REPORT DIGEST CHICAGO STATE UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2019 Release Date: January 30, 2020 FINDINGS THIS AUDIT: 1 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 0 -- 1 FINDINGS LAST AUDIT: 1 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 FRANK J. MAUTINO, 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 the Chicago State University’s Financial Audit as of and for the year ended June 30, 2019. The University’s Compliance Examination (including the Single Audit) covering the year ended June 30, 2019 will be issued in a separate report at a later date. SYNOPSIS • (19-1) The University did not exercise adequate internal control over its financial reporting. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROL OVER FINANCIAL REPORTING The University did not exercise adequate internal control over its financial reporting. During our audit we noted the following: • The University incorrectly recorded funds received for a local grant (Program), totaling $1,506,646, as operating revenues and operating expenses, resulting in an overstatement of each account by $1,506,646. Also, a portion of the Program’s cash balance as of June 30, 2019, totaling $76,801, was recorded as unearned revenue instead of deposits held in custody for others, resulting in an understatement of accounts payable and accrued liabilities by $76,801 and an overstatement of unearned revenue by the same amount. University management corrected these errors in the University’s final financial statements. – The University incorrectly recorded its computer equipment leases totaling $1,053,011 as capital leases instead of operating leases when unit prices of these equipment items were less than the University’s capitalization threshold of $5,000. As a result, net capital assets and capital leases payable were overstated by $1,053,011 and $943,739, respectively, and the University’s net position was overstated by $109,272 as of June 30, 2019. University management corrected this error in the University’s final financial statements. – The University improperly classified various transactions of State, federal and local funds receivable with credit balances totaling $204,690 against accounts receivable, and various transactions of State, federal and local funds payable with debit balances totaling $295,826 against accounts payable and accrued liabilities. University management corrected this error in the University’s final financial statements. – The University improperly classified nongovernmental grants and contracts revenue totaling $92,420 as federal grants and contracts revenue. University management corrected this error in the University’s final financial statements. (Finding 1, pages 62-64) We recommended the University strengthen its controls over financial reporting to allow for the accurate preparation of its financial statements in accordance with GAAP. University officials agreed with the recommendation and stated the University departments are working in concert to review and update the classification coding of all grants, to ensure that they are aligned to the proper financial reporting category. AUDITOR’S OPINION The auditors stated the financial statements of the University as of and for the year ended June 30, 2019 are fairly stated in all material respects. The financial audit was conducted by E.C. Ortiz & Co., LLP. JANE CLARK Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:vrb