will be corrected and this finding will not recur. #2
INADEQUATE DOCUMENTATION FOR FEDERAL PROGRAM EXPENDITURES -
Previous University Response The University accepts the recommendation. The University will develop policies and procedures to ensure that payments are made only when a proper invoice and appropriate documentation and approval is received. Also, the University will maintain a filing system that facilitates locating supporting documentation for all invoices paid. #3
INADEQUATE CONTROLS OVER CONTRACTING PROCEDURES -
Previous University Response The University agrees with the recommendation. The University adopted a comprehensive
policy in 2006, which stipulates the approval and bidding requirements on
contracts. The bidding requirements in
the policy are consistent with the Illinois Procurement Code and require that
contracts be signed prior to the commencement of services. The University now has annual training for
all fiscal officers to review and explain the University’s procurement
policies and to reinforce the universal application of the policy to all
areas of University’s operations.
Additionally, during the year memos are sent to the fiscal officers
reminding them of the requirements of the policy. |
