REPORT DIGEST

CHICAGO STATE UNIVERSITY

Single Audit and State Compliance Examination
For the Year Ended June 30, 2014

Release Date:  March 18, 2015

FINDINGS THIS AUDIT:  20

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  1 -- 0 -- 1
Category 2:  11 -- 8 -- 19
Category 3:  0 -- 0 -- 0
TOTAL:  12 -- 8 -- 20

FINDINGS LAST AUDIT: 16

Category 1:	Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State laws
and regulations (material noncompliance).
Category 2:	Findings that are significant
deficiencies in internal control and
noncompliance with State laws and regulations.
Category 3:	Findings that have no internal
control issues but are in noncompliance with
State laws and regulations.

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
www.auditor.illinois.gov

INTRODUCTION

This digest covers our Single Audit and
Compliance Examination of Chicago State
University (the “University”) for the year
ended June 30, 2014.  A separate Financial
Audit as of and for the year ending June 30,
2014, was previously released on January 29,
2015.  In total, this report contains 20
findings, three of which were reported in the
Financial Audit.
SYNOPSIS

• (14-04)  The University’s controls over
several Federal compliance requirements
related to its Textbook & Learning Materials
Program did not function as designed.
• (14-05)  The University improperly
calculated and remitted the incorrect amount
of Title IV Funds to the Department of
Education for students who withdrew from
classes.
• (14-13)  The University did not fully comply
with requirements applicable to its property
and equipment.
• (14-16)  The University had inadequate
controls in place to ensure criminal
background investigations were conducted prior
to employment for those employees hired for
security sensitive positions.
• (14-19)  The University lacked sufficient
controls to ensure compliance with University
policies in the hiring of certain new
employees.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

INADEQUATE CONTROLS OVER COMPLIANCE APPLICABLE
TO THE TEXTBOOKS & LEARNING MATERIALS PROGRAM

The University’s controls over the compliance
requirements of allowable costs, and cost
principles, procurement, reporting, cash
management, and special contract terms and
provisions related to its Textbook & Learning
Materials Program did not function as
designed.

During our testing of the U.S. AID Program,
some of the things we noted are as follows:

• The University could not provide
documentation of the advance approvals
required by U.S. AID prior to the printing of
teacher guides during fiscal year 2014.

• The University used an incorrect indirect
cost rate for calculating indirect costs for
the award.  The University increased the
indirect cost rate from 8% to 15% and could
not provide documentation that the indirect
cost rate for the award had been increased.
This resulted in an overcharge to indirect
costs of $191,768 which the University
corrected upon bringing this to their
attention.

• The University did not comply with the
requirements requiring open and free
competition in selecting vendors.  The
University identified 3 covered transactions.
We tested all 3 and noted the University could
not provide evidence that one of the contracts
had been competitively procured or was
specifically allowed by the award agreement.
(Finding 4, pages 26-27).

We recommended the University improve its
procedures to ensure they comply with the
requirements applicable to their Federally
funded programs.

University officials agreed with the
recommendation and stated the information will
be reviewed quarterly by the grants office to
ensure compliance.

RETURN OF TITLE IV FUNDS

The University did not properly calculate and
remit the correct amount of Title IV Funds to
the U.S. Department of Education (ED) for
students who withdrew from classes.

Our testing of 60 students who withdrew from
classes indicated that seven refund
calculations were incorrect because the
University did not use the proper withdrawal
date as prescribed by the regulations.  These
seven calculations involved students that did
not provide official notification of their
withdrawal to the University and the
University could not provide documentation of
student’s attendance at an academically-
related event.  The improper calculations
resulted in additional refunds owed to ED
totaling $5,133. (Finding 5, pages 28-29)
This finding was first reported in 2010.

We recommended the University implement
adequate internal controls to ensure that all
Title IV refund calculations are made in
accordance with ED’s regulations.

University officials agreed with the
recommendation and stated the Office of
Student Financial Aid will use the semester
mid-point as the withdrawal date to calculate
the unofficial withdrawal.  (For the previous
University response, see Digest Footnote #1.)

NEED TO IMPROVE CONTROLS OVER PROPERTY AND
EQUIPMENT

The University did not fully comply with
requirements applicable to its property and
equipment.

We reviewed the University’s property
inventory certification as of March 31, 2014
that was submitted to the Department of
Central Management Services (DCMS).  The
inventory certification to DCMS reported 184
items ($276,584) of equipment that could not
be located by the University.  These assets
were acquired by the University during the
current year as well as past fiscal years.
Included in the equipment that was reported as
“unlocated” were approximately 104 computers,
servers, CPU’s or other electronic storage
devices.

In addition, we noted 14 additional computers
(totaling $14,688) that were formally reported
as stolen from the University.  The University
completed a detailed assessment of all stolen
and missing computer items and determined that
one item contained confidential information.
The required notification was sent to the
individuals whose personal information was
breached; however, the University failed to
file its report with the General Assembly as
required by the Personal Information
Protection Act.

In performing our tests of 105 University
equipment items, we noted one item (carpet
extractor) with a cost of $1,995 could not be
located by the University.  It was reported as
lost after the auditors requested to see it.
(Finding 13, pages 43-44)

We recommended the University strengthen its
internal controls over the accountability of
equipment.  Further, the University should
file the required data breach reports with the
General Assembly.

University officials agreed with the
recommendation and stated the University’s
Property Control Department will provide
additional training to its fiscal officers to
reinforce the process governing asset
movement.

NONCOMPLIANCE WITH CAMPUS SECURITY ENHANCEMENT
ACT OF 2008

The University did not have adequate controls
in place to ensure that required criminal
background investigations were conducted prior
to employment for those employees hired for
security sensitive positions.

The Campus Security Enhancement Act of 2008
(Act) (110 ILCS 12/5) states that “Each public
institution of higher education shall, through
written policy and procedures, identify
security-sensitive positions and make
provision for the completion of criminal
background investigations prior to employing
individuals in those positions”.

We obtained a listing of 378 security-
sensitive positions identified by the
University and selected 25 individuals for
testing.  We noted the following:

• Four employees were hired prior to the
completion of criminal background
investigations.  These background
investigations were completed between 1 day
and 5.5 years after the hiring of the
employee.

• Fifteen employees that were hired for
security-sensitive positions had no evidence
that the criminal background investigations
were ever obtained. (Finding 16, page 48)

We recommended the University comply with the
requirements of the Campus Security
Enhancement Act of 2008 and obtain criminal
background investigations prior to hiring
employees for security-sensitive positions.

University officials agreed with the
recommendation and stated the Office of Human
Resources has developed a policy that
identifies security-sensitive positions and
have a plan to obtain background checks of
those who did not previously have one on file.

NEED TO IMPROVE CONTROLS OVER THE HIRING OF
NEW EMPLOYEES

The University did not have sufficient
controls in place to ensure compliance with
University policies applicable to the hiring
of certain new employees.

We selected a sample of 10 employees that were
hired during fiscal year 2013 and 2014 and
noted the following:
• The University could not provide any
documentation that the University had verified
the employment history of any of the
applicants.
• For five of the new hires, the University
could not provide evidence that it had
verified the education credentials that were
contained on the job applicant’s resume or
application.
• One of the hired employees did not meet the
minimum education requirements that were
posted in the job opening description.  The
University did not provide any evidence from
the time of hire to explain why the minimum
education requirements were not an actual
prerequisite.  (Finding 19, pages 53-54)

We recommended the University improve its
procedures to ensure compliance with
University policies.  Further, the University
should fully document its hiring decisions,
especially as it relates to minimum
eligibility requirements for posted positions.

University officials agreed with the
recommendation and stated the Office of Human
Resources has developed a plan to verify
minimum qualifications of candidates
recommended for hire.

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.

AUDITOR’S OPINION

The financial audit report was previously
released.  The auditors stated the financial
statements of the Chicago State University as
of and for the year ended June 30, 2014, are
fairly stated in all material respects.

The auditors also conducted a Single Audit of
the University as required by OMB Circular
A-133.  Our auditors stated the University
complied, in all material respects, with the
types of compliance requirements that could
have a direct and material effect on each of
the University’s major federal programs for
the year ended June 30, 2014 except for the
U.S. Aid Foreign Assistance for Programs
Oversees (CFDA #98.001) in which they
qualified the opinion.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the University for the year
ended June 30, 2014, as required by the
Illinois State Auditing Act.  The auditors
stated the University complied, in all
material respects, with the requirements
described in the report.

WILLIAM G. HOLLAND
Auditor General

WGH:TLK

SPECIAL ASSISTANT AUDITORS

Borschnack Pelletier & Co. were our special
assistant auditors.

DIGEST FOOTNOTES

#1 – RETURN OF TITLE IV FUNDS

2013 - The University accepts the Auditor’s
recommendation.  The withdrawal process has
now been automated with the use of an online,
student-initiated process.  The calculation of
the return of Title IV Funds is now based on
the initial date in which the student
initiated his/her withdrawal from the class.
In addition, the University has implemented a
monthly monitoring process to ensure that all
refunds are returned to the Department of
Education within the 45 day period required by
the regulation.