REPORT DIGEST
GOVERNORS STATE UNIVERSITY
Financial Audit, Compliance Examination and Single Audit
For the Year Ended: June 30, 2011
Release Date: March 8, 2012
Summary of Findings:
Total this audit: 12
Total last audit: 12
Repeated from last audit: 7
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
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(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
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SYNOPSIS
• The University did not properly account for the costs
capitalized to intangible assets in accordance with accounting principles
generally accepted in the United States of America.
• The University did not have adequate procedures over
verification of eligibility requirements for Trio-Cluster – Upward Bound
(Greater Success for U) program.
• The University did not have adequate controls over its
equipment acquired from federal funds.
• The University did not have adequate monitoring procedures
for its subrecipients under a Recovery Act-funded grant from the Employment
Training Administration of the U.S. Department of Labor.
• The University did not comply with certain required
contracting procedures.
• The University did not comply with the state law on Board
membership terms, vacancies and meetings.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE ACCOUNTING FOR INTANGIBLE ASSETS
The University did not properly account for the costs
capitalized to intangible assets in accordance with accounting principles
generally accepted in the United States of America (GAAP).
During our detailed testing of related costs capitalized to
intangible assets for fiscal year 2011, we noted that training and other
post-implementation costs totaling $369,825 were capitalized instead of being
recorded as an expense resulting in an overstatement of assets. This also resulted in an overstatement of
$52,832 in the related depreciation expense.
The University subsequently made the necessary adjustments in the
financial statements.
Failure to properly account for intangible assets resulted
in an overstatement of assets and related depreciation expense on the
University’s financial statements. (Finding 1, Pages 17-18)
We recommended that the University review its current
process for the preparation and review of the annual financial statements to
ensure that financial information is accurate and in accordance with GAAP.
University officials accepted the recommendation.
INADEQUATE PROCEDURES OVER VERIFICATION OF ELIGIBILITY
REQUIREMENTS
The University did not have adequate procedures over
verification of eligibility requirements for TRIO Cluster - Upward Bound
(Greater Success for U) program.
In our eligibility testing of 37 participants under the TRIO
Cluster, we noted the following:
• The University’s eligibility determination for two
participants was either not supported or did not agree with the supporting
documents on file.
• The University did not document its eligibility
determination for three participants.
The related application of review/eligibility determination forms were
not prepared by the program evaluator.
Failure to document and verify the required eligibility
information may result in providing benefits or scholarship awards to
ineligible applicants thereby resulting in noncompliance with Federal
regulations, policies and procedures. (Finding 3, Pages 21-22)
We recommended that the University verify the eligibility
requirements for grant applicants and maintain supporting documentations to
ensure compliance with Federal regulations.
University officials accepted the recommendation and stated
it is improving its processes and supervision to ensure compliance.
INADEQUATE CONTROLS OVER UNIVERSITY EQUIPMENT ACQUIRED FROM
FEDERAL FUNDS
The University did not have adequate controls over its
equipment acquired from federal funds.
During our detailed testing, we obtained a general ledger
listing of equipment acquired from federal funds during the fiscal year 2011
and noted that the following items were not identified as equipment acquired
from federal funds in the property records:
• Six items with a total value of $3,197 acquired and
charged to R&D Cluster – Minority Health and Health Disparities Research
grant fund. These items consisted of an iPad, two central processing units, and three monitors.
• A laptop, valued at $792, acquired and charged to ARRA – Head Start grant fund.
In our physical identification of nine items from the
property records, we also noted the following:
• Information in the property records for a laptop acquired
and charged to ARRA – Head Start grant
fund, valued at $2,795, was not updated.
The item was found in a different location and no Property Change
Request form was prepared to support the change in location. The University subsequently updated the
property records.
• A mobile workstation acquired and charged to TRIO Cluster
– Student Support Services grant fund, valued at $2,085, was not found. The University subsequently reported this
item as stolen and obtained the related police report after being noted during
the audit. (Finding 4, pages 23-25)
We recommended that the University adhere to its procedures
to ensure that equipment records are accurately maintained and updated to
ensure compliance with federal regulations.
University officials accepted the recommendation.
INADEQUATE MONITORING PROCEDURES FOR SUBRECIPIENTS
The University did
not have adequate monitoring procedures for its subrecipients under a Recovery
Act-funded grant from the Employment Training Administration of the U.S.
Department of Labor.
The University awarded $3,190,000 to seven subrecipients
under the ARRA – Program of Competitive Grants for
Worker Training and Placement in High Growth and Emerging Industry Sectors
Program (program). Total expenditures
incurred by the University for the subrecipients
amounts to $966,395 during the current fiscal year.
In our detailed testing of University’s compliance with the
subrecipient monitoring requirements, we noted the following:
• The University does not have procedures in place to
monitor whether subrecipients expending $500,000 or more in Federal awards
during the subrecipients’ fiscal year have met the audit requirement of OMB
Circular A-133. The University
subsequently obtained the information as to the subrecipients’ fiscal year end, Federal awards expended and related A-133 audits (as
applicable) after being noted during the audit.
• At the time of subaward, the
University did not identify all its subrecipieants
the program’s Federal award information such as Catalog of Federal Domestic
Assistance (CFDA) title, CFDA
number, award name and award number. In
addition, the University did not advise all its subrecipients of the
requirement to indentify Recovery Act Funds in the Schedule of Expenditure of
Federal Awards (SEFA) and the SF-SAC (A-133 Data
Collection Form). The University subsequently advised its subrecipients of
these requirements after being noted during the audit.
• One of the subrecipients was not registered in the Central
Contractor Registration (CCR) and did not have Dun
and Bradstreet Data Universal Numbering System (DUNS) number as required.
• The University did not document at the time of
disbursement of funds to subrecipients the program’s CFDA
and Federal Award numbers for all five expenditure vouchers reviewed totaling
$163,015. The University subsequently
advised its subrecipients of this requirement after being noted during the
audit. (Finding 7, pages 31-33)
We recommended that the University establish and implement
procedures to ensure adequate monitoring of subrecipients in compliance with
Federal regulations.
University officials accepted the recommendation and stated
that it has reorganized its grant organization and has invested in additional
grant staff and technology as well as improved processes and communications to
ensure compliance.
NONCOMPLIANCE WITH REQUIRED CONTRACTING PROCEDURES
The University did not comply with certain required
contracting procedures.
During our tests of 25 contracts, we noted the following:
• Three contracts totaling $2,217,736 did not have the three
signatures required for contracts of $250,000 or more.
• Two contracts each valued at more than $10,000 were not
filed with the Office of the State Comptroller within 15 days after execution
(three and four days late). These
contracts were incurred against locally-held funds.
• Two contracts each valued at more than $10,000 were not
filed with the Office of the State Comptroller.
These contracts were incurred against locally-held funds.
• Three contracts totaling $397,736 were not approved and
executed prior to performance of services.
These contracts were executed one to 83 days after the start of related
services.
• A contract for $385,000 was not procured through
competitive selection. Further, the disclosure of financial interest statement
was also not obtained.
• Three contracts totaling $980,000 did not meet the
contract content requirements. The State Board of Elections Certification was
not marked as required. (Finding 9,
pages 36-38)
We recommended that the University ensure all contracts over
the threshold amounts are approved and executed prior to performance of
services and filed with the Office of the Comptroller in accordance with State
statutes and regulations. We also
recommended that the required disclosure of financial interest statement,
contract certifications and signatures be obtained. Further, we recommended the
required competitive solicitation procedures be observed.
University officials accepted the recommendation and stated
that since this was brought to their attention, the University has modified the
contracting procedures to ensure compliance.
NONCOMPLIANCE WITH THE UNIVERSITY’S LAW ON BOARD MEMBERSHIP,
TERMS, VACANCIES AND MEETINGS
The University did not comply with the state law on Board
membership, terms, vacancies and meetings.
During our tests of statutory mandates, we noted that a
quorum was not present during the University’s regular Board of Trustees
(Board) meeting on October 8, 2010.
There were only three board members present during the meeting, which
was less than the required quorum of five.
This raises a concern as to the legitimacy of actions taken by the Board
during that meeting.
In addition, we noted that the University’s Board is not
composed of eight members as required by its law. As of the current fiscal year’s audit, the
University’s Board has only four members appointed by the Governor and one
student member elected by the student body, leaving the University’s Board with
three vacancies. Two of these vacancies
have existed for several years now and one has been recently vacant from a
resignation during the current fiscal year.
(Finding 12, pages 45-46)
We recommended that the University continue to work with the
Governor’s Office to ensure that the Board vacancies are filled. Further, the University should ensure that it
meets the required quorum at all regular Board meetings to comply with the
provisions of the Law.
University officials accepted the recommendation and stated
the Governor’s Office appointed two additional Board members in October 2011.
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.
AUDITORS’ OPINION
Our auditors state the University financial statements as of
June 30, 2011 and for the year then ended, are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
WGH:TLK:RT
SPECIAL ASSISTANT AUDITORS
E.C. Ortiz & Co., LLP were our
special assistant auditors.