REPORT DIGEST

REPORT DIGEST

EASTERN ILLINOIS UNIVERSITY FOUNDATION

FINANCIAL AUDIT

For the One Year Ended:

June 30, 2003

and

COMPLIANCE AUDIT

For the Two Years Ended:

June 30, 2003

Summary of Findings

Total this audit ; 2

Total last audit ; 0

Repeated from the last audit 0

Release Date:

March 30, 2004

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 TDD (217) 524-4646

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

INTRODUCTION

Our report covers our financial and compliance audit of the Eastern Illinois University Foundation. Our audit was performed to express an opinion on the Foundation’s financial statements and to report on special data required by the University Guidelines. The Guidelines were issued by the Legislative Audit Commission to codify and improve the State universities’ fiscal practices and administration of locally held funds.

SYNOPSIS

Foundation personnel did not properly account for certain transactions associated with their unitrusts and, as a result, misstated their share of revenues, liabilities and net assets on their financial records.

Foundation personnel did not maintain proper control over Foundation fundraising efforts initiated by the University Athletic Department.

{Expenditures and Activity Measures are summarized on the reverse page.}

EASTERN ILLINOIS UNIVERSITY FOUNDATION

FINANCIAL AND COMPLIANCE AUDIT

For the Period(s) Ended June 30, 2003

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS	2003	2002
OPERATING REVENUES
Gifts Service contract with University Budget allocation from University Other operating income Total operating revenues	$1,259,018 195,246 60,803 87,880 1,602,947	$1,009,706 209,805 47,360 71,118 $1,337,989
OPERATING EXPENSES Professional fees In-kind expenses under contract with the University Personal services Building expenditures Budget expended at the University Other operating expenses Total operating expenses Operating income NONOPERATING REVENUES (EXPENSES) Investment income (loss) Grants to University Scholarships Other nonoperating income (expenses) Net nonoperating revenues (expenses) Income (loss) before capital contributions Capital contributions INCREASE (Decrease) in net assets FOR THE YEAR Net assets, beginning of the year (restated) Net assets, end of the year	$ 174,514 125,621 66,316 63,300 60,803 163,827 $ 654,381 $ 948,566 $2,086,361 (382,830) (552,233) (487,787) $ 663,511 $1,612,077 945,579 $2,557,656 27,626,895 $30,184,551	$106,967 140,180 48,761 5,079 47,360 161,676 $510,023 $827,966 $(1,546,257) (1,285,116) (578,511) 144,656 $(3,265,228) $(2,437,262) 485,583 $(1,951,679) 29,578,574 $27,626,895
SELECTED ACCOUNT BALANCES AT JUNE 30	2003	2002
ASSETS Cash and investments Capital assets, net of accumulated depreciation Other assets Total Assets LIABILITIES AND NET ASSETS Accounts payable and accrued liabilities Annuities payable Demand mortgage payable Due to others Net assets Total Liabilities and Net Assets	$36,031,156 2,028,989 314,439 $38,374,584 $ 94,453 2,356,871 1,425,581 4,313,128 30,184,551 $38,374,584	$33,910,075 1,931,985 27,924 $35,869,984 $ 249,801 1,995,283 1,427,788 4,570,217 27,626,895 $35,869,984
AGENCY EXECUTIVE OFFICER
During Audit Period and Currently: Ms. Patrice Stratton

Revenues, liabilities, and net assets were misstated

Failure to record amendment in the period which it becomes effective

Failure to obtain pledge contribution receivables records in the amount of $273,868

Inadequate segregation of duties

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO IMPROVE UNITRUST REPORTING CONTROLS

The Foundation did not properly account for certain transactions associated with their unitrusts and, as a result, misstated their share of revenues, liabilities and net assets on their financial records.

Unitrust agreements are trust agreements created by donors to contribute assets to the Foundation at some future point in time based on a trigger event such as the death of the donor. During the duration of the trust agreement, current income from the trust is paid to the donor. During fiscal year 2003, it was discovered that there were amendments to two of the unitrust agreements which were effective in May 2001. These amendments increased the share of assets that the Foundation was entitled to once these trusts terminate, but because of the lapse in internal communication to Foundation accounting personnel, this increase was not recorded on the Foundation’s financial records in a timely manner. In addition, it was noted that an error was made on one of these unitrusts on the allocation of the remainder interest between the Foundation and other beneficiaries. These items had the following effect on the financial statements as shown below:

Over/(Under)

Stated Restricted Over/(Under)

Expendable Stated

Net Assets Liabilities

June 30, 2001 $ (416,792) $ 416,792

June 30, 2002 (118,340) 118,340

June 30, 2003 240,844 ; (240,844)

Unitrust amendments should be recorded in the period in which the amendment becomes effective, and the share of the remainder interest in the unitrust should be recorded in accordance with the agreement as required by generally accepted accounting principles.

According to Foundation personnel, the amendments were not timely recorded in the financial records because the amendments were facilitated directly with the donor through the Foundation’s administrative office and legal counsel, who then inadvertently failed to communicate the changes to accounting personnel. Additionally, according to Foundation personnel, the error in the allocation of remainder interests was the result of a misunderstanding of how this calculation should be properly done. (Finding 1, pages 11-12)

We recommended the Foundation closely examine unitrust agreements and any related amendments that affect the reporting of revenues and liabilities so that they can be properly recorded in their financial records.

Foundation officials stated they would implement the recommendation.

INADEQUATE CONTROLS OVER FUNDRAISING EFFORTS

Foundation personnel did not maintain proper control over Foundation fundraising efforts initiated by the University Athletic Department.

During fiscal year 2003, the Athletic Department of the University initiated various fundraising campaigns soliciting approximately $574,000 in donations to the Foundation. Foundation management and accounting personnel were aware of the Athletic Department's fundraising activities, but the Foundation failed to obtain timely pledge contribution receivable records from the Athletic Department in the amount of $273,868. In addition, the Athletic Department employee who receives the collections from donors is also the one in charge of maintaining the contribution records and preparing the reminder statements for contributors who have pledged donations over a period of time. Our tests showed no instances of assets being misappropriated.

We recommended the Foundation obtain more timely notification of University fundraising efforts. Further, the Foundation should ensure that the duties of the collection and recording of pledge receivables be segregated.

Foundation officials concurred with our recommendation.

Mr. Rick Edwards, Foundation Assistant Treasurer, provided responses to the findings and recommendations.

AUDITORS' OPINION

The auditors state the Eastern Illinois University Foundation financial statements as of June 30, 2003 and for the year then ended are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:JAF:pp

SPECIAL ASSISTANT AUDITORS

Doehring, Winders & Co. LLP were our special assistant auditors for this engagement.