Illinois State University Foundation 2002 Audit

REPORT DIGEST

ILLINOIS STATE UNIVERSITY FOUNDATION
FINANCIAL AUDIT
For the Year Ended:
June 30, 2002
COMPLIANCE AUDIT
For the Two Years Ended
June 30, 2002

Summary of Findings:

Total this audit 3
Total last audit 2
Repeated from last audit 2

Release Date:
March 20, 2003

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
Attn: Records Manager
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

SYNOPSIS

The Foundation needs to improve controls over the disbursement function. One employee had access to blank checks, the signature stamp and also reconciled the bank statements. Proper internal controls would separate the recording, authorizing, and custody of assets.

The Foundation did not notify the University Comptroller’s Office of computer software and equipment donations having an estimated value of $3.4 million.

The Foundation and University Athletic Department did not properly control pre-numbered raffle tickets in conjunction with the trip raffles. The events brought in $54,813 and $50,372 of revenue in fiscal years 2002 and 2001, respectively.

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

ILLINOIS STATE UNIVERSITY FOUNDATION
FINANCIAL AUDIT
For the Year Ended June 30, 2002
COMPLIANCE AUDIT
For the Two Years Ended June 30, 2002

FINANCIAL OPERATIONS	FY 2002			FY 2001*
REVENUES Gifts, grants, and awards Investment income (loss) Other revenue Total Revenue EXPENSES Awards, scholarships, and grants Athletic support Academic departmental support Other expenses Total Expenses ADDITIONS TO PERMANENT ENDOWMENTS * FY 2001 amounts have not been restated to reflect the implementation of GASB statements #34, 35, 37, and 38.	$13,057,216 (3,134,164) 809,333 $10,732,385 $1,698,077 N/A 2,234,063 3,306,838 $7,238,978 $1,516,560			$9,301,170 (3,546,562) 4,044,556 $9,799,164 $800,870 2,130,700 1,754,871 2,177,708 $6,864,149 N/A
SELECTED ACCOUNT BALANCES		AT JUNE 30, 2002	AT JUNE 30, 2001*
Cash and Investments Fund Balances Net Assets * FY 2001 amounts have not been restated to reflect the implementation of GASB statements #34, 35, 37, and 38.		$40,020,627 N/A $48,640,214	$42,613,528 $43,624,932 N/A
FOUNDATION EXECUTIVE DIRECTOR
During Audit Period: Dr. Susan T. Kern Currently: Dr. Susan T. Kern

One employee had access to blank checks and signature stamp, and also reconciled the bank statements

The Foundation did not notify the University Comptroller of computer software and equipment donations estimated at $3.4 million

Individuals selling raffle tickets were not required to turn in any unsold tickets

INTRODUCTION

Our report covers the financial audit of the Illinois State University Foundation for the fiscal year ended June 30, 2002 and a compliance audit for the two years ended June 30, 2002.

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

INTERNAL CONTROL OVER DISBURSEMENTS

An internal control deficiency existed over the disbursement function at the Foundation. One employee had access to the blank checks and signature stamp, and also reconciled the bank statements. Proper internal controls would separate the recording, authorizing, and custody of assets. (Finding 1, page 9)

We recommended the Foundation maintain a system of good internal controls by separating the record keeping, authorization, and treasury functions of assets. We also recommended the Foundation establish written procedures that address adequate segregation of duties over the disbursement function.

Foundation management stated that in June, 2002 its accountant began receiving the unopened bank statement and reviewing the cancelled checks for propriety before the bank reconciliation is performed. Further, they have established written procedures that address the segregation of duties over the disbursement function.

FAILURE TO NOTIFY PROPER UNIVERSITY PERSONNEL OF DONATED SOFTWARE AND EQUIPMENT

The Foundation did not notify the University Comptroller’s Office of computer software and equipment donations having an estimated value of $3.4 million. By not communicating the donations to the University Comptroller's Office or University Property Control, the software and equipment was not recorded in the University’s general ledger or fixed assets records. The Foundation did not have procedures in place outlining the documentation and communications required related to donated assets. (Finding 2, page 10)

We recommended the Foundation establish and implement procedures for documenting the receipt of donated items and communicating donations to the University Comptroller’s Office and University Property Control.

The Foundation agreed with our recommendation and stated they have established written procedures for documenting the receipt of donated items and communicating donations to the University Comptroller’s Office and University Property Control.

LACK OF CONTROLS OVER PRE-NUMBERED RAFFLE TICKETS

The Foundation and University Athletic Department did not properly control pre-numbered raffle tickets in conjunction with the Trip Raffles held in 2002 and 2001. Additionally, individuals selling the tickets were not required to turn in any unsold tickets. The events brought in $54,813 and $50,372 of revenue in fiscal years 2002 and 2001, respectively. Failure to adequately control raffle tickets and receipts does not promote accountability. (Finding 3, page 11) This finding was first reported in 1998.

We recommended the Foundation work with the Athletic Department staff to develop and implement procedures to track pre-numbered raffle tickets.

Foundation management stated they would work with Athletic Department personnel to formalize written procedures for handling raffle ticket sales. The procedures are to include an accounting of all pre-numbered tickets and funds collected. (For previous Foundation responses, see Digest footnote #1.)

Ms. Ronda Queen, financial coordinator, provided foundation responses.

AUDITORS' OPINION

Our auditors state the financial statements of Illinois State University Foundation as of June 30, 2002, and for the year then ended, are fairly presented in all material respects.

_____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:CML:pp

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this engagement were Clifton Gunderson LLP.

DIGEST FOOTNOTES

#1 LACK OF CONTROLS OVER PRE-NUMBERED RAFFLE TICKETS – Previous Foundation Responses

2000: Recommendation accepted. The Foundation will work in conjunction with Athletics to include instructions in the transmittal letter to return any unsold tickets. Additionally, checks for the purchase of raffle ticket will be made payable to ISU Athletics, with the tickets indicating such.

1998: Recommendation accepted. The Foundation and Athletic Department personnel will work to develop a procedure that will provide better tracking of the pre-numbered tickets.