REPORT DIGEST GOVERNORS STATE UNIVERSITY FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2016 Release Date: January 12, 2017 FINDINGS THIS AUDIT: 2 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 1 -- 0 -- 1 Category 2: 1 -- 0 -- 1 Category 3: 0 -- 0 -- 0 TOTAL: 2 -- 0 -- 2 FINDINGS LAST AUDIT: 0 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 Governors State University’s Financial Audit as of and for the year ended June 30, 2016. The Governors State University’s Compliance Examination (including the Single Audit) covering the year ended June 30, 2016 will be issued at a later date. SYNOPSIS • (16-1) The University has not established adequate internal controls over identifying and recording accrued liabilities for financial reporting purposes. • (16-2) The University’s procedures for the substantiation and collection of student accounts receivable were inadequate. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE CONTROLS OVER IDENTIFYING AND RECORDING ACCRUED LIABILITIES The University has not established adequate internal controls over identifying and recording accrued liabilities for financial reporting purposes. During the audit, the auditors inquired of the University whether they had any employees who worked a ten month year but chose to be paid over twelve months. It was determined that the University had numerous employees who worked such an arrangement. University management determined the appropriate expense and related liability for those employees who had completed their contracted services as of June 30, 2015 but had not received final payment for these services until fiscal year 2016. Consequently, University management recorded a prior period adjustment to correct this error. The adjustment reduced unrestricted net position as of June 30, 2015 by $2,165,543 for the unrecorded liability as of that date. (Finding 1, pages 56-57). We recommended the University review and improve its procedures to ensure all properly accruable items are identified and recorded in the University’s accounting records to facilitate accurate financial reporting. University officials agreed and stated the University has recorded the accrual for the current fiscal year and will be diligent to review accounting records in order to identify unrecorded liabilities in the future. INADEQUATE CONTROLS OVER STUDENT ACCOUNTS RECEIVABLE The University’s procedures for the substantiation and collection of student accounts receivable were inadequate. During the audit, the auditors requested the University send a statement of account (statement) to all students who had a balance due to the University. The University and auditors stated they received hundreds of calls from students whose stated account balances due to the University were incorrect. Calls received by auditors were from students whose account charges occurred before the summer 2011 academic term (prior to a computer system conversion). The University stated they have not sent any statements to these older student accounts or actively pursued collection in recent years, but intended to pursue in the future when time permitted. Due to the age of these accounts and the computer system conversion, the University’s ability to substantiate these receivables was time consuming and questionable. The University decided to summarily write- off these older balances. A total of 4,386 account balances were written off totaling $3,316,471. In addition, the University is still collecting data in order to formally obtain approval from the Attorney General to write off approximately 750 accounts that exceed $1,000. (Finding 2, pages 58-59). We recommended the University improve its procedures in order to collect its student accounts receivable in a timely manner. University officials accepted the recommendation and stated current collection practices are in place to perform a series of collection efforts on an established timeline. AUDITOR’S OPINION Our auditors state the financial statements of the Governors State University as of and for the year ended June 30, 2016 are fairly presented in all material respects. FRANK J. MAUTINO Auditor General FJM:JGR SPECIAL ASSISTANT AUDITORS Our Special Assistant Auditors for this audit were Borschnack, Pelletier & Co.