FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
FAILURE TO PERFORM BANK RECONCILIATIONS TIMELY
The University failed to perform timely bank reconciliations or to provide evidence
of the dates bank reconciliations were completed and reviewed. Several reconciling items
from the previous year’s bank reconciliations were not adjusted or removed from the
records. During the review of the reconciliations, we noted there were several reconciling
items representing unrecorded receipts and disbursement transactions as well as $454,167
of items dated one year ago or more. (Finding 98-1, page 20) This finding has been
repeated since 1994.
We recommended the University assign sufficient personnel resources to perform bank
reconciliations and perform such reconciliations in a timely manner. In addition, the
reconciliations should be made available to a supervisor for review and approval.
The University officials agreed with our recommendation and stated it had hired an
assistant controller to review all bank reconciliations and dispose of reconciling items.
(For previous University responses, see Digest footnote #1.)
FAILURE TO TIMELY DEPOSIT AND RECORD CASH RECEIPTS
The University did not record cash receipts timely, nor is there evidence of
adequate supporting documentation as required by law. The State Officers and Employees
Money Disposition Act (30 ILCS 230/2) requires State Agencies to maintain records of cash
receipts including the amount, date, payor, and purpose of the receipts. The Act also
requires the University to deposit cash receipts within 24 hours for cash accumulations of
$10,000 or more.
We noted the following deficiencies:
For $1.7 million of the $2.9 million of cash receipts tested, the University did not
maintain required documented evidence indicating the date of receipt, payor, and the
purpose and amount of the receipt.
The University did not timely record into its accounting records the receipt of $1.9
million of the $2.9 million of receipts we tested.
The University did not timely deposit $.5 million of the $2.9 million in cash receipts
we tested.
Failure to maintain a complete accurate record of cash receipts constitutes a serious
internal control weakness and a clear violation of the State Officers and Employees Money
Disposition Act. (Finding 98-20, page 43)
We recommended that the University establish a system that ensures the timely deposit
of cash receipts and that the University maintain adequate supporting documentation of
cash receipts and promptly record the receipts into the general ledger.
University officials agreed with the finding and recommendation.
PERKINS LOAN ADMINISTRATION PROBLEMS
We noted deficiencies relating to the University’s administration and
collection of loans made under the Perkins Loan program as follows:
The University did not maintain adequate skiptracing procedures and did not track the
enrollment status of all borrowers under the Perkins Loan Program. The term
"skiptracing" refers to the process of locating the address of a debtor who has
defaulted on a debt and has moved to an undisclosed address. The University did not
perform required skiptracing procedures until the accounts were referred to a collection
agency. (Finding 98-24, pages 47-48)
The University did not make collection attempts during the period shortly after
students had separated from the University. This period is known as the "grace
period" under federal regulations. The University is required to make three
collection attempts during this grace period. (Finding 98-25, pages 49-50)
The University failed to adequately send "Intent to Accelerate" letters and
turn over past due Perkins Loans eligible for the default stage to a collection agency.
(Finding 98-26, pages 51-52)
The University violated federal regulations by not pursuing collection of defaulted
Perkins Loans through litigation procedures once other means of collections had been
exhausted. (Finding 98-27, page 53)
We recommended corrective action in each case. Also in each case, the University
officials either agreed with our finding and recommendation or described appropriate
corrective action it intended to take.
INEFFECTIVE EDP PLANNING FRAMEWORK
The University did not have an effective planning framework in place to direct and
assist the University through a major computer system development project, such as the
implementation of a new administrative software package, or the solution of the critical
year 2000 problem.
The University’s planning was ineffective as a management tool due to the
following:
Management did not have a risk assessment framework to identify relevant information
risks. For example, the University failed to draft a comprehensive plan to assess the
upcoming year 2000 problem.
Management did not have standardized policies, procedures, and benchmarks for managing
and monitoring Information Systems.
Responsibilities had not been properly delegated or recognized for security development
and implementation or for quality assurance.
Backup strategies and contingency plans were not required by the existing framework. As
projects failed to adhere to implementation plans due to funding and personnel
constraints, the University had no choice but to extend the time frames.
Based on the review of status reports regarding the implementation of the new
administrative software package, the University failed to adhere to its original project
timetable.
Our review of the budget for fiscal year 98 and correspondence showed an estimated
direct cost overrun of the new administrative software system of $680,000. This amount
consisted of additional costs of outsourcing for the payroll and the accounting system,
lost training costs due to staff turnover, and excess consulting costs not previously
budgeted. This estimation did not include any personal service costs incurred since the
passing of the original deadlines.
A sound planning framework is essential when instituting new procedures and addressing
complex technical issues. The lack of this framework at the University was affecting the
successful implementation of software critical to the University’s mission. The
University also risked vulnerability to the year 2000 problem, as it had not made a
comprehensive analysis of this issue. (Finding 98-7, pages 26-27)
We recommended the University develop and adopt an effective planning framework for all
critical projects.
University officials stated they will continue to develop the computer system planning
framework.
FAILURE TO PROVIDE INFORMATION TO ASSURE PROPER UNEMPLOYMENT BENEFIT PAYMENTS
The University failed to comply with the Unemployment Insurance Act by not
responding to audit requests from the Illinois Department of Employment Security (IDES).
This failure resulted in situations where unemployment benefits charged to State taxpayers
for University employees were not investigated by IDES when some of the individuals were
earning wages from the University during the same weeks.
In response to an Auditor General finding in 1995, IDES started investigating all State
employee matches. The University has failed to return the IDES wage inquiry requests in
all 143 instances for the IDES quarterly audits performed through April 2, 1998. Failure
to provide IDES with this information increases the risk that State assets are used to pay
unallowable unemployment benefits.
We tested 36 wage requests from the audits for the first and second calendar quarters
of 1997 performed by IDES at the University and found that:
61 percent (22 of 36) were benefit recipients charged to the University. In 6 of the 22
cases the recipient earned wages from the University during the same weeks they received
unemployment benefits.
39 percent (14 of 36) were benefit recipients charged to an employer other than the
University. In 3 of those cases the documentation shows the individual worked 12 weeks
during the quarter of the audit at the University. It appears that the benefit recipient
did not report that they were working at the University and another employer was charged
the unemployment benefits. (Finding 98-15, page 36)
We recommended the University develop the necessary controls within the Payroll
Department to ensure compliance with the Unemployment Insurance Act. We further
recommended the University respond to IDES requests for information and work with IDES on
the sample cases to facilitate recovery of funds. The University responded that prompt
completion of the "wage inquiry" requests from IDES will be performed by the
Payroll Office.
LACK OF CONTROLS IN MONITORING UNEMPLOYMENT COMPENSATION
The University’ failure to develop adequate controls over the review of
unemployment benefit claims and payments has resulted in several problems, including
unemployment benefits being paid by the State to employees who were still receiving a
paycheck from the University.
During the audit period, the State of Illinois paid unemployment benefits of $139,675
to 62 former/current employees of the University. We tested for documentation of the
unemployment benefits paid, as well as the appropriateness of the benefit payments for 30
of the 62 and found that:
In 23 percent (7 of 30) of the cases reviewed, benefit recipients were working at the
University while they were also receiving unemployment benefits paid by the State. The
University failed to protest the charges listed on the quarterly activity statement. The
wages earned by these individuals may have been enough to eliminate or reduce the weekly
benefits they received from the Illinois Department of Employment Security (IDES).
In 33 percent (10 of 30) of the cases reviewed, we found that the University failed to
protest potentially ineligible unemployment claims for such causes as resignations or
discharges. Prudent business practices would indicate that protesting questionable claims
is appropriate to permit IDES to find cause to deny ineligible claims.
In 1 of the 30 cases (3 percent) reviewed, the University failed to report a $11,279
vacation payment to an individual after that individual left the University. This
individual received $5,111 in unemployment benefits subsequent to their last day of work.
Failure to report the vacation payments could result in State monies being expended
inappropriately.
In 53 percent of the cases reviewed (16 of 30), the University lacked some
documentation relative to the unemployment activity. The missing documentation included
IDES claim notices and/or decisions to protest and internal documentation that shows the
layoff date and reason. Absence of this documentation limits oversight efforts to ensure
that State resources were adequately protected.
Staff in the University’s Department of Human Resources responsible for the review
of unemployment claims and charges on the quarterly statements received from IDES did not
have a complete understanding of the necessity of reviewing the claim notices and
quarterly charge statements. Additionally, they lacked an understanding of the Illinois
Unemployment Insurance Act from the perspective of whether an individual is eligible for
benefits. (Finding 98-16, page 38)
We recommended the University develop adequate policies and procedures for the review
of unemployment benefit claims and charges that include appropriate training and cross
training of individuals responsible for these reviews. Further, we recommended the
University investigate the cases where questionable benefits were paid and work with the
Illinois Department of Employment Security to see if funds should be recovered. The
University stated its Human Resources staff will be provided with training and that the
recommended policies and procedures would be prepared by 4/30/99.
OTHER FINDINGS
The remaining findings are being given attention by the University. We will review
progress toward implementation of our recommendations in our next audit. Responses to the
findings were provided by John Meehan, Controller.
AUDITORS’ OPINION
Our auditors state the June 30, 1998 financial statements of Chicago State
University and the University Auxiliary Facilities System Revenue Bond Fund are fairly
presented except for the effects of the adjustments, if any, that might be necessary as a
result of uncertainties resulting from the year 2000 computer problems.
___________________________________
WILLIAM G. HOLLAND, Auditor General
WGH:JTD:pp
SPECIAL ASSISTANT AUDITORS
Washington Pittman & McKeever, LLC were our special assistant auditors for
this audit.
DIGEST FOOTNOTES
#1 FAILURE TO PERFORM BANK RECONCILIATIONS TIMELY - Previous Agency Responses
1997 "We agree. The University is in the process of hiring an accountant
with information system and bank reconciliation experience. "
1996: "We agree. Staff turnovers led to delays in the bank reconciliation process.
Contractual services were acquired for bank reconciliation work from a CPA firm prior to
FY 96 year end.
1995: "We agree. Several staff accountant personnel changes resulted in the
aforementioned bank reconciliation problems. Corrective action has occurred and this will
not be a repeat finding."
1994: "We agree. A monthly reconciliation of all bank and cashier funds will be
prepared on a monthly basis. Also, the supervisory review process will be completed and
documented on a timely basis."
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